Ottawa takes hard line with provinces on health transfers

TheGlobeAndMail.com
Dec. 16, 2016
Bill Curry

The federal government is taking a hard line on health transfers ahead of a key meeting with the provinces and territories, warning that Ottawa is not willing to deliver on their requests for major increases.

In an interview with The Globe and Mail, Finance Minister Bill Morneau pointed to the federal government’s fiscal situation – which has seen deficit forecasts grow due to weaker economic growth – as a reason why there is a limit as to how much new federal money Ottawa is willing to offer.

“We have been clear that the federal health transfers are at a level that we believe is appropriate. We also believe that we can make specific investments. Any request that is significantly greater than those numbers won’t be able to be achieved because of our fiscal environment and because we want to make sure that we use our money very wisely in investments in health care,” he said.

According to B.C.’s Health Minister, Ottawa put forward a new offer Friday that would raise the minimum annual increase to the Canada Health Transfer (CHT) from 3 per cent to 3.5 per cent. The offer also included $8-billion over 10 years for home care and mental health.

Mr. Morneau is scheduled to host his provincial and territorial counterparts at a dinner Sunday evening in Ottawa, followed by a day-long meeting Monday at the Chateau Laurier hotel. Health ministers have been invited to attend the meeting on Monday. Both levels of government are grappling with how to prepare the health system for an expected rise in costs as the baby-boom generation retires.

The outcome of Monday’s meeting is also important to the bottom lines of both levels of government. The federal Liberals have abandoned initial promises of keeping deficits under $10-billion and no longer have a timeline for erasing annual deficits, which are currently forecasted to peak at $26.9-billion next year.

Meanwhile, health-care costs account for more than 40 per cent of the budget for many provinces. The Parliamentary Budget Officer has noted that in spite of the federal deficits, Ottawa’s finances are much healthier than the situation facing the provinces, where growing health-care costs are on pace to create dramatic increases in government debt.

The extra money Ottawa is offering for mental health and home care would be outside of the transfer formula, which does not sit well with provinces and territories. Mr. Morneau declined to confirm the proposed figures. However, he expressed the government’s desire to reach a health-care deal on Monday.

“We don’t intend on negotiating in public around the amount of dollars. What we do intend on doing is having the negotiation start and finish on Monday,” he said. “If the provinces are not able to come to an agreement on the kinds of investments we’re talking about … then we will fall back to our campaign commitment of continuing the CHT with $3-billion for home care [over four years].”

Health-care transfers have been increasing by 6 per cent a year since 2005 but are scheduled to shift next year to a formula based on nominal GDP or 3 per cent, whichever is higher. Forecasts call for nominal GDP to average 3.8 per cent over the next decade, meaning a federal concession to 3.5 per cent is not likely to make a material difference. Ontario has called for the transfer to be set at 5.2 per cent and Quebec has made a similar recommendation that would bring Ottawa’s share of overall health spending to 25 per cent from about 23 per cent.

“I remain frustrated,” B.C. Health Minister Terry Lake said in an interview Friday. Dr. Lake spoke to The Globe and Mail after a phone call with federal Health Minister Jane Philpott. Dr. Lake also organized a conference call Friday morning among provincial and territorial health ministers to discuss the state of negotiations.

Dr. Lake outlined the latest federal offer, which he said is based on his conversation with Dr. Philpott and conversations among federal and provincial officials. He said he has not yet decided whether he will travel to Ottawa for Monday’s meeting.

“I don’t want to go and then just listen to: ‘This is what we’re offering. Take it or leave it.’ To me, that’s not meaningful discussion and negotiation,” he said.

The latest data released this week by the Canadian Institute for Health Information showed health spending is expected to rise 2.7 per cent in 2016, which is behind the combined rate of inflation and population growth. The CIHI said this represents a trend that began in 2011.

Spending on health in Canada has declined as a share of GDP since reaching a peak in 2010 and now sits at 11.1 per cent of GDP. That is well above the amounts spent in the 1970s, ’80s and ’90s.

Canada’s per-capita health spending is among the highest in the developed world at $5,543, which is higher than Australia, France and the United Kingdom but well below the $11,126 spent per capita in the United States.