Morneau: Health demands 'out of the realm' for feds' consideration

Provinces unnerved by federal government's commitment to drop escalator from six per cent to three

Canada's Finance Minister Bill Morneau (L) and Advisory Council Chair Dominic Barton take part in a news conference following a meeting with the Advisory Council on Economic Growth in Ottawa, Ontario, Canada, October 20, 2016. (Chris Wattie/Reuters)

Canada’s Finance Minister Bill Morneau (L) and Advisory Council Chair Dominic Barton take part in a news conference following a meeting with the Advisory Council on Economic Growth in Ottawa, Ontario, Canada, October 20, 2016. (Chris Wattie/Reuters)

OTTAWA – Canada’s finance minister is calling provincial demands for bigger federal health transfers “out of the realm” of anything Ottawa would consider as the federation appears headed for a showdown next week over the future of health funding.

In an interview ahead of Monday’s federal-provincial meeting on health financing, Bill Morneau insisted Friday that the feds won’t agree to keep the annual increases in transfers — the so-called health “escalator” — above a three per cent floor.

MORE: Maclean’s On The Hill podcast on health transfers

The Trudeau government also won’t entertain calls to raise the federal share of spending to 25 per cent of provincial health budgets, Morneau told The Canadian Press in an interview.

Instead, he said the government wants to explore ways to work with the provinces on specific investments in areas that Ottawa believes will have an measurable impact, such as home care and mental health.

Ottawa is prepared to put a “significant” amount of money towards these goals over a period longer than five years, Morneau said. Just how much, he wouldn’t say — but the provinces are definitely “outside of where we’re at,” he added.

“The provinces’ requests are out of the realm of anything that we would consider,” said Morneau, who is hosting finance ministers for a working dinner Sunday before Monday’s main event, which will also include health ministers.

“We’re not going to be talking about percentages — either in the escalator … or in terms of the broader percentages.”

MORE: Jane Philpott establishes the framework on health-funding

Clearly, a significant gap remains between the two sides heading into the next phase of the long-running efforts to reach a new health accord.

Earlier this week, several provincial health ministers expressed doubts they would even bother making the trip to Ottawa unless the federal government signalled it was willing to budge from its position.

Ottawa fully intends to allow the escalator to drop to three per cent from six, which is where it’s been set since a federal-provincial deal was struck in 2004.

Starting in April, the rate is due to be three per cent, or the three-year moving average of nominal gross domestic product growth, whichever is higher. That would trim nearly $1.1 billion a year from Ottawa’s combined payments to the provinces.

The provinces say it would also leave big holes in health-care budgets that they can ill afford.

“At three per cent, we’re cutting health care and that can’t happen,” Ontario Finance Minister Charles Sousa said in an interview Friday.

New data released this week by the Canadian Institute for Health Information says health spending by all the provinces combined grew by less than three per cent annually between 2012-13 and 2014-15. The institute also forecasts the provinces only increased total health spending by about 2.3 per cent in 2015-16 and again in 2016-17.

Some provinces support a 10-year federal funding idea proposed by Ontario that would see health transfers increase by 5.2 per cent a year, among other changes. Independent organizations like The Conference Board of Canada have also supported that kind of funding floor, Sousa noted.

Other provinces have called on Ottawa to gradually increase its share of provincial health-care budgets to 25 per cent. Newfoundland and Labrador Health Minister John Haggie said this week that should the escalator dip to three per cent, the federal portion of health spending in his province would fall to 17 per cent.

On Friday, federal Health Minister Jane Philpott said that overall, across the country, Ottawa funds about 23 per cent of health-care budgets.

Ottawa has accused the provinces, which are responsible for health-care delivery under the Constitution, of channelling federal health payments into their general revenues.

Morneau suggested that the only way the federal government might be willing to budge would be on recent requests by the premiers for longer-term federal investments in areas like home care and mental health.

The feds are indeed prepared to offer more cash for health care, he said — but only if the provinces will work with Ottawa on its goals.

“And if we are able to get to those agreements, at a level of investment that we are comfortable with, then we will have a positive day on Monday,” said Morneau, saying he’s “cautiously optimistic” the provinces will agree.

He also pointed to the Liberal government’s 2015 campaign commitment to invest $3 billion on home care — money that was not allocated in the 2016 budget.

The Liberal platform said the home-care funding would be spread out over four years and would start to flow immediately.

Morneau would not confirm Friday whether that money would be included in the 2017 budget.

Sousa said he fully supports targeted funding to help provinces make improvements to home care and mental health. It’s the overall pot of money that needs to be bigger, he said.

“Right now, the discussions that are being had are nothing more than a mug’s game — they’re playing one number and they’re mucking around and they’re coming back to the same number, ultimately,” Sousa said, pointing a finger at federal ministers.

“That’s not acceptable.”

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