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Health transfer reforms sound
Posted: 01/11/2012 1:00 AM
Just before Christmas, the federal government provided its solution to the 2014 expiration of the 2004 Health Transfer Accord.
Finance Minister Jim Flaherty announced to assembled provincial finance ministers not that they would begin discussing a new arrangement but that the federal government had decided to hold the annual increase in the transfer to six per cent until 2016-17, which is the current rate Ottawa gives the provinces.
Starting in 2017-18, however, federal health-transfer increases will be linked to the rate of the country's economic growth including inflation -- which is about four per cent but there will be a floor of three per cent.
There is much that can be criticized about this solution to the health-transfer issue. It appears to herald a departure of the federal government from any attempt at national health standards or fostering innovation as the money is to be transferred no strings attached.
Thus, there is no federal commitment to try to improve health-care delivery. Federal Health Minister Leona Aglukkaq has stated future federal-provincial discussions will now be more about performance measurement, accountability and sharing of best practices rather than money.
When it comes to health, critics might argue Canada now has the federation from Star Trek with the role of the federal government being simply to observe and report rather than involve itself in provincial affairs.
At the same time, one has to conclude that given that health is a provincial sphere of jurisdiction, the federal transfer solution is both clever and sound.
In terms of cleverness, announcing the new arrangement the week before Christmas when the public's attention was elsewhere was inspired.
And if they were paying any attention they would merely note Ottawa was giving money -- the Christmas gift that is always appreciated -- making complainers seem ungrateful.
Moreover, Ottawa is maintaining six per cent increases until 2017 -- the world should last so long. The fact is the provinces have stable federal funding to plan for the day when growth in federal transfers slows.
Federal health transfers are a key component of provincial health spending, accounting for about 20 per cent of their expenditures and are therefore an important driver of spending.
The federal government is creating the incentive for provinces to bend the health-care cost curve but gradually and without a one-size-fits-all policy.
One of the advantages of a federal form of government is that it can foster diversity and innovation in the production and delivery of public services. The provinces now have the opportunity to do just that to health care.
The money, however, is being transferred with no strings attached, no push for national standards. Those who might want to see future federal action on a national drug plan will be disappointed. Those who see the role of the federal government as an enforcer of regional equity in health-care services will also be disappointed.
Those provinces currently unhappy with the new transfer deal, however, would also cry lamentations of domineering federalism and unwarranted federal intrusion if the federal government became more interventionist in applying national heath standards.
The federal government has extricated itself from these types of political health funding operas and in future all the provinces will be more careful about what they wish for.
Finally, the amounts are reasonable. Six per cent until 2017 means five more years of federal transfer growth well in excess of GDP growth.
Of course, given population growth and inflation, it means a freeze in real per capita federal health transfers after 2017.
This is where the challenge lies. For provinces with booming economies and relatively young populations, a freeze in real per capita federal health transfers will allow innovation and experimentation. For provinces with rapidly aging populations and slower economic growth -- Eastern Canada -- the result will be a serious fiscal crunch.
Ontario and Quebec already have extremely challenging deficit and debt situations and they now see an express train rather than light heading towards them at the end of the fiscal tunnel. All this will be in keeping with the new vision for Canadian federalism -- one stable federal funding source with provincial freedom to experience diverse outcomes.