This could pose additional threats (Brimacombe, Antunes and McIntyre, 2001).
There are also two arguments which reveal the overstatement of the estimations. The first refers to the fact that the tax structures are taken as constants, when in fact modifications could occur and result in the allocation of more funds to the health care sector. Then, the second argument is that the business, technology and administrative communities present the population and the markets with various scenarios and tools for improvements in efficiencies (Brimacombe, Antunes and McIntyre, 2001).
5. Approaches of Federal and Provincial Governments
The federal and provincial governments often encounter difficulties in adequately collaborating for the well-being of the Canadians. The provincial governments for instance blame the federal one for decreasing its health care payment from 50 cents per dollar in the 1960s to 16 cents per dollar in 2004. The federals on the other hand argue that the 16 cents only account for direct medical costs, but that the additional coverage of research, schooling and other expenses are not being taken into consideration. The federal government argues that they contribute to the health care system through three simultaneous courses of action: federal contributions to provincial health through transfers for health, equalization and direct contributions to total public spending (Department of Finance Canada, 2007).
The current matter however deals with the future sustainability of the projected growths in health care costs. In 2000 for instance, the state organizations had contributed with a total of 31.1% of their total revenues to the health care system. By 2020, this contribution is expected to increase to 42% of the entire governmental revenue. Through the lens of the gross domestic product, the proportion of health care costs is likely to increase from 8.7% to 10.2% by 2020. Divided into public and private, the public health spending would grow from 6.0% to 7.1% and the private health care spending would increase from 2.7% to 3.1%. Based on this then, as well as the projected economic growth throughout the following two decades, the governments could argue that the growing costs of the health care system are sustainable.
It could also be argued that the foreseen expenditures in the Canadian health care system are financially sustainable as part of them will be generated by price increases due to inflation. This part of the expenses then will be economically regulated and accounted for and will generate neutral impacts as the price increases and inflation rates will be equal in all sectors, including industry, economy or medical care. Increased price and inflation could also generate more liquidity within the financial market. The ultimate impact of inflation however can only be established with further analysis on consumption and purchase behavior. These vary for each group of consumers, based on various group or individual data. The elderly for instance will tend to consume less and save more. The families of spouses and children will tend to spend and will dispose of reduced discretionary income. The young single adults will spend more and they will not be inclined towards saving. Therefore, the economic growth could be further supported through increased levels of consumerism.
The ultimate governmental features which could impact the revenue distribution towards the health care system from both federal and provincial institutions refer to the source of the revenue, including the stability and reliability of the respective source. Federal tax from VAT will continue to increase alongside with consumption, but property taxes are likely to remain constant. The governmental funds and their allocation are also determined by the interest rates practiced on public debt. Considering that Canada's creditors implement an increased interest rate, significant parts of the country's federal budget would be allocated to the payment of the contracted national loans and the subsequent interest rates and other commissions. The government and trade balance, as well as the stock of governmental debt will also impact the budget allocation and the funds redirected towards the public health care system (Brimacombe, Antunes and McIntyre, 2001).
6. Governmental Approaches and Theory
Based on their estimations on economic growth, real GDP growth and also increases in health care costs and spending, the federal and provincial governments found that the model is sustainable. However, the economic theory could argue the opposite and their primary argument would be based on the lack of a relationship between the economic growth and the level of government revenues due to taxes. "Given the manner in which our tax system is constructed, there is no one-to-one relationship between nominal economic growth and the public revenue dollars that accrue to governments. This means that some of our taxes, such as excise and property taxes, are not as responsive to economic growth" (Brimacombe, Antunes and McIntyre, 2001).
The future financial sustainability of the Canadian health care system is based on several ideas emerging from the economic theory. For instance, the economic theory tells us that as bank deposits grow, financial institutions are able to offer loans at favourable rates, making it as such easier for the entrepreneurs to finance their business operations, register revenues and pay taxes as well as create additional jobs. The model proposed by the government refers to this possibility by arguing that the savings of the elderly population will increase.
The social and economic theories tell us that as the individual ages, he needs more attention and consequently, his health care costs will increase significantly. A matter of further research could be constituted from a deeper analysis into how correlated are the liquidities generated by the deposits of the elderly and the increase in health care expenditures.
Another correlation to the economic theory that should have been made revolves around the labor force. In this order of ideas, economists teach us that as an economy grows so to the wages and living standards of the population. But the model used by the Canadian government does not take this fact into consideration. To better explain, the federal institution argues that the future growth in health care costs is sustainable when the salaries of the employees in the medical sector are kept at a constant level, or increased only by the increased in price levels and inflation. If we are to consider additional increases in the salaries of the medical staff, the actual costs could be further increased and therefore could become unsustainable.
A new concept promoted by both the economic theory and practice, but neglected by the Canadian governmental institutions is the proven fact that the threat of an economic recession determines employees to request extensive medical coverage from their employers (Frankel and Orszag, 2002). This could also materialize in further increases in medical expenditures, costs which have not been addressed by the government - mainly focused on costs increase due to the aging of the population.
Another force which should have been addressed is the theoretical and practical relationship between taxes and government revenues. Considering that increased consumption will generate more governmental income, the same cannot be said about property taxes, which are extremely sensitive to the forces in the micro and macro environments.
7. Fallacies Clouding the Issue
Due to the extensive media coverage of the issues in increasing health care costs, the Canadian population has been the target of ideas based on which the federal institutions is no longer able to support the public health care costs. The news presented was often aimed to create sensation and may not have entirely depicted the reality of the actual situation. As a consequence then, the population lost trust in the system and felt encouraged to appeal to private health services. However, as this option implies significantly increased costs for the individuals, the measure has not been well received by the public.
The media however is not the sole originator of misconceptions. Quite ironically, some fallacies are generated by politicians and academicians, who often retrieve conflicting results from their studies and analyses. Relative to the model promoted by the Canadian government, some could argue that it is a desirable approach and stands increased chances of success. Others however could easily state that the model is doomed to failure as it does not properly consider all forces in the micro and macro environments.
Another misconception is linked to the technological developments, which are expected to improve the quality of life, including better medical services and more cost-effective prices. However, technological innovations are often achieved by monopolistic organizations that tend to charge higher prices. Then, another fallacy revolves around the hysteria created relative to the high costs that the seniors generate upon the Canadian health care system. The truth about this is that medical expenditures have historically increased for all age group, regardless of gender. However it is true that the growth has been more accentuated for the elderly segment, it is seldom stated that the population over the age of 75 tends to registered decreases in health care costs (Brimacombe, Antunes and McIntyre, 2001).