By Bacchus Barua
and Ben Eisen
The Fraser Institute
Despite their differences, it seems Canada’s premiers are united in one thing: demanding more federal healthcare dollars. But nobody talked about the price the premiers must pay for the money from Ottawa: the freedom to design and implement policies that could actually improve care.
At the recent meeting of the Council of the Federation, the 13 premiers “reiterated their call for the federal government to increase funding by an annual escalator of 5.2 percent to the Canada Health Transfer.”
The federal government provides a $40.4 billion to provinces via the Canada Health Transfer. The growth of these transfers is tied to a three-year moving average of nominal economic growth, with a minimum three percent annual increase guaranteed regardless of the state of the economy.
The demand for an increased growth of the transfer to 5.2 percent per year harkens back to the funding guarantee from the 2004 health accord between the federal government and the provinces. Back then, the federal government agreed to increase the transfer by six percent every year, with the goal of helping fund provincial efforts to improve their health systems and, specifically, reduce wait times.
Unfortunately, that’s not how things turned out. Instead, wait times persisted as a major problem across the country. In fact, the Health Council of Canada (which was created to monitor progress) determined that “overall, the accords didn’t lead to the major changes that were expected.”
The Conservative government of Stephen Harper decided that maintaining such a rapid increase in the pace of federal transfers wasn’t fiscally sustainable. So it shifted the formula to peg increases to economic growth – a rule that the current Liberal government of Justin Trudeau has kept in place.
The lesson of the 2004 health accord and subsequent boom in transfer funding is that the federal government writing ever-larger cheques to the provinces won’t fix the problems or wait times that plague provincial healthcare.
There are other reasons the premiers should be wary of relying heavily on the federal government to fund their health services. The premiers seem to ignore the fact their continued reliance on federal healthcare funding comes at a cost – the inability to experiment with and design policy that could actually improve healthcare (lest they run afoul of federal guidelines).
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To understand why, look at the transfers and how they’re intended to support the principles of the Canada Health Act, which outlines the conditions that provinces must meet to receive a full cash contribution from Ottawa. Perceived deviation from the rules could cause the federal government to withhold funds.
This isn’t hypothetical. Previous federal health minister Jane Philpott repeatedly threatened to withhold transfers for specific provinces (including British Columbia and Quebec) for perceived violations of the act. If provincial ministers succeed in increasing the amount of transfer payments, the revenue at stake for such threats will be proportionally increased, too.
So what should the provinces do?
Instead of asking for more money and all the strings that come attached, the provinces could ask for more freedom. They should seek the ability to experiment and implement the policies of more successful universal healthcare systems in countries such as Australia, Switzerland, the Netherlands and Germany.
Unlike Canada, these countries embrace the private sector as either a partner or an alternative for the insurance and delivery of medical services. Further, they all expect patients to share the cost of treatment (with limits on total payments and exemptions for vulnerable populations) to encourage them to make more informed decisions about the use of scarce (and costly) medical resources.
All of these countries have shorter wait times for medically necessary treatment than Canada. Despite this, both policies (certainly requiring patients to share in the cost of treatment) could serve as grounds for withholding federal payments.
It’s not surprising the premiers are asking Ottawa for more money but they should be careful what they wish for.
Evidence from our recent past suggests the money might not do much to help reduce wait times and it will certainly come with strings attached. That will continue to make it difficult to innovate and experiment with new models to make healthcare work better.
Bacchus Barua and Ben Eisen are analysts at the Fraser Institute.