Think tank suggests payroll tax to fund Ontario drug program

Ontario Drug Benefit program should be pre-funded: C.D. Howe

The cost of provincial pharmacare is set to rise “precipitously,” with spending on Ontario’s drug benefit plan for seniors projected to increase from about one per cent of provincial income to a five per cent by 2061, according to a C.D. Howe Institute report.

To prepare for this rising spending on drugs, as baby boomers age and workforce growth slows, authors Colin Busby and William Robson recommend partial prefunding of the Ontario Drug Benefit (ODB) program to put the program on a stronger and more sustainable footing.

“Recent evidence suggests that a business-as-usual approach to the ODB amounts to wilfully passing an exorbitant bill to the future – risking some combination of a taxpayer revolt and more stringent rationing of access to drugs,” said the authors. “Reforms that spread foreseeable costs more evenly over time, accompanied by greater transparency and opportunities for better balances of costs and benefits with improved flexibility for consumer choice, would brighten this prospect.”

They propose a payroll tax, a levy or an increase in the harmonized sales tax (HST) as funding models in A Social Insurance Model for Pharmacare: Ontario’s Options for a More Sustainable, Cost-Effective Drug Program.

“Ontario, like all jurisdictions, faces tough challenges at the intersection of fiscal and health policy,” said the authors. “Partial prefunding and benefit-payment reform of the ODB would put a key health program on a stronger and more sustainable footing.”

A social insurance-inspired pharmacare program, loosely modeled on the Canada Pension Plan, might spread the cost of drugs for an aging population over time, according to the report.

For more information, the report can be found at C.D.Howe.

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