Canadians ill prepared for long-term health care costs: report

The solution is one of several recommendations CLHIA made in its report to help the government address the $590 billion funding shortfall it will face as baby boomers pass through old age and require more long-term care (LTC). CLHIA estimates that, by 2036, as many as 25% of Canadians will be over 65 and require more basic living supports, such as caregiving and assisted-living services.

Like an RESP, the new vehicle would allow Canadians to contribute savings to a tax-sheltered account. The government would also top up those contributions. When the money is withdrawn, only the growth on the funds in the account, as well as the government contributions, would be subject to tax. The client’s own contributions would not be taxed. In addition, the marginal rate of the client is likely to be lower when they withdraw the funds later in life.

“By introducing this RESP-like savings vehicle, the government would help bring home the message that long-term care is an important issue for Canadians to address and they are accountable for its costs,” says Stephen Frank, vice-president of policy development at CLHIA.

One of the largest roadblocks when it comes to persuading clients to set money aside for LTC is the misconception that government programs will be enough to cover their care costs.

“Government programs only cover about half the costs for long-term care and [clients] don’t find that out until down the road,” adds Frank. “This is why a combination of public and private funding needs to be accumulated beforehand.”

CLHIA also suggested that the Canadian government follow the U.S. lead and offer tax credits for citizens who purchase LTC insurance. Currently, LTC insurance is not covered in most employer benefit packages and is an extra cost that clients incur to have themselves covered. This type of coverage is provided when a person cannot perform at least two of the six essential activities of daily living (eg. bathing, eating, dressing) or if they require supervision due to being mentally impaired.

To reduce the funding gap, the report also recommended that the government introduce reforms in the way care is structured and funded within institutions. It suggested the government provide funding to LTC facilities on a per-patient basis, as opposed to providing institutions with a lump-sum at the onset of each calendar year. “This would make institutions more competitive and cost efficient,” adds Frank.

Currently, the government spends about $595 billion on LTC programs that range from providing in-home assistance to subsides for assisted living. The report anticipates total LTC costs will grow to $1.2 trillion by 2036.

By finding more ways for individuals to receive care in their homes, as opposed to institutions, CLHIA estimates that the government could save over $62 billion in that time frame. Another $77 billion in savings could be achieved by moving patients who do not require acute care out of hospitals and into long-term facilities.

“As with any long term challenge that grows with time, the sooner you take action the better,” says Frank. To promote its solutions, CLHIA will be meeting with finance and health ministers across the country later this year.

LTC is one of the most undersold health insurance products sold in Canada. According to Toronto-based Sun Life Financial Inc., for every 100 life insurance policies that get sold, only one LTC policy is sold. As of 2010, CLHIA found that there were 385,000 Canadians with this type of insurance coverage.