Major illness can take a financial toll
Many Canadians are illprepared to survive a “major health event” financially, according to the fourth annual Sun Life Canada Health Index.
The study, conducted by Ipsos-Reid, investigated the financial effects of heart attack, stroke, cancer, coronary bypass, chronic diseases, degenerative disorders, terminal illnesses and serious accidents. It found that 40 per cent of people hit with a major health issue suffer financially.
“When you think about Canada and things like universal health care and great support in our culture, to see 40 per cent suffer severe financial hardship because of a major health event was quite surprising,” said Kevin Dougherty, president of Sun Life Financial Canada. “The other stat that jumped out was that in the 45 to 55 age group, 53 per cent of those who experienced a major health event said it resulted in major potential distress, and that’s when they’re close to retirement, so it derailed their retirement plans. It’s a double hit. You don’t expect that in Canada.”
Many Canadians are unaware of the medical coverage they have under provincial health services as well as private group or individual plans.
“The health care system covers doctors and hospitals, and group insurance covers a lot of routine medical expenses like prescription drugs and medical supplies,” Dougherty said. “But what came through from the data is there are other nonmedical expenses that are very important, like fighting off cancer and dealing with the impact on you and your family. You might have to take time off work with no disability insurance to support your child or spouse. People are going into their credit cards, mortgages, savings and retirement savings to cope with them.”
Specifically, of people hit by a health crisis, 22 per cent turned to credit cards or personal lines of credit, 22 per cent to personal savings, 12 per cent borrowed from a loved one, and five per cent were forced to either remortgage or sell their home.
People underestimate out-of-pocket health costs. The study found that 54 per cent never expect to pay any portion of prescription drug expenses. Few people are prepared for a major health event, with 20 per cent having no personal or group health insurance or money saved for health expenses.
Canadians estimate they each paid $1,354 in out-ofpocket health costs last year, led by Albertans paying $1,731 each. A major health problem often leads to a major financial problem, which in turn leads to mental or emotional woe.
The result is that 39 per cent of people who face a health crisis suffer a significant lifestyle change, such as depression, increased reliance on others, job loss or a breakdown of relationships. Dougherty says that 77 per cent of Canadians experienced an uncomfortable level of stress, up from 72 per cent last year.
“Personal relationships are also a big source of stress, especially in younger groups. With older groups, it’s things like unexpected budget expenses.”
One product many people are unaware of or disinterested in is critical illness insurance.
“It’s not tied to pure medical expenses, per se; they get a sum of money they can use to replace income, or to seek medical treatment outside of their community or country. We’ve seen it make a huge difference for people.”
Also, the Canadian Pension and Benefits Institute has long proposed a registered health savings plan, similar to registered retirement, registered education and registered disability plans, which reward savings with tax breaks upon contribution or withdrawal and sometimes government grants.
“There’s an active discussion about that. The industry has been advocating it for quite a period of time, and we’re hopeful something will happen. At the end of the day, the government can’t cover all these expenses, people have to take responsibility for some of them.”
Dougherty suggests planning and saving.
“People do have this very real risk of financial hardship, the take-away is to try to get ahead of that. People need to go through their own balance sheet and stress test it against different things that can happen.”