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. 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, according to the Canadian Institute for Health Information, more than $125 billion of our tax dollars were spent on publicly funded health care in Canada in 2010.

A more informative measure of the cost of our health care system is health expenditures per person. The $125 billion presented above works out to approximately $3,663 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 2010, 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 (25.6% in 2009/2010).

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 2010:

• Average cash income of $11,763; $489 paid for public health care insurance
• Average cash income of $25,252; $1,221 paid for public health care insurance
• Average cash income of $34,180; $2,327 paid for public health care insurance
• Average cash income of $43,152; $3,714 paid for public health care insurance
• Average cash income of $52,897; $5,182 paid for public health care insurance
• Average cash income of $65,308; $6,758 paid for public health care insurance
• Average cash income of $79,259; $8,663 paid for public health care insurance
• Average cash income of $97,486; $10,612 paid for public health care insurance
• Average cash income of $123,452; $13,820 paid for public health care insurance
• Average cash income of $234,129; $32,056 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 2010 was:

• $10,514 for the average 2 adult family
• $10,591 for the average 2 adult and 1 child family
• $10,867 for the average 2 adult and 2 child family
• $3,594 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.