Suggested – Time for an RHSP

Posted Thursday, December 15th, 2011. Filed Under Financial Empowerment

Every country has their issues and Canada has theirs. One issue that exists but no one wants to deal with is our health care system. David Dodge, former governor of the Bank of Canada, has told us that The Canadian universal health care model, with governments as the major funders of service, is fiscally unsustainable. Like all of the developed countries, we have an aging population. Dodge says that within 20 years, Canada could see health care spending rise to take up to 19% of the national economy. Today we sit at 12%.

Some has suggested an RHSP that would resemble a Registered Retirement Savings Plan (RRSP), Tax Free Savings Account (TFSA) or a Registered Education Savings Plan (RESP). Individuals would deposit funds in a registered account that could be withdrawn tax-free for healthcare expenses approved and listed as deductions in the Income Tax Act. The deductible expenses would be those not covered by provincial insurance – among them are dental care, prescription drugs, physiotherapy, prostate tests and dozen of routine procedures.

An RHSP would permit monies to be saved and invested on a limited, tax-free basis for health-care needs of families. RHSPs would help rectify the imbalance in health-care benefits between employees of large organizations, who typically have private health insurance, and employees of smaller ones, who typically do not and therefore use more of their paycheques on uninsured services and medical emergencies. An RHSP would also act as a supplement to the Canada Pension Plan or other pensions, since so much of retirees’ savings is needed to meet health related expenses as they age.

At first the RHSP may seem to cost the government because it shelters income. But the RHSPs could be used to absorb some new or increased costs, generate efficiencies in health care and give rise to the economic benefits of improved health. This will also give people more control over their choices and make them accountable and responsible for their health choices.

This may reduce the need for a two-tiered system (which I believe already happens). We can assist in making our system better by finally getting an E-health system up and running. This technological tool will make your information readily available when needed, reduce administrative burdens and provide better and most cost-effective care
for the patient.

It is said that the implementation of the RHSP would take simple amendments to the Income Tax Act. The terms on which taxation of deposits from income would be deferred or forgone would merely need to be set out. Medical expenses permitted as deductions are already listed in the tax act and could be used to define permitted expenses.

(This article that I summarized was written by Richard C. Owens, from the National Post).

Let’s see what happens. What governments and politicians have not realized is that small changes can bring about big results. This can be an example of such.

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