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The Ontario Liberals are projecting overall spending growth of just 1.2 per cent on hospitals, doctors and other services – an increase that is less than half the size of last year’s and well short of inflation and population growth.Kevin Van Paassen/The Globe and Mail

Ontario has been putting the squeeze on health care for the past three years, but this year the Liberals are moving from a squeeze to a chokehold. They are projecting overall spending growth of just 1.2 per cent on hospitals, doctors and other services – an increase that is less than half the size of last year's and well short of inflation and population growth.

Restraint in health spending is now entrenched in Ontario's fiscal plans, part of a $131.9-billion budget that aims to increase spending in a few key areas, particularly public transit construction, while holding the line nearly everywhere else, all in a bid to erase the $8.5-billion deficit in two years.

Education and the justice ministry will see their funding constrained, which critics warn could lead to "backdoor cuts," particularly at schools. In the case of health care, the plan to barely increase spending would give Ontario one of the slowest health-care growth rates in the country. The Liberals are extending for a fourth straight year a freeze on hospitals' base operating budgets, and they have taken a hard line against the province's doctors.

"I don't think there's any question that the year ahead and absolutely the year after are going to be very challenging times for hospitals," said Anthony Dale, the president of the Ontario Hospital Association. "There's a lot of innovative change right now that's happening to improve efficiency and improve quality, but, at the same time, we're into new territory here."

There is no end in sight to the health-care austerity: Overall funding is expected to rise, on average, by just 1.9 per cent a year in the four years leading up to 2017-2018, when the Liberals have promised to balance the budget.

"I know that in other parts of Canada it's been very high, upwards of 5 or 6 per cent," Finance Minister Charles Sousa said. "This is not about being focused on the process … this is about being focused on the patient and being focused on those who need the help and need the care."

In January, the government imposed a contract on the province's 28,000 doctors that included a 2.65-per-cent cut to all physicians' fees and limited the growth in overall spending on doctors to 1.25 per cent a year. The budget assumes that cap on the growth of the physicians' services budget will stay in place.

Thursday's budget also projects an increase of 1.4 per cent to spending in the hospital sector, but that covers growth related to ongoing funding reform and increases in patient volumes, not a thaw of the base-budget freeze.

By constraining the amount of money they give to hospitals, the Liberals have left local boards and administrators to make the difficult choices necessary to balance their budgets, insulating the government from the blow-back when hospitals cut beds, wards or staff, opposition politicians say.

"The Liberals have figured out [how] to do sort of backdoor cuts in health and education," said Catherine Fife, the NDP's health critic. "Those ministries were supposed to be protected last year, but we watched those cuts actually happen throughout the year."

The Ontario Nurses' Association (ONA), for instance, says 409 registered nursing jobs have been chopped since the start of this year, most through attrition. The union says more than 1,700 nursing positions have been eliminated across the province in the past three years, leaving Ontario with the second lowest nurse-to-patient ratio of any province.

"It's deplorable, quite frankly," said Marie Kelly, the chief executive officer of ONA. "It is not going to get better in Ontario until the Liberal government steps up to the plate and actually starts to appropriately fund health care in our hospitals."

Mr. Sousa was reluctant to answer reporters' repeated questions about whether the freeze to hospitals' base budgets would continue, preferring to trumpet the investments his government is making in hospital infrastructure. The budget documents tout 40 ongoing hospital construction projects, none of them new to this year's budget.

The Liberals are planning to spend more generously on two areas of the health budget: home and community care and publicly funded pharmaceuticals.

They have made caring for patients at home – instead of in expensive hospitals and nursing homes – the cornerstone of their ongoing transformation of the health-care system. The budget for home and community care is expected to grow by about 5 per cent this year, but it still makes up a small fraction of overall health spending. The government is promising $750-million more for the sector over the next three years.

"Drug program utilization," meanwhile, is expected to rise by 4 per cent, an increase the Liberals are hoping to control in future through a series of vaguely described efforts to "ensure the sustainability of the Ontario Drug Benefit," the program that covers the cost of drugs for seniors and people on social assistance.

With a report from Adrian Morrow