December 15, 2017

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Opinion

Health-care premiums have failed

RUTH BONNEVILLE / WINNIPEG FREE PRESS FILES</p><p>Manitoba Premier Brian Pallister, with Crown Services Minister Cliff Cullen, discuss the survey on health-care premiums last week.</p>

RUTH BONNEVILLE / WINNIPEG FREE PRESS FILES

Manitoba Premier Brian Pallister, with Crown Services Minister Cliff Cullen, discuss the survey on health-care premiums last week.

The government of Manitoba is contemplating a new tax to pay for increased health expenditures, according to its 2018 budget consultation documents. It asks Manitobans to choose between a health-care premium and reduced services. This presents a false choice based on misleading information.

Manitobans should look carefully at other jurisdictions that have introduced health premiums before deciding whether this is a model we want to use to pay for our health system.

Health premiums in Ontario and British Columbia are regressive taxes that harm low- and middle-income families. In B.C., base medical service premiums (MSP) kick in when individuals earn as little as $24,000 per year, about the amount earned by a single minimum-wage worker. Families with incomes of $42,000 per year pay the maximum fee even when they are below the federal poverty line. A family with both parents working full time at minimum wage pays $1,800 per year in health premiums.

The Ontario Health Premium (OHP) is only somewhat less regressive. Even so, a family earning $25,000 pays $300, or 1.2 per cent of annual income, while a family earning more than $200,000 pays $900, or only 0.4 per cent of income.

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The government of Manitoba is contemplating a new tax to pay for increased health expenditures, according to its 2018 budget consultation documents. It asks Manitobans to choose between a health-care premium and reduced services. This presents a false choice based on misleading information.

Manitobans should look carefully at other jurisdictions that have introduced health premiums before deciding whether this is a model we want to use to pay for our health system.

Health premiums in Ontario and British Columbia are regressive taxes that harm low- and middle-income families. In B.C., base medical service premiums (MSP) kick in when individuals earn as little as $24,000 per year, about the amount earned by a single minimum-wage worker. Families with incomes of $42,000 per year pay the maximum fee even when they are below the federal poverty line. A family with both parents working full time at minimum wage pays $1,800 per year in health premiums.

The Ontario Health Premium (OHP) is only somewhat less regressive. Even so, a family earning $25,000 pays $300, or 1.2 per cent of annual income, while a family earning more than $200,000 pays $900, or only 0.4 per cent of income.

This approach hurts the working poor who already struggle to pay their rent and put food on the table. For them, a health premium would require cutting back on basic necessities, leaving fewer options for healthy food, good housing or convenient transportation, and sacrificing comforts that many other families take for granted. Families in higher income brackets have much more cushion room to budget for new expenses, especially if phased in with advance notice.

Escalating premiums may also discourage labour market participation through their interaction with other taxes and benefits. If health premiums increase in the same income brackets where other benefits like rent assist or the Canada Child Benefit decline, this may result in punishingly high effective marginal tax rates for low-income households.

The B.C. MSP imposes an effective marginal tax of up to 14 per cent on low-income families earning less than $30,000 per year. This is on top of other federal and provincial taxes they pay. For families just scraping by and seeking better opportunities, up to one out of every seven new dollars they earn can go to pay for health premiums.

The Ontario OHP has a complex premium schedule that imposes sharp increases with a marginal tax of up to 25 per cent for some middle-income households. The definition of taxable income is different for OHP than for income tax, needlessly complicating the work of payroll managers.

Premier Brian Pallister has said that he envisions a discounted health premium for low-income families. However, applying for a discount could tangle both families and government in red tape.

Collecting health-care premiums requires a complex bureaucracy, often running parallel to the existing tax system. In order to receive a discounted rate, B.C. residents with incomes below $42,000 must apply for a subsidy. As an application-based system, thousands of families eligible for reduced rates pay the full premium. As of March 2015, B.C. residents were collectively over $700 million in arrears, facing large overdue bills and harassment from collection agencies.

The administration of MSP is contracted out to Maximus, a U.S.-based corporation. This opens up B.C. residents to the risk that a foreign government could gain access to their sensitive health information under conditions of the U.S. Patriot Act.

In B.C., families that cannot afford health coverage have the option to opt out. Opting out leaves families responsible for all medical bills — a dangerous step toward privatization and the abandonment of universality of the health system Canadians pride themselves on.

Health premiums are a failed experiment. The newly elected B.C. NDP government announced that it will cut premiums by 50 per cent next year and phase them out fully over its four-year term. Other provinces such as Quebec and Alberta have tried health premiums and eliminated them.

Manitoba’s government anticipates a shortfall because of changes in the provincial health transfer formula. While it is in the process of restructuring many parts of the health system, it is unclear how much savings will be obtained. Long-term, a better way to reduce pressure on the health system is to look upstream at the costs of poverty, and working to build a healthier society. To the extent new funding sources may be needed, the existing tax system provides a fairer and more transparent way of raising revenue.

Josh Brandon is a community animator with the Social Planning Council of Winnipeg.

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