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Wednesday, January 30, 2008

Are health care premiums a “good” tax?

The Canadian Taxpayers Federation (CTF) will be delivering 2,000 more petitions to Premier Ed Stelmach tomorrow calling on the Alberta government to eliminate health care premiums. This brings their petition count to 11,000 names.

According to the CTF, Alberta's health care premiums cost the average family $1,056 per year and bring in $979-million in tax revenues. The 64,000 member strong, tax-fighting advocacy group thinks the Alberta government doesn’t need any more money and that eliminating health care premiums will help average families in need of tax relief.

It’s a nice thought, but I’m not sure scrapping health care premiums is a good idea. Health care isn’t free – and health care premiums are a good reminder of this. In fact, maybe these premiums should go up to reflect the rising cost of health care.

Instead of scrapping health care premiums, why not scrap public health care and invite Albertans to direct those same premiums toward private insurance? If that’s too radical a proposal, just cut general revenue and leave this user fee in place until Albertans are ready for a real free market solution.

Tell me why I’m wrong, Scott.

Posted by Matthew Johnston on January 30, 2008 | Permalink


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How about jacking them up to cover the entire system. The awakening to the reality of not only the cost but the total lack of improvement in monopoly unionized sloth service delivery should enrage the masses.

Posted by: John Chittick | 2008-01-30 6:08:27 PM

I'd be happy to Matthew.

For starters, you like most Albertans have been intentionally mis-led to think that health care premiums have something to do with health care. In fact they don't.

The revenues generated by premiums do not go into the health care budget, but rather into the provincial General Revenue Fund like every other tax. It is also not a premium like a normal insurance company would charge because it: a) is mandatory and b) doesn't change depending on your use or risk of use of the health care system.

Reminding people there is a cost to health care is fine, but we would argue it is sending the wrong message. The $44 per month premium sends the message that health care costs $44 per month, when the true cost is closer to $300 per month per Albertan. Secondly, it creates a sense of entitlement. "I paid my health care premium so I'm going to use the system." Third, seniors don’t have to pay it, and they are the highest users of the system, so how does that make sense.

Some, like Dr. Morton, have suggested the premium be eliminated in conjunction with a private parallel health care system in Alberta. The CTF would like both, but is not willing to wait on one for the other. It is clear there is little will in the government to change the current money-sucking health care system, so why should Albertans wait and suffer under this regressive tax while they wait and suffer on surgical wait lists too?

But again, the health care premium does not pay for health care nor is it a premium. They might as well call it the Alberta culture and arts fee, or the Alberta sustainable resource development levy.

You suggest a general income tax cut instead, which we wouldn't oppose, but would favour the health care premium first. Here are a few more reasons:

1. As mentioned it is a regressive tax. The tax is $1,056 per family per year regardless of whether that family earns $40,000 or $140,000. At $40k that is over 3% of their after-tax income. At $140k it's 1.5%. So it punishes low-to-middle income families the hardest.

2. It's a costly tax to collect. It costs $12-$13-million per year to collect and administer the premium tax, with almost half of that ($4.5-million in 05-06) going to pay private collection agencies.

3. Even if you don't pay the tax directly and your company pays it, it is still treated like a taxable benefit, so you have to pay the tax on it like it was income.

4. It would be an administrative help for businesses whose payroll department wouldn't have to calculate and mail the cheque in every three months.

For all these reasons and more, this tax has to go and go now.

Posted by: Scott Hennig | 2008-01-30 7:23:58 PM

Allow me to add one more reason to Scott's list of reasons to target the health care premium: Its visibility makes it easier to win public support.

When Harper announced a reduction in the GST from 7% to 6% and then 5%, many people pointed out that actually more good would be done by cutting other taxes and leaving the GST. But it is a highly visible and not well liked tax, so it made it easy to win points by cutting it. Similarly, not only do conservatives who want ALL taxes reduced like the idea of cutting the health care premium, but liberals who want health care to remain "free" for everyone like the idea too. Cutting the health care premium would be a very popular move, and rallying support for it would not be as difficult as for a more vague general revenue reduction. Pragmatically, going after the health care premium makes sense.

Posted by: Fact Check | 2008-01-30 7:47:10 PM

Cut them by all means but if you do, charge a per visit fee for going to the doctor or medi-clinic- depending on what the doctor thinks of your visit.

Posted by: DML | 2008-01-30 10:28:55 PM

I agree with DML to a degree. I think that charging pervisit is a much better way to go. People would think twice before running to a doctor over a common cold or hang nail.
A ten dollar fee would be perfect. Categorize the ailments in order of severity. If some of the older patients or terminal patients who need daily or weekly visits, would of course fall into another category where, they would not have to pay every day.
Not a plan that's thought out completely, but worth looking at.

Posted by: Boggy | 2008-01-31 6:39:38 AM

You could charge a higher fee. $10 for an average family is over 100 visits per family. A $50 fee would still save money for most families, is a better deterrent to frivolous visits and exceptions can be dealt with as Bogs points out for chronic or emergency situations.


Posted by: Epsilon | 2008-01-31 9:28:49 AM

Alberta tried user fees with very little success. People simply refused to pay, and doctors had to decide whether to treat them, or turn them away.

These fees are a nuisance, and as Scott points out they are going to general revenue. We have a surplus. Get rid of them.

Posted by: dp | 2008-01-31 10:38:51 AM

Since it is a single payer system, a call to the government could execute a lien. The word would get around and the "free riders" would soon be reduced in numbers.

Posted by: DML | 2008-01-31 10:39:58 PM

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