Sean SpeerGiving the provinces the tools to make their own decisions on how to reform health care is the best way to cut costs and deliver better services to Canadians, writes Sean Speer.

By Sean Speer, July 24, 2016

Last week’s Council of the Federation meeting ended with renewed calls from the provinces for more federal dollars even if they come with more strings attached. Health care stakeholders, federal officials, and even provincial politicians seem determined to have Ottawa play a greater role in the formulation of priorities, the allocation of resources, and the driving of reform. With provincialists like this, who needs centralists?

The Trudeau government’s posture on a new health accord reflects this predisposition to nationalise the issue. The prime minister has frequently criticised his predecessor’s failure to engage in “the critical conversation we need to have about where our health care system is going” and instead offered his vision of “collaborative federal leadership.” It is not surprising therefore that Ottawa has reaffirmed its support for a new health accord with national objectives and federal conditions.

It is more surprising that the premiers and provincial ministers seem so prepared to accept the imposition of Ottawa-driven requirements and specifications. Most of the focus has been on the need for more federal funding but the quid pro quo is a new set of strings attached as Minister Philpot recently confirmed. And still the provinces seem ready to bend over the backwards in exchange for a few extra bucks. “Money is money at the end of the day, right?” is one how premier responded.

Not only does this collective push for a greater health-care role for Ottawa offend the basic principle of classical federalism, it fails to learn the lessons of past experiments with health-care financing and reform. We do not need another health accord. Ottawa should get out of the way on health-care reform.

The last Liberal government in Ottawa sought to drive better health-care outcomes with the 2003 Accord on Health Care Renewal. The 10-year accord split the Canada Health and Social Transfer into the Canada Health Transfer and the Canada Social Transfer and agreed to grow the former by six percent annually. In exchange for this infusion of federal funding the provinces and territories agreed to joint priorities, such as home care and electronic health records, and some conditional payments associated with waiting times. Funds would continue to flow as long as the provinces focused the resources on these priorities and regularly reported back to Ottawa on progress.

We do not need another health accord. Ottawa should get out of the way on health-care reform.

The accord’s ambitions were lofty. An accompanying press document claimed: “[the accord] marks a turning point in our efforts to renew health care for the 21st century.” Yet the accord proved to be a failure. It did not lead to the transformative change that was promised. Instead it injected billions of dollars into the system and essentially bought stasis. Spending rose. Wait-times grew. And the relative performance of Canada’s health-care system fell.

Notwithstanding these negative trends, the general assumption was that the Harper government would negotiate a similar health accord with the provinces and territories before the 10-year agreement expired in 2014. Health-care groups came to Ottawa in earnest beginning in 2010 with recommendations on what new conditions ought to be attached to federal health-care transfers.

The Harper government considered a range of options including renegotiating a federal-provincial accord (few remember the Conservative Party’s 2011 election platform contemplated such an agreement) but ultimately opted to proceed in a different direction based at least in part on the failed experience of the 2003 accord.

The Harper government thus unilaterally announced it would renew the Canada Health Transfer for a 10-year period following the conclusion of the health accord. The transfer would grow by six percent annual until 2017-18 and would then increase at the rate of growth in the economy thereafter. There would be no new agreement or set of federal conditions. The Canada Health Act’s provisions would still apply but otherwise the administration of health care and the impetus for reform would be left to provincial and territorial governments.

The government’s decision attracted immediate criticism from the provinces and territories and health stakeholders who implicitly understood that a federal-provincial negotiating dynamic would invariably lead to more monies in the system. We were told that Medicare needed Ottawa. Policy commentators lamented the absence of federal strings. One premier demanded greater federal conditionality and warned that provinces “could end up taking different approaches to health-care reform.” Oh, the horror!

It is during this period of perceived federal inaction that we have witnessed greater movement in the direction of more spending control and structural reform than under the previous 10-year federal-provincial agreement.

 

But after the initial shock dissipated, we began to witness useful reforms. Annual provincial and territorial spending on health care stopped climbing at unsustainable rates and provincial governments started to experiment with new financing and delivery approaches and the adoption of best practices.

It is a point worth emphasizing: it is during this period of perceived federal inaction that we have witnessed greater movement in the direction of more spending control and structural reform than under the previous 10-year federal-provincial agreement.

This experience points to an inherent weakness in the executive federalism model that underpinned the health accord. There are three central problems with this model in health care. The first is that more conditional funding discourages provincial-led structural reforms to improve outcomes and reduce costs. As a former NDP finance minister from Saskatchewan said of the 2003 health accord: “why would you make a tough decision if somebody is going to give you more money to keep the status quo? .... The money didn’t go to change.”

The second is it assumes that Ottawa is better suited than the provinces to make determinations about priorities and reforms. What does the federal government know about running hospitals or serving patients? The presumption that the provinces require federal leadership to identify cost-savings or drive structural reforms belies the evidence. There is a reason that Ottawa has devolved veterans hospitals and is coordinating First Nations health care with the provinces. Health care is not a federal competency.

The provinces “taking different approaches to health-care reform” is a virtue rather than a vice.

The third is that centralizing priority-setting and reform initiatives undermines the potential for provincial experimentation and responsiveness to local circumstances or priorities. The genius of federalism is to allow for a national economic and political entity while preserving the scope for regional and local pluralism and experimentation. Maybe one province should focus on heart disease based on the health profile of its citizens and another’s priority ought to be something different. Maybe another’s population is prepared to accept some forms of private delivery in exchange for shorter wait times and some provinces are not. These are precisely the types of experiments and local priorities that can be diminished as a result of one-size-fits-all national standards.

The key takeaway is that federalism is not a problem to be minimized but rather a strength to be leveraged when it comes to improving Canada’s health-care system. Put differently: the provinces “taking different approaches to health-care reform” is a virtue rather than a vice.

The provinces are capable and best suited to drive reform without Ottawa telling them what to do.

Ottawa’s contribution to health-care reform should therefore be fewer strings not more. As we set out in a recent MLI study, the Trudeau government should grant the provinces flexibility to experiment with different financing options while protecting the principle of universality. Such a policy change would enable the provinces to test different forms of patient cost-sharing and the use of private insurance to reduce pressure on government budgets and possibly extend public coverage to a broader range of services for low- and middle-income citizens.

Federal leadership should be exercised by resisting the temptation to get more involved in provincial health care in the form of a new health accord. The provinces are capable and best suited to drive reform without Ottawa telling them what to do. And that is not a bad thing.

Sean Speer is a Munk Senior Fellow at the Macdonald-Laurier Institute and a co-author of the recent MLI study, Toward a more fair Medicare: Why Canadian health care isn't equitable or sustainable and how it can be, available here.