Ontario Premier Doug Ford
is hosting Canada’s provincial premiers and territorial leaders at
a dinner tomorrow tonight in advance of the First Minister Meeting in Toronto on
Monday. Apparently, Premier Ford is
expected to ask the premiers to get behind a call for an increase in the
federal Canada Health Transfer escalator to 5.2 percent from the current 3
percent which took effect in 2017 under the Trudeau administration - after being
announced nearly five years earlier by the Harper government. This was a reduction in the growth rate of
federal health transfers in the wake of the 2004 Health Accord Escalator which
saw annual increases of 6 percent.
Now, asking
the federal government for more transfers at meetings of provincial premiers is
a practice with a long tradition and one might expect the federal government to
make some bland soothing diplomatic statements but generally ignore the
premiers. Indeed, provincial premiers
traditionally pine for the good old days of 50/50 health cost sharing with the
federal government in the early days of Medicare. This eroded after 1977 when Established
Program Financing turned into a block grant and then the Canada Health and
Social Transfer after 1996. However, I think this time Doug Ford’s request
is actually a reasonable one given recent trends in federal finances, federal health
transfer funding and provincial-territorial government health spending.
First, according to
the federal Parliamentary
Budget Officer, federal finances are generally sustainable but that of the
provinces are not given growing and aging populations and their growing demands
on the health care system. Indeed,
federal policy to grow Canada’s population via larger immigration rates is a
factor behind growing demand for health services along with aging populations
and the onset of new demands given changes in illness patterns and new
technologies. Immigrants to Canada are on
average generally younger than Canadians, but it turns out that some of the
highest growth rates in health spending recently have been for younger
cohorts. And as for federal finances, it is true they are running large
deficits but given the lack of interest in taming their deficits, why not spend
it on something more useful like health care?
Second, the provinces
have made big strides in making their health care systems more sustainable and
been bending the cost curve but a decade of this is beginning to strain their
health systems. Between 2009-10 and
2019-20, it turns out that after adjusting for population growth and inflation,
real per capita provincial-territorial government health spending has been growing
at 0.9 percent annually. Indeed, a
glance at Figure 1 below shows how since 2009-10, real per capita provincial-territorial
health spending has essentially flattened out. Indeed, the situation is worse in Ontario than
the rest of Canada. Along with the effects of the 2008-09
Recession on provincial finances, there was also the announcement of the coming
end of the 6 percent health transfer escalator which has spurred the provinces
to get their health spending under control.
The average annual
growth rate of real per capita federal health transfers since 2009-10 has been
2.1 percent while provincial-territorial health spending has grown at 0.9
percent. In other words, health spending
is growing slower than federal real per capita health transfer increases. As a result, the federal transfer share of
provincial-territorial government health spending has actually grown from 20
percent to 23 percent. This is not
because the federal government has become more generous but because after
population growth and inflation, the provinces are increasing their spending
slower than the increases in transfers. The
provinces have become more responsible when it comes to managing their health
spending but after nearly a decade of much slower growth they need some help.
There are only so many
efficiencies that one can obtain within the health care system without at some
point needing to actually get more real resources. The recent efforts to once again health care
reform delivery in Ontario via the Ontario Health Teams is a step to further
bend the cost curve but it will come to naught without the federal government
also coming to the table with assistance.
Trying to do more with less eventually will create a situation where
less is indeed less. In trying to solve
his problems, Doug Ford will also be helping the other provinces solve theirs.