Globe and Mail (December 19, 2011)
Shrewd tactics not the same as good health policy
By Andre Picard

Globe and Mail (December 20, 2011)
By attaching no strings, Flaherty binds irate provinces to health plan
John Ibbitson

Toronto Star (December 20, 2011)
Why the Harper funding diktat endangers medicare
By Thomas Walkom

CBC News (December 20, 2011)
New Brunswick criticizes Flaherty’s health proposal
Blaine Higgs said the federal proposal would hurt smaller provinces

CTV News (December 21, 2011)
Flaherty sketches out health spending until 2024
Canadian Health Coalition responds

Globe and Mail (December 19, 2011)
Flaherty’s 10-year health-care plan divides provinces
By Ian bailey and Bill Curry

Globe and Mail Blog (December 22, 2011)
Ottawa’s health plan: When money misses the point
By Armine yalnizyan

Toronto Star (December 21, 2011)
6 per cent solution for better health care
By Armine Yalnizyan

Toronto Star (December 21, 2011)
How to save medicare while saving money
By Martin Regg Cohn

Halifax Herald (December 20, 2011)
Dexter: Rich provinces get richer
By Paul McLeod

Winnipeg Free Press (Decmeber 21, 2011)
Ottawa shirks health funding: Oswald
Says unilateral action to hurt Manitoba’s future
By Larry Kusch

Globe and Mail (December 21, 2011)
Provinces get more autonomy to drive health-care reform
By John Ibbitson and Bill Curry

Macleans Magazine (December 14, 2011)
What did the Conservatives promise on health transfers?
By Aaron Wherry

TORONTO – The Harper government let down millions of Canadians this week by effectively walking away from the opportunity to craft a 2014 Health Accord that brings real reform to our health care system.

“The federal government has thrown away a golden opportunity to lead health care transformation in Canada,” said Dr. Danielle Martin, chair of Canadian Doctors for Medicare. “Instead, they are jeopardizing the principles of the Canada Health Act, and throwing accountability out the window.”

The federal government announced this week that it would not be sitting down with the provinces and territories to craft meaningful national standards, effectively reducing the federal role in health care to cheque-writing.

With no enforceable interprovincial policy in place, the new federal approach abandons any real effort to ensure that all Canadians can access appropriate care across the country, and it disadvantages poorer provinces.

“We need stable funding of health care, but patients and taxpayers also want to see accountability and quality – from coast to coast to coast” said Linda Silas of the Canadian Federation of Nurses Unions. “We are urging the federal government to work with the provinces to develop national standards and targets.”

For more information:

Alissa Von Bargen
Canadian Doctors for Medicare
647.230.9164, alissa@canadiandoctorsformedicare.ca

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It is often said that Prime Minister Stephen Harper is a brilliant tactician. We saw a striking example of that on Monday when, over lunch, his finance minister presented his provincial counterparts with what was essentially a take-it-or-leave offer on federal health and social transfers.

The gradual levelling off in growth ofhealth transfers is probably the best possible deal the provinces and territories – and Ottawa for that matter – could hope for. At least in base political terms.

But shrewd tactics and political palatability are not the same thing as good public policy. At a time when medicare needs leadership and vision, the new accord continues the lamentable tradition of thoughtlessly shovelling money at the status quo.

Jim Flaherty’s offer was this: Continuing the 6-per-cent annual increase in the Canada Health Transfer and 3-per-cent per annum hike in the Canada Social Transfer until the 2016-17 fiscal year; after that, until at least 2024, increases in the CHT will be tied to economic growth, while the CST will continue at 3 per cent.

Until now, Ottawa has basically refused to negotiate the CHT/CST, so the provincial/territorial finance ministers were gob smacked by the move. A predictable outpouring of rhetorical rage followed.

Still, the deal offered by Mr. Harper’s government is reasonable. It is fiscally responsible, tying spending increases to inflation. It is also politically astute, for a host of reasons:

* It avoids the sordid scene we saw in 2004 when provincial premiers ganged up on prime minister Paul Martin and extorted $41-billion in additional health dollars and a spendthrift 6-per-cent escalator clause on transfers.

* It is a 10-year deal, just as the provinces demanded, allowing some certainty in budgeting.

* It respects Mr. Harper’s election promise to maintain 6-per-cent increases beyond 2014 – at least nominally. (Those who wanted 6 per cent per annum were dreaming in Technicolor.)

* It puts the onus on the provinces to justify why health-care spending should exceed inflation, something they have never been able to do.

* It places no restrictions on how the provinces spend the $40-billion a year they receive in federal health transfers (along with another $20-billion in social transfers for education and welfare programs.)

Ultimately, though, the Canada Health Transfer should not merely be a means of transferring federal dollars to the provinces while sustaining minimal political wounds. It should be an instrument for improving health-care delivery, and in that regard, Mr. Flaherty’s offer fails miserably.

In the proposed deal, funding increases will slow from 6 per cent to 3 per cent, but the approach remains the same: mindless shuffle of money between jurisdictions.

What the public should expect from Ottawa is that federal funds be used to exercise leadership and foster innovation (or to “buy change,” to use an expression that has become hackneyed through rhetorical misuse.) The reason Ottawa transfers money to the provinces in the first place (because health is a provincial responsibility constitutionally) is to ensure some semblance of equity coast-to-coast-to-coast. But there are areas, such as catastrophic drug coverage and homecare, where there are gross regional disparities.

This accord will force the provinces to rein in health spending, which is not a bad thing in itself. But one of the consequences will likely be greater disparities in the quality of care and breadth of coverage between the have and have-not provinces.

The great failure here is not refusing to increase transfers by 6 per cent, it is failing to attach strings to the monies.

Federal dollars should be used to level the playing field, to ensure there is a semblance of a national medicare program. That should be a goal even for a government that, philosophically, believes in decentralization, as the current one does.

With this deal, Mr. Harper has shown himself to be politically astute and fiscally prudent, but he has failed to show a commitment to strengthening health care, and medicare more specifically.

That, ultimately, is what should matter to Canadians.

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Where was the first-ministers meeting? The tense communiqués? The last-minute proposal from Saskatchewan? The walkout by Quebec?

All gone, replaced Monday by a drab announcement from Finance Minister Jim Flaherty that, whatever the premiers say, lays what was supposed to be a major federal-provincial irritant to rest until well after the next federal election. Where was the fun in that?

Quebec Finance Minister Raymond Bachand denounced Mr. Flaherty’s new 13-year funding formula as “totally unacceptable.”

But in fact Quebec and every other provincial government has no choice but to accept it, at least for now. That’s because the Conservatives are asking for nothing in return.

Liberal prime ministers Paul Martin and Jean Chrétien caused no end of trouble because they wanted to impose national standards on the health system as the price for any increased funding.

But Stephen Harper has always believed that things work best when Ottawa and the provinces stick to their respective knitting. And since the federal government is attaching no conditions to this deal, thus requiring no protracted negotiations, it alone decides how much it will give.

As it turns out, increases will continue at the current rate of 6 per cent annually until 2017, then slow to match the increase in the nominal gross domestic product (real growth plus inflation) until 2024. Annual increases will never be allowed to drop below 3 per cent.

Sources within the government report that Mr. Harper won’t interfere with any province that experiments with or expands private delivery of publicly funded care. But user fees, fully private care or other major violations of the Canada Health Act will result in clawbacks.

Each province must either take the deal or walk away. Ten years from now, some may have walked away.

Federal funding currently accounts for about 20 per cent of provincial health budgets. If costs increase annually above nominal GDP, which they might as the population gets older and sicker, then the federal contribution could become proportionately so meager that one or more provinces may decide it’s cheaper to impose copayments or let the rich purchase private care, and forgo the federal cash.

Of course, the provinces could use this advance notice to begin reining in health costs. But that may be over the rainbow.

There is another aspect of Monday’s announcement that warrants notice. Finance ministers from Manitoba to PEI lined up to condemn the future funding as inadequate.

But British Columbia Finance Minister Kevin Falcon praised Mr. Flaherty, saying it was up to provincial governments to bring health costs under control. Criticism from Alberta and Saskatchewan was also noticeable by its absence.

Once again we have the prosperous, growing West supporting a Western-based Conservative government, against the protests of the declining East.

Which brings us to Ontario. In previous health-care talks, every premier from John Robarts to Dalton McGuinty fought to limit federal influence over the province’s health policy. Ontario now has that freedom until well into the next decade.

But Ontario Finance Minister Dwight Duncan preferred to dwell instead on the future reduced funding increases – not decreases, mind you, just reduced increases that begin five years out – and on Mr. Flaherty’s rudeness.

The Finance Minister “put the document in front of us and said, ‘This is how it is going to be.’ And that’s just no way to do business,” he complained.

That this formula strips out the equalization component that the larger, richer provinces have always found galling in health funding deals should make it particularly welcome to the Ontario Liberals.

But with unemployment up, tax receipts down, deficits chronic and federal welfare (that is, equalization) cheques now a regular fact of life, Ontario appears to be turning into a larger version of New Brunswick.

For those of us who have watched Queen’s Park tussle with Parliament Hill for decades, the sight is something to behold.

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Toronto Star (December 20, 2011)
Why the Harper funding diktat endangers medicare
By Thomas Walkom

For medicare, the federal government’s new health financing ultimatum is a clear and deliberate step backward.
By scaling back cash contributions to provincial medicare plans, it will gradually and inevitably destroy Ottawa’s ability to enforce the Canada Health Act.

By tying these contributions to the vagaries of the overall economy, it will make it harder for provinces to forge long-term health-care strategies.

And by cutting back health spending during slump periods, it will remove money and jobs from health care precisely at those times when they are needed most.

Most provincial governments were furious when federal Finance Minister Jim Flaherty formally unveiled his non-negotiable scheme Monday. Justly so.

The new plan from Prime Minister Stephen Harper’s Conservatives threatens to undo key medicare gains that Canada has made in the past eight years.

To understand those gains, we have to understand what medicare is. It is a national public health insurance scheme administered and partly funded by the provinces.

The only incentive for individual provinces to adhere to national standards set out in the Canada Health Act is that doing so allows them to get cash from Ottawa.

But since its inauguration by the Liberals in 1968, medicare has been under attack from those who think the federal government has no business in health care.

Indeed, it was a Liberal government that, in 1977, first devised a way to gradually extricate Ottawa from what had been a 50-50 cost sharing arrangement with the provinces.

The Liberals did so by first tying annual federal health transfers to the ups and downs of the economy. Like Flaherty, they explained this as a cost-saving measure.

More important, they began to count any tax room ceded to the provinces as part of their health contribution.

The use of these so-called tax points allowed successive Liberal and Conservative governments to gradually reduce the actual cash they transferred to provinces.

By 2002, Ottawa was contributing only 18 per cent of the public cash going to medicare. An increasingly unenforceable Canada Health Act was on its way to becoming a dead letter.

This is why Roy Romanow’s 2002 Royal Commission into health care recommended a boost in federal cash contributions.

And it is why the federal-provincial health accord two years later was so important.

That accord eliminated any linkage between federal health transfers and economic growth. More important, it committed Ottawa to put more real cash into medicare.

Thanks to that accord, the federal government’s cash share of health-care funding has gone back up to about 25 per cent.

Flaherty’s new plan very carefully doesn’t mention the accounting fiction known as tax points. But even so, the Conservative arrangement would eventually return the country to where it was in 2002 — with Ottawa putting little into medicare and the federal government losing all ability to enforce national standards that Canadians accept as given.

Think of this as stage one.

Stage two has not yet been announced. But it is intriguing to see that Ottawa still wants to continue talking to the provinces about health, even as it insists that the main topic of contention — money — is non-negotiable.

What will they talk about? My guess is “flexibility.” Having warned the provinces that he plans to eventually starve them of cash, Prime Minister Stephen Harper can now tell the premiers that he’ll turn a blind eye if they try to make up this shortfall through creative solutions — even if such solutions (delisting of all but core services? user fees?) run directly counter to the letter and spirit of medicare.

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The federal government’s new health-care funding plan will place heavier burdens on small provinces, according to Finance Minister Blaine Higgs.

Federal Finance Minister Jim Flaherty announced on Monday at a meeting in Victoria that health transfers will be tied to economic growth starting in 2017.

Several provinces have already blasted the federal government for the move.

Higgs also said the proposed move is unacceptable to the New Brunswick government.

“We understand that the federal government is trying to rein in health care spending. Our government is faced with similar challenges, and we are addressing them through the government renewal process,” Higgs said.

“But by tying health care dollars to GDP, the federal government is making the burden even heavier for smaller provinces with declining and aging populations.”

The New Brunswick government has already asked the Department of Health to limit its new revenue demands to three per cent.

Hopeful for a different deal

Higgs also dismissed a report in a national newspaper that New Brunswick didn’t speak out against the federal government on Monday because the provincial government feared “retribution.”

Higgs said that’s not true. He said the other provincial finance ministers organized a media scrum with reporters after he’d already left for the airport.

Higgs said he’s hopeful the federal government will reconsider its plan.

The federal plan would have Ottawa guarantee six per cent health-care funding increases until the 2016-17 fiscal year.

After then, the annual increase will be tied to nominal GDP, but is guaranteed to be at least three per cent.

Nominal GDP is the monetary value of all goods and services produced within the country annually, including inflation. If nominal GDP rises four per cent and inflation is two per cent, the economy’s real GDP growth is two per cent.

The current agreement, which guarantees six per cent a year increases, expires in 2014, and the provinces wanted that to continue.

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Interview with Canadian Health Coalition’s Michael McBane

CTV Story and Flaherty Press Conference

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Canada’s provinces are divided over a 10-year federal plan for health care that locks in efforts to slow rising costs – all delivered by Ottawa with little notice and no negotiation.

The plan that Finance Minister Jim Flaherty delivered over lunch on Monday in Victoria was welcomed as a sign of stability by most Western premiers, and largely greeted with outrage from Manitoba eastward.

“My feelings have moved from surprise to anger,” Stan Struthers, Manitoba’s finance minister, said as the news sank in. “They just landed this on the table over the lunch hour. It caught us all by surprise.”

According to Ottawa’s plan, federal transfers for health care will continue at six per cent – a rate of increase set in a 10-year accord in 2004 – until 2016-17. After that, the plan has transfers move to a system that ties increases to the growth in nominal gross domestic product, which is a measure of real GDP plus inflation.

Mr. Flaherty said the plan is not open to negotiation, but some provincial ministers said there is still time to get Ottawa to change position.

Mr. Flaherty’s blunt approach is a sign of the pressure he is under to get Ottawa’s long-term spending on a sustainable path, but also recognition that Western provinces in particular are prepared to take on the issue because they are better shape economically.

For comparison’s sake, the increase in nominal GDP from 2011 to 2015 is expected to average 4.6 per cent during a period of low growth and low inflation. That means that with a stronger economy, the growth in transfers under the new system might not be much different from what it would be under the old six per cent rule. Ottawa also said increases to health transfers would not go below three per cent.

But Ontario Finance Minister Dwight Duncan called the offer a “a frontal attack on public health care” from Ottawa, insisting federal Conservatives were breaking a campaign pledge to stick to six per cent increases for the duration of any new accord. Mr. Duncan said the offer of less will force provinces to cut their health care budgets and, therefore, their services.

Mr. Flaherty called the plan an effort to move toward responsible spending.

“Our public health care system is a source of pride to all Canadians,” he said. “We all want to see a strong, sustainable system that is there when we need it for today and for our children and our grandchildren tomorrow.”

But as Mr. Flaherty defended his plan, heads were still spinning over the short notice with which it was delivered.

Mr. Duncan said he and his colleagues never saw it coming. Everyone was in a genial mood on Sunday evening when the provincial and territorial ministers joined Mr. Flaherty for a private dinner at Vista 18, a rooftop restaurant at the Chateau Victoria Hotel.

As the ministers dined on beef tenderloin, wild Pacific salmon and B.C. wines, they took in the stunning view of the harbour and congratulated themselves on how well they had all worked together during the recent economic downturn.

The ministers did not find out until Monday afternoon, after they wrapped up their formal meeting and headed into a working lunch with Mr. Flaherty, that he had already drafted the transfer agreements. As ministers and their staff began eating a buffet lunch, Mr. Flaherty strode into the room and handed out copies of the agreements to everyone.

As Mr. Flaherty began walking ministers through the documents, the mood shifted immediately to one of palpable anger.

Graham Steele, the finance minister from Nova Scotia’s NDP government, said he asked the first question: “’What is the process from here on?’” he recalled.

He said the answer from Mr. Flaherty was that there would be no process. This was Ottawa’s position.

Wes Sheridan, PEI’s finance minister, said he looked around the room, seeking reaction. “I caught Dwight Duncan’s eye. I looked across at [Quebec Finance Minister Raymond Bachand]. We’ve been at this table a long time together.

“I couldn’t quite believe what we were seeing.”

Shortly after Mr. Flaherty made his plan public at a news conference, the finance ministers of Manitoba, Ontario, Quebec, Prince Edward Island, Nova Scotia and Newfoundland and Labrador went to the microphone as a group. Few pulled their punches.

When asked why Saskatchewan, Alberta and New Brunswick were not with them, Mr. Sheridan said there was a “quick decision” by some to form a front and speak.

“We’ll see how it breaks down in the next few days,” he said. “We have plenty of time. There is no rush. We have to get it right for the sake of the country.”

New Brunswick did not join the group of six because of concerns about retribution from Ottawa if officials publicly criticized the federal government, a source said. New Brunswick Finance Minister Blaine Higgs is more concerned about the equalization program than the Canada Health Transfer, the source said.

Speaking as host, B.C. Finance Minister Kevin Falcon reacted positively to the federal announcement. “I appreciate that certainty,” he said. “Obviously some of my colleagues feel differently.”

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Globe and Mail Blog (December 22, 2011)
Ottawa’s health plan: When money misses the point
By Armine yalnizyan

As Christmas presents go, this one was a shocker: Over lunch on Monday, cash-strapped Finance Minister Jim Flaherty promised provincial and territorial finance ministers he’d increase federal funding for health care by six per cent each year for the next five years. No strings attached. No negotiations. A done deal. With a catch.

The provinces and territories have five years to figure out how to make health care sustainable on their own terms, every Premier for himself. After that, the Harper Government will contribute less, tying federal contributions to the growth in the economy, with a floor of 3 per cent.

That punts serious discussions about tackling growing health and regional disparities to the other side of the next federal election. And it maintains the Harper government’s “talk to the hand” stance on major changes in public policy which affect other jurisdictions, like the senseless census long-form debacle and the evidence-free crime and punishment agenda.

But, politics aside, what does the six per cent mean economically and fiscally?

For starters, it means one more year of a sure thing than what was on offer a mere 72 hours ago.

In terms of cold hard cash, the feds will put up $27-billion this year through the Canada Health Transfer. By 2017, when the deal ends, the annual transfer will have grown to $36-billion. See this post for more about the history of federal contributions to health care in Canada.

In the context of austerity and slow growth, a budget item worth $9-billion more in five years sounds sweet. In the context of what the provinces and territories spend on health care ($130-billion), not so much. See the related chart.

Over the next five years the automatic 6 per cent escalator will pump an accumulated $26-billion more into provincial and territorial coffers.

That’s not chump change, but it pales in comparison with the more than $220-billion dedicated to tax cuts since 2006, or the 20-year, $490-billion commitment to refurbishing military hardware.

As costly as these other priorities are, nobody’s scrutinizing their sustainability the way the future of public health care is regularly questioned.

If sustainability means bending the cost curve for health care, we need more than what Flaherty’s Done Deal offers. I’m not talking more money. The $26-billion over five years could buy important reforms if it’s harnessed to that purpose, just like our federal, provincial and territorial governments agreed to do in 2004.

The 2004 Health Accord was negotiated, not decreed. Everyone agreed, new money had to buy change. It provided an injection of $41-billion in new federal funds over 10 years to “fix” health care.

It named wait times, diagnostic equipment, pharmaceuticals and access to primary care as the biggest problems to fix.

Seven years later, we see that the provinces and territories delivered results on the first two problems and dropped focus on the last two.

Wait times for cataract, knee and hip and cardiac surgery and screening for cancers have fallen dramatically across the country. That means that in every part of Canada more citizens are getting more care more quickly.

You never hear about that. The attention is always on what isn’t working. For sure, everyone knows there is plenty of room for improvement. So, as the 10-year 2004 Health Accord comes to a close, the question is: what is the most important thing for our governments to focus on improving, together, right now?

The Harper Team boiled down the meaning of the 2004 Health Accord to an automatic escalator. That misses the point. The Accord has shown that focus and commonality of political will, with a long-term financial guarantee, can bring about positive and meaningful change.

More money without a plan is just that, more money. Canadians deserve better than that. Our most valued social program needs a plan. A plan that tackles growing disparities in health outcomes and growing gaps in access to care. A plan that brings our best minds together, working in concert, to bend the cost curve by focusing on improving health and improving care. It’s possible, but it requires more than the blunt tool of cost control.

It requires a shared strategy and focus on improvement. A health “plan” without a plan is just a fancy way to say “devolution”.

Armine Yalnizyan is a senior economist with the Canadian Centre for Policy Alternatives

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Non-negotiable. Finance Minister Jim Flaherty’s health plan was presented as a fait accompli on Monday. A guaranteed 6 per cent more federal cash for health care each year for the next five years, but thereafter the Harper government will reduce its level of support.

And there is no plan to ensure that money buys the kind of change that tackles Canada’s growing health and regional disparities. As far as the Conservatives are concerned, that’s not their issue.

So now it’s up to the provinces and territories to show Canadians what it means to govern. Anyone can shovel taxpayers’ money out the door but it takes a plan to turn that money into a 6 per cent solution that benefits people in every part of the country.

Next year, the 6 per cent escalator will provide the provinces and territories with $1.6 billion more. Over the next five years, it will put another $26 billion into their coffers. That’s more than enough to make changes that can transform our system.

The 2004 federal-provincial Health Accord pumped $41 billion into provincial and territorial budgets. We achieved huge improvements in diagnostic equipment and Canadians saw wait times for cancer care, cardiac, vision, hip and knee surgeries plummet. The lesson learned: When we keep our eyes on the prize and have a focus, we can make a real difference.

Here are three ways to spend that $1.6 billion next year that could lever increased efficiency and equity.

• Lower costs through economies of scale.

One of the two fastest drivers of health expenditures is pharmaceuticals. Canadians spent $26 billion on prescription drugs in 2010, 46 per cent of which was through the public purse. We pay retail for every pill.

There are many drugs that Canadians turn to repeatedly, in growing numbers every year. Why not coordinate our purchases? We did just that when the anthrax scare of 2001 triggered a run on the antibiotic Ciproflaxin. The federal government’s emergency preparedness plans shaved $3 off the original $4.70 price per pill, saving millions on just one drug.

The feds could work with the provinces to set up a “buyer in chief,” trimming costs for everyone by flexing our purchasing-power muscle through a single-payer system. Taking $600 million from the escalator, matched with existing expenditures by the provinces and territories, could start a process that, over five years, could build toward a pan-Canadian formulary of the 100 most commonly prescribed drugs, negotiate a better price through bulk buying, and collectively save ourselves billions.

• Bend the cost curve by improving health.

The biggest gains in health outcomes over the past century have come about through public health measures that reduce preventable illnesses. Think about the impact of clean drinking water and waste management systems, or anti-smoking campaigns.

Simply put, healthier people require less health care. Small investments today can produce big payoffs down the road.

Take oral health. Canadians will have spent $13.7 billion on dental services in 2011, only 5 per cent of which was publicly funded. Cavities are a 100 per cent preventable disease. A mounting body of evidence is showing the linkages between poor oral health and higher incidence of diabetes, cardiovascular diseases, pneumonia and Alzheimer’s.

Relaunching a Saskatchewan initiative that started in the 1970s could bring a preventive, child-focused dental care program to every child under 14 in their schools for an estimated $564 million nationwide. The feds could provide a 50-cent dollar for every province that signs up. A $300 million investment through the new funds, matched by what the provinces already spend, would save billions down the road and improve lives in the process, one healthy smile at a time.

• Allocate resources strategically.

The biggest challenge to our system is the rise of chronic diseases. We really haven’t tackled the integration of care between our hospitals and our communities. Far too many people turn to our hospitals for want of options for primary health care in the community.

We know how to get savings downstream by investing in upstream investments. It’s time to put that knowledge into action. We have plenty of successful pilot programs in the community that can be scaled up. Take $700 million from the escalator funds today and start the process of expansion tomorrow.

Those are just three ways to advance a 6 per cent solution. And that’s what Canadians want: change that buys better health, better care and better control of costs. Six per cent: small change that can buy transformational change for Canada’s most treasured social program.

Armine Yalnizyan is senior economist at the Canadian Centre for Policy Alternatives.

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It is a truism that Canadians value medicare above all else.

But here’s another fundamental truth: Canadians tune out bickering between Ottawa and the provinces faster than you can say medicare matters.

So I’m pleased to announce that today’s column is a federal-provincial-fiscal-free zone.

Let’s look instead at what really matters about medicare, a program for which Canadians never see a bill — yet quietly pay all the bills as taxpayers. With health care consuming about 42 per cent of program spending in Ontario — and an unhealthy percentage of economic output — medicare threatens to crowd out other pressing needs and productive investments.

All the moping about more money misses the point. The media, doctors, hospitals and opposition politicians have long conspired to perpetuate the myth that health care is starved of cash, that more money can cure medicare’s ills.

The real challenge is value for money, not more money. Just because doctors and hospitals have done things a certain way for 40 years is no reason to perpetuate inefficiencies.

For all the flailing from Ontario Finance Minister Dwight Duncan about how Ottawa is imperiling medicare, he, too, is lowering the boom on hospitals in his bailiwick.

Next month, the treasurer will get some political cover from a commission engineering a massive overhaul of Ontario government services, headed by influential economist Don Drummond. Health care is at the top of the hit list.

After working on two recent studies of health-care inefficiencies, Drummond’s reform agenda is no secret: reintegrating the system; and reallocating more money to health promotion, community care, home care and long-term care.

But Drummond’s conceptual elegance won’t make Duncan’s political task any easier. Vested interests erupt in fury when asked to make medical sacrifices.

The Bill Davis government learned that lesson when rationalizing hospitals in the late 1970s, and then-premier Mike Harris repeated history two decades later. Now, Drummond and Duncan are trying to avoid their mistakes.

They are also looking at a far more painful and protracted restraint exercise, one that gets relatively little attention: In the early 1990s, Saskatchewan’s new NDP government faced a financial reckoning when credit rating agencies started downgrading the province’s debt.

Then-premier Roy Romanow resolved to close 52 hospitals and reopen them as well-being centres offering community-based care. He ignited a firestorm.

“It was very, very emotional — we had huge battles,” Romanow told me. “The people didn’t want it because they were used to the way the system operated.”

With no choice, Romanow plunged ahead even at the risk of alienating voters. Necessity, it turns out, was the mother of invention. The reforms took root. And he won re-election.

The lesson: To win the day, Premier Dalton McGuinty must also be prepared to muster political will — and risk defeat.

“If I had to give Dalton any advice,” Romanow muses, “you have to have the will and the determination to lose if you have to.”

But Romanow also offers this advice to his fellow New Democrats as the health-care debate heats up: You ignore Ontario’s debt load at your peril.

“If you’re a social democratic movement, you don’t want your decisions to be made by the bankers of New York or Toronto.”

Drummond has looked closely at the Saskatchewan experiment because it comes closest to a sustained transformation of government finances.

It’s a lesson Duncan has also heeded. The treasurer has taken to telling his fellow Liberals in caucus and cabinet that the prairie New Democrats pioneered an ambitious reform model — and provide an example of how good government can be rewarded by voters in the next election.

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Nova Scotia Premier Darrell Dexter say Nova Scotia and other parts of the country will start losing ground to booming provinces such as Alberta once the current health accord expires in 2014. (CHRISTIAN LAFORCE / Staff / File)

Poor provinces will be worse off, rich provinces will receive more, and the federal government will pay less under Ottawa’s new health transfers scheme, Premier Darrell Dexter said Tuesday.

Federal Finance Minister Jim Flaherty stunned the provinces Monday when he announced health payments from Ottawa will be tied to economic growth starting in 2017.

Nova Scotia had been working with the other Atlantic provinces to develop a position — continuing to raise payments six per cent each year — that they would then take to the rest of the provinces to negotiate a united front, which they would then present to the federal government.

That’s now out the window.

“It’s clearly unexpected and I think regrettable that that they would decide to approach this in the way that they have,” said Dexter.

“It’s confounding in a lot of ways but not unlike what the prime minister and this government have operated like.”

Dexter said Nova Scotia and other parts of the country will start losing ground to booming provinces like Alberta once the current health accord expires in 2014.

At that point, Ottawa will start calculating health transfers on a per capita basis.

Alberta is expected to get about a billion dollars more once this happens, while provinces with populations shrinking relative to the rest of the country, like Nova Scotia, would see their shares dwindle.

This already happens to a certain extent with the current formula, which mixes percapita numbers with some tax calculations that smooth out the values. Though the federal pot of money has risen six per cent each year, Nova Scotia received just 4.9 per cent more money this year.

In the four previous years, that amount ranged from 4.1 per cent to 4.7 per cent, according to the Nova Scotia Finance Department.

Dexter said this gap will only grow once the tax values are taken out.

“You’re benefiting the province with the single strongest economy in the country,” said Dexter.

“I don’t begrudge Alberta that, but I don’t think we’re the ones who should have to pay for that.”

Just as the Harper government laid down the hammer with one hand, it offered an olive branch with the other. Federal Health Minister Leona Aglukkaq sent a letter to her provincial counterparts Tuesday in which she offered to work with them to reshape health care.

The provinces already had a health summit planned for mid-January. They thought they’d be debating funding, but Aglukkaq says they should turn their sights to how to spend the money they will get.

Aglukkaq called Flaherty’s funding plan balanced and sustainable, saying it allows the country to “put this divisive issue of funding behind us” to focus on the real issue of how to improve the system.

The letter proposes building standardized metrics to monitor health care performance across the country.

“I have asked my officials to work with yours over the coming weeks to discuss next steps and propose an approach for moving forward,” reads the letter.

But at least six provinces are far from happy.

Nova Scotia, Newfoundland and Labrador, Ontario, Quebec, Prince Edward Island and Manitoba held a joint news conference Monday criticizing Flaherty’s plan to move the escalator of health payments from six per cent each year to nominal gross domestic product growth from 2017 to 2024.

Canada’s nominal GDP is currently growing at about four per cent. A floor clause means payments cannot increase by less than three per cent each year.

Dexter said the whole point of the escalator was to get the federal government up to funding 25 per cent of health-care costs. But he said it never reached that point due to new services being provided.

This year, the province is receiving just under $800 million in health transfers from Ottawa, which makes up 21 per cent of the Health Department’s budget. Dexter said that ratio will only drop further once GDP becomes the measuring stick.

“If it goes to three per cent, it will decline rapidly. And the provinces that will be hurt most by that will be the smaller and less economically well-off provinces.”

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THE Selinger government is worried it will shoulder a greater share of health care-funding in the future — and angry Ottawa is imposing this on Manitoba and other provinces unilaterally.

Health Minister Theresa Oswald also took exception Tuesday to a statement from her federal counterpart that she and other provincial health ministers had agreed recently to leave the thorny issue of health funding to the country’s finance ministers to sort out.

Oswald said medicare was created as an equal partnership between Ottawa and the provinces.

“Today, the feds fund roughly 20 per cent of Manitoba’s health services,” she said. “What they’re saying this week is they’re going to be contributing even less than that, and I view that to be very concerning for all citizens of Manitoba.”

A long-term agreement that provided provinces with annual six per cent health funding increases is close to an end. Federal Finance Minister Jim Flaherty surprised his provincial counterparts Monday by unilaterally deciding the six per cent increases will continue for another six years followed by increases tied to the growth in the economy. He vowed that annual increases would not fall below three per cent.

On Tuesday, federal Health Minister Leona Aglukkaq asserted in a letter to provincial health ministers that they all had agreed to let finance ministers do the deciding on federal health transfers at a recent conference in Halifax.

Oswald called the statement “revisionist history” on Aglukkaq’s part, adding it would be a “gross assumption” the provinces are content with the “unilateral nature of this decision-making.”

Manitoba spends 38 per cent of its annual budget on health care. It was looking for a 10-year funding commitment from Ottawa with six per cent annual increases as a negotiating starting point. It has also argued health transfers should not be discussed in isolation from equalization and other social transfers. The worry is that one sector will benefit at another’s expense, which has occurred in the past.

Oswald said health ministers wanted to discuss funding at their meeting last month but Aglukkaq refused. She said that in the past when Ottawa worked constructively with the provinces — such as on reducing health-care wait times — the results were positive. She said it’s critically important such co-operation continue in the future.

Meanwhile, late Tuesday, the Harper government issued a statement boasting that no federal administration had ever committed so much cash for health care. The Conservative government will invest more than $178 billion in the nation’s health system between 2013-14 and 2018-19 — an all-time record, said St. Boniface MP Shelly Glover, Flaherty’s parliamentary secretary.

She said health transfers were “dramatically slashed” under the previous federal Liberal government, but the Conservatives have refused to reduce them. She said federal health transfers have risen to $27 billion this year from $19 billion when her party formed government in 2006.

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Canada’s provinces are being granted more autonomy to reshape health care as Ottawa moves to end 50 years of using its funding power to coerce provinces to adopt national standards.

With federal funding now set, Health Minister Leona Aglukkaq sent a letter on Tuesday to her provincial and territorial counterparts urging them to focus on how to reduce escalating health costs and to “put the divisive issue of funding behind us.”

The letter is a sequel to the most important change in half a century to how Ottawa and the provinces run Canada. Prime Minister Stephen

Harper is inviting provinces, with some federal guidance, to do as they see fit in their own jurisdictions while inviting them to co-operate in establishing national benchmarks for delivering health services.

But the new funding formula – annual increases staying at the current level of six per cent until 2017, then tied to inflation and economic growth – has divided the country.

The West welcomes the certainty of the new model. It sees as a key victory the fact that Ottawa will allocate funds on a per capital basis rather than disproportionately favouring poorer provinces. The East calls the offer insufficient and an abuse of the federal-provincial process.

Saskatchewan Premier Brad Wall on Tuesday acknowledged frustration with the process, but said he and Western colleagues agree that health talks can’t be just about money.

“I think it would be better if everybody sort of agreed, but, man, it’s Canada. I don’t know if there are many examples of that,” he said in an interview. “Each province has to develop their own position on this. I absolutely respect that. I get that. Some of it may be more informed by the relative fiscal status of a province, for example.”

Alberta Premier Alison Redford was buoyant on Tuesday.

“What we were very pleased to see was an acknowledgement for the first time that Alberta needed to be treated equally on a per capita basis. That is a tremendous success for us. It’s going to make a difference in terms of our health transfer payment.”

Ottawa’s move has also enraged champions of the traditional approach to crafting a national strategy for delivering social services.

“This really is quite astounding and maybe unprecedented and I think potentially very dangerous to the future of medicare in Canada,” said Roy Romanow, the former Saskatchewan premier who wrote a royal commission report on health care reform in 2002.

By offering money with no strings attached, Mr. Romanow said, richer provinces can experiment with new services – via public or private routes – that other provinces can’t afford.

On Tuesday, New Brunswick’s Conservative Premier David Alward joined other Eastern provinces in opposing the proposal, saying the approach is “totally unacceptable” and that he would work with other premiers to force Ottawa to negotiate a deal rather than impose one.

The Conservatives decided on a unilateral approach several months ago, government sources said. The goal was to provide the provinces with certainty while weaning them off annual increases in transfers that are currently three times the rate of inflation.

Mr. Harper particularly wanted to avoid getting into protracted negotiations with premiers over how much money there would be and how the funding formula would be calculated.

Officials identified three potential windows for releasing the new numbers. The first was Mr. Flaherty’s November fiscal update. But cabinet had not approved the new deal then.

The second opportunity was Monday’s meeting of federal and provincial finance ministers. The Conservatives also contemplated holding off until January, when the premiers meet to discuss health care, but decided to reveal their plan sooner rather than later.

Questions remain about the government’s contention that health-care spending is slowing.

Background documents posted on the Finance Canada website in conjunction with the announcement of the new formula for health transfers pointed to a recent report from the Canadian Institute for Health Information to support the claim. The CIHI data showed that while increases in provincial health costs averaged more than seven per cent from 2000 to 2010, the rate of growth is projected to decline to 3.2 per cent for 2011.

Finance Canada documents said that the slower growth is because “governments are working to move health care funding to a balanced and sustainable path,” but a CIHI official said the institute can’t explain the one year drop, or whether it is a statistical blip.

While a lot of public attention has been given to the expected long-term increase in health care costs due to an aging population, Francine Anne Roy, the CIHI’s director of health spending and strategic initiatives, points out that the institute’s research has found population aging to be a “relatively modest” driver of health costs. The more pressing causes are labour, hospitals, drugs, population increases and inflation.

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The Harper government is apparently eager to cap increases to health transfers after 2016 and is apparently willing to argue that their election promise to increase transfers at 6% per year was limited to two years. The Ontario government seems to think that’s not quite what the Conservatives promised.

… Ontario government officials pointed to an interview Mr. Flaherty gave to the CBC during the campaign. “We will keep it at 6 per cent for whatever the duration of the agreement is,” Mr. Flaherty said last April, adding that the length of the new accord will be negotiated with the provinces. “It could be two years, five years, whatever.”

During the election—on Friday, April 8, to be specific—Michael Ignatieff promised to maintain the 6% increase and challenged Stephen Harper’s willingness to do likewise. The Conservatives duly responded.

Here is how the CBC reported that day’s events.

When Conservative Leader Stephen Harper released his party’s platform on Friday, he said he would continue the six-per-cent health transfer increases, though he didn’t specify they would go beyond 2014. “This government has been very clear not just in this document but in all our budgets,” Harper said. “We are planning on a six-per-cent ongoing increase for health transfers. We have been very consistent on this.”

A Conservative spokesman later said the transfers would continue past 2014, the first time the Conservatives have pledged to maintain the escalator clause at six per cent after the 2004 health accord concludes. Leona Aglukkaq, who was the health minister in the last session of Parliament, has only ever pledged to maintain them until 2014.

In an interview with CBC’s Power & Politics with Evan Solomon on Friday evening, Finance Minister Jim Flaherty confirmed the base figure will remain the same. ”The annual growth figure that we’ve been using these past several years will continue at six per cent,” Flaherty said. Asked by Solomon whether that would continue past 2014, Flaherty said yes.

Here is how CTV reported that day’s events.

“What we are saying today is when that accord runs out in 2014, our government — a Liberal government — will commit to maintain the six per cent escalator in health investment into the future so that all provinces can have stability as they plan to maintain, extend, renew and improve amazing facilities like this one,” Ignatieff said, speaking at Hamilton’s Juravinski Cancer Centre.

Within moments of that speech, the Conservatives responded, saying that a six per cent rise has already been factored into their long-term plan. Campaign spokesman Ryan Sparrow said in an email to The Canadian Press that “we are flattered to see Mr. Ignatieff agree to our commitment.”

And here is how the Sun reported the situation.

The Liberals, Tories and NDP all committed Friday to maintain the current 6% compounding increases set out in the 2004 Health Accord. And while the Liberals officially promised to keep the payments increasing beyond 2014, when the accord expires, both Conservative and New Democrat party officials confirmed their parties’ pledge to do the same beyond the deal’s expiry date, too.

The official Conservative election platform actually included no mention of the 6% escalator, but in a news release sent out 17 days later, the Conservative campaign referenced the promise three times.

Our low-tax plan to eliminate the deficit while protecting Canada’s universal health-care system by maintaining 6 per cent annual increases in federal transfers to the provinces and territories … A re-elected Conservative Government will build on our strong record of protecting Canada’s universal health-care system by increasing funding for health care by 6 per cent per year and making sure that Canadians see better treatment from the new money … Eliminating the deficit while protecting Canada’s universal health-care system by increasing federal funding by 6 per cent per year.

Reelected on May 2, the Conservatives then wrote the 6% promise into the Speech from the Throne.

Our Government is committed to respecting provincial jurisdiction and working with the provinces and territories to ensure that the health care system is sustainable and that there is accountability for results. It will maintain the six percent escalator for the Canada Health Transfer, while working collaboratively with provincial partners to renew the Health Accord and to continue reducing wait times.

If there was an asterisk to that promise, I’ve so far only been able to find it referenced in a piece from the Canadian Medical Association Journal, originally published on April 18.

When the writ dropped for the 2011 federal election, no one expected any of the political parties to spell out their intentions for annual transfer payments for health care made to the provinces after 2014, once the current intergovernmental health accord expires. In fact, conventional wisdom held that it would be foolish to do so, given that there was no way to forecast what the economy might look like or how much the government might be able to afford. Moreover, experts argued that any promise to maintain unconditional 6% annual increases in health transfers ad infinitum would put the government of the day behind the eight-ball at the negotiating table. Why would any province agree to any manner of accountability measures if they knew the federal government would open its coffers come what may?

Conventional wisdom, though, quickly proved wrong as the Conservative, Liberal and New Democrat parties indicated that the 6% escalator clause will be maintained post-2014 (www.cmaj.ca/earlyreleases/4theRecord.dtl). They essentially affirmed their stances in response to a health spending question in CMAJ’s 2011 election survey (see below).

But each of the vows come with something on the order of a rider.

The Conservatives have been careful to limit their escalator commitment to that specified in the recent federal budget (www.budget.gc.ca/2011/plan/Budget2011-eng.pdf). In that budget, which was not approved by Parliament, an increase in federal transfers for health care is prescribed for exactly two years after the accord expires, i.e., to $44.7 billion 2014–15 and $47 billion in 2015–16. When asked if that constitutes a commitment ad infinitum, a Conservative spokesman carefully restated that the escalator commitment is precisely that specified in the budget. Translation: the promise doesn’t necessarily extend beyond 2015–16.

If anyone can find Mr. Harper, Mr. Flaherty or any other Conservative candidate stating on the record that the 6% promise covered only the two fiscal years after 2014, please let me know.

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