Want to Know What Canada’s Health Care System Costs You?


By Nadeem Esmail, Senior Fellow
and Milagros Palacios, Senior Research Economist
The Fraser Institute


VANCOUVER, BC, Nov. 15, 2011 – The true cost of Medicare for individuals and families in Canada is often misunderstood, with many people thinking it’s either free or covered by our provincial health insurance premiums.


This misconception 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.


A $130-billion bill

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, according to the Canadian Institute for Health Information’s latest data release, provincial/territorial governments are estimated to have spent $130.3 billion of our tax dollars on publicly-funded health care in Canada in 2011.


A more informative measure of the cost of our health care system is health expenditures per person. The $130.3 billion presented above works out to approximately $3,778 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 2011, we must determine how much an average family is expected to contribute in taxes to all three levels of government. The percentage of the family’s 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 (estimated to be 24.9 per cent in 2010/2011).


Breaking down the Canadian population into 10 income groups makes it possible to show what families from various income brackets will pay for public health care insurance in 2011. Income figures are pre-tax and based on cash income, which includes wages and salaries, self-employment income (farm and non-farm), interest, dividends, private and government pension payments, old age pension payments, and other transfers from governments (such as universal child care benefit):


  • Average cash income of $11,395; $496 paid for public health care insurance
  • Average cash income of $25,624; $1,166 paid for public health care insurance
  • Average cash income of $34,696; $2,328 paid for public health care insurance
  • Average cash income of $43,949; $3,671 paid for public health care insurance
  • Average cash income of $54,339; $5,123 paid for public health care insurance
  • Average cash income of $67,115; $6,663 paid for public health care insurance
  • Average cash income of $80,752; $8,567 paid for public health care insurance
  • Average cash income of $98,750; $10,656 paid for public health care insurance
  • Average cash income of $124,579; $13,946 paid for public health care insurance
  • Average cash income of $241,549; $32,116 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 2011 was:


  • $10,707 for the average 2 adult family
  • $10,473 for the average 2 adult and 1 child family
  • $10,486 for the average 2 adult and 2 child family
  • $3,607 for the average unattached (single) individual

Good return for money spent?

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.


Nadeem Esmail is a senior fellow with the Fraser Institute. Milagros Palacios is a Fraser Institute senior research economist.


Source: Troy Media

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