Advice for the BC Finance Minister on MSP premiums: listen to the Green Party

You might not know this, but BC charges premiums for public health care coverage (one of only two provinces).

BC MSP premiums are currently $72 a month for a single person, $130.50 for a family of two, and $144 for a family of three or more, and these premiums have been rising steadily over the last few years as BC works to balance its budget.

As BC is now on track to post a healthy surplus, there have been calls to eliminate these premiums. Andrew Weaver, the Deputy leader of the BC Green Party, is currently leading this charge noting that the premium is the same “whether you make $30,000 or $3,000,000 per year.”

The BC Finance Minister, Mike DeJong, recently dismissed this proposal, noting that low income residents can apply for premium assistance. Premium assistance exists for individuals are families with adjusted net income below $30,000 which reduces the premium to $0-$51.20 a month, depending on income.

The are two problems with Mike’s argument. First, it does not address the concern that once at $30,000 a year, a family must pay the whole portion of the premium. Second, he assumes that anyone who would qualify for the assistance would obviously apply for it. Yet it is well known that the take up rate of assistance program are less than 100%.

My colleague, Rebecca Warburton has examined this exact issue: what is the take up rate of the MSP premium subsidy. Her finding? A whopping 26% of families eligible for premium assistance did not apply. This rate is much higher than is found for most benefit programs which is great cause for concern.

The current system in place in BC for premium assistance is what is called an ‘opt-in’ system, similar to that which exists for organ donation, vaccinations, and RRSP/RESP contributions (and we are all learning how successful opt-in has been in these areas). The trouble with opt-in systems is that: (1) you need to know that you can opt in and (2) it imposes the cost to ‘opt-in’ on the potential recipient.

A much better approach, and one that is supported by Nudge Economics, is one based on opting-out. In this case, you are automatically entered into the system and then apply to opt-out. An opt-out system does not require you to have knowledge that the system exists and reverses the application cost to those not wanting to participate.

With respect to health premiums, this is the procedure in place in Ontario, where health premiums are also paid but are embedded into the tax system. You are automatically assessed based on the information known to the tax authority, including income and family size, thereby substantially lowering administrative costs over an opt-in system. The added advantage is that given that it is already rested in the tax system, the premium can also be based on a sliding scale with those with higher income paying higher premiums.

Moving BC to a premium model similar to that which exists in Ontario would be a substantial improvement over that which currently exists. It streamlines the process, ensures that those who qualify for assistance get it, and reduces administrative costs. Of course, you can achieve the same outcome by simply adjusting provincial statutory tax rates, but that might be too much to accept in one go. Further, the advantage of the premium is that there is strong accountability as the governmetn reports what it collects and that money has to be spent on what is was collected for: health care. And what is even better, as BC struggles with a burgeoning health care budget, is that you could actually raise more money to fund health care.

Perhaps the BC Green Party knows more about economics, and tax policy, than many give them credit for.