Federal election primer:

The better medicare edition

The importance of maintaining and improving Canada’s health care system is widely acknowledged and supported. So too is the underlying vision of a universal Medicare system. Time and again, public opinion polls find that Canadians are proud of our health care system, but more work needs to be done to address the high costs of prescription drugs, meeting the needs of an aging society and immediately acting to address the opioid crisis and its impact on communities across the country. But while public support for strengthening our health care system is clear, the situation is complicated by how the funding model has evolved in recent years.

As part of the run up to the 2019 fall election, we’re publishing a series of blogs on progressive steps that a new government could take, based on our 2019 Alternative Federal Budget.  Previous primers are listed below.

Whose budget line is it anyway?

The federal government doesn’t have direct jurisdiction over health care, except on First Nation reserves. Rather, provinces oversee their health care services. But this doesn’t mean that provinces act independently. Since the inception of Medicare in Canada, the federal government has been deeply involved, providing both funding and oversight to maintain uniform standards of treatment. This is meant to ensure that no matter where you live, you can expect a high standard of care. 

But while the federal government doesn’t directly control health care systems, their funding can direct and prioritize improvements and standardizations of provincial care. Since 2004, the main source of federal funds for health care has been the Canada Health Transfer. 

What is a CHT Escalator?

The Canada Health Transfer “Escalator” was part of the funding model recommended by the Romanow Report, released in 2002. The Report recommended “a new dedicated cash-only Canada Health Transfer should be established as part of the Canada Health Act. It will require an increased share of federal funding and will include an escalator provision that is set in advance for five years to ensure future funding is stable, predictable and increases at a realistic rate, commensurate with our economic growth and capacity to pay.”

The escalator model includes set increases for each year, ensuring that the provinces and territories have stable funding to invest in health care infrastructure and improvements.

From 2004 to 2014, Canada had a nationwide Health Accord that guaranteed federal health care funding to the provinces with a 6% increase per year (the CHT escalator). The Health Accord also enabled the federal government to issue financial penalties for violations of  the Canada Health Act.

When the Accord expired, the Harper government reduced the CHT escalator to nominal GDP growth (but no less than 3%).

When negotiating the most recent funding agreement, the federal government asked the provinces and territories to sign on to a Common Statement of Principles on Shared Health Priorities. Following their agreement on this Statement, each province and territory signed bilateral agreements with the federal government, detailing federal funding allocation for specific services and communities. These bilateral agreements, which came about after the 2016-2017 Health Accord negotiations failed to produce an agreement, reduced funding packages for each province—amounting to an estimated $31 billion shortfall over the 10-year lifespan of the deals. In the worst-hit provinces, deficits are projected to reach as high as $13.6 billion over 10 years.¹

The Parliamentary Budget Office, the Conference Board of Canada and the Financial Accountability Office of Ontario have all stated that maintaining Canada’s health care services for the next decade requires a CHT escalator of approximately 5.2%. The bilateral agreements have an escalator tied to Nominal GDP growth rate (roughly 4 - 5% per year) for 10 years with a floor of 3%⁠—a clear gap between what is provided and what is recommended.

So how much more funding are we talking about?

One of the basic issues in Canadian health care funding is that the federal government’s contributions have been falling relative to those of the provinces.  When national medicare was initially created, the federal government had promised a 50/50 split for Medicare expenses. That ratio was sadly never achieved. More recently, the 2002 Building on Values: The Future of Health Care in Canada – Final Report (also known as the Romanow Report) proposed that, “at a minimum, future federal expenditures should be based on its past cash commitment of 25% of provincial territorial costs for services. 

The federal government currently contributes 23% of Medicare costs. 

This proportion of funding will remain the same unless the federal government changes its escalator from nominal GDP to 5.2% a year increase, thereby pushing the federal contribution up to at least the recommended minimum of 25%.

Building better medicare

While this additional funding is required to maintain the current system, there has been a groundswell of support for increasing the scope of Medicare, specifically to include a national pharmacare system; improving senior care; and addressing the opioid crisis. 

I’ve examined who wins most from pharmacare and how to design such a system so that the middle class and working class gain the biggest benefit. The recent Hoskins Commission wholeheartedly endorses a national public pharmacare plan so no Canadian would have to pay for prescription drugs. Of course, the AFB has recommending a national pharmacare plan funded by the federal government for years. Given current realities⁠—an aging population, the high cost of prescription drugs, affordability pressures on households across the country, and the opioid crisis⁠—this is an opportune moment to fulfill Tommy Douglas’ vision of Medicare that includes prescription drugs.

As our population ages, the services that provide for seniors are simply not keeping pace with the current and growing need. Staffing levels and spaces in long term care facilities across the country are well behind where they should be. Wait lists and backlogs are the norm, forcing heavy burdens on caregivers who struggle to provide the levels of care that are required. The welcome  boost in federal funding for home care is back-end loaded into the future, when the need is immediate. A robust strategy for seniors’ health requires funding that provides for better service and more accessibility in long term care and faster rollout of existing funding for home care.

The opioid crisis in Canada is so severe that it is lowering life expectancy in Canada, particularly in the western provinces. A crisis of this scale demands an overwhelming national response. The 2018 federal budget did provide an emergency allocation of funding to implement solutions; however, that funding must be extended by future governments to control this epidemic, and end the tragedy of so many unnecessary deaths. This funding should be in conjunction with  a federal commission to make recommendations about a health-centred approach to decriminalizing and regulating illicit drugs. Addiction should be treated as a health issue, not a criminal act.

There are innovations and programs within reach that could radically improve Canada’s health care system and the health outcomes of people across the country. But they require bold, visionary policy and the stable funding required to make these programs a reality.

¹ http://www.healthcoalition.ca/wp-content/uploads/2017/10/Health-Accord-Report.pdf

David Macdonald is a senior economist with the Canadian Centre for Policy Alternatives. Follow him on Twitter at @DavidMacCdn