Medicare and the Retirement Conundrum
By Murray Dobbin
There’s been lots of attention paid recently to the Canada Pension Plan and how to extend it, and news stories and commentary about how adequate or otherwise Canadians’ retirement situation will be. The sunshine boys over at the C.D. Howe Institute (a.k.a. the Isn’t Capitalism Wonderful Institute, or ICWI) reassure us that everything is fine and we should just ignore all the warnings. The author of one ICWI study observes: “Canadians frequently read that they borrow too much, spend too much, save too little, retire too early and live too long.”
Well, yes, they are told that because it is regrettably true. Personal debt levels are at a record high of 163 per cent of after-tax yearly income, savings rates are a small fraction of what they were in the 1970s and ’80s, and low interest rates (trying to goose a system that has now adjusted to goosing) has given them license to borrow madly off in all directions. According to a 2014 BMO Rainy Day report, “Three in 10 Canadians are living paycheque to paycheque or spending more than they earn… Forty-seven per cent of Canadians said they have enough to cover three months or less… One in five — 19 per cent — have less than $1,000.” The 2014 survey of employees by the Canadian Payroll Association (CPA) “shows more people are overwhelmed by their debt, are saving less and would face real hardship if their paycheque was delayed by a single week… Just over half, or 51 per cent, of the 3,211 employees surveyed by the CPA said it would be tough to make ends meet if their paycheque was delayed by one week.”
Between 1980 and 2005, the actual dollar (after inflation) increase in annual income in Canada was $52 — that’s right, just $2 a year. But I guess you could save that.
Enough about the brutal facts that everyone except the folks at the ICWI know about. Whatever is done with the CPP — however much wages may or may not increase and however we deal with the 17 per cent of mortgage holders who will be under water if interest rates go up two per cent — there is another elephant in the room. It’s called Medicare — or, if you’ve been paying attention, the threat to Medicare.
When actuaries and economists work out their retirement numbers, they do so with a bunch of working assumptions. But if the plan for Medicare designed by our prime minister is actually carried out (and the numerous other threats materialize), there is one very large assumption that will be patently false. Medicare allows everyone, including the one per cent, to lop off a big chunk from their retirement needs. In the U.S., private health insurance costs the average American family $15,000 a year — and even that covers only a portion of costs.
A U.S. study, “Get Sick, Get Out: The Medical Causes of Home Mortgage Foreclosures,” shows just how devastating sickness can be without public healthcare. “Half of all respondents (49 per cent) indicated that their foreclosure was caused in part by a medical problem.” The study also examined the impact of medical disruptions — large, out-of-pocket health payments, loss of work due to medical issues, and those tapping into home equity to pay medical bills. Sixty-nine percent of respondents reported at least one of these factors.
Medicare isn’t dead yet, you say. But for Canadians looking to retire in 25 to 40 years, given the trends it well could be. Medicare is under attack on so many fronts, and it will take incredible determination on the part of those who will need it to ensure it’s there when they retire. Yet younger generations — who face the greatest threat of losing public health care — don’t seem to think about it that much. They should — and before the fall election.
The number of vultures circling the most lucrative public service plum in the firmaments is truly scary. They are driven by the fact that there is almost nowhere else to invest the hundreds of billions of idle cash sloshing around in corporate coffers. The obscenely profitable private system in the U.S. is a powerful motivator.
The big five vultures anticipating the joys of feeding off Medicare’s carcass include a B.C. medical privateer’s legal challenge, a major trade deal, the public-private partnerships fleecing health budgets of hundreds of millions of dollars in excess costs in virtually every province, a new domestic services treaty, and lastly, Prime Minister Stephen Harper’s new, imposed health “accord” that will decrease federal contributions to the provinces by $36 billion over 10 years.
Dr. Brian Day’s challenge, based on the Charter of Rights and Freedoms, is perhaps the most frightening, because if he wins it will effectively constitutionalize the right of health care corporations to compete with Medicare. Researcher Colleen Fuller’s CCPA study, “The Legal Assault on Universal Health Care,” details how “Day wants the B.C. Supreme Court to legalize extra-billing, user fees and private insurance, creating an American-style health care system here in Canada.” In the U.S., in 2004, “health care regulation cost up to $340 billion out of a total health expenditure of $1.7 trillion. In spite of such high expenditures, fraud costs the U.S. health system $75 billion annually.”
The flurry of corporate rights agreements being pursued by the Harper government are also a threat to the viability of Medicare. The Canada-EU deal, the Comprehensive Economic and Trade Agreement, will immediately add at least $2 billion to drug costs in this country. The international Trade in Services Agreement (TiSA) now being negotiated in secret threatens to apply the deregulatory imperative of investment agreements explicitly to services, including health care. As Public Services International has pointed out, TiSA “would restrict governments’ ability to regulate, purchase and provide services. This would essentially change the regulation of many public services from serving the public interest to serving the profit interests of private, foreign corporations.”
But by far the most dangerous threat to Medicare is our prime minister, who loathes Medicare more than any other aspect of Canadian governance and democracy. Harper actually quit politics in the late 1990s to become the head of the viciously right-wing National Citizens Coalition — an organization founded in the early 1970s explicitly to fight Medicare.
Until 2014, Medicare in Canada received federal funding through a 10-year, legally binding accord negotiated by the provinces and the federal government, providing them with a six per cent increase every year. But what is in place now is a 10-year funding formula imposed on the provinces with virtually no consultation. Its increase per year is just three per cent, which means a loss of $36 billion over the 10 years. It is classic Harper — make a structural change whose bite is worse and worse as years go by. The underfunding systematically pushes provinces to cut and privatize.
Harper has abandoned all federal oversight or guardianship. There are no strings attached to the money. And the equalization aspect of the former accord is also gone, meaning increasingly unequal health care across the country and an erosion of the principle of universality. Lastly, the current funding formula not only brings the funding contribution of Ottawa to a record low 19 per cent, but it is not legally binding. If Harper wins the election, he could unilaterally chop billions from Medicare any time he chooses.
Some 40 per cent of Canadians can’t be bothered to vote in federal elections, mistaking ill-informed cynicism for sophistication along the lines of “they’re all the same.” I wonder if they’ll remember that refrain 30 years from now when they have to remortgage their house to pay their medical bills.
