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opinion

The federal government will transfer $34-billion to the provinces for health care this year, an amount equal to about 23 per cent of provincial health budgets. That's up from barely 15 per cent in the late 1990s, and represents a 70-per-cent increase in federal cash in the past decade.

When equalization is taken into account, Ottawa's share of health spending might even exceed 25 per cent, since most have-not provinces likely use some of the $17.3-billion they get in equalization to pay for hospitals, doctors, prescription drugs and other health-related expenditures. Equalization, after all, is meant to allow poorer provinces to offer comparable public services at comparable rates of taxation, with health care being the great equalizer among Canadians.

Sadly, that is no longer saying very much. As last month's report by Ottawa's advisory panel on health-care innovation noted, the performance of Canada's health-care system has been "middling" even though "spending is high relative to many [developed] countries."

Ottawa already turns over cash for health care without any requirement on the part of the provinces to account for how they use it. (It only asks that the provinces conform to the principles of the 1984 Canada Health Act, which bans such practices as extra billing by doctors.) And no federal leader is about to pick a fight with the premiers by insisting it should be otherwise.

Since federal transfers have been growing at more than twice the rate of health spending since 2010, some federal cash destined for health care is presumably being diverted elsewhere or replacing provincial cash. The Canadian Institute for Health Information says spending on health care in Canada grew by 2.1 per cent in 2014. But federal health transfers grew by 6 per cent.

Starting in 2017, federal health transfers will grow at the same rate as the economy, with the floor for increases set at 3 per cent. The advisory panel on health innovation led by former University of Toronto president David Naylor rejected provincial calls to maintain the annual 6 per cent escalator adopted in 2007. It also rejected a "return to earlier approaches that depended on unanimously agreed priorities and formulaic allocations of funds" between Ottawa and the provinces.

Yet this is precisely what NDP leader Thomas Mulcair and Liberal leader Justin Trudeau are promising should one or the other become prime minister after Oct. 19. "If my party forms government, it will call a federal-provincial meeting to reach a long-term agreement on health-care funding," Mr. Trudeau wrote last week in a letter to Quebec Premier Philippe Couillard.

Mr. Mulcair promises an NDP government would "use any budget surplus" to restore the 6 per cent escalator. "Money alone cannot solve the problems facing our health-care system. But without money, we won't solve a thing," he told the Canadian Medical Association in 2014.

The approach promised by Mr. Mulcair and Mr. Trudeau has a clear track record of failure. Despite its good intentions, the 2004 health accord negotiated by former prime minister Paul Martin reduced pressure on the provinces to overhaul the outdated architecture of their health systems. As the Naylor panel noted, most of the $41-billion transferred under the accord was used to increase doctors' fees rather than invest in innovation or more cost-effective ways to deliver health care.

This is exactly what should have been expected. As William Robson and Alexandre Laurin of the C.D. Howe Institute concluded in a recent report on this history of fiscal federalism: "The more federal transfers appear to respond to provincial fiscal pressures, the weaker are the incentives for provincial governments to raise [provincial taxes] or manage expenditures efficiently."

Now, the premiers are warning that their provinces are about to be submerged by a grey tsunami. Though the proportion of health-care spending devoted to seniors' care has not budged, remaining steady at 45 per cent since 2002, the CMA projects it will hit 62 per cent by 2036.

But that's only if Canada keeps on doing what it has always done – pumping more money into a system designed in the 1960s and which has barely changed since. It's hard to see how yet more federal cash would incentivize the provinces to innovate their way to health-care sustainability.

The Naylor panel's recommendation for the creation of a $1-billion federal health-care innovation fund hits the mark. The most meaningful contribution Ottawa could make to saving Canadian health care right now is as a catalyst for change, not as an enabler of the status quo.