Active Retired Members (ARM)
Council

Retiring with dignity: The issue of medical coverage for retirees and OSSTF

By Richard Clausi, retired teacher

Every career teacher will encounter two realities…facts of life, if you will:  you will retire AND you will be in need of medical prescriptions and health services eventually. Unfortunately, in the everyday bustle of teaching, this concern is not on the radar of most employed teachers—yet, should it be? Many veteran teachers discover on retiring that they must settle for reduced medical coverage, or perhaps, in the case of dental coverage, elimination of coverage altogether because of the cost and limited coverage involved. A clear negative in the retirement process is that retirees, as they age, face exposure to more medical risk with less coverage than they had prior to retirement.

In the past, retirees were dropped from board plans because their prescription needs unduly loaded the cost of administering the program.  In the case of dental coverage, however, relative to the needs of young families with children requiring braces, orthodontics etc. the needs of seniors would appear to be modest. Should over-use of the services be a concern or consideration by service providers?

This leads to a broader question: Should OSSTF care?

There are many good reasons for federation to remember their retired members. For example, in a time of difficult negotiations, the political clout that comes with retaining the loyalty and involvement of retirees in federation is one worth considering. It now appears that the provincial government is intent on negotiating provincially, and it has been suggested that a provincial benefits program would be cost-effective. In a zero-increase salary environment, a comprehensive benefits agreement with the inclusion of retirees in at least a dental benefit program would be reasonable and fair. This simply means that retirees would be able to buy into such a program, without subsidy but with access to the same rates and extended coverage as employed “pool” members. The prospect of “lifetime” OSSTF membership should be appealing to Federation. No other professional group could lay claim to such a broad talent pool willing to participate in federation activities after their employment has ended.  Federation could also act for current members by moving the health discussion onto the provincial and national agenda.

This issue of health coverage for seniors is a looming national crisis! There is ongoing and universal concern for the plight of a growing senior demographic, and the strain, both financial and physical, that this group will place on medical services. As long-term taxpayers, this demographic believes that they have a claim to provision of services. Young people who may dispute this will be old eventually. Clearly, no one is immune from the ensuing crisis.

Several recent papers have addressed the concern with interesting suggestions.

  1. The Congress of Union Retirees of Canada (http://unionretiree.ca/) has prepared a policy paper which can be accessed at the website by selecting the PHARMACARE button in the lower right corner.  The paper notes that “Drugs today are an essential part of health care and should be financed with federal government support on a first dollar basis similar to Medicare”. It adds that “This is a political struggle that may take a number of years.”. Several shortcomings in government policy such as drug patent legislation and the drug approval process are identified. The paper notes that “Without Pharmacare, the high cost of drugs is, in effect, a tax on poor health”.   I note that the cost of yet another government program could be a concern to taxpayers who see their daily struggle to survive as more vital than a problem in their future. Should taxpayers shoulder this financial burden?
     Two recent studies ( by IRPP and C.D. Howe Institute) are discussed in an article by Sheryl Ubelacker of the Canadian Press.  The article is available at:

    http://www.therecord.com/news-story/5178095-reports-call-for-seniors-drug-plans-revamping/

    Both of the plans she describes have obvious flaws; yet, there is an  alternative that suggests itself that can address the shortcomings. I will quote from the article and  then briefly address the proposals:

  2. The “ Institute for Research on Public Policy (IRPP) suggests that if the provinces and territories created an agency to buy medications as a single bulk purchaser, it would mean billions of dollars in savings to help fund such a program — and one that could be implemented with a modest income tax hike of under one percentage point.  “   [2]  OSSTF could facilitate such a provincial plan in Ontario within its own  general negotiations. The anticipated income tax hike for the general population would be a concern; yet, the overall savings in out-of-pocket costs might make this politically attractive. Within the context of Federation, the inclusion of retired members could add a synergy to this proposal and keep it “in-house”.

  3. “…a report by the C.D. Howe Institute advocates for income-based drug insurance plans, saying age-based plans will be a poor model for handling the coming surge of baby boomers moving into their senior years.  The IRPP paper argues against income-based drug benefit programs, such as those in B.C., Saskatchewan, Manitoba and Newfoundland and Labrador, with  (researchers) saying they represent a significant financial burden that most seniors will have to bear year after year. Under these universal coverage plans, seniors and other Canadians pay a percentage of their income toward the cost of medicines before a government subsidy kicks in.  An income-based deductible is equivalent to saying your income tax will go up by three per cent or more, depending on the province you live in, under one of these programs, because that's how they're structured," Morgan said Tuesday from Vancouver, where he heads the Centre for Health Services and Policy Research at the University of British Columbia. We view this as a tax on ill health and, by proxy, it's also a tax on being older."[2]

I note that retirees are on fixed incomes with poor investment returns on, for example, their RRSP contributions. A form of “PharmaCare” could be attractive even though out-right public support may be expensive and generate hostility. There are certainly precedents for an outright subsidy; for example, some public servants retire and enjoy free medical benefits.  A better strategy, though, might be one that allows seniors to direct RRSP savings towards affordable medical coverage without a tax penalty.

Seniors use their own finances to provide reasonable medical coverage now—but they are taxed when they access their RRSP contributions and they are eventually forced to begin withdrawals. What if, a qualified retiree could elect to use their RRSP funds to pay medical premiums, tax-free; that is, retirees could harness their own retirement savings in a powerful way for what the fund was created for.. retirement. Specifically, a legal mechanism would allow seniors to channel funds from their RRSP directly to a health benefits provider. Since the individuals would not handle the money, the “withdrawal” /transfer would be tax free.  Certainly, this is “forgiven” tax . While the tax that might have been collected via RRIF or direct withdrawal later would be foregone by the federal government, there would be a direct benefit to government as it would help to keep a fragile and aging demographic healthier and self-insured longer. The anticipated RRSP tax dollars are claw-backs which have not been included in any forward projections by government. That “tax” would simply be “forgiven” and, hence, disappear from the books.  In return, funds that might otherwise have to be committed, in the future, to an overwhelming onslaught on the national medical infrastructure by a demanding and needy aging population could be diverted elsewhere. Of course, seniors still have the option to pay their medical expenses directly and then submit medical claims on their income tax. A transfer of RRSP funds to pay for medical coverage would obviously not be claimable on income tax-however, it might be an advantageous way for seniors to withdraw from an RRSP without the gymnastics and penalties of RRIFs.

Quality of Life, today and tomorrow, is a common concern. The means to enjoy a healthy longevity in retirement may hinge on access to health care and medication at a reasonable cost.  There are powerful benefits for Federation and the membership, both now and in the future, to either include retirees in a provincial health/dental plan for teachers, or to lobby very hard to provide retired members with access to their RRSP savings in a “Tax-Free Medical Account”. What do you think?

References:

[1] Policy Paper, Pharmacare by CURC. Available at: http://unionretiree.ca/

[2] Sheryl Ubelacker of the Canadian Press. Available at: http://www.therecord.com/news-story/5178095-reports-call-for-seniors-drug-plans-revamping/