The meeting of the Council of the Federation held on December 10 marks the start of an intense financial standoff between the federal government and the provinces and territories over the funding of health care.
Posted on December 12, 2020 at 11:00 a.m.
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Long before the start of the pandemic, the provinces were already complaining that the federal share in the funding of their health care was being cut (this share fell from 50% 50 years ago, when the health insurance, at 22% today). The pandemic has therefore only exacerbated an already very strong pressure on health systems under heavy strain.
Provincial demands
Faced with the explosion in healthcare costs generated by the COVID-19 pandemic, the premiers of the provinces and territories demanded from Ottawa an immediate injection of $ 28 billion in the Canada Health Transfer (CHT) for help them finance their respective health systems. This injection would increase the share of health care funded by the federal government from 22% to 35%, a ratio the provinces want to see maintained in the long term. In Quebec, the Minister of Finance is also counting on this increase in the CHT to find a balanced budget in 2025-2026.
The federal response
To date, the federal government’s financial framework has completely ignored this demand from the provinces. In the short term, Ottawa has spent massively to support households and businesses, which has made it possible to maintain consumption, and therefore provincial revenues, during this period of crisis. Ottawa also occasionally helped the provinces to finance the explosion of their health expenses inherent in the pandemic. Quebec alone has received more than $ 4.5 billion for the current year.
However, in the medium term, the Trudeau government seems more interested in funding new services, such as a national drug insurance program – universal, public drug insurance would cost the country about $ 38.5 billion a year – than transferring more funds. to provinces for health without attached conditions.
Are the requests from the provinces justified?
According to the most recent projections made by the Conference Board of Canada, health spending will increase at an average annual rate of 5.4% until 2030-2031. About 46% of this average annual increase is thought to be attributable to inflation, 18% to population growth, 19% to an aging population and the remaining 17% to better access to care and improvements in systems. health.
To this must be added additional health expenditure linked to COVID-19 of the order of $ 42.7 to 63.3 billion by 2022-2023, depending on the evolution of the pandemic, the effectiveness of vaccines and their administration.
Overall, health spending is expected to grow at an average annual rate of 5.5 to 5.7 percent over the next decade.
This increase is well above the revenue growth projections of provincial governments and the expected increase in the CHT. In other words, provinces will inevitably face either austerity or spiraling debt without increased support from Ottawa to meet the costs of the tsunami of aging populations.
The means of our ambitions?
As deficits keep getting revised upwards in the fight against COVID-19, cleaning up Ottawa and the provinces’ public finances will primarily depend on who foots the bill for this remarkable rise in costs. health care. However, whether it is one level of government or another, it is the same taxpayers who will ultimately be called upon, which is why the federal government should first ensure that it better supports the provinces in the funding of the health before investing in new, more expensive programs.
Although the federal Liberals’ proposal to create a national prescription drug insurance plan is promising and is part of the vision of a fairer recovery, it would nonetheless entail significant additional expenditure, on a recurrent, for new services when the provinces do not currently have the means to maintain adequate funding for their immediate health needs. Before moving forward in this area, Ottawa should therefore first of all provide better support to the provinces by helping them to assume the costs generated in particular by the aging of their population and this crisis… without, however, giving them a blank check.
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