About 15 per cent of Canadians are now senior citizens, that is, over 65 years old. In a decade, seniors will make up one-fifth of the population. The shift to an older population is gradual, but profound.
It will show up in many aspects of life, and Canadian society has not yet fully come to terms with what the changes will mean or cost, in part because it is easier to punt future expenses down the road.
An aging population will put stress on government budgets – for example, with more expensive seniors' prescription-drug programs. All provinces have such plans, though they vary from place to place in what they cover and the deductible amount, the amount a senior must pay. (The federal government also has a plan for its former employees.)
More seniors mean more drug consumption, since 85 per cent of seniors take at least one prescription drug and those over 80, on average, take five.
More drugs mean more costs for government. Those higher costs have to be paid, because the amount of money seniors pay for their prescription drugs represents a fraction of the cost to government.
Currently, these drugs are being paid for (that is, subsidized) by people under 65, a group that will shrink as a share of total population in years ahead. Put crudely: The working children of seniors will be paying a disproportionate share of their parents' drug costs. As now structured, the prescription drug plans represent an intergenerational shifting of costs from older to younger.
What's a government to do? The options are unpleasant, but higher costs cannot be avoided if seniors' drug plans keep being financed in the traditional way – money in, money out.
A government could: a) reduce the drugs on the formulary; b) cut government spending elsewhere and shift resources to seniors' drugs; c) use gambling revenues (except that in Ontario, for example, hospitals already take $1.6-billion of the $2.2-billion raised from gambling); d) raise overall taxes; e) make better-off seniors pay more.
Ontario, among others, is already on this path; its recent budget jacked up the annual deductible for people with incomes of more than $19,000 a year, and raised the co-payments per prescription. More changes are coming because, as the budget said, "to help ensure that Ontario's public drug program benefits are sustainable over the long term, it will be important to target benefits to those most in need." That word – "sustainable" – was used repeatedly. It means, in plain English, we can't afford what we have if we keep doing things the same way. Something will have to give.
What will give in Ontario will become clearer in 2019 (after the next provincial election), when the government has promised a "redesigned" program. It will, according to the budget, "improve long-term sustainability while ensuring access to prescription drugs for people who need them." It will "increase fairness and equity among beneficiaries."
These code words mean: This program can't be maintained at existing levels of benefits. Therefore, middle- and upper-income seniors will pay more. (The same shift will happen, by the way, with university fees that will rise for students of middle- and upper-income families but disappear for those below a certain income threshold.)
What the Ontario government will find is that even by increasing deductibles and co-payments, seniors' drug plans will still cost the treasury a packet of money that will keep increasing, albeit perhaps less slowly than before.
That's what happens when a government has to pay costs from tax revenues and individual payments every year rather than using a social insurance model, such as a pension plan, into which it and future beneficiaries pay.
Prescription drugs are almost a universal need for seniors. If we had a social insurance scheme for drugs, people would pay into a program, similar to the Canada Pension Plan, throughout their working lives. In exchange, they would receive drugs at a given age, say 65 or 67, with a deductible that is geared to income.
That way, we wouldn't be asking the children of seniors to essentially finance the bulk of their parents' prescription drug costs. Without prepayment – or social insurance, if you like – we'll be chipping and snipping programs to help make them "sustainable," as Ontario will do, and as will other provinces.
It would be so much better to have a national insurance scheme for seniors' drugs attached to the CPP. But we dream, one supposes.