Morneau firm on health transfers
Somewhere in Canada, Stephen Harper is in danger of cracking a rib.
The Liberal government had promised “collaborative federal leadership” when it came to the renewal of Canada’s $36-billion health accord. But that election promise was trampled beneath the feet of provincial health ministers rushing to waiting microphones to explain why they were rejecting the federal government’s inadequate offer.
The venerable Chateau Laurier reverberated to the sounds of antlers crashing as the Trudeau Liberals and their provincial and territorial counterparts jousted over health-care funding Monday.
Ottawa offered to increase health transfers by 3.5 per cent a year and inject $11 billion into home care and mental-health treatment over the next decade.
The provinces have, for now, turned down the offer, so the transfer will revert to the previously legislated three per cent increase, while the $11 billion is off the table.
The day started off badly, as provincial health ministers aired their grievances to the media.
The Liberals issued an “ultimatum at the expense of real people,” said Manitoba Health Minister Kelvin Goertzen. He dismissed as “ridiculous” the suggestion by federal Health Minister Jane Philpott that Ottawa had made a “transformative offer.”
“If Minister Philpott is calling this a transformative proposal, she’s right. She’ll be transforming the system and for the worse,” said Quebec Health Minister Gaetan Barrette.
Harper will feel his decade-long aversion to this kind of petty extortion is entirely vindicated.
After watching the Danny Williams show unfold in 2004, when the former Newfoundland and Labrador premier extracted six per cent increases in health transfers from Paul Martin every year for a decade, Harper vowed never to engage in public negotiations over health care.
In 2011, Jim Flaherty signalled that future funding increases would be linked to growth in the economy — cutting in half what the provinces had come to expect.
But with the Trudeau government’s indication that it was willing to run apparently unlimited deficits, the premiers licked their chops and prepared to exert bargaining power they do not have.
They turned down the deal Monday but, ultimately, they will take it. They always take the money — because what other choice do they have?
Bill Morneau is right to stand firm on his fiscal plan, given he’s already $30 billion in the red.
He has a crucial budget to prepare and he needs to nail down growth in the biggest single federal expenditure — $36 billion last year.
Nominal GDP is forecast to average 3.9 per cent over the next four years. Revenues are predicted to increase 3.7 per cent over the same time period. No responsible finance minister can afford the cost of the health-care system to rise more quickly than revenues over a protracted period of time.
The imposition of fiscal discipline on the provinces is no surprise — Flaherty flagged it five years ago.
Provincial health systems have responded by exhibiting restraint and flexibility — spending grew just 2.7 per cent last year to $228 billion, or $6,299 per person.
That is a considerable improvement on the decade covered by the health accord, during which hospital spending in particular skyrocketed. The system has responded by treating less complex cases on an outpatient basis.
But if a short-term solution has been imposed, all governments need to consider the longer-term structural problems that are as evident today as they were in 2004, when former senators Michael Kirby and Dr. Wilbert Keon penned a report arguing that competition is essential in the delivery of health-care services.
They argued that the single public funder principle should be retained but that competition should be introduced so that hospitals and doctors compete on the basis of price and quality of service.
The argument was that the monopoly that exists on the labour side means that doctors and nurses wield excessive power and secure pay increases that surpass bargaining in other industries — historically, twice as much as non-health workers, without any consideration for increases in productivity.
Given around 10 cents of every health-care dollar goes to doctors’ salaries, the time is long overdue to encourage more experimentation.
Philpott, to her credit, has stressed that the health system needs profound structural change, although her prescription is to encourage better collaboration between family doctors and specialists; increase use of digital technology in record-keeping; give greater priority to social factors to keep people out of the system; and, ramp up use of home care.
Others, such as academic Brian Lee Crowley, have suggested Ottawa get out of the social transfer business altogether and transfer tax points such as the GST to provinces, so that if they want to offer more generous health care, they simply increase the sales tax rates within their borders.
Whatever the solution, it is increasingly clear that the status quo is not an option.
A report by the Parliamentary Budget Office last year pointed out that the demographics of an aging population are set to defeat all attempts at business-asusual cost containment. The report said that while there were 4.3 people aged 15 to 64 for every one over 65 in 2014, that ratio will fall to 2.6 to one by 2034.
The PBO estimated that provincial governments need to find savings of around $30 billion a year to put themselves back on a sustainable footing.
That requires a far more-grown up discussion than the manufactured outrage on display at the Chateau Laurier.