Time to defuse the bomb that will explode when boomers turn 85

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The aging of Canada’s population is a powerful force that will stress government budgets.

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Some systems have less protection than others. At one end of the spectrum is the Canada Pension Plan: a highly monitored, partially pre-funded national program that actuaries have determined will be financially sustainable for the next 75 years. The program also has guardrails in place to ensure its long-term viability even if the future does not unfold as predicted. For example, if payroll contributions prove insufficient and the provinces can’t agree on raising the rates, there is a mechanism to make modest adjustments to pension indexing that will ensure long-term sustainability.

At the other end of the spectrum is our long-term care (LTC) system. This system has no national monitoring of its financial viability and is far from adequate today, let alone in the future when demand will become even more intense.

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Population aging has been blamed for the gaps that led to the pandemic crisis in nursing homes across Canada, but when it comes to LTC demand, we’re just at the tip of the iceberg. In 2021, the oldest baby boomer turned 76, an age at which the vast majority of Canadians are still living independently and do not require care.

We have not yet hit the critical threshold where large numbers of older Canadians will need care – a need that only becomes pronounced for those aged 85 and older. According to Statistics Canada’s Canadian Community Health Survey, approximately one in five seniors over age 85 have a severe disability, while for seniors ages 65 to 70, that figure is only one in twenty.

By the time baby boomers move into their 80s, a combination of factors will create intense pressure on our LTC system. Along with being the largest generation in history and having the longest life expectancies, they are also the first generation to have relatively few children. Adult children have traditionally been, and continue to be, the backbone of LTC in Canada. In fact, research by the National Institute on Ageing (NIA) has found that 75 per cent of all care is being provided informally by close family members.

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Using a complex population microsimulation model to project Canada’s future LTC costs, we at the NIA found that if Canada continues on its current track and loses its 75-per-cent “family discount,” the cost of publicly funded LTC will more than quadruple in 30 years, rising to $98 billion (in today’s dollars) from $22 billion currently. A cost burden of that size in 2050 would represent more than one-quarter of all projected provincial and federal personal income tax revenue.

Stakeholders across Canada unanimously agree that the status quo isn’t working. Fixing the problems in our LTC system will require fundamental change, but what has so far been missing is the collective will of policy-makers to make significant reforms with long-term payoffs.

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Good work has been done on a small scale across Canada; however, to date, there has been no meaningful, holistic and integrated national plan to move forward. Provinces must come together with a much broader view and develop a collective strategic response to these issues, with the federal government front and centre.

For example, experts overwhelmingly recommend helping seniors age at home – a solution that is both preferred by individuals and generally more affordable for the public purse. The prime minister’s mandate letter to Seniors Minister Kamal Khera recommends the establishment of a new benefit for those who choose to age at home, but, as always, the devil will be in the details.

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The COVID-19 pandemic has provided a grim reminder of the consequences of being vulnerable at advanced ages, while highlighting the gaps in our LTC system. Without fundamental reform, the situation is only going to get worse. Today, baby boomers make up a quarter of the population. They have the health, wealth and numbers to ensure the creation of adequate, financially sustainable systems to protect them over the coming decades, as they move into their 70s, 80s and beyond.

Otherwise, financing injections without a viable path forward will only make an already unsustainable system even more unaffordable.

Bonnie-Jeanne MacDonald is the director of financial security research at the National Institute on Ageing at Ryerson University; a fellow at the Society of Actuaries and  the Canadian Institute of Actuaries; and resident scholar at Eckler Ltd.