Canada’s 13 premiers met last week in Victoria to deliver a well-worn message: We want more money from Ottawa.
Specifically, they were demanding that the federal government fork over more funding for health care. About $28-billion a year more, on top of the $45-billion the feds expect to transfer this year.
“Spend more” is a compelling message at a time when the country’s beloved medicare system seems to be crumbling under our feet.
But instead of highlighting the seemingly endless series of horror stories about lack of access to care – presumably because that would reflect badly on them – the premiers tried to make an argument based on math.
According to provincial math, Ottawa only funds about 22 per cent of health spending. The premiers say that should be at least 35 per cent. Why? That’s not entirely clear, but the argument seems to be based largely on history.
So, let’s briefly examine the Byzantine history of health funding.
Ottawa had nothing to do with funding health care until 1957. The provinces, led by Saskatchewan, started to introduce publicly funded insurance for hospital care (the basis of what we now call medicare) but that was creating inequities in access.
So, the federal government adopted the Hospital Insurance and Diagnostic Services Act, offering to pay 50 per cent of hospital costs if provinces offered that care universally (at no cost to the public).
Provinces started covering physician services too. So, in 1966, Ottawa adopted the Medical Care Act, extending the 50-per-cent funding offer to doctors’ bills. Not every province came on board; Quebec didn’t sign on to medicare until 1972.
Historically, the federal government paid 50 per cent of hospital and physician services. There were strings attached: Provinces had to commit to certain standards for public administration, comprehensiveness, universality and portability – principles later enshrined in the Canada Health Act, along with accessibility.
Costs soared and things got a lot more complicated. In 1977, Ottawa introduced the Established Programs Financing Act, replacing the 50/50 funding formula with a combination of block grants and tax points, along with an escalator formula tied to the federal GDP. (Tax points are a transfer of income tax room from the feds to the provinces.)
The provinces liked the flexibility but, over time, Ottawa steadily reduced the escalator. By one estimate, that cost the provinces more than $30-billion over the course of a decade.
In 1996, after years of provinces complaining about “fiscal imbalance,” Ottawa upped health spending by $11.5-billion over five years. It also created the Canada Health and Social Transfer, to bring some clarity to what the feds were contributing.
Clearly, it was not enough. The Romanow Commission noted that Ottawa was paying only 18.7 per cent of health expenditures (hospital and physician services), and said it should be at least 25 per cent.
What followed was a series of three health accords, including a $41.3-billion “fix for a generation” in 2004. The Canada Health Transfer (CHT) also became a separate entity, and it was to be increased by six per cent per annum.
That CHT escalator was reduced to three per cent in 2017 by the Conservatives. Subsequently, instead of increasing overall funding, the Liberal government invested in targeted transfers for mental health, home care and long-term care.
So where does the 22-per-cent figure come from? Public spending amounted to $186.3-billion for health between 2020 and 2021, and Ottawa’s CHT payments totalled $41.8-billion. But that doesn’t include tax points, which are worth about $20-billion. That would make Ottawa’s contribution 33 per cent.
Technically, Ottawa only ever agreed to fund medically necessary services – hospital and physician care – and that’s $102-billion. That means Ottawa is covering 40 to 60 per cent.
The message here is when you start using dubious math, it can cut both ways.
But the more important message is that both Ottawa and the provinces should stop playing these numbers games and focus instead on the task at hand: Fixing the health system.
Canadians don’t especially care if the funding for health care is federal or provincial, split 22/78 or 35/65 or 50/50.
They want the care to be there when they need it – and it isn’t.
Structural reform is increasingly urgent. Part of that equation will have to be a new funding formula, one that requires a lot more accountability than we currently have.
The first step has to be setting clear priorities for reform, and costing them out – which is how the premiers should have spent their time, instead of just whinging.
Fix the system. We can worry about how we split the cheque later.
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