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Will money make or break a new health accord?

Åke Blomqvist is an adjunct research professor at Carleton University in Ottawa and Colin Busby is a senior policy analyst at the C.D. Howe Institute in Toronto.

The joint federal/provincial statement coming out of the Vancouver meeting of health ministers is encouraging in several ways. It suggests a more co-operative and pragmatic approach to health policy than we have seen in the past, and includes a welcome focus on aboriginal health. That said, the tough financing and accountability issues still need resolution, and the provinces have heavy lifting ahead if they want to engage in serious reform.

On the positive side, the health ministers signalled their intention to address gaps in coverage and performance with respect to care in the community, mental health, prescription drugs and health outcomes for aboriginal people. The federal government's decision to join the pan-Canadian Pharmaceutical Alliance, which negotiates drug prices on behalf of public drug plans in Canada, is an important step forward.

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Less encouraging were the continued calls for more money and the joint agreement that more resources were needed. Stable, predictable funding is important, but past evidence on the Canadian health system's performance does not inspire confidence that more money will address its shortcomings, or necessarily act as a catalyst for change. Annual health-care spending increased by more than $1,700 per person in the past 10 years, with only small pockets of performance improvement when compared with our peers.

Federal transfer payments for health have a checkered history. The agreement with the provinces when medicare began committed to a 50/50 federal-provincial cost-sharing of doctor and hospital care, but the flaws of this structure soon became apparent: With the feds paying half, provinces lacked strong incentives to resist provider calls for more money, and health-care spending grew rapidly.

Cost-sharing agreements, when one level of government is responsible for spending and the other for funding, creates what economists call "moral hazard" – it leads to more spending because it diminishes the spending government's accountability to its citizens. Like other forms of federal bailouts, it should be avoided whenever possible, and we can only hope that the federal government does not bend to provincial requests for more cost-sharing, regardless of the level.

The joint statement also mentioned that the federal government would commit to long-term funding arrangements that would include bilateral agreements. We question whether this is a good idea – province-by-province arrangements could have major unintended consequences.

Yes, provinces face different financing pressures and priorities. But bilateral agreements will pit provinces against one another in seeking favourable arrangements, and can create disputes when a province chooses to prioritize some areas of health over others. A more productive role for the federal government would be to bolster forums where it and the provinces can learn from one another, and from approaches that the feds are trying out with its own programs.

If governments are going to address the gaps in areas such as continuing care, mental health, prescription drugs and aboriginal health without vastly increasing total spending, new spending in these areas has to come from savings elsewhere in the system. Such savings are possible, but they will involve new approaches and hard choices.

Provinces can try to get more efficient by moving away from fee-for-service payments for physician services. They can also lower costs by renegotiating scopes of practice between providers and shift services into the community. Given the widespread support for using competitive tendering to reduce drug prices, would this approach not also be sensible in other areas of health spending, such as routine hospital procedures, diagnostic imaging, etc?

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Because of the need for more public coverage in neglected areas, do we really need to have around 100 per cent public funding of all physician and hospital services? This is, after all, a startling feature of the Canadian system that sets us apart from other progressive health regimes in Europe and elsewhere.

Making a lasting dent in reforming health care in Canada means dirty work for the provinces: They must sit down with the doctors, nurses, hospitals and other health professionals in politically sensitive negotiations. If, or when, this happens, the real test for Ottawa to act as a positive force in health care is whether it will let reforms take their course when opponents march down Wellington Street claiming that provincial reforms are "against medicare."

Canadians, as patients and taxpayers, will benefit from a health accord that allows the provinces to do this work without being undercut by federal politics. They do not need one where the federal government raises taxes to finance increased health transfers to the provinces – the provincial politicians who make health-care spending decisions should also be the ones responsible for the taxes needed to pay for it.

All told, there is plenty of positive momentum from last week's meetings. Money, as usual, remains a sticking point, and the hard work of restructuring will take place far away from the cozy confines of ministerial meetings. It will call for moves that, advisers will say, could put political futures at peril, but that nevertheless are urgently needed.

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