Health Care and Fed­eral-Provin­cial Re­la­tions: Cash and Con­fronta­tion

Policy - - In This Issue - Ed Whit­comb

Like so many pol­icy ques­tions in Canada from trans­porta­tion to trade to the en­vi­ron­ment, health care in­volves fed­eral-provin­cial co­or­di­na­tion. And, as his­to­rian and re­tired diplo­mat Ed Whit­comb writes, co­or­di­na­tion is most def­i­nitely a eu­phemism for how bi­lat­eral in­ter­ac­tions on health care have played out over the past half-cen­tury.

Gov­ern­ments have long been in­volved in health mat­ters, deal­ing with epi­demics and sup­port­ing church-run hos­pi­tals, for ex­am­ple. When they be­gan to de­velop the wel­fare state in the 1880s, health care was bound to be a ma­jor el­e­ment. Un­der the BNA Act of 1867, health was clearly a provin­cial re­spon­si­bil­ity, but Ot­tawa was re­spon­si­ble for the health of Indige­nous peo­ples and for the tens of thou­sands of wounded veter­ans pro­duced by the First World war. By 1945, Cana­di­ans were ready for a greatly-ex­panded gov­ern­ment role in health and wel­fare and the ques­tion was what level of gov­ern­ment would pro­vide it—the prov­inces, which had con­sti­tu­tional re­spon­si­bil­ity, or Ot­tawa which had a greater ca­pac­ity to collect taxes.

Saskatchewan took the lead in 1947 when its so­cial­ist gov­ern­ment, the CCF, in­tro­duced hos­pi­tal in­sur­ance. The fed­eral CCF and Pro­gres­sive Con­ser­va­tive par­ties were in­ter­ested, so for po­lit­i­cal rea­sons the Lib­eral gov­ern­ment of Louis St.-Lau­rent took ac­tion. In April, 1957, the House of Com­mons unan­i­mously passed the Hos­pi­tal and Di­ag­nos­tic Ser­vices Act, which cov­ered a range of hos­pi­tal ser­vices. The scheme was de­signed to fail, be­cause it re­quired the sup­port of five prov­inces with half Canada’s pop­u­la­tion and On­tario and Que­bec were op­posed. A year later, the newly-elected Pro­gres­sive Con­ser­va­tive gov­ern­ment of John Diefen­baker dropped that con­di­tion, five small prov­inces joined the scheme, and Canada had univer­sal hos­pi­tal in­sur­ance. Saskatchewan then used the money freed up by Ot­tawa’s con­tri­bu­tions to hos­pi­tal in­sur­ance to launch the next pro­gram in its plan for the wel­fare state; Medi­care.

Saskatchewan in­tro­duced its pub­lic Medi­care sys­tem in 1959. The fed­eral CCF nat­u­rally wanted a fed­eral pro­gram, the Diefen­baker gov­ern­ment ap­pointed a Royal Com­mis­sion to lay the foun­da­tions, and the fed­eral Lib­er­als joined the band­wagon promis­ing Medi­care in the 1962 elec­tion. Work on var­i­ous plans pro­ceeded at both the fed­eral and provin­cial lev­els, and at a con­fer­ence on June 19, 1965, Lib­eral Prime Min­is­ter Lester B. Pear­son told a sur­prised group of pre­miers that Canada was to have a fed­er­ally-drafted, shared-cost Medi­care pro­gram. Eighty per­cent of provin­cial ser­vices would be cov­ered and Ot­tawa would pay half the cost.

Only Saskatchewan agreed. Al­berta Pre­mier Ernest Man­ning said it was un­nec­es­sary and ques­tion­able con­sti­tu­tion­ally. A fu­ri­ous On­tario Pre­mier John Ro­barts stated that it was “one of the great­est frauds that has ever been per­pe­trated on the peo­ple of this coun­try.” Que­bec re­garded it as yet an­other mas­sive in­cur­sion into provin­cial ju­ris­dic­tion. The prov­inces would be pay­ing half the bill for the new health pro­grams and they had to meet four fed­eral con­di­tions: that the pro­gram be por­ta­ble, com­pre­hen­sive, univer­sal, and gov­ern­ment-run. On­tario had pri­vate plans that did not meet these cri­te­ria and it had a gov­ern­ment plan to cover those too poor to par­tic­i­pate in the pri­vate ones. It did not need a na­tional plan and ve­he­mently ob­jected to the fed­eral gov­ern­ment’s at­tempt to im­pose such a mas­sive plan in an area of provin­cial ju­ris­dic­tion. Al­berta and Man­i­toba did not sup­port any gov­ern­ment-run scheme, but B.C. started to move to­wards Saskatchewan’s po­si­tion.

Pub­lic opin­ion was strongly in favour of the sin­gle plan for the whole of Canada, and the Medi­care Act was passed by the Com­mons in De­cem­ber 1966, with a start-up date of July 1, 1968. Saskatchewan and B.C. were the only prov­inces that joined Medi­care at the be­gin­ning but all had joined by 1971. Medi­care be­came one of the most suc­cess­ful and pop­u­lar pro­grams ever launched by any gov­ern­ment in Canada, en­ter­ing po­lit­i­cal leg­end as a “Cana­dian value.”

Ot­tawa had a well-es­tab­lished pol­icy to­wards shared-cost pro­grams. It selected an area in provin­cial ju­ris­dic­tion where there was high pub­lic de­mand for more ser­vice (and good po­lit­i­cal mileage to be made), de­vel­oped a pro­gram with­out con­sul­ta­tion, pre­sented it to the prov­inces, pub­lished it to ob­tain pub­lic sup­port, de­manded that the prov­inces pay half the costs, and, once it was in op­er­a­tion, re­duced its con­tri­bu­tions, leav­ing the prov­inces to pay more for a fed­eral pro­gram the pub­lic now saw as nor­mal. Medi­care fol­lowed the pat­tern, and by the early 1980s, Ot­tawa’s share had fallen to well un­der the orig­i­nal 50 per cent. In re­sponse, strapped hos­pi­tals and doc­tors had started charg­ing user fees and ex­tra-billing for ser­vices they be­lieved were not cov­ered by Medi­care.

That pro­duced a pub­lic up­roar. De­fend­ers of Medi­care ar­gued that this was cre­at­ing a two-tier sys­tem that ben­e­fited the rich who could pay those ex­tra fees. In fact, Medi­care had never cov­ered all as­pects of health and had been a two-tier sys­tem since the be­gin­ning. Nev­er­the­less, Prime Min­is­ter Pierre Trudeau’s gov­ern­ment re­sponded with the Canada Health Act of 1984. It im­posed dol­lar-for-dol­lar penal­ties on prov­inces that al­lowed user fees and ex­tra-billing. That was an ad­di­tional con­di­tion to the orig­i­nal four. Provin­cial gov­ern­ments were en­raged over yet an­other in­va­sion of provin­cial ju­ris­dic­tion done with­out con­sul­ta­tion. B.C., Al­berta and Que­bec took Ot­tawa to court and lost. The Act did re­duce ex­tra-billing and user fees, but Medi­care’s mo­nop­oly could not be fully en­forced. Many peo­ple re­sented the vi­o­la­tion of the prin­ci­ple of free­dom of choice: some went abroad or to other prov­inces and paid for quicker or bet­ter ser­vice; some prov­inces be­gan al­low­ing med­i­cal clin­ics to charge for ser­vices such as MRIs; and uni­form stan­dards be­tween prov­inces sim­ply could not be en­forced per­fectly. Two-tier health ser­vice was, in fact, multi-tier health ser­vice and it still is.

In the mid-1990s, the fed­eral Lib­eral gov­ern­ment of Jean Chré­tien made mas­sive cuts to all trans­fer pay­ments to the prov­inces, which further weak­ened both health care and its own in­flu­ence over provin­cial pro­grams. Once its bud­get was bal­anced, a top pri­or­ity was restor­ing some but not all of the fed­eral fund­ing for health care, which it did in the bud­gets of 1999 and 2000. In re­turn for that money the prov­inces had to ac­cept new ac­count­ing prac­tices and com­mit more ex­pen­di­ture to four spe­cific ar­eas: pri­mary care, home care, drug costs and hos­pi­tal equip­ment. These were ad­di­tional con­di­tions to the orig­i­nal four of the 1967 medi­care scheme and the fifth one which had been added in 1984.

In 2004, the new prime min­is­ter, Paul Martin, made health care a top pri­or­ity, par­tic­u­larly re­duc­ing long wait time for cer­tain health ser­vices. Once more, Ot­tawa was cherry-pick­ing an is­sue that was re­ceiv­ing more at­ten­tion than oth­ers and there­fore had po­lit­i­cal ap­peal. For the prov­inces, the idea of ac­cept­ing new con­di­tions for an­other par­tial restora­tion of fund­ing was un­ac­cept­able as was the amount of­fered. Martin was forced to in­crease the fund­ing from $11 bil­lion over six years to $41 bil­lion over ten years. The agree­ments ended the bick­er­ing over health fund­ing for a decade but was not the “fix of a gen­er­a­tion” he had promised.

Martin’s 10-year ac­cord on health care was due to ex­pire in 2014, and the next prime min­is­ter, Stephen Harper, had no in­ten­tion of let­ting the 10 pre­miers gang up on him at a pub­lic con­fer­ence de­signed to ne­go­ti­ate a re­newal. In­stead, on De­cem­ber 19, 2011, Fi­nance Min­is­ter Jim Fla­herty an­nounced the amount of trans­fers for the pe­riod 2014-2024. Ot­tawa’s con­tri­bu­tion would con­tinue to in­crease at the same rate as in the ex­ist­ing pro­gram (6 per cent) for two more years, and then drop to the level of in­fla­tion or 3 per cent for the fol­low­ing eight years. That was a rea­son­ably gen­er­ous amount and the prov­inces would have to live with it or raise their own taxes.

Pub­lic opin­ion was strongly in favour of the sin­gle plan for the whole of Canada, and the Medi­care Act was passed by the Com­mons in De­cem­ber 1966, with a start-up date of July 1, 1968.

Like the Martin pro­gram, this one met the provin­cial de­mands for trans­parency, sta­bil­ity and pre­dictabil­ity. Un­like the Lib­eral pro­grams, Ot­tawa did not at­tempt to tell the prov­inces how to run their health ser­vices, a fact that drew much crit­i­cism from Cana­dian na­tion­al­ists. The prov­inces were forced to find ef­fi­cien­cies within their health care sys­tems which they did with con­sid­er­able suc­cess, and health care dis­ap­peared from the fed­er­al­provin­cial agenda the­o­ret­i­cally for an­other 10 years or at least as long as the Con­ser­va­tives were in power.

In the 2015 elec­tion, Justin Trudeau’s Lib­er­als crit­i­cized Harper’s health deal and promised bet­ter re­la­tions with the prov­inces. Since their main de­mand was an in­crease in the 3 per cent rate of growth in trans­fer pay­ments, it was un­der­stand­able if they be­lieved there would be an in­crease in that rate. To their sur­prise, a year af­ter the elec­tion, Ot­tawa uni­lat­er­ally an­nounced that the rate of growth in Harper’s pro­gram would be main­tained. Un­der pres­sure, Ot­tawa of­fered to in­crease the rate from 3 per cent to 3.5 per cent and to pro­vide $11.5 bil­lion over 10 years for home­care and men­tal health, yet an­other ex­am­ple of fed­eral cherry-pick­ing amongst dozens of ser­vices and an­other fed­eral con­di­tion on health trans­fers. The prov­inces were united in re­ject­ing the pro­posal but within days Ot­tawa had “ne­go­ti­ated” sep­a­rate deals with New Brunswick, New­found and Labrador, and Nova Sco­tia, the old pol­i­tics of di­vide and con­quer and of Ot­tawa’s re­liance on Canada’s poor­est prov­inces to ac­cept new fed­eral pro­grams with what­ever con­di­tions Ot­tawa dic­tates. As usual, the other prov­inces had to fall in line. With this new deal in place, peace once more de­scended over fed­eral-provin­cial re­la­tions in terms of over­all health care though other is­sues such as the opi­oid cri­sis and the le­gal­iza­tion of mar­i­juana kept fed­eral and provin­cial politi­cians and of­fi­cials en­gaged with each other.

There is a puz­zling para­dox in all this. Since Con­fed­er­a­tion, Ot­tawa has spent far less on those Cana­di­ans whose health is its re­spon­si­bil­ity than the prov­inces have spent on their health re­spon­si­bil­i­ties. The star­va­tion and dis­ease of First Na­tions was well known in Ot­tawa in the 1880s. Over a cen­tury ago, Ot­tawa was told that tu­ber­cu­lo­sis rates on In­dian re­serves far ex­ceeded those among the white pop­u­la­tion, a prob­lem that ac­cel­er­ated in the res­i­den­tial schools. Yet, for 70 years Ot­tawa has col­lected hun­dreds of bil­lions of dol­lars from tax­pay­ers in the ten prov­inces and forced their gov­ern­ments to alter their spend­ing pri­or­i­ties and to treat cer­tain ser­vices as though the need was the same in ev­ery prov­ince.

Today, as the prov­inces strug­gle to ad­just to the lat­est im­po­si­tion of Ot­tawa’s pri­or­i­ties, an­other TB epi­demic rages in the North and the Cana­dian Hu­man Rights Tri­bunal has re­peat­edly or­dered this gov­ern­ment to spend as much on Indige­nous peo­ple as the prov­inces spend on other Cana­dian cit­i­zens. It is dif­fi­cult to avoid the con­clu­sion that Ot­tawa’s in­ter­ven­tions in provin­cial health poli­cies, how­ever valu­able, have been as much about pol­i­tics and power as the good health of our cit­i­zens.

Since Con­fed­er­a­tion, Ot­tawa has spent far less on those Cana­di­ans whose health is its re­spon­si­bil­ity than the prov­inces have spent on their health re­spon­si­bil­i­ties. The star­va­tion and dis­ease of First Na­tions was well known in Ot­tawa in the 1880s.

Ed Whit­comb taught Euro­pean and Cana­dian his­tory and has writ­ten 16 books in­clud­ing short his­to­ries of Canada’s 10 prov­inces. His lat­est book is a his­tory of fed­er­al­ism: “Ri­vals for Power: Ot­tawa and the Prov­inces, The Con­tentious His­tory of the Cana­dian Fed­er­a­tion.” He has won nu­mer­ous awards and is on the Brandon Univer­sity Wall of Fame. books@from­seatosea.com

Li­brary and Ar­chives Canada photo

Prime Min­is­ter Lester B. Pear­son, the fa­ther of Medi­care, in the House of Com­mons.

Pol­icy photo

Fi­nance Min­is­ter Jim Fla­herty, who put the prov­inces on no­tice that health care trans­fers would stop in­creas­ing by 6 per cent a year.

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