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By Bacchus Barua
and Milagros Palacios
The Fraser Institute
VANCOUVER, BC Aug 21, 2015/ Troy Media/ – The notion of “free health care” seems to have gained cult-like status in Canada. This is perplexing given that provincial/territorial government spending on health care (including federal transfers) accounted for 7.1 per cent ($141 billion) of the Canadian economy in 2014. And yet, time and again, people tout the zero dollar price-tag.
There are two primary reasons for this seemingly poor arithmetic.
First, individual Canadians are not exposed to any portion of the cost of basic physician and hospital services, at the point of use. Instead, they annually pay a substantial amount of money for health-care goods and services through taxes. While (primarily or partially) tax-funded health-care systems are not uncommon, the lack of any deductibles and copayments puts Canada in a very small minority among universal health-care systems.
Can’t calculate how much tax goes to health care
Second, instead of using a dedicated health insurance tax that earmarks tax money for the specific purpose, general government tax revenues finance health care in Canada. Even specific health premiums in provinces such as British Columbia and Ontario go into general government revenues. This makes it impossible for Canadians to calculate how much of their total tax payments go towards health care every year.
Without such a fundamental piece of information, discussions about the performance and sustainability of our health-care system routinely devolve into emotional grandstanding.
To help inform such discussions, we used publically available tax and health-care expenditure data to calculate how much different types of families will pay for public health-care insurance this year.
We estimate that the average Canadian family (two parents, two children) earning $119,082 will pay $11,735 for public health-care insurance in 2015. Meanwhile, a single individual earning $42,244 will pay $4,222.
As one would expect, there’s a great deal of variation in the amount paid for health care by families earning different levels of income. For example, the 10 per cent of Canadian families with the lowest incomes will pay an average of about $477 for public health care, while families among the top 10 per cent of income earners in Canada will pay $37,180.
And what about cost increases? Looking back over the last decade, we estimate that the cost of public health-care insurance for the average Canadian family grew 1.6 times faster than the average income between 2005 and 2015. While increases have been less drastic in recent years, this suggests that we have long been on a financially unsustainable path.
Not so free after all
It is always important to continually assess whether or not we receive good value for our money from the public programs our tax dollars fund. While Canadians routinely experience the good and bad of our health care system, it can be hard to measure those experiences against their annual contributions to the system because of the murky manner in which it is funded.
At the very least, our estimates provide us with an important reminder that Canada’s health-care system is not “free.”
Bacchus Barua is a senior economist in the Fraser Institute’s Centre for Health Policy Studies. Milagros Palacios is a Fraser Institute senior research economist.