Is there anything more traditionally Canadian than an old fashioned squabble between federal and provincial governments over healthcare transfers? Ever since Ottawa passed the Medical Care Act in 1966, heralding the start of modern Canadian Medicare, Premiers and Prime Ministers have been jockeying for control over the future of our most potent national symbol.

Past federal governments have tried to play activist roles in shaping the delivery of Canadian healthcare services. The complication they face is that the British North America Act of 1867 and the subsequent Constitution Act of 1982 place the delivery of healthcare services within provincial jurisdiction. Historically, Ottawa has tried to influence the delivery of healthcare through the power of transfer payments to the provinces. When Medicare began in the 1960s the Pearson government picked up nearly half the national tab.

Since those heady days health care funding from the federal government has gradually decreased to a low of 19 per cent in the mid-1990s. Recently it has inched back to 23 per cent as a result of the annual 6 per cent funding increases instituted by the Martin government in the 2004 Health Accord agreement with the provinces. These increases were continued by the Harper government but are scheduled to cease as of April 1st, 2017. Afterwards, the increases will move to a system tied to growth in nominal Gross Domestic Product, which is a measure of GDP plus inflation.

During the 2015 federal election, the Liberal Party platform was relatively vague on healthcare commitments. While the Liberals did promise to negotiate a new Health Accord with the provinces, they made few concrete promises beyond a commitment to spend $3 billion over four years on homecare.

Upon assuming her role as federal Minister of Health, Jane Philpott began reaching out to provincial colleagues to find common ground. The provinces insisted on receiving a federal commitment to continue increasing transfer payments at a rate of 6 per cent annually, before entering into discussions on how to spend new money.

This brings us to Monday’s result; a breakdown in talks between federal, provincial and territorial Finance and Health Ministers, despite an apparent $11.5 billion pledge by the federal government to boost targeted spending over 10 years.

The federal offer to the provinces included the following funding over the next decade:

  • $6 billion for home care
    • $1 billion set aside for home-care infrastructure
  • $5 billion towards targeted spending on mental health services
    • $2 billion over the first five years
    • $3 billion in the subsequent five years

The offer included an additional $544 million over five years in funding for unspecified provincial and territorial prescription drug initiatives, and health innovation. The provinces rejected the offer calling it “inadequate” to meet the growing demands on their healthcare systems. The federal government has now taken this offer off the table.

In the week leading up to the national discussions, Ontario tabled a compromise proposal based on data from the Conference Board of Canada and the Parliamentary Budget Office. The Ontario proposal called for annual funding increases of 5.2 per cent over five years targeted towards priorities to be mutually agreed upon with the federal government. With the failure of talks yesterday, federal funding levels are set to increase by only 3 per cent a year as of April 1, 2017.

By some estimates, the federal health care funding change will remove up to $40 billion from provincial healthcare budgets across Canada, placing enormous pressure on already stretched provincial health programs. By tying funding to GDP, the Trudeau government is essentially trying to protect itself from the impact of an aging population on health care costs. It remains to be seen how already stretched provincial healthcare budgets can adjust to the new federal funding reality.