This paper studies heterogeneity in health status across income groups using administrative panel data that link hospital discharges to tax records in Canada. We construct a health measure based on a comorbidity index capturing disease severity and mortality risk. We document that individuals in their 50s from the bottom 10% of the income distribution are nearly twice as unhealthy as those from the top 10% on average. To explain why health inequalities persist despite universal health insurance, we develop an overlapping-generations model in which adult health is shaped by parental investments in early childhood. In the model, universal insurance potentially crowds out early childhood health investment particularly among low-income households. Our results show that targeted subsidies supporting early health investment can complement universal insurance and reduce health inequality.

• Understanding how socioeconomic status and health interact throughout life is essential for improving health equity and guiding effective policy. This study develops an objective and multidimensional measure of health shocks based on the Charlson Comorbidity Index, allowing for precise identification of severe health events and their cumulative impact. By linking the Discharge Abstract Database, which contains detailed hospitalization records, with the Longitudinal Administrative Databank, a rich source of socioeconomic information, we connect individual health histories with long-run income trajectories. The results show that health shocks substantially reduce future income, even after controlling for prior income, family characteristics, age, and sex, indicating that serious illness imposes lasting economic costs. The effects differ across groups: lower-income and older individuals experience sharper income declines after a shock, while higher-income groups show greater resilience. These findings highlight how socioeconomic status influences both exposure to and recovery from adverse health events. By combining objective health and income data over two decades, this paper provides new evidence on the mechanisms through which health shocks reinforce inequality and shape intergenerational economic outcomes.