Health-care reform—less Ottawa, more Alberta (and other provinces)
Alberta is helping force a national discussion about the fiscal relationship between Ottawa and the provinces. In this discussion, the federal government has an opportunity to, among other things, increase provincial autonomy of health care and unleash a wave of innovation and experimentation within our universal system.
Currently, Ottawa supports provincial health care through the Canada Health Transfer (CHT). In 2019/20, the federal government provided more than $40 billion to the provinces via the CHT. This cost is expected to reach $48.6 billion by 2024/25, an increase of 20.3 per cent (or nearly twice the projected rate of growth for all other federal program spending).
But federal CHT funding comes with strings attached, linked with provincial compliance to regulations in the Canada Health Act (CHA). If any province violates these regulations, it can lose money from Ottawa. This prevents provinces from innovating and adopting policies used by the world’s best-performing universal health-care systems.
Consider this. Canada ranks second in health-care spending (age-adjusted, as a share of the economy) among OECD countries with universal health care. But despite our high levels of spending, Canada’s health-care system performs comparatively poorly. Wait times remain a major problem, and Canada ranks among the bottom of OECD countries (again, with universal care) for the number of doctors and hospital beds (adjusted for population).
So spending continues to increase while performance wanes. Fortunately, there’s a solution based on Canada’s past experience with welfare reform.
In 1994, the costs of delivering social assistance were rising across Canada as nearly 11 per cent of Canadians depended on welfare. The Chrétien government reduced federal transfers to the provinces for social services but also eliminated almost all strings attached to federal funding, opening up a range of policy options for the provinces. This increased autonomy and flexibility empowered provinces to innovate and experiment. Some common reforms occurred—eligibility rules were tightened in almost every province and focus shifted from delivering payments to integrating recipients back into the workforce.
Moreover, British Columbia introduced time limits for employable individuals receiving benefits, Alberta and Manitoba used transition programs to aid people moving from welfare to work, and Ontario introduced “workfare” programs.
The results were remarkable. While government spending declined, dependency rates fell and a significant proportion of those reliant on social assistance re-entered the workforce. In fact, the percentage of the population relying on social assistance declined from 10.7 per cent in 1994 to 4.9 per cent in 2008. The Chrétien government’s changes enhanced the effectiveness and efficiency of federal transfers while increasing autonomy for the provinces in areas of their responsibility including welfare.
Clearly, the welfare reform of the 1990s provides Ottawa a template for reforming health care today. The federal government should reduce the health transfer to the provinces and lower personal income tax rates, while amending specific provisions of the CHA that prevent provinces from introducing reforms observed in high-performing universal health-care countries such as Switzerland, Germany, Australia and France. Provinces would be free to raise their own tax rates to make up the loss of federal transfers while having the freedom to truly reform the financing and delivery of health care while retaining universality. Simply put, we need less Ottawa and more provincial autonomy of health care in Alberta and across the country.