Why provinces deserve help on health care
It’s tempting to roll our eyes at the premiers this week for turning to the lazy common ground of holding their hands out to the federal government asking for more health-care money.
It’s so predictable. Provinces’ demands for increased transfers are perennial and parochial, frequently ignored by the federal government as just noise.
But there are some reasons why the provinces’ request for 5.2 per cent increases in health-care transfers makes at least some sense right now. The number comes from a Conference Board of Canada analysis that lays out two conclusions quite clearly: an aging population will drive up health costs at a faster pace than what we’ve seen over the past few years; and provinces can’t really sustain those increases without a lot of pain elsewhere.
The federal government, however, is in relatively better shape.
The conference board paper dates back to 2017, well before the Liberals promised to increase spending on its election promises, and well before economists were projecting a slowdown in revenues in the near term. But chief economist Pedro Antunes has gone through the numbers again, and the conclusions stand. Health-care costs will be rising at about 5.2 per cent a year, he says, because the population is growing and aging, and inflation in the delivery of health care is quite a bit higher than inflation in the economy more broadly.
He figures that patients at the end of life each cost between $20,000 and $25,000 in public health care, while patients between 60 and 64 years of age cost $5,000 a year on average.
The Canadian Institute for Health Information recently calculated that population aging will cost the country’s health-care system an extra $2 billion a year, requiring governments to make harsh decisions about quality and access to care.
The Parliamentary Budget Officer has looked at similar scenarios and found that a bigger health-care funding role for the federal government would not solve all the provinces’ fiscal problems. But it would help — without destroying the federal fiscal track.
Ottawa drove a hard bargain the last time we had this conversation in a serious way, in 2016. Federal Finance Minister Bill Morneau broke from tradition and negotiated separately with each province, stitching together a 10-year agreement that would see federal transfers rise by a minimum of three per cent a year — more, if the economy is healthy — plus an additional $11.5 billion for mental health and home care.
But, as the premiers well know, the political dynamics have changed since then. The provinces are striking while the iron is hot, and Ottawa looks eager to please.
“We’re open and pretty keen in discussing how we can tackle issues together,” an official in Morneau’s office indicated on Tuesday.
Of course, the official is likely overstating Ottawa’s keenness. The other fiscal requests from this week’s premiers’ meeting in Mississauga — lifting the cap on fiscal stabilization funding for provinces in deep difficulty and rushing out funding for infrastructure — are quite affordable for the federal government. The health-care request, on the other hand, would put a permanent and expanding dent in the federal balance sheet.
Mostafa Askari, chief economist at the Institute of Fiscal Studies and Democracy, calculates that the provinces’ request would add about $800 million to federal spending next year and climb every year after that, by definition. By 2023-24, costs would be $3.7 billion higher than otherwise, bulking up deficits that are already projected to run well over $20 billion a year.
The Liberals in Ottawa, if they eventually rediscover some fiscal discipline, will be tempted to point out that their election platform contained a promise for $6 billion over five years for public health — a doctor for every family, mental health services, home-care services, and mapping a way to pharmacare.
That’s not really what the provinces are talking about here though. They’re talking about the health care they’re already delivering and anticipating a growing bill for which there’s no miracle cure. Rolling our eyes won’t change that.
The provinces are striking while the iron is hot, and Ottawa looks eager to please