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Canada healthcare
Provinces try to reopen health talks with federal government
January 5th 2017 | Canada | Provision
Following the breakdown of talks on the health accord in December, several provincial and territorial governments are attempting to bring the federal government back to the negotiating table in the hope of extracting more generous terms.
Canada's universal healthcare system is a source of pride for most Canadians, who believe that it distinguishes them from their American neighbours. But there is less unanimity on the subject of funding. Healthcare is a shared jurisdiction, with the federal government setting standards and transferring money to the provinces and territories to cover some healthcare expenses. The lower levels of government control the healthcare systems within their borders and are ultimately responsible for covering the costs.
In 2011 the Conservative federal government told the provinces that the federal transfer would increase by 6% a year until fiscal year 2016/17 (April-March), after which it would increase in line with nominal GDP growth or a minimum of 3%. The Liberal government has stuck to this plan, prompting the provinces to complain of cuts to federal health funding.
Under pressure from the provinces, in December the federal government offered to bump the increase in the health transfer to 3.5% and offered C$11.5bn (US$8.7bn) over ten years for provincial governments to spend on mental health, home care, drugs and innovation. The offer was made despite a slowdown in growth of provincial health spending from 7% a year in the 2000s to 3% a year in the 2010s. The deal was rejected on the grounds that the increase was insufficient, given ageing populations and the principle of attaching strings to a federal transfer.
The federal government has since cut health deals with three provinces—Nova Scotia, New Brunswick and Newfoundland and Labrador—which include the original 3% increase plus a share of the C$11.5bn. The others are still holding out for a larger increase. The government in Ontario says that the annual increase should be 5.2%. Bill Morneau, the finance minister, says that provincial demands are "out of the realm" of what the federal government would consider.
We expect the federal government to make a slight increase to its offer and that this will be accepted by the provincial governments. As with negotiations on a nationwide climate change deal, the federal government is in a strong position to dictate terms. Such an agreement does not require a change to our fiscal forecasts.
Healthcare provision