It’s time the feds got off the health-care escalator

Posted on October 6, 2016 in Governance Debates – Full Comment
October 5, 2016.   ANDREW COYNE

A cynic, looking on at the latest round of federal-provincial hair-pulling over health care, might be tempted to put it all down to politics, or money, or both. How jaded, and how wrong. In fact these disputes are rooted in questions of fundamental principle, as any of the participants will tell you.

There is, for example, the very ancient principle known as “the rule of six per cent.” It is an established axiom, taught in the schools and sung on patriotic occasions, that federal transfers to the provinces for health care must rise at a rate of six per cent per annum, every year, forever. Why six per cent? Silly question. Because that is how fast transfers have been increasing.

Likewise, the provinces are fond of invoking the principle that the federal government should foot 25 per cent of the bill for provincial health spending, rather than the 22 per cent it now provides. Why is 25 per cent a more appropriate number, other than the obvious fact that it is more than 22 per cent? Because it is half of 50 per cent, the ratio that obtained 50 years ago when Medicare was introduced.

In the latest example, some provinces, with disproportionate numbers of old people, have been arguing they should receive a larger share of federal transfers than that to which they would otherwise be entitled, on the principle that, er, provinces with disproportionately old populations should get more.

As principles go, this one has the advantage of having some plausible basis in fact or logic. Old people — I say this respectfully, as a future old person myself — cost a great deal more to look after than young people. So provinces with higher numbers of old people will tend to spend more on health care, other things being equal.

The provinces are adamant Ottawa can have nothing to do with health care. Nothing that is, except pay for it
But, well, you can go a long way with that line of argument. As it happens, the provinces with the older populations are to be found in the Atlantic region. For a number of reasons, things tend to cost less there than elsewhere, as do people. Health care is no exception. A doctor in St. John’s would not expect to make as much as one in Toronto. Maybe we should factor that in as well.

But all these are minor skirmishes, beside the epic battle now under way in defence of the sacred principle of unconditionalism. Constitutionally, health care is provincial jurisdiction. As such the provinces are adamant Ottawa can have nothing to do with it. Nothing that is, except pay for it.

Undaunted, the Trudeau government has offered $3 billion over four years, on top of the three per cent annual “escalator” to which its predecessor had agreed. There’s just one catch: the provinces have to spend it on home care. On the surface, this makes perfect sense. It costs much less to care for people at home than in hospitals. Every study of the system urges more resources be put into home care.

The federal government, for its part, is understandably anxious to see that the money it provides is put to good use. Past bursts of federal largesse, it well remembers, intended to “buy change,” instead went to buy peace with provincial health-care unions. As federal Health Minister Jane Philpott has observed, “we took the status quo and inflated it.”

It’s equally understandable why the provinces would bristle at the feds telling them how to run their health-care systems. If home care is such a good idea, provinces are quite capable of figuring that out for themselves. Still, the reality is the feds have the money and the provinces need it, or will, as the numbers of the elderly soar. Even the most radical reforms in health care delivery are unlikely to save enough to offset this.

So: more federal transfers, with strings? Or more transfers, without? The answer, of course, is neither.

Conditional transfers might have made sense once, when the issue was enforcing national standards. But with the crisis of population aging very much upon us, some shift of priorities is in order. Provinces aren’t going just to need more money; they’re going to need maximum flexibility, to experiment and innovate.

But unconditional transfers make even less sense. It’s one thing to take money from richer parts of the country to distribute to poorer, as through the equalization program. But it is unclear what is achieved by collecting money from Ontario taxpayers just to give it back to them, minus shipping and handling, other than to let two groups of politicians claim credit for spending the same cash.

There’s a third alternative. It’s true the provinces need more money. And it’s true they need the freedom to spend it as they see fit. At the same time, it’s true they should be accountable for the results — to someone. But that someone doesn’t have to be the federal government. Accountability, like charity, begins at home, with the people who elect them.

It’s time the feds got off the escalator. Rather than the old game of fiscal federalism — Ottawa raises the taxes for the provinces to spend — the federal government should instead offer to convert the existing transfer into “tax points,” Ottawa cutting its own taxes to make room for the provinces to raise theirs.

The sums involved would be roughly the same, but it would at last be clear just who was paying for what, and should answer to whom. I believe this principle is called responsible government.

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