Ottawa may begin cutting back health-transfer payments in 2017
“We can’t pretend that we can spend money that we don’t have”
VICTORIA — Ottawa could begin cutting back on health-care transfer payments to provincial and territorial governments in 2017, federal Finance Minister Jim Flaherty said Monday.
Flaherty said his government will hold the annual increase in the transfer to six per cent until 2016-17, which is the current rate Ottawa gives the provinces.
But then it will begin linking the health care increases to the rate of the country’s economic growth including inflation — which is currently roughly four per cent.
The federal government also is promising that it won’t lower the annual increases to below three per cent, even if economic growth dips below that level, Flaherty said.
The new funding formula, which provinces have said will lead to health-care service declines and rising wait lists, was announced after a meeting of federal, provincial and territorial finance ministers in Victoria Monday.
Flaherty acknowledged the provincial finance ministers expressed `”some concern” in a `”frank discussion.”
But he said he hopes the new accord will allow for stable, long-term funding and let the provinces begin seriously discussing reforms to the health-care system. The new Health Care Accord will be reviewed again in 2024, the federal government said. The annual payment will be $38 billion in 2018-19.
The government said it will hold the Canada Social Transfer increase rate at three per cent in 2014-15 and then link to the gross domestic product.
Territories will see their funding for social transfers continue based on the current formula, government said.
Finance ministers began talks Monday morning clearly expecting a cut in health care from Ottawa.
“The federal government has moved unilaterally . . . and we think this is most regrettable,” Ontario Finance Minister Dwight Duncan said, adding that it would mean less health service in Ontario.
“It’s not a present at all. It’s a lump of coal.”
Manitoba Finance Minister Stan Struthers called it a formula that takes transfers wealth from the poor provinces to the richer ones.
“Today I view this as a slap in the face,” he said.
The current 10-year Health Accord between the federal government and provincial and territorial government expires in 2014. Health transfers had been locked into annual six per cent increases since 2004, and the Conservative government had promised to hold that rate. But Flaherty repeatedly indicated in recent weeks that Ottawa intends to curb future increases.
The provinces are set to receive a total of $27 billion from Ottawa in health transfers this year, which make up a significant chunk of provincial health ministry budgets. Flaherty said Monday he doesn’t think provincial and territorial finance ministers had unrealistic expectations going into the talks.
“I think we all realize that public finances are related to revenues and we can’t pretend that we can spend money that we don’t have,” said Flaherty.
“If we do that then we run the risk of damaging the Canadian brand, quite frankly, which is a strong fiscal responsibility brand around the world.”