Increased federal funding in healthcare seems imminent, but talk of "strings" seem to have faded

Published on
February 3, 2023
Written by
Jason Grier
Read time
5 min

On Tuesday, February 7, Prime Minister Justin Trudeau will be meeting his provincial counterparts to discuss an increase in the federal contributions towards provincial spending on healthcare.

The meeting comes on the heels of federal finance minister Chrystia Freeland's meeting with her provincial and territorial counterparts in Toronto today.  News coming out of the meeting confirmed that "healthcare challenges" were on the agenda.

Far from being a showdown, recent messaging from federal representatives suggest that a significant increase in the Canadian Health Transfer ($45.9B in 2020-21) is now a given – although they are downplaying expectations of an agreement being struck on Tuesday’s meeting itself.

The Canada Health Transfer is the most recent iteration of federal funding towards provincial healthcare spending, going all the way back to the creation of Canadian Medicare, in stages, with 50/50 cost sharing offered as an incentive for provinces to adopt universal hospital coverage (1957) then, later, for extending it to universal coverage of physician services.

Today, as provincial health care services expanded well beyond just hospital and physician services, the federal share of provincial health expenditures represents just 22% of total costs.  As Ottawa considers increasing its contributions, a key point of consideration is conditionality – the degree to which ‘strings’ are attached to those dollars.

Attaching conditions to federal funding for provincial services is a sensitive one for the provinces. For one, provinces guard jealously their constitutional responsibility for delivering health services.  The federal government’s ability to assert a role has rested primarily on the use of the federal spending power, offering funding to a province in exchange for delivering a program in alignment with some kind of pan-Canadian principles or expectations. This was all well in good so long as the federal government can be relied on as an ongoing funding partner. However, in 1994 and in the face of massive deficits, the federal government pulled the rug pull of all rug pulls by unilaterally altering its funding of healthcare, splitting it out of the Canada Health and Social Transfer (CHST) and creating the Canada Health Transfer (CHT). In the process, some estimates are that the changes resulted in cuts of as much as 50% reduction in the federal contributions to healthcare spending.

This one move has been in the background of all negotiations around funding ever since and can be seen as to why provinces have been very wary about new federal initiatives to potentially create new shared cost programs under the lure of new federal money, something which was explicitly acknowledged by the Chrétien government in the 1999 Social Union Framework agreement.  Ever since, provinces have taken a pretty hard line on their rights when it comes to federal spending in their areas of jurisdiction and why, perhaps, the federal government has appeared to downplay expectations on the new money coming with anything other than the faintest of requirements, particular those that would require provinces themselves to make significant new investments to deliver on those requirements.

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