Cutting through the numbers on health-care funding

Posted on October 11, 2016 in Health History – Opinion
Oct. 11, 2016.   ANDRÉ PICARD

One of the truisms of Canadian political discourse is that the federal government grossly underfunds health care. Ottawa’s health transfers, the argument goes, only cover about 20 per cent of medicare spending.

This year, the cash transfer for health is $34-billion; the provinces and territories will spend $155-billion in public money on health – or 22 per cent. (Total health spending, however, will be $219-billion; 30 per cent of health spending is private.)

When medicare began, the argument continues, Ottawa committed to pay 50 per cent of health spending. Ergo, the provinces are being ripped off big time.

A little history lesson is required here. In 1957, the Hospital Insurance and Diagnostic Services Act was passed. The federal government agreed to pay half the costs of hospital and diagnostic care. Then, in 1966, Parliament adopted the Medical Care Act, which extended the 50-50 cost-sharing formula to physician services outside hospital.

These payments were not negotiated: They were take-it-or-leave-it offers, and came with strings, such as a guarantee that access to these services would be universal and that there would be no user fees. The conditions for receiving federal money were formalized in 1984 in the Canada Health Act.

Over the years, the formula used for determining cash transfers changed a number of times. There was always money for health care, but it wasn’t necessarily earmarked as such.

Flash forward to 2004, when then-prime minister Paul Martin decided to negotiate a health accord with the provinces and territories. That deal set the federal health transfer at $22.6-billion, with an escalator of 6 per cent, per year. (There was also another $14-billion in tax points, and a $16-billion Health Reform Fund for priority areas such as home care, but we will leave those out of the discussion for simplicity’s sake.)

When the health accord expired in 2014, the federal government extended the 6-per-cent a year escalator to 2017, then 3-per-cent per annum after that date.

Now, Ottawa and the provinces are negotiating a new deal, in backrooms, and via the media. A recurring theme of sorties by lobby groups is that Ottawa is only funding 20 per cent of health care, so: a) it needs to pay more and; b) it has no business telling provinces what to do.

This argument irritates Lee Soderstrom, a retired McGill University economics professor who has followed the cost-sharing debate for more than 40 years. He notes that Ottawa has never paid half of all health costs, nor did it ever agree to do so.

“There’s a lot of confusion about what the federal share is, and what it should be,” he said in an interview. By Dr. Soderstrom’s expert calculation, Ottawa’s cash transfer covers 37 per cent of the costs of hospital, diagnostics and physician services (which were $92-billion last year). Federal tax dollars also go to health via equalization payments and targeted programs.

“I don’t know what the precise percentage should be – that will be determined in political horse trading – but I think we need to be clear what the actual numbers are,” he said.

Quite right. We need to be clear not only how much money Ottawa is transferring, but how it is being divvied up among the provinces. Currently, it is strictly on a per-capita basis, but some provinces argue that there should be adjustments based on demographics – for example, a top-up for provinces with a large percentage of seniors.

Finally, beyond the dollars, there needs to be discussion about why Ottawa transfers dollars for health care. It should be to ensure that there is a semblance of a national system, to ensure that all Canadians have similar and equitable to care, regardless of their ability to pay, and where they live.

In a sense, Ottawa should be the conscience of medicare – and the way it can do that is by enforcing the terms of the Canada Health Act, and by targeting funds to underresourced parts of the system such home care, palliative care and mental health.

But to have moral authority, Ottawa needs to have skin in the game; it needs to contribute financially and otherwise. There is no single magic number or percentage that will allow the federal government to play that role. But the simplistic “50 per cent versus 20 per cent” argument is fallacious and unhelpful.

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