Due to the way our health care system is structured and funded, a massive unfunded liability has been created. In other words, under the present arrangements, current and future generations of taxpayers have made a promise - indeed assumed an obligation - to provide comparable health care in the future.

A brief comparison is helpful: Canada's public health care is a 'pay-as-you go' system, just like the Canada Pension Plan (CPP). Rather than accumulating and building funds in savings accounts now to pay future bills, current contributions (payroll deductions in the case of CPP, and general tax revenues in the case of health care) are used to pay for current costs.

Both programs have massive unfunded liabilities. The future liability of the Canada Pension Plan is an incredible $485 billion. The future liability in the health care system, however, is an unbelievable $1.2 trillion dollars. That amount represents our current obligation to provide health care in the future.

To put this in perspective, the unpaid liability of the health care system exceeds the total direct debt of all governments in Canada by almost 300%! This is an enormous obligation on our government and, of course, future taxpayers.

According to actuarial reports, in order to fund the current level of health care if we were to pay for this outstanding obligation through raising taxes it would require either:

· A 70% increase in federal and provincial personal income tax rates,
· A 400% increase in the GST from 7% to 35%, or
· An increase in payroll taxes to 17% of gross pay.

A recent study by the Association of Pension Managers suggests that public spending on pensions and health care could rise from 13% of economic output to 23% in 2030.

How can we possibly pay for this

The missing link is capitalization. In other words, setting money aside for your future health care is not unlike putting money aside for your retirement. The government has recognized this with the CPP. It is currently investing part of the excess CPP premiums to build a fund from which baby boomers can draw benefits when they hit retirement age.

But in health care, the government steadfastly refuses to plan for future health care costs. Governments need to take immediate steps to address this massive unfunded liability, and also to protect patients - who should not, and need not, suffer because of the failure of our governments to recognize the extent of this problem.

In the meantime, waiting lines continue for a wide range of services in every province, and an ever-aging population will place increasing and tremendous pressures on the health care system. Unless governments take action soon, these pressures will inevitably lead to much higher taxes, or a further reduction in health services, including even longer waiting lists.