Commission on the Reform of Ontario's Public Services

In the meantime, the ODB should be better targeted. Two basic options are on the table, each
with differing effects on who would benefit and the level of savings that can be achieved.
A minimal step would be to make the portion of pharmaceutical costs paid for by seniors rise
more sharply as income increases. The other, preferred, option is to sever the link to age and
instead link the benefit to income only. In either case, changes would need to be phased in
over time.
Option 1, which the <strong>Commission</strong> views as de minimus, is to change the program only as it
applies to seniors. That change would see the tightening of the relationship to income. In other
words, co-payments would increase more sharply, and in a more graduated fashion,
as income rises. This option would permit substantial savings. Out of the $2.7 billion now
spent within the ODB program on subsidizing pharmaceuticals for seniors, at least
$300 million could be saved annually. Tightening the relationship further, it is feasible to
save as much as $1 billion per year. In that scenario, the highest-income seniors would see
their annual co-payments increase around $1,000 per year.
Option 2, and the preferred route forward for the <strong>Commission</strong>, is to change the program as
it applies to both seniors and lower-income non-seniors. In this option, the links to age and
social assistance status would end. Instead, the program would be linked solely to income.
So an individual or family would have the same eligibility and extent of assistance with the
cost of pharmaceuticals regardless of age or whether they are receiving social assistance.
This option would greatly strengthen the equity of the program. It would also remove a large
brick in the so-called “welfare wall.”
What is the “welfare wall”? It is a series of barriers that can discourage people from leaving
social assistance. In the case of the ODB, after a short interval social assistance recipients
through Ontario Works and the Ontario Disability Support Program (ODSP) lose access to
pharmaceutical cost support if they take a job. This is a major contributor to what is known as
the high marginal tax rate faced by social assistance recipients entering the workplace (more
information on barriers in the current social support system can be found in Chapter 8, Social
Programs). Put simply, it serves as a disincentive to finding employment. Making the ODB
available to all within a low-income range would remove this disincentive.
However, it would be more difficult under this scenario to extract the large savings feasible
under Option 1. That is because there would be new recipients that would become eligible —
lower-income non-seniors who are not receiving Ontario Works or ODSP — and this would
offset much of the savings from no longer subsidizing pharmaceuticals for higher-income
seniors.
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