A ”Less Is More” Approach to Canadian Health Care: Reformulating the Canada Health Transfer

 Change has come to Canada’s health-care funding model. In December 2011, federal Minister of Finance Jim Flaherty announced that the Canada Health Transfer (CHT) – the legislative vehicle through which much of the funding (some $29 billion for the 2012-2013 period alone) for Canada’s provincial and territorial health-care systems is supplied and which is the most significant cash transfer mechanism in the country – would have its general funding formula and the method by which it is calculated altered. Flaherty said that structural reform of the CHT was necessary because “we all want to see a strong, sustainable system that is there when we need it for today and for our children and our grandchildren tomorrow.” He noted that the 2004 Health Accord which provided for the transfer payments to the provinces and territories was set to expire and that “we want to put the issue of funding behind us to allow us all to focus on the real issue — how to improve the system so the provinces and territories can ensure timely access to health care when needed.”

When the changes to the CHT were announced by Minister Flaherty, it became clear that a “less is more” approach was the underpinning of the Harper government’s recipe for the next chapter in the funding of Canada’s health-care system. Federal Health Minister Leona Aglukkaq defends Ottawa’s hands-off role in health-care funding, noting that: “Decision making about health care is best left to the provincial, territorial and local levels.” This past August at the Canadian Medical Association’s 2012 conference in Yellowknife, Aglukkak told delegates that: “As federal minister of health, I will not dictate to the provinces and territories how they will deliver services or set their priorities.”

In information provided to Ottawa Life Magazine, Minister Aglukkaq noted that the federal government has provided long-term, stable health funding via the Canada Health Transfer of $27 billion in 2012 and rising to $40 billion annually by 2019. She says that these sums give the provinces and territories the “flexibility to focus on areas of their priority.” Aglukkaq also pointed to more than $1 billion annually in funding for health research and data collection provided to the Canadian Institutes of Health Research and the Canadian Institute for Health Information.

“There’s been a lot of negative, over-the-top rhetoric from individuals and organizations about the federal role in health care,” Aglukkaq said, insisting that the Harper government was on the right track.

For the Harper Conservative government, the new formula settles the issue of health funding for a generation. By implementing the new CHT funding, the current annual CHT growth rate of 6 per cent will be replaced in 2017-2018 with a new funding formula pegged to a “three-year moving average of nominal Gross Domestic Product (GDP)” growth. What this means is that the annual growth of the CHT transfers will be determined by the speed at which Canada’s GDP grows. Under this new funding formula, CHT funding would be prohibited from growing at a rate of less than 3 per cent annually — an important safety feature, given the slow-paced global economic recovery that has been ongoing since the 2008 financial crisis and the looming fiscal meltdowns in Europe and the United States which have the potential to substantially damage Canada’s GDP growth.

What is most surprising about the new general funding formula is the explanation of how that transfer will occur. Currently, as the Department of Finance makes clear, “CHT transfer payments are made on an equal per capita basis and include both cash and tax point transfers. [But] starting in 2014-15, provincial and territorial CHT transfers will be allocated on an equal per capita cash basis only.” The Department of Finance justifies this important detail by stating that “the move to an equal [per] capita cash allocation is part of a long-term plan announced by the Government in Budget 2007 to provide comparable treatment for all Canadians, regardless of where they live.” It then offers a caveat by stating that “the Government will ensure that the transition is fiscally responsible by implementing a by-province-and-territory protection that will ensure that no province or territory will receive less than its 2013-14 CHT cash allocation in future years as a result of the move to equal per capita cash.”

These changes raise a number of concerns that could prove to be problematic in the not-so-distant future. For instance, an equal cash per capita distribution of transfer payments for health makes sense from a public relations perspective, since no one particular province or territory (or group thereof) would appear to receive a disproportionate amount of federal health-care money. However, it does not take into account the inconsistent demographic cross section of Canada’s provinces and territories and the fact that the varying demographic makeup from one province or territory to the next means that what could be considered adequate funding for health care in one province would be considered inadequate in another. Compared to other provinces, British Columbia – with its substantially higher percentage of older citizens, many with chronic diseases, the percentage of which increases markedly with an aging population that requires expensive, continuing treatment – would likely need more federal money to be allocated to its health-care system under the CHT than would provinces with a younger, healthier populace. Yet, with a strictly equal cash per capita allotment, such considerations are difficult to address, to say the least.

One thing is certain. The new CHT formula puts significant pressure on all provinces to ensure they are being cost-effective and properly managing their health dollars. Gone are the days when provinces could squander billions on ineffective programs like Ontario’s eHealth electronic medical records and Ornge air ambulance scandals that cost Ontario taxpayers over $1.3 billion in misspent health funds. In declaring that the federal government has no desire to tell the provinces and territories how to deliver services or set health priorities, Minister Aglukkak is also making it clear that Ottawa is not going to pay for egregious mistakes made by provincial governments who mismanage their health care budgets.

TOP PHOTO: Canada’s Minister of Health, Leona Aglukkaq. CREDIT:  Jake Wright