Canada’s health-care system has lots of problems including its comparatively high cost, long wait times and middling performance among universal health-care countries.
One problem, which has largely been overlooked, is how Canada’s financing of public health care fails to account for interprovincial migration of seniors. As a result, provinces such as Quebec benefit (through lower health-care costs) when seniors leave the province while provinces that attract seniors, such as British Columbia, incur increased costs.
The underlying cause of this cost—or benefit—from seniors migration is that taxation (the resources used to pay for public health care), and the consumption of health care, follow two different patterns. People pay very little tax until they begin working, with their contributions typically peaking during their peak earning years. Their earnings then decline when they retire. For example, almost three-quarters (73.4 per cent) of Canada’s total tax burden is paid by the working-age population (24 to 64).
Health care, on the other hand, follows almost the exact opposite pattern. Canadians consume quite a bit of health care in their first year of life, then health consumption drops markedly until about the mid-50s. Indeed, the majority of health-care consumption typically takes place post-65. For example, the average annual spending on health care by government on people between the ages of one and 59 is $2,188. This amount almost triples, on average, to $6,424 for Canadians aged 65 to 69. The average per person spending for those over 70 is $13,797.
Consequently, when seniors migrate from one province to another, they are highly likely to have paid most of their lifetime taxes in one province while consuming most of their lifetime health care in another province.
In a recent study, the migration patterns of Canadian seniors and health-care spending over a 36-year period starting in 1980 to 2016 were analyzed. During this period, B.C. gained a net total of 40,512 seniors. In contrast, Quebec experienced a net loss of 37,305 seniors during the same period.
The estimated cost to B.C. for health-care expenditures related to these seniors was $7.2 billion. Quebec, by comparison, likely saved about $6.0 billion during the same 36-year period from seniors migrating out of the province. Of course, taxes paid by migrating seniors mitigate these costs or savings. The study estimates that up to 36 per cent of the cost to B.C. could have been offset by taxes and up to 19 per cent of savings to Quebec could have been reduced.
To be clear, the problem is not that seniors are migrating between provinces. But migration of seniors across provincial borders brings to light an embedded problem within current government financing of health care.
All government financing of Canada’s health-care system is done on a pay-as-you-go basis, meaning there’s no pre-funding of expenses. Rather, annual tax revenues finance annual health-care spending in the same year. As a result, there’s a mismatch between the prime earning years of most Canadians and the years they are most likely to consume health-care services.
The migration of seniors is just one problem with Canadian health care, which is fraught with broad systemic deficiencies. Therefore, simply introducing a Band-Aid mechanism to solve this particular issue would miss the larger opportunity—and indeed need—for broad reform of our health-care system based on successful real-world alternatives in other countries that, like Canada, maintain universality.
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Seniors migration cost British Columbia $7.2 billion in health-care expenses
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Canada’s health-care system has lots of problems including its comparatively high cost, long wait times and middling performance among universal health-care countries.
One problem, which has largely been overlooked, is how Canada’s financing of public health care fails to account for interprovincial migration of seniors. As a result, provinces such as Quebec benefit (through lower health-care costs) when seniors leave the province while provinces that attract seniors, such as British Columbia, incur increased costs.
The underlying cause of this cost—or benefit—from seniors migration is that taxation (the resources used to pay for public health care), and the consumption of health care, follow two different patterns. People pay very little tax until they begin working, with their contributions typically peaking during their peak earning years. Their earnings then decline when they retire. For example, almost three-quarters (73.4 per cent) of Canada’s total tax burden is paid by the working-age population (24 to 64).
Health care, on the other hand, follows almost the exact opposite pattern. Canadians consume quite a bit of health care in their first year of life, then health consumption drops markedly until about the mid-50s. Indeed, the majority of health-care consumption typically takes place post-65. For example, the average annual spending on health care by government on people between the ages of one and 59 is $2,188. This amount almost triples, on average, to $6,424 for Canadians aged 65 to 69. The average per person spending for those over 70 is $13,797.
Consequently, when seniors migrate from one province to another, they are highly likely to have paid most of their lifetime taxes in one province while consuming most of their lifetime health care in another province.
In a recent study, the migration patterns of Canadian seniors and health-care spending over a 36-year period starting in 1980 to 2016 were analyzed. During this period, B.C. gained a net total of 40,512 seniors. In contrast, Quebec experienced a net loss of 37,305 seniors during the same period.
The estimated cost to B.C. for health-care expenditures related to these seniors was $7.2 billion. Quebec, by comparison, likely saved about $6.0 billion during the same 36-year period from seniors migrating out of the province. Of course, taxes paid by migrating seniors mitigate these costs or savings. The study estimates that up to 36 per cent of the cost to B.C. could have been offset by taxes and up to 19 per cent of savings to Quebec could have been reduced.
To be clear, the problem is not that seniors are migrating between provinces. But migration of seniors across provincial borders brings to light an embedded problem within current government financing of health care.
All government financing of Canada’s health-care system is done on a pay-as-you-go basis, meaning there’s no pre-funding of expenses. Rather, annual tax revenues finance annual health-care spending in the same year. As a result, there’s a mismatch between the prime earning years of most Canadians and the years they are most likely to consume health-care services.
The migration of seniors is just one problem with Canadian health care, which is fraught with broad systemic deficiencies. Therefore, simply introducing a Band-Aid mechanism to solve this particular issue would miss the larger opportunity—and indeed need—for broad reform of our health-care system based on successful real-world alternatives in other countries that, like Canada, maintain universality.
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Ashley Stedman
Jason Clemens
Executive Vice President, Fraser Institute
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