The Canadian Long-term Care Model: Why It’s Broken and How We Can Fix It

Alyssa HodderOctober 26, 2020October 21, 2020

When it comes to the future of long-term care in Canada, there are two critical issues we need to consider right now: who’s going to provide it, and how are we going to pay for it?

A panel discussion at our virtual Annual Canadian Employee Benefits Conference—with Dr. Bonnie-Jeanne MacDonald, director of financial security research at the National Institute on Ageing (NIA), Philippe Laplante, principal at Eckler Ltd. and Dr. Samir K. Sinha, director of health policy research at the NIA, moderated by Michael Nicin, executive director of the NIA—explored these issues and potential solutions.

The Canadian Long-term Care Model: Why It’s Broken and How We Can Fix It

Bridging the gaps

Long-term care is the largest form of hands-on care that isn’t covered under the Canada Health Act, noted Dr. Sinha, and the costs can be significant. The demand for these services is already unprecedented and is expected to grow further with our aging Canadian population, he explained.

The COVID-19 pandemic has also exposed significant gaps in the current system. For example, more than 430,000 Canadians have unmet home care needs today, and 40,000 are on nursing home waitlists, Dr. Sinha added.

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In the past, care needs were often met by family members who would provide those services on an unpaid basis, explained Dr. MacDonald. But the family unit is changing, and going forward, we won’t be able to rely on them as much for that care.

Between 2019 and 2050, there will be about 40% fewer close family members available to provide care. If all of those unpaid hours of care were picked up by the public system instead, that would add $27 billion to public sector costs by 2050, she added.

An individual burden

Private health insurance available through benefits plans can help, but it’s unlikely to be a sustainable solution—particularly as the ongoing trend among plan sponsors is to reduce or eliminate retiree benefits coverage altogether, said Laplante. It’s often up to the individual to pick up the slack—but that’s no small task.

To accumulate $250,000 by age 60 (assuming a 2.5% annual return), a
40-year-old today needs to save $9,800 a year, he explained. Especially in a COVID-19 world—where people are facing terminations, layoffs or salary freezes and may be dipping into their savings just to stay afloat—that’s likely not a realistic expectation.

New solutions needed

So where do we go from here? The panel proposed some potential solutions to address the long-term care dilemma, including:

Expanding or changing coverage for long-term care under benefits plans;
Providing dollars in health care spending accounts for workers to use based on their needs; and
Creating new savings vehicles to make it easier for people to save for their future care.

In particular, they proposed the creation of an individual health savings account—structured like an RRSP, with favourable tax treatment, but designed specifically for health expenses. However, the Canada Revenue Agency would have to expand the acceptable uses of these funds to allow for the creation of these vehicles.

There are no easy answers, but the pandemic has brought to light the fact that Canada’s long-term care system needs substantial reform. Without a viable solution in the public space, it will be up to the individual to ensure their future care needs are met—and that burden will be too great for many to bear.

Missed this session? You can still register for the conference and watch it here. Or, join or renew your International Foundation membership and get free access to all of our 2020 virtual conferences.

Alyssa Hodder
Director, Education and Outreach – Canada