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Health care transfer payments to be discussed at federal-provincial summit

Finance minister Bill Morneau

The Globe and Mail reports, “According to B.C.’s Health Minister, Ottawa put forward a new offer Friday that would raise the minimum annual increase to the Canada Health Transfer (CHT) from 3 per cent to 3.5 per cent. The offer also included $8-billion over 10 years for home care and mental health.”

The article explains, “Health-care transfers have been increasing by 6 per cent a year since 2005 but are scheduled to shift next year to a formula based on nominal GDP or 3 per cent, whichever is higher. Forecasts call for nominal GDP to average 3.8 per cent over the next decade, meaning a federal concession to 3.5 per cent is not likely to make a material difference.” And Finance Minister Bill Morneau says, “If the provinces are not able to come to an agreement on the kinds of investments we’re talking about … then we will fall back to our campaign commitment of continuing the CHT with $3-billion for home care [over four years].”

The finance minister is scheduled to meet with his provincial and territorial counterparts on Sunday December 18 for a dinner meeting and then for a full-day meeting on Monday December 19. Morneau says, “We don’t intend on negotiating in public around the amount of dollars. What we do intend on doing is having the negotiation start and finish on Monday.”

The Canadian Press adds, “Starting in April, the rate is due to be three per cent, or the three-year moving average of nominal gross domestic product growth, whichever is higher. That would trim nearly $1.1 billion a year from Ottawa’s combined payments to the provinces. The provinces say it would also leave big holes in health-care budgets that they can ill afford [given health care costs account for more than 40 per cent of the budget for many provinces].”

That article highlights, “Some provinces support a 10-year federal funding idea proposed by Ontario that would see health transfers increase by 5.2 per cent a year, among other changes. Independent organizations like The Conference Board of Canada have also supported that kind of funding floor, [Ontario Finance Minister Charles] Sousa noted. Other provinces have called on Ottawa to gradually increase its share of provincial health-care budgets to 25 per cent.” But Morneau says, “The provinces’ requests are out of the realm of anything that we would consider. We’re not going to be talking about percentages — either in the escalator … or in terms of the broader percentages.”

Morneau argues that weak economic growth and increasing deficits have forced this situation. The Globe and Mail notes, “The federal Liberals have abandoned initial promises of keeping deficits under $10-billion and no longer have a timeline for erasing annual deficits, which are currently forecasted to peak at $26.9-billion next year.” That said, the Canadian Press reports, “The Parliamentary Budget Officer has noted that in spite of the federal deficits, Ottawa’s finances are much healthier than the situation facing the provinces, where growing health-care costs are on pace to create dramatic increases in government debt.”

It’s not clear at this point how many provincial and territorial ministers will choose to attend the meeting convened by the federal government on Monday. The new health transfer formula is scheduled to begin on April 1, 2017. This suggests that there will be further intense negotiations over the next three months.

In January 2012, then-Parliamentary Budget Officer Kevin Page estimated that this funding formula would cost the provinces about $31 billion over a ten year period. In July 2012, the provincial premiers forecast the loss would be closer to $36 billion. In July 2015, the Canadian Federation of Nurses Unions estimated the loss at $43.5 billion over an eight year period.

The Council of Canadians has long called for a 10-year accord with annual 6 per cent increases in health care transfer payments to the provinces, at least 25 per cent federal funding of provincial health care costs, a prohibition on user fees and privatization, the implementation of pharmacare, and a commitment to public solutions.

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