Pensions & Peace of Mind Series: Long-Term Care
It is no secret that a secure and enjoyable retirement requires critical thinking, strategic planning and diligent budgeting. Many Canadians are aware of this but are unaware of the fact that a portion of that retirement budgeting must be allocated for long-term health care costs. This may come as a surprise to some since, for the most part, Canada’s single-payer health-care system has been designed in a way that rarely requires individuals to fund their own health-care costs. Yet, the Canada Health Act (CHA), which simultaneously establishes the framework for the Canadian health care insurance system and dictates the conditions that the provinces and territories must meet to receive their maximum share of federal funding for health-care delivery under the Canada Health Transfer (CHT), does not guarantee publicly funded insurance for long-term care. What this means is that a person who no longer is able to live independently due to a debilitating illness or a chronic disease and who has to rely on long-term care whether it be received in one’s own home or in an assisted living facility — may need to pay a significant portion of the tab.
In terms of public funding, there are a variety of programs — most of which are at the provincial level —intended to help offset long-term care costs, but these programs vary substantially across the provinces and territories and also the socio-economic landscape. Yet even with the existing limited patchwork of provincial programs, a significant portion of the costs must still be absorbed by the individual requiring care.
Over the coming decades, Canada’s changing demographics will begin to place an increasing level of stress on the existing long-term care system in Canada. There will be a dramatic rise in the costs of long-term care and, at current funding levels, also a massive funding shortfall to pay for the increasing demand for long-term care services. Why will this happen? To put it simply, Canada’s large population of baby boomers is beginning to move into old age. Analysis shows that by 2036, about 25 per cent of all Canadians will be over 65 years of age, compared to 14 per cent today. This double-digit expansion in the percentage of elderly Canadians will push up the demand for long-term health care since a larger number of older Canadians means that a greater number of Canadians will be diagnosed with chronic diseases like Alzheimer’s or other forms of dementia as well as strokes and cancers. The consequence will be a substantial increase in the demand for long-term health care services, a demand which will quickly outstrip the current supply of physicians, nurses and other health care practitioners across the country who specialize in geriatrics.
To make matters worse, if the existing model of long-term care remains unchanged, costs will continue to rise due not only to the impact of demographics, but to the inefficiencies that also plague Canada’s long-term care delivery system. Often, individuals receive care in relatively expensive settings (like hospitals) when they could just as easily be helped in a less expensive long-term care facility or even in their own homes. Stephen Frank, Vice-President, Policy Development and Health for the Canadian Life and Health Insurance Association (CLHIA) — the trade association representing Canada’s life and health insurers — explains this problem. “Currently, 7 per cent of hospital beds in Canada are occupied by patients who could be more appropriately supported in a long-term care facility. There are also many Canadians who move into a long-term care facility because of inadequate home care support.” Put differently, because many Canadians must currently rely on more expensive forms of long-term care, the costs are adding up. A recent study by the North East Ontario Local Health Integration Network (LHIN) calculated that the average daily cost of a bed in a hospital is $842, while the daily cost of a bed in a long-term care facility is $126 and the cost of administering long-term care in the patient’s home is about $42 per day. With our current system’s bias towards providing acute care, we are not managing long-term care optimally, not only from a cost-effectiveness point of view but even more importantly, we are not providing continuing care in the most appropriate settings from a patient perspective.
Structural reforms are required to create a more efficient, cost-effective and patient-specific approach to long-term health care delivery in Canada. As Frank puts it: “In order to meet the increased demand, all of those involved, including health care professionals, long-term care providers, volunteers and governments have to work together to find solutions.” The cost of inaction is too high to ignore. For instance, it is estimated that the cost in current dollars to provide long-term care to Canada’s baby boomers as they pass through old age is roughly $1.2 trillion. But the current support programs and funding channels are not adequate to meet this need and there is currently a massive long-term care funding shortfall. The CLHIA broke new ground by quantifying the size of this funding shortfall in a recent study which identified that “at current levels of coverage, all governments in Canada have programs in place that will cover roughly $595 billion of future long-term care costs over the next 35 years. Clearly, this is well short of what is needed and leaves a funding shortfall of just over $590 billion to be financed either through government initiatives or individual savings by Canadians.”
While Canadians may hope that painful individual belt-tightening could be precluded by increased government spending, meaningful reform cannot be accomplished by these means. To do so would require permanent annual corporate and personal tax increases that would be unpalatable to most. As a result, the burden of responsibility for Canada’s long-term health care delivery system will largely fall on the shoulders of individual Canadians who will need to learn the importance of allocating a portion of their retirement savings to cover the costs of their own future long-term care.
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