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How to replace MSP in BC? A $2.4 billion challenge.

The challenge of MSP reform in British Columbia.

Currently, British Columbians pay close to $2.4 billion in MSP premiums and will receive $18 billion in health related services this year.  On top of this BC will borrow close to $1 billion to build more health care infrastructure adding to the $7 billion worth of health related debt we currently have.  Remember, repayment of this debt and interest payments are not part of the Health Care budget.

So, when you hear about cuts…it is not the budget that is being cut.  It is more complex than that. Perhaps, that is a topic for another time.

MSP rates have been connected to the growth of the health budget.  That budget was $9.5 billion in 2001.  MSP rates have gone from $72 to $150 per month and everyone who earns more than $30K per year pays the same rate with no special treatment for seniors.  Many in BC are struggling with this tax as it is currently structured.

Clearly, something needs to change but we can’t just demand government get rid of a huge source of revenue without cutting expenses.  I don’t think folks want a $2.4 billion cut in the health budget. Maybe some do….  No more increases might be a good start as we have a lot of other priorities that need investments from government.

Here are a couple of ideas on how to replace MSP revenue:

Roll MSP into an existing tax – 2 options

  1. Personal ($8billion) and corporate taxes($2.6billion) – 23% increase in both rates to bring in an extra $2.4 billion.
  2. MST – Medical Services Tax – a Value Added Tax (VAT) that is harmonized with the GST replacing PST($6 billion) and MSP. The rate would have to be about 9-10%+GST to bring in $8.4 billion.

Here are two outside the Box ideas if you want to keep MSP but change the way it is charged.

  1. Charge more for out of province folks

Create rates based on your age then reduce the rate based on how many years you have paid taxes in BC. This helps our cost recovery from people who paid provincial taxes elsewhere during their high income and low health cost years.  End of Life care and seniors care is expensive and Canada has not saved for the future costs.  These are underfunded liabilities.  This policy could have a two-fold impact by driving down costs from a reduction in interprovincial migration and shifting the burden into a different kind of fairness.

  1. Monetize our health assets to reduce MSP premiums

Partnering with medical research companies we could allow access to our massive medical database in return for a share of any revenue generated from the associated discoveries.  This approach could be lucrative with this revenue being used to lower our MSP premiums.  Another bonus from this approach would be high paying medical research jobs right here in BC.  Creating an income stream from our public asset would be very helpful on a number of levels.

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