Health care solutions will not be found in the past

How much should the federal government pay toward health care? Hardly a week goes by without this thorny issue being disputed between the federal and provincial governments — even now that the budget has been tabled and health-accord deals have been reached.

There’s considerable scope for inflating or deflating the numbers on both sides. The simple solution often repeated is health costs should be shared between Ottawa and the provinces 50-50. But this solution is far from simple and very misleading.

The old model of shared-cost financing — with the federal government paying about half the costs — hasn’t existed since 1977. The model was replaced with a block transfer of funds, with about half the transfer in the form of tax points. This meant the federal government reduced its tax rate, which allowed provinces to increase their tax rate without any net effect on the taxpayer.

The result is, since 1977, the federal cash contribution toward health care is roughly 25 per cent of provincial medicare expenditures. Today, provincial governments routinely and conveniently ignore the tax points when calculating how much health money they get from Ottawa.

To make matters more confusing, the block transfer, called the Canada Health Transfer, is not earmarked specifically for health care. The transfers go into general revenue of the provinces. This system makes it impossible to know whether provinces are spending federal health dollars on health care.

The older, cost-shared model for health funding also didn’t cover all provincial health expenditures. Federal money was directed only to universal coverage for all residents of each province/territory for medically required care. This restriction still applies — the Canada Health Act definition of insured services only requires provinces to cover hospital and medical care (largely doctor) services, although they can and do go beyond that.

So how much does Ottawa contribute to health care?

If we estimate the federal contribution to provincial spending on hospital and physician services without counting the tax points or including all provincial health spending, we end up with a federal cash contribution of nearly 30 per cent. Why, then, is there a perceived funding crisis? Why are the provinces crying foul when it comes to health funding?

One key reason: how we deliver care has changed.

Provincial governments spend considerable amounts on items that aren’t insured services under the Canada Health Act. This includes outpatient prescription drugs, longterm care, home care, rehabilitation, dental care and mental health.

There are no national standards or conditions on covering these services.

Researchers have long pointed out the potential for improving outcomes and cutting total costs if provinces and territories could work together to identify and implement best practices and potentially gain buying power. Some of this is now, thankfully, beginning to happen — for example, buying pharmaceuticals on a national basis.

So, rather than squabbling over whether the federal government is contributing its “fair share” of health dollars, it’s time to move on. Now, more than ever, we need federal and provincial governments to talk about the important areas of health care that have never been required to be covered by medicare. This is particularly pertinent as technology allows more care to be delivered by non-physicians in the home and in the community.

Provinces are spending more in health arenas outside of the Canada Health Act, with considerable variability across jurisdictions for who is covered for what.

Our governments need to work out a new arrangement for health for the 21st century. Filling in these gaps with better and more cost-effective coverage should be the focus of our first ministers.

Proposals for targeted funding for some home care and mental-health programs in the bilateral agreements between Ottawa and some provincial and territorial governments could be a helpful first step. But they still omit critical cost drivers such as PharmaCare, dental care and rehab.

Moving the debate forward could help us stop living in the past and construct a better future for all Canadians.

Greg Marchildon and Raisa Deber are expert advisers with EvidenceNetwork.ca and professors in the Institute of Health Policy, Management and Evaluation, University of Toronto.