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So we have a deal. Hallelujah! No wonder the newspapers cleared their front pages.

There we read that the Prime Minister and the premiers have reached an agreement to save health care, in which the federal government will send the provinces another $46-billion or is it $196-billion or maybe $21-billion, in return for which the provinces have promised to do a number of things they maybe wouldn’t have done anyway.

Only it’s not a deal, really. Nobody’s agreed to do anything. Nothing’s been signed, and the premiers have been clear that they don’t regard the money as sufficient. Some observers, accordingly, prefer to call it an “offer.” Only it’s not an offer, either. An offer is something you make in the course of a negotiation, on the way to an agreement: Each side brings something to the table, and the result is binding on both parties.

But there’s no negotiation involved here. The federal government has simply announced the sum of money it intends to add to the amount it transfers to the provinces every year, together with the actions it expects the provinces to take in return. The provinces may not like it, but they will take the money, because what are they going to do, not take it?

But they can’t hold the feds to their side of the “bargain” – if some federal government, current or future, decides to give them less than was announced this week, there is nothing they can do about it. For their part, the feds can’t hold the provinces to whatever it is they may or may not have promised to do in return.

Well in theory they can withhold some of the money. But they haven’t been too keen about doing that, even as provided for under the Canada Health Act: The penalties the federal government has imposed have been relatively few compared to the many and varied ways in which the provinces have been in violation of the Act.

The provinces made all sorts of similar undertakings, you’ll recall, under a previous federal-provincial “agreement,” the 2004 “fix for a generation”: reduced wait times, comparable indicators, performance benchmarks, home care, primary care reform, the works. Not much remains of them. Wait times have grown since then by 50 per cent. The feds sent the money anyway because what were they going to do, not send it?

They didn’t even hold them to spend the money on health care. Provincial spending on health care has grown by 5.3 per cent a year since then. But the Canada Health Transfer, Ottawa’s contribution to the pot, has grown by nearly 6 per cent per year, which means the provinces’ contribution has grown by rather less than that. (See the chart below.)

And federal transfers to the provinces had already been increasing rapidly for some years before the “fix.” All told, federal transfers for health care have more than quadrupled over the past two decades, from roughly $10-billion (assigning roughly two-thirds of what was then the Canada Health and Social Transfer to health care, which was how the money was divided when the CHST was split into the current Health and Social transfers) to $45-billion this year. The part of provincial health spending paid for by the provinces (out of revenues that were in part ceded to them by the feds way back when, but that’s another story) has merely tripled.

To be sure, tripling over 20 years is nothing to sneeze at, but because federal transfers have grown even faster, the provinces’ share of the total has fallen. And while the provinces have spent an increasing share of their budgets on health care – it now consumes nearly 50 per cent of own-source revenues – they have not had to devote as much of their budgets to it as they might have, had federal transfers not grown as fast as they have. In other words, part of the money the provinces receive in federal transfers for health has gone to other things, such as cutting taxes, or reducing deficits or spending on other programs.

Of course it did. You can call it a transfer “for health,” but there’s no way of actually monitoring it – the money doesn’t come with little labels on it. It all goes into general revenues, to be spent as the provinces please. The only way the feds could know for sure whether the provinces had spent the money they sent them “for health” on health is if they knew what provincial spending on health would have been in its absence – which is unknowable.

But never mind! $196-billion in new money is still – wait, wait. Even the feds couldn’t put that one out with a straight face. Any figure that sums annual increases over several years is always dodgy – it’s a bit like summing up the daily temperatures in February and concluding that, for the month as a whole, it was 400-below. But in this case the increases are largely fictional: Most of the money has already been announced and allocated. It’s only “new” relative to some previous point, before the money had been announced and allocated. By that standard the government could claim all the money it spends on health care is new money, relative to before there was health care.

In any case, what significance do we attach to that dazzling figure of $196-billion? Is that a lot or a little? It seems like a lot, compared with, say, the cost of dinner out. But in the context of total public spending on health care, likely to exceed $3-trillion over the next decade? The same applies to the $46-billion in actual new money, $21-billion of it earmarked for the Canada Health Transfer. That, too, sounds like a lot. But what does it mean?

Numbers only have meaning next to some reference point: For example, how much did we spend this year compared with last year? How much will we spend next year compared with this? Specifically, how much larger would annual CHT payments be in future than they are today? That’s a little harder to find, but dig a little deeper and you learn they would grow by $27-billion over 10 years, from $45-billion this year to $72-billion and change in fiscal 2033 – a 61 per cent increase!

Only, do the math: a 61 per cent increase over 10 years is … just under 5 per cent per year. Versus the nearly 6 per cent a year the CHT has been growing since its inception. And since transfers are supposed to increase rather faster in the first five years of the plan – 33 per cent, or nearly 6 per cent a year – that means transfers in the last five years will be growing at … just under 4 per cent.

What this historic, momentous, earth-shaking “deal” amounts to, then, is a federal decision to carry on with much the same system of notionally conditional but largely unconditional transfers under the CHT, at roughly the same rate of increase they have been increasing for a generation.

The really new part is the $25-billion the government has set aside for bilateral side deals with each of the provinces – deals that have also yet to be negotiated. The reason for these is murky. The professed rationale is to take account of the “unique needs” of each province. Well, no; that’s what the CHT is for. That’s why you hand out the money in cash: so that each province can spend it in the way best suited to its particular “needs.”

The actual rationale, rather, is so that Ottawa can bully or bribe each province into spending money in line with its needs – chiefly, to be seen to be doing something about health care. Whether the deals are ever likely to be enforced is another matter, though the thinking must be that it is easier to enforce 10 different deals, one province at a time, than one deal with all 10.

To what end? I’m all for a strong federal government, in matters that are appropriately federal – such as enforcing the internal common market it has failed to enforce for 150 years. And the feds have a legitimate role to play in nudging provincial health care systems to work more closely together – for example, putting their data on a comparable basis and sharing it with each other and the public.

But there is no reason to think Ottawa has been endowed with any superior insight into the internal workings of each province’s health care system – whether new money should go to mental health, or home care, or paying health care workers more, or what have you – superior, that is, to the people who actually run them.

So far as the new federal money has any influence, it is likely to be malign. We seem to oscillate between two approaches to health care in this country (see the chart below). One, as costs mount, cap spending systemwide, without addressing any of the underlying factors driving those cost increases. Result: shortages and wait lists. Two, pour more money into the system, easing shortages for a time but driving costs still higher. Repeat.

Capping spending, without reform, can only lead to shortages. Adding money just ensures no reforms ever take place. The only way health care will ever get better is by “localizing the budget constraint”: embedding spending discipline throughout the system, such that every one of its many participants has accurate information on costs and, more important, the incentive to use it – including competition from other providers, public or private. Maybe 10 years from now?

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