The Dollar Cost of Medicare
The true cost of Medicare for individuals and families in Canada is often misunderstood with many people thinking its either free or covered by what we pay for our provincial health insurance coverage. It is critically important however, that Canadians understand the true cost of Medicare. Armed with a more meaningful estimate, Canadians will be able to better assess whether or not they are receiving value for their health care dollars.
The misunderstanding of the true costs of health care in Canada has many sources. In part, it stems from the fact that health care consumption is free at the point of use, leading many to grossly underestimate the actual cost of care delivered. Furthermore, health care is financed through general government revenues, rather than financed through a dedicated tax, further blurring the true dollar cost of the service.
In addition, health spending numbers are often presented in aggregate, which results in a number so large that it becomes almost meaningless to the average Canadian. For instance, consider that more than $115 billion of our tax dollars were spent on publicly funded health care in Canada in 2007/2008. The BC budget dedicated $15.7 billion for health spending in 2009/10.
A more informative measure of the cost of our health care system is health expenditures per person. The $115 billion presented above works out to approximately $3,498 per Canadian. This would be the cost of the public health care insurance plan if every Canadian resident paid an equal share. But some Canadians are children and dependents and thus are not taxpayers, and Canadians certainly do not pay equal amounts.
So how much do we really pay as individuals and families for our Medicare system?
In order to determine a more precise estimate of the cost of public health care insurance for the average Canadian family in 2008, we must determine how much an average family is expected to contribute in taxes to all three levels of government. The percentage of the familys total tax bill that pays for public health insurance is then assumed to match the share of total government tax revenues (including natural resource revenues) dedicated to health care (22.6% in 2007/2008).
Breaking down the Canadian population into 10 income groups (income figures are pre-tax) makes it possible to show what families from various income brackets will pay for public health care insurance in 2008:
- Average cash income of $11,309; $389 paid for public health care insurance
- Average cash income of $24,271; $1,076 paid for public health care insurance
- Average cash income of $32,866; $2,214 paid for public health care insurance
- Average cash income of $41,637; $3,449 paid for public health care insurance
- Average cash income of $51,298; $4,862 paid for public health care insurance
- Average cash income of $64,415; $6,245 paid for public health care insurance
- Average cash income of $78,430; $7.750 paid for public health care insurance
- Average cash income of $96,217; $9,873 paid for public health care insurance
- Average cash income of $122,321; $12,877 paid for public health care insurance
- Average cash income of $232,739; $29,575 paid for public health care insurance
Looking by common family types, this calculation finds that the estimated average payment for public health care insurance in 2008 was:
- $9,572 for the average 2 adult family
- $9,855 for the average 2 adult and 1 child family
- $10,191 for the average 2 adult and 2 child family
- $3,484 for the average unattached (single) individual
It is critical to recognize that these estimates count only the direct costs of Medicare. They do not count administrative costs subsumed by other government departments that support health care through activities such as tax collection, or other privately borne costs related to the financing and operation of Medicare such as tax compliance or the private burden of waiting for health care.
Hopefully these estimates of the cost of Medicare by family will provide Canadians with a clearer picture of just how much they pay for public health care insurance. With a more precise estimate of what they really pay, Canadians will be in a better position to decide whether they are getting a good return on the money they spend.
Subscribe to the Fraser Institute
Get the latest news from the Fraser Institute on the latest research studies, news and events.