Ottawa s gloves come off over healthcare funding


It’s been a while since Canadians have heard their Prime Minister berate the provinces for how they spend the health-care money Ottawa sends their way. But Justin Trudeau this week finally revealed more about his vision of Canadian federalism in one sentence about cash transfers to the provinces for health care than he has in a year of travelling the country as the second coming.

“Canadians expect that any new money invested in health by the federal government is actually spent on health by the provinces and not on tax cuts or I-don’t-know-what [other] programs,” Mr. Trudeau told Le Devoir on Monday, suggesting that billions in health transfers accorded by the previous Conservative government were diverted by the provinces to other uses.

It’s true that federal transfers for health care have grown more than twice as quickly as overall health spending in the past five years, as debt-strapped provinces seek to rein in deficits and tame a health-care beast that for a decade prior had been sucking up a greater and greater share of provincial budgets. But Mr. Trudeau’s comment nevertheless landed with a thud at a meeting of federal and provincial health ministers in Toronto, confirming provincial fears that the peaceful era of no-strings-attached federal health funding is over.

Combined with federal Health Minister Jane Philpott’s admonition, at the outset of the meeting, that “we can do better for the money we’re spending,” the provinces have been put on notice: The activist Liberal regime in Ottawa intends to assert the central government’s authority. Any new money, she intimated, will come with conditions.

It’s not clear that such federal meddling will yield any better results than it did under previous Liberal governments. As long as the provinces remained bound by the Canada Health Act, which constrains their ability to dramatically alter the way health care is paid for and delivered, any new conditions on the use of federal transfers are only likely to further weigh down an already overly bureaucratic system. Such meddling betrays an age-old Liberal desire to ensure that Ottawa gains visibility, and credit, for health funding. It almost never leads to an improvement of services.

This doesn’t mean that former prime minister Stephen Harper’s approach of writing ever-bigger cheques to the provinces, no questions asked, was the right one, either. It spared Canadians the tedious federal-provincial bickering of yesteryear. But it provided no incentive for the provinces to undertake structural reforms or resist salary demands from doctors or health-care workers. Only after the recession left them with massive deficits did the provinces crack down on health costs.

This rather exceptional restraint is what Mr. Trudeau is referring to when he suggests the provinces have been spending federal money intended for health care on other things. What he leaves out is that, in the decade before the recession, annual increases in provincial health spending dramatically exceeded annual increases in federal transfers. And unless Ottawa ups its current offer, that pattern is set to resume as an aging population, expensive new drugs and an influx of med-school graduates send health costs surging.

Conservative leadership contender Maxime Bernier suggests there is an easy way to end the bickering, forever. Ottawa should simply cease transferring health cash to the provinces and cut federal tax levels, enabling the provinces to raise theirs to pay for health care. The problem is that the provinces have an unequal ability to raise taxes. The poorest provinces are also saddled with demographic profiles that lead to higher per-capita health costs. Without a massive increase in federal equalization payments, controversial in itself, Mr. Bernier’s plan would result in a dramatic divergence in the accessibility and quality of care across the country.

A better idea would be to end the federal ban on extra billing to allow the provinces to charge wealthier Canadians co-payments or deductibles for the publicly funded health care they receive. This approach, advocated by Sean Speer and Ian Lee in a recent Macdonald-Laurier Institute paper, would enable an extension of publicly funded health care to cover prescription drugs and dental and vision care, services that most other public health systems provide.

If Mr. Harper wouldn’t go down this road, the odds aren’t great that Mr. Trudeau will. Instead, the Prime Minister seems intent on picking the same old unproductive fights with the provinces that his Liberal predecessors did.

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