Health care is the largest government expenditure in Canada.  The ageing of our population has created anxiety about the ability of our health care system to meet future needs.  Likely there will be many health care changes over the next few years.  One change underway is the Canada Health Transfer (CHT) (http://www.fin.gc.ca/fedprov/cht-eng.asp ).  This is the largest movement of money from the federal government.  A new calculation beginning in 2014 is determined by the following:

CHT transfer payments are made on an equal per capita basis, and include both cash and tax point transfers. Starting in 2014-15, provincial and territorial CHT transfers will be allocated on an equal per capita cash basis only.

The per capita approach has not been received well by some premiers.  Jurisdictions with older populations may feel they are penalized by a simple per capita approach when their health care costs are likely to be higher.  Some provinces or territories would prefer an age-adjusted per capita approach.  However, the development of an algorithm to assessment an appropriate way to adjust the per capita approach would be extremely complex.  Some issues that would arise in creating a suitable algorithm are presented below chart #1.  First, an objective look at the trends in median age by geographic jurisdiction provides some interesting insights.

Chart 1 shows that half of the provinces or territories (Newfoundland/Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Ontario and BC) have a median age over 40 years.  Chart 1 also provides a historical look at how the provinces and territories have aged – or in some cases gotten younger – at different census points.  The census year 1961 is particularly interesting because every geographic area experienced a drop in median age due to the baby boomers, with 1959 being the peak birth year.

Chart 1:  Median age of province/territory by census year

Median age Census year
1921 1951 1961 1991 2001 2011
Canada 23.9 27.7 26.3 33.5 37.6 40.6
Newfoundland and Labrador ··· 21.6 19.1 30.8 38.4 44.0
Prince Edward Island 24.8 26.2 24.5 32.8 37.7 42.8
Nova Scotia 23.6 26.5 24.9 33.4 38.8 43.7
New Brunswick 22.2 24.2 22.3 33.2 38.6 43.7
Quebec 20.8 24.8 24.0 34.2 38.8 41.9
Ontario 26.8 30.1 28.4 33.6 37.2 40.4
Manitoba 22.7 29.0 27.7 33.0 36.8 38.4
Saskatchewan 21.2 27.4 26.6 32.6 36.7 38.2
Alberta 23.6 27.2 25.5 31.3 35.0 36.5
British Columbia 29.8 32.0 29.8 34.7 38.4 41.9
Yukon 40.7 27.7 25.6 31.0 36.1 39.1
Northwest Territories 19.7 22.5 21.4 24.8 30.1 32.3
Nunavut 20.1

 

The complexity of considering an age-adjusted transfer payment approach

1.  Provinces such as Nova Scotia and B.C. are retirement destinations.  This implies that their older populations will continue to grow as more Canadian’s retire.  Since health risks increase with age, health care demands are likely to rise with the increasing retiree population.

2.  Younger residents are leaving some provinces/territories due to the lack of employment.  Those with higher education are more likely to leave.  Health is highly correlated with education and this means that those remaining behind are more likely to require health care services.

3.  Those areas receiving retirees are likely attracting individuals who are from higher socio-economic groups and therefore can afford to move.  This would be especially true in provinces where housing is expensive (such as B.C.).  Other jurisdictions are left with a greater number of less-healthy retirees.  Consequently those ‘giving’ provinces/territories lose not only on their lower per capita count but also have higher health care costs for those remaining retirees.

4.  Provinces/territories where housing is expensive increase the likelihood of young couples delaying or skipping parenthood.  This decrease in fertility rate will increase the rate that the jurisdiction ages.

5.  Geographies with more moderate climates makes it possible for retirees to lead more active lifestyles.  Barriers such as driving in the snow, fear of slipping on ice are greatly reduced for these residents, increasing their levels of activity.  Active lifestyles will extend the health of the retirees and result in lower health care costs.

When a population is aging there are two phenomena occurring: 1-fertility rate is decreasing and, 2-life expectancy is increasing.  The reasons for these changes will vary by country but the outcome is the same – more older than younger people.  The federal government has made it clear that a per capita measurement is the only one they will use to determine the CHT payment.  Any other approach would require the use of health care and demographic data in order to assess the health needs of each province or territory population and to forecast trends.  Age on its own cannot be an indicator of health care usage.  Reaching consensus on a feasible and suitable algorithm would be unlikely.  Although imprecise, the per capita choice is realistically the only feasible option.