One economist says transferring more cash might not bring the “transformative change” needed to help the health-care system.
Health-care funding in Canada has been one of the major topics of debate between the provincial and federal governments in recent months — but will increased spending from Ottawa change the status quo of how health care is delivered?
In early July, the Council of the Federation, a congress made up of all 13 of Canada’s provincial and territorial premiers, declared health-care issues are the leading problems addressed by the group.
As a result, Canada’s premiers are calling on the federal government to increase federal funding from 22 per cent to 35 per cent.
How is health care funded in Canada?
The federal government provides health-care funding to the provinces and territories through the Canada Health Transfer (CHT).
CHT payments are made on an equal per capital basis “to provide comparable treatment for all Canadians,” regardless of where they live, states the government’s website. CHT is the largest major federal transfer.
Funding for health-care in Canada is made primarily through the CHT. Since 2018, funding for the transfer is set to grow along “with a three-year moving average of nominal gross domestic product,” according to the government’s website. Total funding is also guaranteed to increase by at least three per cent per year.
What is Canada’s tax-point system?
Tax points are a permanent transfer of income tax room from the federal to the provincial governments. In order to leave total federal and provincial taxes unaffected, the federal government reduces its basic tax rate and the provinces increases theirs by an equivalent amount.
The federal government has utilized tax points to fund health care for Canadian provinces but have primarily moved to cash payments as the main form of funding.
Some experts Glacier Media interviewed for this story say even if there was a funding boost, little would change to improve how health care is delivered.
Canadian economist Trevor Tombe says health-care spending on the part of the federal government “does not automatically improve health care in Canada.”
“We’ve tried this already with the Roy Romanow report two decades ago that led to a decade of six per cent, per year, increases in the federal transfers to the provinces. And very little is different as a result of that, except for overall spending being higher. But that doesn’t translate into more doctors or nurses, for example,” he said.
What it will do is translate into higher pay for those professions, Tombe adds; however, he says throwing more federal dollars at the health-care system may not translate into the results Canadians need.
Ontario-based economist Livio Di Matteo also believes that more funding may not change the status quo, citing the same Romanow report, which made recommendations to improve health care with increases in federal funding as part of the solution.
“The money was supposed to buy transformative change, but we are 20 years later, and it’s all the same issues with access to physicians, staff and hospitals. In the end, simply transferring cash doesn’t seem to have bought the transformative changes,” he said.
Kevin Milligan, professor of economics at UBC, says more cash transfers can improve health care for Canadians.
“When Paul Martin was prime minister, there was a substantial escalation for a period of 10 years in health transfers, and that did make a big difference to transfers and to spending in the health system,” he said.
One part of the debate is exactly how much the federal government is spending on health care. According to B.C. Premier John Horgan, the provinces are financing 78 per cent of the health-care costs.
From Ottawa’s perspective, they are funding more than the 22 per cent the provinces are citing.
“At the end of the day, the jurisdiction for delivering the services rests with the provinces and, historically, that exchange of responsibilities was, we deliver the services and we share the financing of those services at a 50/50 rate,” Horgan said at a press conference for the July meeting of the federation.
Tombe says that when you take into account the tax room granted to the provinces by the federal government, the federal funding adds up to roughly 34.6 per cent.
“Neglecting the existence of the tax-point transfers is in the premiers’ interest because once you account for them, then the federal contribution adds to precisely what the premiers are demanding,” Tombe said.
The last transfer of tax points took place in 1977 as a result of fiscal and budgetary constraints on the federal government. What has happened recently, is the provinces treat those tax points as their own source of revenue and not contributions from the federal government, says Di Matteo.
“I think the tax points are fictitious, in that, this is tax revenue raised by provincial governments,” Milligan said. “I don’t see how the federal government should be able to claim credit for that.”
As the debate over the cash transfers continues, the federal government has provided a $2-billion top-up to the Canada Health Transfer that is aimed at reducing backlogs caused by COVID-19.
“This investment supplements the Budget 2021 investment of $4 billion through the Canada Health Transfer, distributed equally per capita, to help provinces and territories address immediate health-care system pressures,” Health Canada and Public Health Agency of Canada said in a statement.
Health Minister Jean-Yves Duclos responded to calls on the federal government to increase spending in an Aug. 23 media event.
Duclos said that a few weeks ago there was already an increase to the Canada Health Transfer from $43 billion to $45 billion.
“It’s going to go up to 49 next year, to 51 to 53. So, over the next three, four years, we will see an increase of about 25 per cent in the Canada Health Transfer that we will see even without taking into account the prime minister’s promise to do more.”
Glacier Media reached out to the premier’s office but did not hear back in time for publication.
Horgan has said he and his colleagues are ready to address Ottawa’s expectations of any accountability measures that would come with more money.
But premiers first need to know what types of “strings” will be attached to it, he said, adding national solutions are needed to deal with problems plaguing provinces and territories.
With a file from Canadian Press