Prince Edward Island Confronts A $14 Billion Fiscal Glacier

Summary:
Page Title:Prince Edward Island Confronts A $14 Billion Fiscal Glacier – C.D. Howe Institute
Article Title:Prince Edward Island Confronts A $14 Billion Fiscal Glacier
URL:https://cdhowe.org/publication/prince-edward-island-confronts-14-billion-fiscal-glacier/
Published Date:February 27, 2013
Accessed Date:February 15, 2025

February 27, 2013 – Prince Edward Islanders carry a $14 billion fiscal burden – the higher tax bill for increased healthcare costs over the next half-century – and should prepare now for the coming demographic squeeze, says a report released today from the C.D. Howe Institute. In “Managing Healthcare for an Aging Population: Prince Edward Island’s $14 Billion Healthcare Glacier,” authors Colin Busby and William B.P. Robson recommend that the province prefund selected healthcare services and benchmark against other provinces to get better health bang for their tax bucks.

“Publicly funded healthcare’s claim on provincial resources continues to rise in Prince Edward Island,” said Colin Busby. “Our projections show the share of demographically sensitive programs – healthcare and education – rising from 20.3 percent of provincial GDP today to 32.0 percent over the next five decades. The implicit liability amounts to $15 billion (of which $14 billion is for healthcare alone) or about $99,000 per Islander. Meeting these demands from its own resources would require the province to tax a higher share of provincial income in the future,” added Busby.

The study projects Prince Edward Island’s population and the impact of demographic change on government revenues and programs. Among its recommendations:

  • Prefunding: finance selected healthcare programs similarly to the Canada Pension Plan, which converted from pay-as-you-go to a model in which a portion of premiums collected from participants today prefunds their own benefits in the future.
  • Benchmarking best practices: while Prince Edward Island spends less than most  provinces on physicians and drugs, it spends much more on administration. Having administration costs in line with the national average, for example, would lower its spending by some $14 million annually.

“Comparing bang-for-buck in these areas with other provinces could help Prince Edward Island deliver quality care without compromising other fiscal goals, such as fair tax rates for tomorrow’s working population,” commented William Robson.

Click here for the full report.

For more information contact: Colin Busby, Senior Policy Analyst, or William Robson, President and CEO, C.D. Howe Institute; 1-416-865-1904; email: cdhowe@cdhowe.org.

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