The size and complexity of the unfunded liability associated with Medicare warrants special attention. At its inception, this program was based on the assumption that demographics, economic growth rates, and wage increases prevalent in the 1960s would persist. These assumptions have proven false. Birth rates have declined, income growth has slowed, and mortality rates have decreased. Demographic changes will continue to undermine the ability of this plan to provide the intended level of benefits at the current level of taxation.
Spending on Medicare is the largest expenditure category in all of the provinces’ budgets and, although difficult to determine exactly, a large expenditure in the federal budget. According to the Canadian Institute for Health Information, Medicare spending was $126.4 billion in 2010 and has grown by 30.6% between 2006 and 2010. Medicare’s unfunded liability has grown by 2.1% between 2006 and 2010, from $526.7 billion to $537.7 billion. This represents $15,756 for each Canadian citizen, or $32,834 for each Canadian taxpayer.