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André Picard

How much should Ottawa spend on health? It’s complicated Add to ...

Federal Health Minister Jane Philpott has said repeatedly that she would like a new Health Accord to be signed, sealed and delivered by year’s end.

If that’s going to happen, negotiations have to begin in earnest now and the two (or more) sides have to make their positions clear by the time the First Ministers meet in Whitehorse in July. On the surface, the issue is pretty simple: The provinces and territories want more money. They always do.

Ottawa, for its part, wants to control its spending. But more importantly, it wants a political payoff for the health dollars it transfers, and the way to do that is to put strings on how the money is spent.

But things don’t always work out.

In 2004, then prime minister Paul Martin signed a 10-year, $41-billion Health Accord that promised to be the “fix for a generation.” While it promised to fix wait times, home care, and a host of other problems plaguing the health system, there were few accountability measures.

Essentially, the provinces and territories got a six-per-cent annual increase in federal health dollars while promising nothing in return. Prime Minister Stephen Harper made the “no strings attached” policy explicit when he extended the six-per-cent per annum increase for three more years. The catch is that, come 2017, that escalator drops to three per cent a year (or the equivalent of GDP growth, whichever is greater.)

Naturally, the provinces and territories say three per cent is not enough – after all, there is a relentless clamour for more health spending.

However, the reality is that health spending increased only 1.6 per cent last year, thanks to holding the line on drug spending and increases in payments to health workers, and doctors in particular.

When you factor in inflation and population growth, health spending actually declined 1.4 per cent last year, and has dipped an average 0.6 per cent annually since 2011.

Another tack by the provinces and territories is to call on the federal government to increase its share of public health spending to 25 per cent from the current 22 per cent. (The Canada Health Transfer was $34-billion in 2015, while public health spending was $155-billion.)

This is actually a legitimate demand, given that, when medicare began, Ottawa vowed to cover 50 per cent of costs. However, it would mean additional federal spending of $5-billion a year so it’s unlikely to happen.

Ms. Philpott has hinted repeatedly that the three-per-cent cap on the CHT will stay. The way you say this diplomatically is: “More money is not necessarily the answer.”

On that count, the Minister is quite right: Many Western countries have far better health outcomes (and fewer problems like wait times) while spending significantly less than Canada.

Despite the “hold-the-line” approach, Ottawa is actually open to spending more on specific programs, particularly home care, where it has promised $3-billion over four years. Other federal priorities include pharmacare, mental health, and palliative care, all of which have some traction in various provinces.

Practically, the way to address this in a decentralized health system like Canada’s is to sign separate funding deals with individual provinces and territories. This approach, which policy wonks will recognize as “asymmetrical federalism,” is actually much discussed these days in policy circles.

Bilateral agreements are attractive because they allow provinces and territories to pursue specific policy goals while allowing Ottawa to have some visibility (and take some credit). The lesson of history, though, is that once these agreements run out, provinces are on the hook for maintaining spending, so they are a bit of a Trojan horse.

The other, much-discussed piece of the health-transfer puzzle is how the CHT monies are distributed among provinces/territories. Currently, that is done strictly on a per-capita basis, but some provinces (namely those in the Atlantic with large seniors’ populations) have been pushing for age adjustment or, better yet, a “demographic top-up.” This would cost Ottawa an estimated $1.6-billion. That’s likely affordable, especially when you factor in the political payoff of investing in seniors and have-not regions.

There is much work to be done to negotiate a new Health Accord (or accords), and it’s pressing. If there are to be monies and specific allocations in the winter 2017 federal budget, decisions have to be made now, during budget-building season.

Editor's Note: The annual increase in federal health dollars will drop to three per cent a year in 2017.  An earlier version of this column stated the year was 2013.

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