January 8, 2015 – Newfoundland and Labrador face a $65 billion fiscal burden – the future 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: Are Demographics a Fiscal Iceberg for Newfoundland and Labrador?,” authors William B.P. Robson, Colin Busby and Aaron Jacobs find that the province faces a liability related to demographically sensitive programs that is larger than the provincial GDP, raising the prospect of the province doubling the share of provincial income it collects as taxes.
“Newfoundland and Labrador’s looming liability amounts to $73 billion, of which $65 billion – more than 90 percent – relates to healthcare,” remarked Busby. “To cover the additional 50-year cost of these programs, the province would need that much in assets yielding income at the same rate as its long-term bonds. This is a huge amount – an iceberg indeed – and is more than double the provincial GDP, or some $140,000 per Newfoundlander and Labradorian,” he adds.
According to Robson: “One way to mitigate the impact of rising costs in some healthcare services would be to follow the lead of the late-1990s reforms to the Canada and Quebec Pension Plans, which converted them from pay-as-you-go to schemes in which a portion of premiums collected from people today prefund their future needs.”
Recommendations to improve the sustainability of Newfoundland and Labrador’s healthcare system include:
- Incorporate team-based primary care models where patients can get comprehensive non-major services from an organized group of healthcare professionals;
- Better coordinated care for patients after they leave hospital;
- Electronic health records;
- Let less expensive medical providers, such as nurse practitioners, deliver simple services that are currently performed by more expensive doctors; and
- More use of clinical evidence to reduce variation in diagnostics and therapeutics use.
Because it is set to age faster than most provinces, the authors conclude that Newfoundland and Labrador should be increasingly concerned about the impact of demographic change on its fiscal situation. They state that “in the face of this fiscal iceberg, selective prefunding and benchmarking against other provinces’ best practices can help Newfoundland and Labrador deliver high-quality healthcare in a sustainable fiscal framework.”
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank.
For more information contact: William B.P. Robson, President and CEO, and Colin Busby, Senior Policy Analyst, C.D. Howe Institute, at 416-865-1904; E-mail: amcbrien@cdhowe.org.