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Canada’s long-term care funding crisis

About three-quarters of Canadians admit they have no financial plan to pay for LTC expenses

Oct 05, 2016, By: Brent Mizzen

The first step in solving a problem is recognizing the issue. Unfortunately, the majority of Canadians do not realize that they will have to take personal financial responsibility for a significant portion of their long-term care expenses. This lack of awareness is holding us back from the meaningful and timely reform that is required.

About three-quarters (74 per cent) of Canadians admit they have no financial plan to pay for LTC expenses, according to a Léger Marketing poll conducted on behalf of the Canadian Life and Health Insurance Association (CLHIA). Just as troubling is that 55 per cent of Canadians believe government programs cover half or more of these expenses.

These figures are alarming, given the reality of how LTC is funded in Canada. To put the magnitude of the problem in context, the CLHIA conservatively estimates that the cost to support the LTC needs of baby boomers through to 2050, as they pass through old age, will be about $1.2 trillion, and that existing government programs will cover only about half of this amount. Canadians are facing a $600 billion shortfall that needs to be addressed urgently. Solutions must be put in place now to prevent the shortfall from increasing.

Most provinces are already operating with significant deficits, and there are questions about the sustainability of the programs they currently provide to Canadians. This will limit the ability of governments to provide significantly more funding to cover LTC costs. While governments are not likely to be the sole solution, the CLHIA believes they can do more to ensure the system is more efficient and that Canadians take the needed actions to prepare.

For example, governments must become much more effective at ensuring care is provided in the most appropriate setting. As a starting point, they need to get serious about transitioning patients out of hospitals and into either LTC facilities or a home care setting. The CLHIA estimates that if individuals in hospitals who are waiting for an LTC bed were transitioned to an LTC facility, and if, at the same time, adequate support was provided to significantly increase the number of Canadians receiving care at home, governments would save $140 billion as baby boomers pass through old age. This type of reform would result in significant savings, which could be reinvested in other LTC initiatives, and would recognize that Canadians overwhelmingly prefer to age in their own homes if at all possible. CLHIA’s polling shows that 77 per cent would prefer to receive care at home.

To provide an incentive to Canadians to take responsibility for their own potential LTC costs, the CLHIA recommends the introduction of a non-refundable 15 per cent federal tax credit (and the provincial equivalent) against qualifying LTC insurance policy premiums. This initiative would help Canadians prepare financially and send an important message about the need for them to take financial responsibility for these costs.

We need to urgently help Canadians understand that they will have to take financial responsibility for their own care as they age. Governments will have to play an active role in helping them prepare for what lies ahead. The time for action is now; the longer we wait, the more problematic addressing these issues will become.

Brent Mizzen is assistant vice president, underwriting and policy, with the Canadian Life and Health Insurance Association.