Retirement planning is a key focus of many Canadians. Most of us associate this with wealth accumulation, and ensuring we will have an adequate pension income at age 65.

A critical issue associated with this, however, is whether provisions have been made for health care in our senior years. While no one wants to think about it, the fact is that no matter how well we've taken care of ourselves, the human body still tends to wear out with time.

Canadians are very fortunate in that we have a government-sponsored national healthcare program. However, its funding is largely from tax dollars derived from today's workforce. As the population continues to age, there will be fewer people in the workforce to support the funding of health care programs. Every day, 600 Canadians turn age 65. The 80+ age group will double in 20 years, and triple in 40 years. Provincial healthcare spending has already increased 242% in the last 20 years.

The shift in costs from the government to the individual has already begun to take place. Cutbacks in home care support were announced this past fall 2003.

Added to this problem is the issue of changes in family structure. In the past, extended families lived closer and could help each other. There were fewer women in the workplace.  Despite the fact that today there are many more women in established careers, there still are 3.5 women for every man fulfilling the role of caregiver.

Current estimates indicate that almost 50% of people over the age of 65 will need some kind of home care at some point.

Cost of Home Care versus Facility Care

The cost of home care is initially less than the cost of facility care. However, as a chronic condition worsens, the cost of home care will exceed the cost of facility care, and the ailing senior will be better cared for in a long term care centre where there is 24-hour nursing care 7 days a week.

The average cost of homecare is $35 per hour. The government-funded homecare support limits the number of hours of care per week. If more is required, the individual must pay for it, or transfer to a long-term care facility.

Long-term care facilities charge according to the accommodation level: ward, semi-private, and private. Also, costs vary by province due to differences in subsidization of the medical component. In Ontario, the government fully pays for the cost of medical care, and the individual must pay for the accommodation charge only. The cost to the individual starts at $1200 (ward) and ranges up to $2100 (private) in a government-subsidized facility.  Compare

this with provinces in eastern Canada where there is no government subsidy of health care costs. Here, the charges are double the rates charged in Ontario.

If an individual cannot afford to pay the charge, further government assistance is available - no one is refused health care. However, some provinces use both income and assets tests, while other provinces such as Ontario, only look at income and not assets.

Regardless, there is still the issue of availability of space. Entry is controlled by the Community Care Access Centre. They perform a gatekeeper role in determining the need. There are more seniors in need, than there are beds available at the ward level. This is because those who require additional government subsidy, only have access to ward level.  There is greater access, at the semi-private and private levels, because the cost is being born by the individual themselves.

So ability to pay brings greater access to health care in Canada.

Sources of Funds

The assets that have been accumulated for retirement can be depleted very quickly when health costs rise. Furthermore, once spouse may have a need for residential treatment while the other spouse still requires the use of the home. Therefore, an important part of financial planning, is ensuring there are funds earmarked for future health needs.

One way to accomplish this, is to purchase a long term care insurance policy while you are still earning an income. There are limited-pay plans available that enable the individual to pay for their plan while they are still working and have benefits full paid up by the time they are age 65. This is a valuable asset to have entering retirement years, because pension can be used for daily living expenses, and the long term care insurance can provide the funds to pay for home care and facility care when required.

Jacqueline Figas, CLU, EPC