Despite heavy criticism from state premiers about the federal government’s slow progress in funding for health care, an analysis of 20 years of health care funding data shows that federal transfers have almost always outpaced increases in state health budgets.
In 2023, federal health care transfers will reach $47.1 billion, a 212% increase from 2005, when transfers were $15.1 billion. Over the same period, total spending across the 10 states increased from $86.2 billion to $221.9 billion, an increase of 158%.
The Canadian Press partnered with Humber College Story Lab to collect data on provincial health-care budgets and federal health transfers from 2004 to 2023, tracking annual spending since the federal-provincial health-care agreement began in 2004 under former Liberal premier Paul Martin.
The findings stand in stark contrast to the rhetoric that has been emphasized in federal and state health care negotiations over the past few years as health care systems struggle in the aftermath of the COVID-19 pandemic.
Two years ago, a shortage of medical staff led to emergency room closures and severe strain on services across the country, leading state premiers to call on the federal government to cover a larger share of health-care spending.
The provincial government tabled its 2024 budget on Tuesday, showing underlying health-care spending growing below the rate of inflation. Ontario New Democratic Party Leader Marit Stiles said this is “deeply concerning” given ongoing emergency room closures and family doctor shortages.
Former Manitoba Premier Heather Stephenson, after meeting with other provincial premiers in late 2022, said health-care costs were once shared equally, but the federal government’s share has gradually decreased over time.
In 1959, when most provinces had not yet introduced Medicare, the government initially envisioned health care costs being shared equally between Ottawa and the provincial governments, but the funding model changed dramatically in the 1970s and has changed several times since.
The data shows that rather than gradually declining over the past 20 years, as premiers have suggested, transfers from the federal government have actually increased at a slightly faster pace than provincial health spending since the 2004 Martin Health Agreement.
From 2005 to 2006, federal health care transfers increased 39 percent per year, while state health care spending increased 6 percent.
This means that the federal government’s share of total health care spending jumped from 17.5% to 20.7%.
Federal health care spending has increased significantly during the COVID-19 pandemic due to certain funding transfers. These additional funding inflows will cease in 2022-23, at which point the federal share of total state spending will increase slightly to 21.2%.
A recently published study out of Ontario suggests that the Canadian health care system could actually reduce overall spending by offering patients free drugs. The researchers say that providing prescription drugs free of charge would reduce the need for costly doctor’s visits, emergency room visits and hospitalizations. Canada is the only country with a universal health care system that doesn’t cover drugs.
Federal Health Minister Mark Holland said in a recent interview that this reality wasn’t acknowledged when state premiers were pushing for more funding from the federal government in the wake of the pandemic.
It also wasn’t taken into account in recent negotiations with the provinces as part of Prime Minister Justin Trudeau’s proposed $196 billion health-care deal, which would have required separate agreements with each.
“I understand the position that states are in, the great demands that have been placed on them, but we have made sure that we have provided the necessary and needed funding to support their health care systems,” Holland said.
“What we need to do now is start changing the way the system works. We need to move from a crisis-based system, where we wait until people are really sick and then we respond, to a system where we’re upstream and we’re avoiding disease and working on prevention.”
Ontario Premier Doug Ford, who serves as president of the Council of Federation, the provincial premiers’ official body, declined an interview request from The Canadian Press.
“We continue to urge the federal government to provide adequate and sustainable funding for health care,” the state premiers said in a written statement, reiterating their concern that the agreement has a deadline.
State governors are calling this a “funding cliff” and worry that all federal proposals have deadlines and make it impossible to plan for long-term stability.
In February 2023, about 10 days after Trudeau introduced his latest health care budget, the premiers of both provinces issued a joint statement reluctantly accepting it.
“While this first step marks positive progress, it is clear that the federal approach does not address the structural health financing needs and long-term sustainability challenges facing health systems across the country,” they wrote.
Who is donating and how much?
Getting a clear picture of who is paying for Canada’s growing health care costs is not easy.
No government collects health care spending data on a national scale, making it difficult to determine exactly how much the federal government contributes.
Heidjen Mouw, a professor at the University of Saskatchewan’s School of Public Policy, said it’s important for voters to know how much each government is contributing in order to hold them accountable.
“People have certain expectations about the quality and quantity of health care they receive, but they can’t hold either level of government accountable because the division of responsibility is not clear,” said Mou, who studies health-care financing and politics.
“So far the scheme has no clear and transparent contribution rates or expectations from either government for this contribution.”
The Canadian Press and Humber College Story Lab combed through decades of provincial public accounts and federal transfers and compiled the data by hand.
Some regions were not included because records of medical costs could not be verified in those areas, and the regions receive additional assistance from the federal government to cover travel and lodging costs for some patients who cannot receive treatment closer to home.
The analysis does not take into account equalization payments or other federal contributions to states’ general revenues that may ultimately be used for health care.
It also did not consider tax shifting, a system that the federal government uses to assess how much it gives states for health care, which dates back to 1977 when the federal government cut personal and corporate tax rates and allowed states to raise their own state taxes and collect the revenue in return.
Ottawa announced tax transfers would reach $25 billion in 2023 after the latest health-care budget was released to provincial premiers. But provinces have not included tax transfers when discussing the federal government’s share of health-care spending.
Holland said she’s open to finding ways to make health care cost information more accessible as a way to cut through the political rhetoric.
“Anything that provides transparency and allows us to talk about the substantive things that we need to do, rather than discussing monetary value, I think would be helpful,” he said.
Houston’s latest state budget continues a trend of huge spending on health care, including assistance for people feeling the strain of the cost of living.
The new health care deal calls on states to improve collection of national health care data but does not specifically mention tracking federal and state spending.
One thing is clear: health care costs are rising.
On a per capita basis, Canada’s health care transfers will grow six times faster than population growth, from $427 per capita in 2005 to $1,115 per capita in 2023. These figures are not adjusted for inflation.
There was a large difference in the rate at which per capita spending grew among the provinces, with Newfoundland’s budget growing 19 times faster than its population, while Nova Scotia and Alberta’s spending grew less than twice as fast as their population.
