No need to panic: Older workers’ health-care bills not that bad

Aging of population a slow, manageable process
By Chris Bonnett
|Canadian HR Reporter|Last Updated: 06/14/2013

Many have suggested our aging population will wreak havoc on our health-care system. So, will older workers bankrupt health benefit programs?

The most recent census data shows the median age of Canada’s labour force rose from 39.5 in 2001 to 41.2 in 2006 — it will have to grow quite a bit more before we can expect health cost increases to race ahead.

It’s not just age, though. We are generally working longer and delaying our retirement, according to Statistics Canada. A 50-year-old worker in 2009 could expect to work 2.6 years longer than her counterpart of the same age in 1998.

That might be due to the recent economic setback, personal choice or the end of mandatory retirement in many jurisdictions.

But it may also be due to necessity. Only 27 per cent of Canadians expect to be retired at age 66 compared to 55 per cent in 2009, according to Sun Life’s 2013 Unretirement Index. Of the 58 per cent who expect to be working full- or part-time, 63 per cent will work to pay for basic living expenses.

It will be hard for most employers to duck this issue — an older workforce that needs or wants to work longer will be the norm.

Health-care data provides more detail

In 2010, Canadians over age 65 accounted for 14 per cent of the population but consumed nearly one-half (45 per cent) of government health-care costs, according to the Canadian Institute for Health Information (CIHI). So seniors cost more than almost every other demographic.

But between 2000 and 2010, the share spent on seniors rose only from 43.8 per cent to 45 per cent. CIHI (and others) have determined that age in and of itself is responsible for just a small part — 0.9 per cent annually — of the overall increase in health-care costs.

CIHI data from 2010 also illustrates per capita provincial and territorial health spending in five-year age bands. There are some interesting points relevant to aging:

• The first year of life is the most expensive ($9,264) period until people reach their late 70s ($12,050).

• Five-year cost increases are typically moderate until people reach their later 40s.

• From age 50 through 64, costs increase about 20 per cent for each five-year period.

• From age 65 to 80, costs increase about 40 per cent every five years.

• The cost of health care is typically highest in the last several months of life.

The main message here is that through most of our working years, health-care costs increase only modestly with each year. Even between age 50 and 65, the average annual cost increase is about four per cent compounded. That should be manageable.

But CIHI data is not specific to employers and workplaces. Data from a major Canadian insurance company’s block of extended health-care business (including drugs) shows a very different pattern than provincial or territorial health spending (see chart above).

As plan members age, health benefit use increases at much slower rates than provincial or territorial health costs. This indicates older workers should have even less impact on employer health costs than governments can expect from Canadians at large.

The employee view

In looking at the findings of past health-care surveys by Sanofi Canada, which look at how plan members feel about their access to health benefits:

• 48 per cent would choose their health benefit plan over $20,000 in cash — age is the major factor here, with older respondents much more likely to choose their benefits (2011)

• 51 per cent expect their health benefit plan will continue into retirement (2012)

• 54 per cent would be willing to pay to extend their health benefits into retirement (2012).

For those worried about risk and entitlement, the 2012 Sanofi Canada Healthcare Survey reported:

• 57 per cent said they have an obligation to help their employer control the cost of their plan

• 92 per cent said they would be likely to participate in work site health-risk screening

• 91 per cent said they were willing to participate in disease education in order to access higher cost drugs.

The survey indicates plan members appreciate health benefits way out of proportion to their costs but, in many cases, have unrealistic expectations about access to benefits after retirement. Fortunately, most are willing to help manage their use of the plan, but they need to know how to do this and what’s at stake.

Bigger issues include chronic diseases, usage

CIHI and others have noted a stronger correlation between the presence of multiple chronic diseases and higher use of health services than between age and health-care usage.

Unfortunately, there are mixed messages about the level of corporate support and employee engagement in workplace health promotion (or wellness) programs, according to the Sanofi survey and others — such as the Buffett National Wellness Survey.

Most lack adequate scope, duration and intensity to be effective, and few measure outcomes. Employers and governments should be promoting illness and injury prevention as a better way of controlling health costs.

One major issue still largely off the radar screens is our implicit choice of transferring our health costs to our children’s generation. The C.D. Howe Institute estimated a net (unfunded) liability of $1.9 trillion for health care in 2007.

A 2012 analysis from the University of Calgary’s School of Public Policy — Can We Avoid a Sick Fiscal Future? The Non-Sustainability of Health-Care Spending with an Aging Population — shows this burden will fall mostly on those born after 1990, while the biggest beneficiaries of our pay-as-you-go funding model are those born between 1958 and 1977.

Without younger workers who are collectively willing to pay, this country may not be able to give older workers the health services they’ll need. That won’t change the demand for services. Instead, it will likely shift them to employers and our personal pocketbooks.

While the idea that an aging population will wreak havoc on health spending is popular, it is not well-supported by the data. Aging is one of many factors affecting health spending, and there are bigger issues for employers.

There is a much stronger association between health spending increases and the presence of chronic disease and several common risk factors. There is also a compelling social issue to address — that of transferring costs from older workers to the tax bills of (at least) the next two generations.

The good news is aging is happening slowly enough that we should be able to actively manage it. For older workers, it’s not their age but it could be their lifestyle.

Concerned employers taking the long view should focus on what they can control: supporting disease-prevention strategies and creating a work environment much more conducive to good health.

Chris Bonnett is president of H3 Consulting in Guelph, Ont. He can be reached at (416) 458-5468, chris@hthree.ca or, for more information, visit www.hthree.ca


Numbers don't lie

Annual health-care costs 

Age band

CIHI 2010

Insurance company 2011

25 to 29

$2,012

$810

30 to 34

$2,156

$1,250

35 to 39

$2,148

$1,530

40 to 44

$2,206

$1,875

45 to 49

$2,438

$2,190

50 to 54

$2,917

$2,375

55 to 59

$3,536

$2,500

60 to 64

$4,380

$2,815

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