Canadian taxpayers will be on the hook for Canada’s underfunded health-care system, according to a new Fraser Institute report that calculated that the system had a $537.7 billion shortfall as of the end of 2010.
“The reality of this large and growing unfunded liability is that young Canadians will likely be hit with a significantly larger tax bill in future to pay for health care,” said Nadeem Esmail, Fraser Institute senior fellow and co-author of the report.
“In the absence of reform, governments will be forced to choose between further eroding non-health-care government services, further reducing available medical services, dramatically increasing taxes, or some combination,” Esmail added.
The report calculated that medicare’s unfunded liability increased by 2.1% to $537.7 billion in 2010 relative to 2006 levels.
According to the Fraser Institute, most Canadians view medicare as an insurance plan where individuals contribute funds when they’re younger and receive benefits later on. But it states that medicare is actually funded on a “pay-as-you-go” basis, where current contributions are used to pay the benefits of current recipients.
“Governments at both the provincial and federal level pay for medicare out of general revenue and neither level of government has assets or reserve funding to pay for promised future benefits,” Esmail said.
Esmail attributed the problem to an aging population and said today’s tax rates won’t cover the future needs of Canadians.
“Without fundamental reform to Canada’s health-care system, young Canadians will be digging much deeper to pay their future tax bills.”