The Globe & Mail: Recent health care deal is a win for retirees. The finances of younger Canadians are collateral damage

Originally published in The Globe & Mail's Young Money on February 17, 2023

Federal and provincial leaders just agreed
Ottawa would increase its spending on medical care by $196-billion over the next decade. No mention was made of a plan to pay for this new investment, nor was there any consideration of its financial implications for different generations.

So I ran calculations from my lab in UBC’s School of Population Health. Here are the main take-aways: The new health money is a win for the personal finances of retirees. But it’s a different story for younger residents, who must pay an ever-growing amount in taxes for the medical needs of our aging population by comparison with what baby boomers paid for retirees when they were younger.

These divergent generational impacts require more attention from elected officials – something more likely to be forthcoming if governments appoint high-ranking officials responsible for generational fairness.

Such an official could draw attention to the fact that over the 10-year period, the $196-billion will pay for an extra $12,000 in medical services for every Canadian over 65, $4,400 for every resident 45 to 64 and $2,900 for every person under 45.

This information is readily available, because the Canadian Institute of Health Information annually publishes data about how medical spending per capita breaks down by age. When multiplied by Statistics Canada data showing the number of Canadians in each age group, it reveals that seniors receive 45 per cent of medical spending, even though they represent 19 per cent of the population. Retirees consume three times more medical spending than do those 45 to 64, and four times more than those under 45.

Perhaps that’s fine. It’s not surprising, because human beings become more frail as they age, with more complex care needs. But it is surprising that we rarely talk about whether today’s aging population paid enough taxes to cover their use of the medical care system.

Spoiler alert, they didn’t.

Research I’ve published in the Canadian Tax Journal and elsewhere shows that baby boomers came of age when 5 per cent of their taxes were directed toward medical care for retirees. When boomers started in the labour market, for every retiree there were seven workers contributing their tax dollars to cover the cost of medical and other services.

As birth rates dropped after the baby boom, everyone knew that the ratio of retirees relative to workers would eventually grow, and dramatically so.

And that’s exactly what has happened. There are now fewer than four workers for every retiree. Without dramatic increases to immigration, soon there will be fewer than three.

This is a big deal for the personal finances of younger Canadians. They now must pay 10 per cent of their total taxes for a retiree’s medical care – twice the percentage boomers paid.

It also has real implications for their wallets. A young person with an annual income around $25,000 pays about $100 more per year in income taxes for retirees’ medical care by comparison with taxes paid by a young boomer with the same income (after adjusting for inflation). A middle earner with income around $50,000 pays $250 more. A young worker earning in the top quartile (around $75,000) pays approximately $550 more. A worker in the top 1 per cent of her generation (earning over $200,000) pays approximately $3,500 more for retirees’ medical care by comparison with the boomer who was in the top 1 per cent when young.

Alas, young people’s additional tax payments often aren’t enough to balance government budgets. No party in the last federal election promised to balance the budget in a first term in office. Nor did any party in Ontario’s last election.

The absence of any real discussion about how to raise revenue fairly between generations is a primary reason that governments routinely run deficits when our economies are not in recessions. This is especially so when political dialogue steers clear of asking affluent members of the aging population to pay a fair share for the additional public investment in their generation’s medical care.

Canadian retirees should be worried, because the government is once again prioritizing their needs over leaving a financially sound legacy for their kids and grandchildren. This anxiety hits home all the harder this week because Campaign 2000 – a non-profit committed to ending child and family poverty in Canada – published another report reminding Canadians that Statscan data show we tolerate our children and their parents suffering higher rates of poverty than our retirees.

In recent letters to the editor, Globe readers, Len Ashby and Bob Seiler, who identify as a boomer and a senior, respectively, observe it’s time for retirees to stand up for their children and grandchildren. I agree. Standing up includes joining forces with your adult kids to call on governments to appoint ministers, deputy ministers or other high-ranking officials for generational fairness.

In the absence of ministerial-level leadership, governments will continue to overlook the age implications of budget decisions. The finances of younger Canadians are collateral damage.

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