Federal spending is growing faster than provincial spending

(Ottawa) Despite criticism from provincial premiers about the lag in federal contributions to health spending, an analysis of 20 years of health funding data shows that growth in federal transfers has far outpaced increases in provincial health budgets in every province.

In Quebec, health spending per person increased from $2,773.90 in 2005 to $6,638.62 in 2023, an increase of 139.4%. This is the largest increase among Canada’s 10 provinces for this period. Between the same years, federal health transfers increased from $427.23 to $1,115.31 in the country, an increase of 161.1%, higher than that of the provinces.

In total, federal health transfers in 2023 amounted to $47.1 billion, an increase of 212% from 2005, when transfers were $15.1 billion. Total spending in the 10 provinces increased from $86.2 billion to $221.9 billion between 2005 and 2023, an increase of 158%.

The Canadian Press, in partnership with Humber College’s StoryLab, collected data on provincial health budgets and federal health transfers from 2004 to 2023 to track annual spending since the launch of the 2004 federal-provincial health accord under former Liberal prime minister Paul Martin.

The results contrast sharply with the rhetoric that has punctuated federal-provincial health negotiations in recent years, as health systems struggled in the wake of the COVID-19 pandemic.

Two years ago, a shortage of health-care workers led to emergency room closures and extreme delays in services across the country and provincial premiers demanded that the federal government foot a bigger share of the health-care bill.

Evolving model

Former Manitoba Premier Heather Stefanson, after a meeting with her fellow provincial leaders in late 2022, said health-care spending used to be evenly distributed, but the federal share has slowly declined over time.

Governments originally envisioned that health care costs would be split evenly between Ottawa and provincial governments in 1959, before most provinces even had medicare. But the funding model changed dramatically in the 1970s and has continued to evolve ever since.

Rather than slowly declining over the past two decades as premiers have suggested, the data show that federal transfers have actually increased at a slightly faster pace than provincial health spending since the 2004 health accord.

In 2005-2006, federal health transfers increased by 39% in one year, while provincial health spending increased by 6%.

This means that the federal share of total health spending increased from 17.5% to 20.7%.

Federal health spending was much higher during the COVID-19 pandemic due to specific transfers. These additional funds stopped flowing in 2022–23, by which time the share of health spending had increased only slightly to 21.2%.

Reality ignored

That reality wasn’t acknowledged when premiers were calling for more federal money after the pandemic, Health Minister Mark Holland said in a recent interview.

Nor was it recognized in its recent negotiations with the provinces under Prime Minister Justin Trudeau’s proposed $196-billion health care deal, which involved signing individual agreements with each province.

“I understand the position of the provinces, which have enormous demands to meet, but we are ensuring that we provide the necessary and required funds to help them with their health systems,” said Mr. Holland.

“What we need to do now is start transforming the way our system works. We need to move from a crisis-based system, where we wait until people are really sick to deal with them, to an upstream system, where we avoid illness and engage in prevention.”

Ontario Premier Doug Ford declined an interview request from The Canadian Press as chair of the Council of the Federation, the official organization of premiers.

A written statement said the premiers “continue to urge the federal government to provide adequate and sustainable funding for health care,” also reiterating concerns about the end date of the agreements.

Premiers are calling it the “funding cliff,” fearing they won’t be able to plan for long-term stability when federal offers all have expiry dates.

In February 2023, about 10 days after Justin Trudeau presented the latest health funding offer, the premiers issued a joint statement reluctantly accepting it.

“While this first step marks a positive development, the federal approach will clearly not address the structural health care funding needs or the long-term sustainability challenges we face in our health care systems across the country,” they wrote.

A vagueness persists

It is not easy to have a clear vision of health spending in Canada.

No government collects data on health spending nationally, and federal contributions are difficult to determine.

It’s important to know how much each government contributes so voters can hold them accountable, said Haizhen Mou, a professor at the University of Saskatchewan’s graduate school of public policy.

“They have certain expectations about the quality and quantity of health care they receive, but they can’t hold either level of government accountable because there is no clear division of responsibilities,” said Mr.^me Mou, who studies health financing and policy.

“There is no clear and transparent contribution ratio or expectation for this contribution from either government in the system so far.”

The Canadian Press and Humber College’s StoryLab combed through decades of provincial public accounts and federal transfers to compile the data manually.

The territories were not included because health spending records could not be verified in some cases. The territories also receive additional support from the federal government to fund necessary travel and accommodation for some patients who cannot be treated close to home.

The analysis does not take into account equalization payments and other federal contributions to provincial general revenues that might ultimately be spent on health.

Nor did it look at tax point transfers, which the federal government includes when it estimates how much money it gives to the provinces for health care. That goes back to 1977, when the federal government lowered its personal and corporate income tax rates and provinces could raise their provincial tax rates and take that revenue instead.

In 2023, after the last health funding offer to premiers was made public, Ottawa said the tax point transfers would amount to $25 billion. However, provinces do not include tax point transfers when discussing the federal share of health spending.

With research from Humber College StoryLab and Danielle Monterroso