Home Page Election 2019 News Opinion Foreign Policy Politics Policy Legislation Lobbying Hill Life & People Hill Climbers Heard On The Hill Calendar Archives Classifieds
Hill Times Events Inside Ottawa Directory Hill Times Store Hill Times Careers The Wire Report The Lobby Monitor Parliament Now
Subscribe Free Trial Reuse & Permissions Advertising FAQ
Log In

When it comes to health care funding in Canada, we must stop living in the past

By Greg Marchildon, Raisa Deber      

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.

Federal Health Minister Jane Philpott has been working to negotiate long-term health accords between the federal government and the provinces and territories. The Hill Times photograph by Jake Wright
Share a story
The story link will be added automatically.

How much should the federal government pay towards health care costs?

Hardly a week goes by without this thorny issue being disputed between federal and provincial governments—even as health accord agreements are reached, one-by-one. There’s considerable scope for inflating or deflating the numbers on both sides. The simple solution, often repeated, is that health costs should be shared between the federal government and the provinces 50-50.

But this solution is far from simple and is very misleading.

The old model of ‘shared-cost’ financing—with the federal government paying about half the costs of what the provinces spend on medicare—has not existed since 1977. At that time, the shared-cost model was replaced with a block transfer of funds, with roughly half of the new transfer being in the form of ‘tax points.’ This meant that the federal government reduced its tax rate, which allowed provinces to increase their tax rate without any net effect on the taxpayer.

The result was that, since 1977, the federal cash contribution toward health care was roughly 25 per cent of provincial medicare expenditures. Today, provincial governments routinely—and conveniently—ignore the ‘tax points’ when calculating how much money they are receiving for health care from the federal government.

To make matters more confusing, the block transfer, currently called the Canada Health Transfer, is not earmarked specifically for provincial health ministries to spend on health care. Instead, the entire transfer goes into the general revenue funds of the provinces—and it is up to the provinces where and how they spend it.

This funding system makes it impossible to know whether a Canada Health Transfer dollar from Ottawa to the provinces ends up being spent on health care.

An additional complexity is that the older cost-shared model for health funding did not cover all provincial health expenditures. Federal money was directed only to universal coverage for all residents of each province/territory for ‘medically required’ hospital and medical care services. This restriction still applies today; the Canada Health Act definition of insured services only requires provinces to cover hospital and medical care—largely doctor—services, although they can, and often do, go beyond that.

So how much does the federal government contribute to health care?

If we very roughly estimate the federal contribution to provincial spending on hospital and physician services today without counting the tax points or including all provincial health spending, we end up with a federal cash contribution that is in the range of 25 to 30 per cent.

Why, then, is there a perceived funding crisis?  Why are the provinces crying foul when it comes to health care funding?

One key reason is that how we deliver health care has changed.

Provincial governments now spend considerable amounts of money on items that are not insured services under the Canada Health Act; this includes out-patient prescription drugs (since drugs administered in hospitals are required to be covered), long-term 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/territories could work together to identify and implement best practices and potentially gain buying power. Some of this is now, thankfully, beginning to happen (e.g., purchasing 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 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 of 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 rehabilitation.

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

Politics This Morning

Get the latest news from The Hill Times

Politics This Morning


Your email has been added. An email has been sent to your address, please click the link inside of it to confirm your subscription.

‘Six systemic crises’ confronting Canada, and politicians, policy-makers, health-care professionals need ‘systems thinking’ to tackle them, says public policy expert

News|By Mike Lapointe
Global Brief magazine editor Irvin Studin says politicians and policy-makers' thinking is 'too small, it’s too linear, it’s too path dependent, and it looks increasingly absurd as these systemic crises.'

Canada needs a new ‘fiscal anchor’ and Freeland needs to share financial plans, says PBO Giroux

Parliamentary Budget Officer Yves Giroux says he's found it 'much more difficult to get information out of the minister’s officer' since Parliament returned with Chrystia Freeland in charge of the nation's finances.

House emergency debate on Nova Scotia lobster conflict underway, as feds say Indigenous people ‘let down,’ more police deployed to ‘keep peace’ amid rising tensions

News|By Palak Mangat
'Because these criminal actions and violence have escalated, the response from the police in Nova Scotia has by necessity also escalated,' says Public Safety Minister Bill Blair.

Demolition work well underway in the Centre Block

Workers are currently removing the painted canvas that lined the ceiling of the House of Commons Chamber and stained glass from the Memorial Chamber for restoration.

Senators zip lips on Meredith deal that includes gag order for harassed former staffers

Senators on the Internal Economy Committee have little to say about approving a deal to bind Don Meredith's harassment victims to silence in order to receive compensation for their treatment.

MPs, Taiwanese envoy highlight opportunities to strengthen relations between Taiwan, Canada amid COVID-19 fallout, China tensions

News|By Mike Lapointe
Liberal MP John McKay says closer cooperation with Taiwan in the current environment represents a ‘massive opportunity with little or no downside’

NDP open to Tory special committee on WE scandal, says MP Julian, as Liberals slam the proposal

News|By Palak Mangat
Government House Leader Pablo Rodriguez would not rule out turning next week's possible vote into one of confidence, which the NDP called ‘very bizarre.’

A parliamentary recognition of Uyghur genocide will be met with a ‘strong reaction,’ says Chinese ambassador

News|By Neil Moss
'We will take resolute measures to safeguard our sovereignty, national security, and the development interests,' Chinese Ambassador Cong Peiwu says.

Senate art group turns focus to restoration, finding gaps in Indigenous representation

‘We can do it in small steps and make big impacts,’ says Senator Patricia Bovey of a plan to broaden the Indigenous works the Chamber highlights, and help with reconciliation.
Your group subscription includes premium access to Politics This Morning briefing.