As part of the release of MLI’s "Debunking the Myths: A broader perspective of the Canada Health Act", author Michael Watts has written a series op-eds on the subject.

In the fourth entry, he argues that reducing the amount of money the federal government transfers to the provinces will open a window to reforming the system.

Michael Watts, Oct. 15, 2013, The Telegraph-Journal

The current Canada Health Transfer, which resulted from federal-provincial negotiations is set to expire in 2014.

In December of 2011, the federal government announced a unilateral renewal of the Transfer. On Jan. 19, 2012, the Office of the Parliamentary Budget Officer provided further details when it issued Renewing the Canada Health Transfer: Implications for Federal and Provincial-Territorial Fiscal Sustainability. In this publication, the PBO articulated the following:

"If the new Transfer escalator formula is maintained, PBO projects that the share of federal cash payments in provincial-territorial health spending will decrease substantially from 20.4 per cent in 2010/11 to average 18.6 per cent from 2011/12 through 2035/36, then 13.8 per cent over the following 25 years, and 11.9 per cent "over the remainder of the projection horizon. This would ultimately bring the level of federal cash support to historical lows [11.1 per cent on average] observed under the 1996/97 to 2001/02 period of Canada Health and Social Transfer Funding."

The federal government's unilateral renewal of the Transfer has been described as a "take-it-or-leave-it deal" which has "no-strings-attached" and which "reflects a growing hands off approach to health care in federal politics."

Rather than viewing this approach as a threat, however, it is possible to see it in a very positive light.

Increasing financial pressures on the provinces, combined with decreasing control measures taken by the federal government, create a situation that is very similar to the environment that surrounded social assistance payments and programs in the early 1990s. In 2011, the Macdonald-Laurier Institute published a paper concerning how legislators could apply the welfare reform lessons of the 1990s to the health care predicament that exists today. Without repeating the entire contents of that paper, it is important to note that

(1) welfare dependency had reached unsustainable rates (10.7 per cent of the population in 1994);

(2) the federal government reduced funding to the provinces for social support programs; and

(3) the provinces implemented numerous reforms to make the system sustainable (and, arguably, to improve welfare programs as well).

The reforms varied from province to province, as each strove to deal with its unique challenges. In hindsight, reforming the provincial welfare systems was an extremely wise thing to do, which may, in fact, have prevented the collapse of the systems.

The provincial welfare reforms were not limited to a simple reduction in benefit levels. One reason for this is that there "was an increasing understanding that when welfare benefits surpass comparable income available from low-paid work, incentives were created to enter or remain on welfare." Therefore, provinces focused on creating new incentives for people to enter the work force.

A similar strategy is needed in regards to the provision of health care services. Provinces overwhelmingly spend the funds they allocate to health care services on acute care and long-term care with little allocation of funds to health and wellness promotion or management of chronic illnesses (which can be provided in the community).

In addition, provincial governments will need to develop incentives to improve the value patients receive for the dollars the provinces are spending for their insured patients' care.

Any significant shifts in health care policy, however, will require significant political will, as well as substantial public consultation and engagement, in light of health care's status as the proverbial third rail of Canadian politics.

This series is not intended to provide a blueprint on how to repair provincial health care systems. However, it is imperative that provincial legislators have a clear understanding about what services are required (and, just as importantly, not required) by the CHA. If legislators recognize the flexibility afforded by the CHA and can contemplate reforms with a certainty that provincial actions will not be impeded by arbitrary federal interventions, they will find that there is enormous room for innovative changes that could address not only the provinces' financial difficulties in insuring health care but also the significant quality concerns related to the health care system in this country.

If there is to be any hope for responsible action to deal with the health care challenge, we know that real change must and can come from the provinces. Provinces should investigate and address the costly and inefficient incentives that have been created by their own provincial health insurance plans. It is not in the federal government's jurisdiction (or on its agenda) to engage in or foster (or hinder) any reformation plans.

This series has outlined a number of areas for potential action, each of which is ripe with possibilities for experimentation of the sort that are not governed at all by the Canada Health Act.

Given the "hands-off" approach suggested by the current federal government, one could argue that it might be reasonable to expect benign federal approval of such innovations. More importantly, given the current financial realities, changes must be made in order for provinces to sustain the provision of publicly administered, comprehensive, universal, portable, and accessible health care to their residents.

Michael Watts is a partner at Osler, Hoskin & Harcourt LLP and Chair of the firm's National Health Industry Group. This series was written for theMacdonald-Laurier Institute and syndicated by

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