The pandemic has changed some aspects of the political landscape and may affect many more. One thing that’s different is the debate about federal health transfers to the provinces. Although likely to be subject to political wrangling, an improved formula may be coming.

This site is full of articles about this subject, but to save looking them up, here is a summary of the saga.

  • Between 2004 and 2016 health transfers increased at the rate of six percent a year.
  • In 2017, in a change imposed by the Harper Conservatives, the increase was capped at the lesser of three percent or growth in nominal GDP. The change, plus an earlier move to increase transfers to Alberta at the expense of the other provinces, was an issue in the 2015 election.
  • Despite past criticisms of Harper’s cap and a promise to negotiate with the provinces, the Trudeau government retained the cap, while offering provinces token increases targeted to home care and mental health services – Harper-plus.
  • In several reports the Parliamentary Budget Office projected that by capping health and other major transfer payments the federal government was on course to eliminate its debt by mid-century while health costs and an aging population left many provincial governments heading toward bankruptcy.

That latter projection was before the pandemic threw a monkey wrench into everybody’s attempts to project into the future. Nevertheless, it attracted little attention, and, as reported here, health transfers barely registered as an issue in the 2019 election campaign. Both the Liberals and Conservatives stuck to the doomsday Harper-plus formula, with some minor tweaking and chose to talk about other stuff.

But then comes the pandemic and talk about health can’t be avoided. Whether a lack of resources or misallocation of them is to blame is an open question. But the lack of preparedness, the scarcity of protective equipment for front line workers and the deaths of thousands of residents of long-term care homes make a prima facie case for more health spending.

Enter the premiers…

With the lid off federal spending, hundreds of billions being pumped out and talk of post-pandemic investment in day care, senior care, pharmacare – even a universal basic income – provincial and federal Conservatives suddenly became advocates of a humungous increase in federal health spending.

Even as their provinces struggled with rising levels of COVID-19, the Conservative Premiers of Ontario, Manitoba and Alberta, along with their small “c” conservative ally from Quebec, banded together last month to demand $28 billion more in health funding from Ottawa. That $28 billion is on top of the $42 billion in pre-pandemic transfers for 2020-21 and would, according to the Premiers, bring the federal share of health funding to 35 percent.

That federal share request looks ambitious, considering that when the six percent a year increase was offered 16 years ago by Paul Martin, it was supposed to keep federal contributions at 25 percent. Federal transfers covered less than 22 percent in 2019-20.

For his part, Justin Trudeau has committed to “sitting down with the premiers this fall to talk about the future of the Canada health transfers,” but recent history has shown that agreeing to meet the premiers and actually delivering larger transfers are not the same.

However, a couple of things have changed since Trudeau’s disingenuous campaign promise of 2015. The pandemic and the increase in federal spending in response has altered both the fiscal outlook and public expectations about what needs to be done to address defects in the social safety net.

It will be very difficult for the feds to get agreement from the provinces on fixing the pandemic-identified problems without first dealing with chronic concerns about health transfers. And any credible long-term fiscal plan has to take into account the pre-pandemic trajectory identified in successive sustainability reports from the Parliamentary Budget Office.

…and the federal C0nservatives

The other difference this time is that the Conservatives – or as they’ve taken to calling themselves Canada’s government-in-waiting – are trying to outbid the Liberals on health transfers. In her response to last month’s throne speech, the party’s deputy leader Candice Bergen called for federal funding of 50 per cent of health care costs. Leader Erin O’Toole did not come up with a number when he joined the debate, but did promise to “increase health transfers to the provinces by providing stable, predictable funding, no strings attached.”

In addition to the numbers in play – the current 22 percent, the 35 percent Premiers’ ask and the 50 percent floated by the Conservatives – O’Toole’s reference to strings attached highlights another point of contention. The biggest hole in the social safety net exposed by the pandemic has been long-term care, specifically in nursing homes. The dreadful conditions revealed in some of them – most notably in Quebec and Ontario – have led to widespread calls for national standards.

Even if they wanted to, the Liberals would risk backlash by handing over new health funding to the provinces without attaching some strings concerning long-term care. And in recently fielding a friendly question from a Liberal backbencher, Health Minister Patty Hajdu showed that the Trudeau government has no interest in going that route. As Hajdu put it:

“We are deeply concerned about the outbreaks of COVID-19 that are growing in long-term care again despite the $740 million that we have provided to provinces and territories to strengthen protections for seniors in these facilities. I will be working with the Minister of Seniors on a path forward to ensure that long-term care homes have national standards and that they adhere to those national standards, so we can protect seniors from coast to coast to coast.”

After a short absence, health transfers are back on the political agenda. With huge gaps to be negotiated in dollar amounts and policy – no strings versus national standards – the issue is likely to remain there for a while.