Le Québécois Libre, June 15, 2010, No 279.
The Quebec government is taking a step backward with its introduction of a new health tax called the “health contribution.” This new tax, which takes effect July 1st, will apply to all adults living in Quebec except those with low incomes, and will be collected when residents file their annual income taxes. According to Finance Minister Raymond Bachand, the contribution will be $25 (per person) in 2010, $100 in 2011, and $200 in 2012.
Over the most recent 10-year period (1999/2000 to 2008/2009), government health expenditures in the province grew at an average annual rate of 6.9 per cent, compared to 5.1 per cent for total available provincial revenues. Meanwhile, over the same period, the economy only grew by 4.4 per cent annually.
In his recent budget speech, Bachand acknowledged that Quebec’s health care system is in serious financial trouble. While this recognition of the problem is encouraging, the proposed new health tax will do nothing to solve the problem. Since the new tax is not linked to the cost of care or a person’s past or potential use of medical services, it is not connected to health care demand and consequently, will have no effect on current or future costs. Therefore, it will do nothing to tame the unsustainable growth in government health care spending.
Instead the government should follow through with its plan to introduce a health deductible, which would require Quebecers to pay a small user fee when using medical services. This would encourage patients to use the health care system more responsibly, a much-needed reform currently in use in many European countries. Unfortunately, the government is now backpedaling on the idea of the health deductible.
The problem with the current system is that patients pay for health care through taxes, meaning there is no price at the point of service. Without price signals, individuals do not have an incentive to control the amount (and type) of health care services they consume, which inevitably leads to excessive demand for health care services.
As government health care spending continues to consume a larger amount of provincial revenues, the government will eventually be forced to either increase or introduce new taxes or cutback the medical services that it currently provides, neither of which is good for patients and taxpayers more generally. Quebec must stop relying on this ‘paying more and getting less in return’ approach to funding health care.
Ontario introduced a similar tax in 2004 called the Ontario Health Premium which is also not linked to health care consumption. Ontario’s health tax has done nothing to improve the sustainability of government health care spending. Research shows that Ontario is projected to consume 50 per cent of provincial revenues by 2014.
The real solution to Quebec’s health care woes is to make people responsible for a portion of the health care services they use and the proposed health deductible does just that. This would create the necessary incentives for individuals to make reasonable choices when using medical services and reduce demand for unnecessary care. In addition, it would improve the allocation of medical resources as the supply of medical services would be determined by consumer demand.
The idea of requiring patients to pay a small user fee at the point of service until a determined deductible limit has been reached is not exclusive to Quebec. In fact, most European countries have some form of cost sharing at the point of service, and many of those countries have superior access to a higher quality of care than Canadians.
The primary resistance to cost sharing for medically necessary services in Canada is the belief that low-income individuals would be deterred from using health care services to the detriment of their health. The underlying assumption is that the rich would have access to high quality health care while the poor would not, and the health of low income families would suffer as a result.
However, the results of the RAND Health Insurance Experiment—a seminal study on the effects of cost sharing for medical services on health care utilization and health outcomes—indicates that such criticisms are mostly groundless. Moreover, in many European countries that have cost sharing mechanisms, low income individuals are exempt from paying user fees. There is no reason that Quebec, and ultimately other Canadian provinces, could introduce a health deductible for which low income individuals or families (determined by means-testing) would be exempt.
A health tax is a step backward for Quebec. Real reform and improvement in health care delivery will result from the rational proposal to introduce a health deductible. Now is not the time for Quebec’s government to get cold feet.
* Mark Rovere is a Senior Policy Analyst with the Fraser Institute’s Health Policy Research Centre.