Editor’s Note: I broke this article into two pieces (see Part I here) to allow you an opportunity to rest between decades but now it’s time to face the ’80s and ’90s.
Canada’s mania for deficit reduction, although it reached its peak in the ’90s, started in the ’80s. As a Government of Canada publication by Odette Madore explains, the the federal government “repeatedly limited the growth of transfers” under two programs we discussed in Part I–Established Program Financing (EPF) for healthcare and education and the Canada Assistance Program (CAP), for social welfare.
Paul Martin
In 1997, as finance minister, Liberal Paul Martin combined the EPF and the CAP into the Canada Health and Social Transfer (CHST). Madore herself says the CHST funding formula is complicated, so I am going to take her word for that, but she also said that:
According to some observers, the CHST, as initially introduced, was not really an innovation. On the one hand, it followed the policy of restricting expenditures that had been adopted in the 1980s. On the other hand, the CHST legislation did not encourage any new approaches to increasing effectiveness and efficiency in the delivery of health care, even though the lack of effectiveness and efficiency is considered one of the main obstacles to maintaining a publicly funded health care insurance plan across the country.
Madore says the provinces, who had their own deficits to deal with:
…were forced to revise their priorities in order to compensate for the decrease in income brought about by reductions in federal transfer payments. Most provinces have reduced the level of health care services; a number of them have de-insured certain services and streamlined hospital services.
Madore was a government researcher who wrote with dry restraint, but writer and researcher Mitchell Thompson, writing in Jacobin earlier this month, faced no such constraints. He says that in the 1990s:
…the Liberal party implemented one of the harshest austerity programs in the industrialized world — cutting transfer payments to the provinces by nearly 50 percent.
This, as Antonia Maioni explained in Policy Options:
…accelerated the provincial wave of cost-cutting that led to hospital closures and significant reductions in health human resources, as well as the corresponding erosion in timeliness of care and public confidence. In 2002, the Romanow commission sounded the alarm about money; the Kirby committee did the same about waiting times.
The Liberals cut $13.3 billion in expenses and eliminated 55,000 positions from the federal public sector (although many of these cuts proved too deep and the dismissed civil servants ended up coming back as consultants).
They also managed to cut taxes.
But in 2000, with an election looming, the Liberals convened a First Ministers meeting which led to the first Health Accord, which raised the combined health and social transfer from $15.5 billion in 2001 to $21 billion by 2006. There was also one-time funding for medical equipment, health IT and primary care reform.
In 2004, Liberal Prime Minister Paul Martin divided the CHST back up into the Canada Health Transfer (CHT) and the Canada Social Transfer (CST). University of Saskatchewan Professor Haizhen Mou explains:
Like previous programs, both the CHT and CST included a cash transfer and the value of the tax points transferred in 1977. The cash portion of the CHT was indexed to economic growth…The CHT and CST were allocated on an equal per capita (cash and tax point) basis. Because the cash transfer was calculated as the residual between the total gross amount of the transfer and the value of the income tax points, provinces with smaller per capita income tax bases received larger cash transfers than those with above average tax bases
Martin’s government also produced a 10-Year Plan to Strengthen Healthcare in which it committed to increasing the cash portion of the Canada Health Transfer by 6% annually from 2007 to 2014. Mou says the plan “restored certainty and stability to provincial and territorial health systems (which is the least the Liberals could do having destroyed both).
And then came Stephen Harper.
Fiscal federalism
Jim Flaherty
As that Canadian Medical Association Journal article by C. David Naylor, Andrew Boozary and Owen Adams I cited repeatedly in Part I puts it:
Starting in the 1950s, the Government of Canada had repeatedly leveraged its fiscal capacity to catalyze adoption of national social programs by provinces and territories. A more cautious approach to fiscal federalism ensued when a Conservative government took office in 2006.
Even fiscally conservative prime ministers need to get re-elected, though, so in the run-up to the 2011 election, Harper pledged to negotiate another Health Accord. He won his much-coveted majority government, however:
No negotiations ensued. Instead, at a December 2011 gathering of federal, provincial and territorial finance ministers, Federal Minister James Flaherty announced that when the 2004 accord expired in 2014, the Canada Health Transfer escalator would remain at 6% until 2017 and then grow for the next decade at the higher of 3% per annum or the 3-year moving average of nominal GDP growth % A provincial/territorial working group estimated that these new rules would reduce federal outlays for health by a cumulative $36 billion as compared to those expected had the 6% escalator remained in place from 2014/15 through 2023/24.
(The CBC discovered Flaherty had asked for “a review of the Liberal government’s ambitious spending cuts to programs of the 1990s” in 2010, as in, a full year before “there was any hint the Conservatives might do the same thing.”)
Return of the Libs
In July 2015, with another election on the horizon, the premiers called on the feds to increase the Canada Health Transfer envelope to cover 25% of all health spending (a level of funding that had been recommended by the 2002 Romanow Commission on the Future of Health Care in Canada).
The campaigning Liberals, under Justin Trudeau, attacked the Harper government on health financing and promised, if elected, to negotiate a new Health Accord with provincial and territorial governments. But after the Liberals won a majority in the October 2015 election:
…no health summit occurred. The 2017 federal budget reaffirmed the drop in the Canada Health Transfer escalator set by the Harper Government while providing term-limited funding of $11 billion over 10 years for home care and mental health initiatives.
Mou notes that bilateral agreements struck in 2016 offered an additional $11.5 billion over 10 years to improve home and community care, mental health and addiction services. (These are examples of what she calls “conditional, special-purpose health funding” which she says grew out of the Romonow Commission but I don’t have time to get into that here.)
And then came COVID.
Pandemic
That the pandemic showed up the “cracks in our healthcare system” has become such a cliché, I probably shouldn’t have used it.
Stock photo of COVID vaccine that is obviously not Pfizer’s because it’s not being stored in dry ice.
Mou, writing in 2021, predicted that, post-pandemic (whatever that means) “fiscal arrangements” between the two levels of government would have to be “rebalanced,” and I think that’s what we’re watching now, with the premiers calling on the federal government to return the Canada Health Transfer to 35% of costs and maintain it there.
This would mean an extra $28 billion to the provinces for healthcare.
Mou, back in 2021, had suggested the federal government could adjust the formula for the cash portion of the Canada Health Transfer to account for the provinces’ “differing demographics,” meaning, to recognize that some provinces have more older residents than others and thus face higher healthcare costs. Such a change, she wrote would benefit the Atlantic Provinces, British Columbia and Québec.
The other option she suggested would be for the feds to continue using conditional, special purpose health funding to “implement new programs in areas of provincial responsibility.”
We may soon find out what the feds are thinking, because Prime Minister Justin Trudeau has agreed to meet the premiers to discuss healthcare on February 7, although he warned they would “not be signing deals.”
But it’s worth noting (as Mitchell Thompson did) that many of the same premiers who will be looking for more funding have been “eagerly cutting and privatizing” their healthcare systems and it’s this subject—the cutting and privatizing of health care—that will be my subject next week.
