Summary

• New analysis from the University of British Columbia shows that population aging is the primary driver of PEI’s current deficit.
• Medical costs linked to baby-boomer aging now exceed $278 million annually.
• If PEI still had the same age structure it did in 1976, when boomers were young, the 2025 budget would flip from a ~$184 million deficit to a ~$95 million surplus—without changing any spending or revenue policy.
• In short: PEI’s current deficit reflects a structural gap left by earlier governments that did not align medical-care revenues with an aging population—unlike Ottawa’s foresight in adapting the CPP for retirement income.
• Younger Canadians now contribute 20 to 40 per cent more of their income taxes toward seniors’ medical care and benefits than boomers did at the same age. Contemporary fiscal policy therefore obliges Millennials and Gen Z to subsidize their aging loved ones’ healthy retirements, even as they face far higher housing costs and greater financial insecurity than earlier generations.

Recommendation

PEI should launch a “Better Late Than Never” task force to design a generationally fair financing plan for medical care. Without a modernized approach to medical financing, the province will drift toward larger deficits, longer waits, and continued under-investment in other priorities. Any new revenue systems must protect vulnerable seniors, stabilize provincial finances, and lighten the load on younger generations whose wellbeing is deteriorating.

Key Evidence

Medical spending rises steeply with age: roughly $3,000 per person under 50, about $10,000 by age 70, and close to $37,000 by age 90. Each PEI resident age 65 and older represents about four under-50 patients in terms of medical demand.

This ratio allows us to estimate the impact of population aging on provincial medical spending, independent of overall population growth.

In 1976, PEI’s population was ~119,000, with only 11 per cent over age 64. That age structure translated into the medical demand of 170,000 “under-50 equivalent” residents. Boomers therefore grew up in a younger province with correspondingly lighter medical demands.

By 2024, PEI’s population had grown to ~179,000. If the age structure had remained the same as in 1976, the province would have the equivalent of 256,000 under-50 patients—a 50 per cent increase in medical demand that tracks population growth.

However, one in five PEI residents is now over age 64, making actual medical demand far higher: 334,000 under-50 equivalents. This represents an 97 per cent increase overall, with aging alone adding the equivalent of 78,000 extra younger and middle-age patients beyond population growth.

Applying this “under-50 equivalents” framework to PEI’s population allows us to estimate the fiscal footprint of aging.

If PEI still had just 11 per cent of its population age 65 and over – not 20 per cent – its 2025 medical-care expenditure plan would be $963 million, rather than the $1.24 billion forecasted in the 2025 budget.

Without these additional aging-related expenditures of $278 million, PEI’s projected $184 million deficit would convert to a $95 million surplus.

The implication is that PEI’s deficit is structural. Decades ago, successive governments understood that population aging would increase medical costs but did not modernize revenue systems to keep pace—unlike the federal government’s CPP reforms in the 1990s, which anticipated boomers’ increased use of public pension benefits.