September 27, 2002

Means Test or Income Test

A means test is not the same as an income test. Income tests examine income. It could be employment income, or total income, but it is just income, not assets. Means tests look at assets - how much is in your bank account, what is the value of your house, mutual funds, RRSP, car, etc. People who apply for welfare must pass a means test. Provinces that make their provincial drug plan on ability to pay use an income test. They do not look at assets.

Pharmacare will depend on an income test if BC goes the way that Filmon did in Manitoba. If the government is concerned about fairness rather than using "fairness" as code language to justify more cutbacks, then the use of income tests will not be adequate.

A renter in Vancouver likely pays $800 or more per month for a suite. That is $9,600 per year. In order to pay $9,600 after taxes it is necessary to earn about $14,000. By contrast a person who owns their own home has to pay for property tax and some maintenance, but that is unlikely to total anything close to $14,000 over a year. A retired couple with an income of $35,000 per year is in much different circumstances if they rent rather than own their own home. You can alter the marginal tax rate and the amount of rent in this example but the point remains the same. By applying the Manitoba formula to Pharmacare renters and owners are treated the same even though the homeowner has a real income that is substantially higher (40% in this example).

Don't be fooled when the government talks about making Pharmacare fair. The Campbell government is using more New Speak in order to shift costs onto people who need prescription drugs.