Once upon a time it was only Americans who had to worry about the cost of healthcare in retirement. Or so Canadians thought, as they cast a self-satisfied glance south of the border.
It was probably never true, but it’s what we still believe. We think we live in the land of free medical services, with a system that gives us everything from doctors and hospitals, to drugs and long-term care. But it doesn’t. In retirement, most of us will be getting the basics, but beyond that we’ll be faced with escalating out-of pocket expenses.
We’ll still have access to doctors and acute care in hospitals, but the benefits many take for granted with their jobs — drugs, regular dental checkups, physiotherapy for a bad back, will only be there at a price.
How much it will cost is hard is hard to say. Statistics Canada says the average cost of medical extras for those between 18 and 80 is $1,561 a year in Ontario. However, the average offsets higher spending by seniors against lower spending by young adults.
The latest Sun Life Canadian Health Index highlights how many of us have bought in to the cradle-to-grave myth. The annual study released Tuesday looks at Canadian attitudes toward health and the costs of healthcare in retirement. Not surprisingly, the study finds that our number one concern as we age is our health. But it also finds only 22 per cent of us have saved anything to pay for what might lie ahead.
That’s because there’s a huge misunderstanding about what our healthcare system will cover. The study finds that 44 per cent of Canadians expect to pay nothing for drugs, 50 per cent nothing for eye care and 78 per cent nothing for hearing aids.
One reason for the disconnect may be that we form an opinion of the health system through our use of it, says Kevin Dougherty, president of Sun Life Financial Canada. Most of us don’t need much from it during our early years and into middle age and what we do need is covered.
“There isn’t an awareness of what things will be like when we’re older,” he says. But with Boomers now looking after the needs of their elderly parents, they’re seeing exactly what the future holds.
The Sun Life findings mirror a study by the BMO Wealth Institute earlier this year which also found few people seem to understand the extent of health-care costs later in life.
The one sure thing is that as the number of retirees grows, governments will be looking for ways to contain healthcare costs that are rising faster than inflation. Low income families will be looked after and high income families, as always will take care of themselves. The rest of us will be faced with more pay-as-you-go.
There’s already some nibbling around the edges. In August, a measure from Ontario’s 2012 budget was to come into effect, requiring seniors over 65 with incomes of $100,000 or more to pay virtually all of the costs of their prescription drugs. Finance minister Dwight Duncan said at the time it would affect 5 per cent of Ontarians.
It didn’t come to pass only because the Ontario Ministry of Health and its federal counterparts couldn’t come up with a joint plan to administer it.
But it’s only a delay, a spokesman for the Health ministry says.
“Ontario remains committed to income-testing as a means of ensuring fairness and sustainability of the Ontario Drug Benefit Program,” he said.
The big message in all this is that these costs should be part of your retirement planning process.
So, if you’re retiring soon, or want to get a better grip on them here are some suggestions:
1. Start with your employer. Some companies offer extended health benefits to retirees at no cost. If not, you may be able to pay to continue the same coverage.
2. Your union or professional association may have a group plan. You may also get a group rate through your university affiliation. Asks friends and colleagues what they’ve done.
3. Call insurers directly and compare packages.
4.The OmbudService for Life and Health Insurance, www.olhi.ca, has an insurance finder tool and the Canadian Life Health Insurance Association web site has a guide to supplementary health insurance as well.
It’s one of those things where thinking ahead now can save a lot stress later.