Sean Speer, US deficit, deficit reductionThe 2016 Census showed that seniors outnumbered children for the first time in Canada’s history. This trend is only going to continue and it's up to our policymakers to recognize the stakes and respond writes Munk Senior Fellow Sean Speer in the Toronto Sun.

By Sean Speer, Dec. 15, 2017

This past week’s annual meeting between the federal, provincial, and territorial finance ministers was mostly animated by an inter-jurisdictional squabble about who should get the impending marijuana revenues. This debate about weed monies certainly received a lot of media and political attention.

But it’s a rounding error. It amounts to about one-tenth of 1% of total provincial tax revenues. If the tensions seemed high, it’s only because the stakes are so low.

Instead ministers should have focused on Canada’s aging demographics and their inexorable effects on the future of health care. This is far from a rounding error. It has the potential to do real damage to provincial and territorial budgets. The only question is whether policymakers do something before it’s too late.

The source of this demographic pressure is two separate, yet linked, trends.

The first is that older citizens disproportionately consume health care services. Nearly one of every two health-care dollars is spent on those aged 65 and older. This is intuitive. We need more care, services, and treatment (including pharmaceuticals) as we get older, frailer, and sicker.

The second is that this age cohort is the fastest-growing population in the country. Its share of the population is presently 16.9%. It could reach one-quarter by the mid-2030s.

One way to think of it is this: old people consume more health care and Canada’s demographic patterns will produce more old people. The confluence of these two forces will place a significant burden on provincial and territorial health-care spending and their attendant fiscal capacities for the foreseeable future.

The budgetary results are predictable. Provincial and territorial spending on health care is already nearly 40% of total expenditures. This will continue climbing. No province is immune. Eventually health-care spending will crowd out other public priorities and lead to higher taxes, more debt, or both.

Carleton University economist Frances Wooley calls it a “slow-motion train wreck.”

She’s not wrong, especially as our politicians fight over trivial matters. The provincial share of pot revenues will pay for less than one day of provincial and territorial health-care spending.

Ministers must realize that inaction (or distraction) amounts to a choice. The result is fiscal unsustainability as the Macdonald-Laurier Institute has warned in a new study. There’s no way of getting around it. Even slow-motion trains ultimately collide.

There are various steps that Canadian governments can take to mitigate these long-term risks. One is to reform health-care financing and delivery to enable patient cost-sharing and more competition. Another is to provide greater incentives to encourage the usage of Health Savings Accounts. A major inter-jurisdictional response could involve modernizing the tax and spending roles of the federal and provincial governments to enhance accountability and exclusivity. There are no doubt countless others.

But the point is that these are the debates that we ought to be having. We can’t afford to wait much longer. The 2016 Census showed that seniors outnumbered children for the first time in Canada’s history. This trend is only going to continue. It’s up to our policymakers to recognize the stakes and respond with proportionate solutions. It’s time to move on from the weed.

Sean Speer is a Munk Senior Fellow and co-author of the new paper, Running out of Time: Demographic Pressures and the Future of Canadian Health Care.

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