A progressively funded universal drug plan could save families hundreds of dollars a year, says new report
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Ottawa — A federally funded universal national pharmacare plan could create large net savings for Canadians, up to $600 per household a year, but just who benefits depends on how the funding is designed, says new research from the Canadian Centre for Policy Alternatives (CCPA) and Canadians for Tax Fairness (C4TF).
A range of policy options have been proposed to finance a national pharmacare program. A Prescription for Savings analyses various options to determine which are the most fair and equitable, and how Canadians can best share and distribute the considerable savings that would be generated by the introduction of pharmacare .
“There is a right and a wrong way to pay for pharmacare. Pick the wrong way and you can completely eliminate pharmacare’s net savings for low and middle income families. Pick the right way and you can fairly distribute those savings between low-income families, the middle-class, businesses and governments,” says CCPA Senior Economist David Macdonald, co-author of the report.
The report analyses seven tax-based scenarios the federal government could consider if additional fiscal capacity is needed to raise the estimated $10.4 billion required to finance a pharmacare program based on the Quebec drug formulary.
For each scenario, the costs of these new federal tax changes are weighed against the pharmacare savings for households, employers and provincial governments. These savings include lower out-of-pocket drug costs and private drug insurance premiums.
In almost all cases, middle class households save $400 to $500 more under a new public pharmacare plan than they would pay in new taxes, while lower income households end up between $300 and $400 ahead. The one exception is if pharmacare is paid for by increasing the GST, in which case the benefits for low and middle income households are almost completely eliminated and employers capture all of the savings.
In almost all scenarios. employers also see net savings as their contributions to private drug plans decrease by more than their taxes increase. In options where pharmacare savings are shared with households, employers still save between $1 billion and $3 billion a year.
“It’s important that we distribute the substantial savings from pharmacare in a progressive way that reduces inequalities and makes the vast majority of households better off. This report shows there are a number of ways to do that,” says C4TF Executive Director Toby Sanger. “What we need now is the political commitment to move forward and turn this historic opportunity into reality.”
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