BBE - Robert Brown

[Lord T Hawkeye]

This was in the editorial section of the BC newspaper "The Province" and from the title alone, I knew I was in for some big time bogosity.

Canada's health system isn't a ponzi scheme
Academics and policy wonks who wish to privatize many benefit delivery systems in Canada have a new media savvy salvo now aimed at the Canadian health care system.  They argue that since this system is not pre-funded, then it is a ponzi scheme with costs being passed to the next generation that are not sustainable.
According to wikipedia, "a ponzi scheme is a fraudulent investment operation that...is destined to collapse."  Is our health care system a ponzi scheme?
It's true that our health care system is not pre-funded.  Each year we have to find tax dollars to cover the benefit expenditures for that year.  But all tax based benefit systems have unfunded future commitments.  This includes all schools and all infastructure like highways.  We don't hear the same fears about them being unfunded.
What makes health care a more appropriate target is that the aging of the baby boom will put upward pressure on health care costs since such costs rise with age.  More accurately, these costs peak in the last few months of life.  So, as the boomers approach their time of death, health care costs will experience upward pressure.
Bill Robson of the C.D. Howe Institute estimates that the current value of this "implicit liability" of promised public healthcare spending under the pay as you go funding model by 2040 could be as much as 1.4 trillion (the value of the unfunded portion of future health care costs).
The impact of population aging on health care has been researched extensively - almost to death.  Population aging, by itself, will increase healthcare costs by about one percent per year.  If, today, healthcare costs 6000$ per person, then 10 years from now that will rise to 6,630$, purely because of population aging.
What percentage this will be of GDP will depend on how rapidly GDP is growing.  But with any growth, the overall impact will be less than one percent per annum.  Any rise in costs in excess of those projections will have other causes such as over servicing patients.
Thus if we are worried about health care costs, it is this modest added cost gap because of the aging of the baby boom that should be our focus rather than fully pre funding the system.
Many commentators point to the Canada Pension Plan as a success story with respect to adjusting to the aging baby boom.  In the early years, the CPP ran on a pay as you go basis.  Contribution cheques arrived in the morning and benefit cheques went out in the afternoon.  Assets were not growing.
But in 1996, the plan was significantly ammended, with contribution rates rising from six percent in 1997 to 9.9 percent in 2003.  The plan how has assets of around 160 billion.
But, it is not fully funded.  The liability of the CPP is around 900 billion, making the plan approximately 17 percent funded.  That is, total assets are about one sixth of total liabilities.  What is important however is that the plan is sustainable for the next 75 years with the current contribution rate of 9.9 percent.
Given the data above, the focus of our concerns for healthcare financing should be the temporary added costs of the baby boom.  If we decide to have partial pre funding to maintain the baby boom hump, then we need to move quickly.
For example, shifting the eligibility age for OAS to age 67 from 65 was delayed until 2023 - the majority of the boomers - faces no impact.
One mitigating factor in this saga is the improving life expectancy of Canadians.  Given that the biggest expenditure on health care is just before death, improving life expectancy, and therefore delaying the time of death, saves the health care system money.  In a pay as you go system, any costs delayed are actually costs saved.  So while there are some real concerns for the sustainability of our healthcare system, they are not as overwhelming as portrayed by some commentators.
Clearly the Canadian healthcare system  is not a ponzi scheme.  It is not fraudulent and it is not destined to collapse.  And full pre funding should not be the preffered policy solution.
Robert Brown is an expert adviser with the EvidenceNetwork.ca and a fellow with the Canadian Institute of Actuaries

Oh yeah, and from his picture, I'd estimate him to be in his late 50's or early 60's, heading towards retirement.  Anyone surprised?

Where does one even start with this train wreck?

[MrBogosity]

"What's important, however, is that the plan is sustainable until after I'm dead."

[Ibrahim90]

"What's important, however, is that the plan is sustainable until after I'm dead."

because fuck the people who live after him....

[Lord T Hawkeye]

Sigh... tried to send a letter to the editor in response but it seems they changed their e-mail and I can't find it on their website so I'll post it here just so it doesn't go to waste.

"First, a ponzi scheme is when someone takes investors' money but rather than actually invest it, simply spends it on himself and when it comes time to pay them back, seeks new investors to get money from and repeats.
Healthcare and pension both share a similar tactic in there's no investment.  No wealth is being created.  Money is simply taken from one group and given to another with the promise of compensation at a far later date.
Brown argues that this is sustainable because the money going in equals the money going out and that the boomers is just a minor bumb that can easily be weathered.  Unfortunately, he's ignoring a very important fact.  The fact that cuts are taken out of the money each time for expenses and to pay off those in charge of running healthcare and pensions.  His caculations are working off the assumption that government is a charity operation that runs at 0 overhead cost, a naive if not downright disingenuous assumption indeed.  Not to mention he's also assuming no inflation, no depressions and a completely stable population level for years to come.
Then there's the moral issue of why the boomer generation gets to vote themselves lavish healthcare and pension goodies and leave the bill for it for the next generation to pay?  A generation who wasn't even of voting age at the time and thus had no say in the matter whatsoever.  This is predatory and wrong.
A wise man once said the surest way to erode society is to allow people to vote themselves money.  A pity we failed to heed his warning."

[MrBogosity]

Then there's the moral issue of why the boomer generation gets to vote themselves lavish healthcare and pension goodies and leave the bill for it for the next generation to pay?  A generation who wasn't even of voting age at the time and thus had no say in the matter whatsoever.  This is predatory and wrong.

And who saddled us with debt in the '80s so they could become rich, and today remain the richest age demographic in America.