Health care is an expenditure that is difficult to control at a personal level.  This means that health care expenditures can be a key threat to wealth depletion.  Information collected by Statistics Canada can be  helpful when preparing financial plans.   Although it’s impossible to know how the health care insurance system may experience future changes, this information is helpful in assessing some risks in retirement.

Comparing the Canadian experience to our American neighbours adds a bit of interest to this financial planning exercise.  Even though it’s rather obvious that Americans will spend more on health care, it’s interesting to find out ‘how much’.

After reaching middle age (age 45 to 54), total consumer spending moves downward, in both countries.  At this point in time health care begins to consume larger and larger portions of overall household expenditures.  Health care expenditure does not increase, for the age groups, in absolute dollar values in Canada.

The numbers from a study by Statistics Canada are a bit old but they provide proportions and absolute dollar values1 .  The proportions will be useful for planning today.  Canadian dollars have been used for comparison purposes (% of total spending in brackets):

Age 55 to 64:  U.S. = $3,800 (8.1%), Canada = $1,900 (4.3%)

Age 65 to 74:  U.S. = $4,500 (12.1%), Canada = $1,700 (5.5%)

Age 75+:  U.S. = $4,800 (17.3%), Canada = $1,500 (6.8%)

In Canada, health care spending consumes a greater percentage of total expenditures with age.  However, the absolute dollar expenditure goes down for each increasing age group (youngest to oldest: $1,900, $1,700, $1,500).   Health care was the third lowest expenditure for older Canadians.  Only clothing and recreation were lower.

Americans experience health care expenditures increases (both proportionately and absolutely) with increasing age.  By age 75+ nearly a fifth of total expenditures are health care.  Health care spending for older Americans is their second largest expenditure, after housing.

By age 65, both countries offer insured health care.  Canada also provides prescription drug coverage.  So it’s not surprising to see Canadians spending less on health care expenditures upon reaching age 65.  Americans need to purchase additional insurance coverage and this likely explains their increasing costs after age 65.

 

1.      Chawla, R. K. (2007). Spending   patterns in Canada and the U.S., Statistics Canada, Perspectives. Catalogue no.   75-001-XIE.