The B.C. government has taken its first step toward eliminating Medical Services Plan (MSP) premiums on Jan. 1, slashing single adult rates by half and eliminating the need for new residents to register.
The Canadian Taxpayers’ Federation (CTF) calculates that the reduction will save an average household with two adults $900 per year, and applauds the NDP government’s promise to eliminate MSP entirely within four years.
Effective Jan. 1, 2018, families with an annual adjusted net income of $26,000 or less will pay no MSP premiums at all. This is a $2000 increase from the current $24,000.
The NDP government is implementing an election campaign promise first made by the B.C. Liberals, who tinkered with Canada’s only user fee for medical services for years before announcing plans to phase it out last spring.
Kris Sims, B.C. director for the CTF, notes that the MSP break will soon be offset by tax increases, including the first increase in five years to B.C.’s carbon tax. That tax rises to $35 per tonne of carbon dioxide emissions as of April 1, translating to an increase from seven to 8.5 cents on a litre of gasoline and more than 10 cents per litre on diesel fuel.
Phasing out MSP leaves a large hole in the province’s health care budget. The finance ministry estimated last year that income from medical premiums covers 17 per cent of health costs, by far the largest operating expenditure in the B.C. government, and James has yet to say how the revenue will be made up.
Finance minister Carole James announced in September that the NDP government is going beyond the 50-per-cent cut to MSP promised by both parties in the May 2017 election. She said the B.C. Liberal pledge to apply the rate cut only to those with household incomes below $120,000 is “unworkable,” and announced plans to scrap the income-tested application form.
The NDP has long opposed MSP as an unfair tax that has the same rate for people earning $45,000 and $450,000 a year. For government and large corporation employees, it is generally a payroll tax paid by their employers, while self-employed and small business workers have to pay it out of pocket.
Eliminating MSP also means the phase-out of its administration and bill collection, which was contracted out to U.S.-based back-office specialist Maximus Corp. in 2005. Maximus took over existing administration staff represented by the B.C. Government Employees’ Union, and had to add more staff after B.C. assessed penalties on the contractor for slow service to the public.