Provinces brace for health-care transfer-payment showdown with Ottawa

Posted on November 8, 2010 in Health Debates

— Authors: , – News/National
Published Sunday, Nov. 07, 2010. Last updated Monday, Nov. 08, 2010.   Karen Howlett and André Picard

Canada’s provinces are bracing for a showdown with the Harper government as they approach the deadline for a new federal medicare-funding deal, with the risk that rising health-care costs could crowd out investment in schools and other programs.

Provincial officials worry about the signals from Prime Minister Stephen Harper: his government appears in no hurry to confront the competing pressures of rising budgets and an aging population that could further accelerate costs. So far, the only public statement on the prospects for a new health-funding deal is a suggestion from the Finance Minister of applying the brakes to spending increases.

These signs are ominous, according to Ontario Finance Minister Dwight Duncan. If the federal government holds the line on transfer payments when the funding accord expires in three years, he warns, the provinces will not be able to sustain the system Canadians take for granted.

“This is not a debate about transfers to the provinces,” Mr. Duncan said in an interview. “This is a debate about the future of universal health care.”

The transfers are crucial because about 20 cents of every dollar the provinces spend on health care comes from Ottawa. They are slated to receive annual increases of 6 per cent until the Canada Health Transfer Program expires in fiscal 2013-14.

Federal Finance Minister Jim Flaherty hinted in his annual economic update last month that he wants to tie the increase in transfers to inflation and economic growth, both of which are projected to remain in the range of 0 to 2 per cent in coming years.

The provinces, many of them deep in deficit, would be hard pressed to take up the slack without raising dedicated revenues or cutting into other social programs or money for schools and post-secondary education.

Part of the concern stems from the view that governments have already squeezed a lot of money out of the system. During the recession in the early 1990s, the impact of spending cuts was felt across the country when cash-strapped provincial governments laid off nurses and closed hospitals.

Alan Hudson lived through that turmoil as chief executive officer of University Health Network, Canada’s largest hospital complex.

“In the early 1990s, when we had to make drastic cuts, there was fat to cut,” Dr. Hudson said in an interview. “My concern is now that with big cuts going to be required, there’s not much fat left.”

Federal Health Minister Leona Aglukkaq has issued a statement that the Harper government is working to strengthen health care in partnership with the provinces and territories. “By doing so, this government is contributing to real improvements in the health-care system for all Canadians,” she said.

But the stakes are rising. Health care consumes roughly 40 cents of every program dollar and the cost is rising at between 5 and 7 per cent each year. The provinces will be considering their strategies next month, when finance ministers meet in Kananaskis, Alta.

It remains to be seen whether public statements and proposals will enter the dangerous territory of new revenues or new ways to harness private and profit-seeking health enterprises. On the revenue side, Quebec’s Liberal government was stung this year by its proposal for a new form of means-tested user fee, which was dumped in the face of sustained opposition. As for publicly entertaining a role for private actors, the political dangers may appear even worse.

Former prime minister Brian Mulroney has jumped into the fray, calling for a “serious, adult discussion” on whether medicare is financially sustainable. He said in a speech to the Canadian Council of Chief Executives last month that the country needs to strike a better balance between the “intrinsic value of universal coverage” for basic medical services and the ability of Canadians to pay taxes to support the system.

Was he floating a trial balloon for the Conservative government? Mr. Mulroney laughed heartily at the suggestion.

“It’s just me,” he said in an interview. “I just put the idea out there for others to kick around.”

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