The sick politics of a national health accord

How the talks between Ottawa and the provinces to reach a new health accord went so wrong, and what the Trudeau government is likely to do next

Minister of Finance Bill Morneau and Minister of Health Jane Philpott listen to a question during a news conference following the Finance Ministers meeting in Ottawa, Monday, December 19, 2016. THE CANADIAN PRESS/Adrian Wyld

Minister of Finance Bill Morneau and Minister of Health Jane Philpott listen to a question during a news conference following the Finance Ministers meeting in Ottawa, Monday, December 19, 2016. THE CANADIAN PRESS/Adrian Wyld

“What now?”

That’s the question an exhausted health official told me was swirling around government after the collapse of the health accord arrangement with the provinces. “We actually expected a deal and that’s not just posturing,” the official said. “Frankly, we have not thought through the next options.”

Health Minister Jane Philpott reflected this bewildered mood when she tweeted with unusual ministerial candour that she was “profoundly sad” that a deal would not be reached. Emotions ran raw.

It’s not that surprising. Even before the premiers rejected the government’s offer, bureaucrats in the Health department were already in a zombie-like state, having just come off a torrent of announcements, including a national strategy to fight opioids, easing restrictions on supervised injection sites, releasing the task force report on legalizing cannabis, and banning the sale of asbestos. A new health accord was supposed to be the culmination of a frenetic month—make that a frenetic year—but the government was caught up, finally, by its own hyper-ambition. It believed that earlier agreements with the provinces on extending the Canadian Pension Plan and on a national price on carbon—save for Saskatchewan and Manitoba—meant a new health accord was a slam dunk. Wrong, as Donald Trump might say. Health is a tougher game altogether.

It was naïve to believe that the provinces and territories would accept a deal where the Canada Health Transfer dropped from a six per cent annual escalator to 3.5 per cent, even if $11.5 billion over five years was added for home care and mental health. On background, officials admitted as much. Still, they’d convinced themselves it was going to happen. After all, the provinces knew that mental health and home care were the key priorities for any new deal, and in the days leading up to the meeting, Philpott and her team worked the phones to lay the groundwork for a deal. If the provinces were never going to come on board, it was news to the government, who were so taken by their own offer that a senior source told me on the night before the meeting that things were “trending well” and there was a “chance of a real breakthrough.”

It was a miscalculation. The provinces and territories came with one thing in mind: money. Defending the annual increase of the Canada Health Transfer (CHT) was their primary goal and, to be fair, the government’s offer, a 3.5 per cent annual increase, was provocatively meagre. Even Stephen Harper’s plan offered more than that, because while the floor was three per cent, the increase was tied to the rate of nominal GDP—that is, growth plus the rate of inflation. Next year nominal GDP is expected to be 3.9 per cent, so why the government expected the provinces to bite on something less is baffling.

In any case, the provinces and territories had settled on an annual health transfer increase of 5.2 per cent. That was their red line, a number they argued was backed up by the Conference Board of Canada and the parliamentary budget officer. After 10 years of Stephen Harper, they saw a Liberal government unafraid to run up deficits, and they were not going to miss their moment to press for more. And they do need real money. According to the Canadian Institute of Health Information, “In 2016, total health expenditure in Canada is expected to reach $228 billion, or $6,299 per person. It is anticipated that, overall, health spending will represent 11 per cent of Canada’s gross domestic product.” As Dr. Eric Hoskins, the Ontario minister of health, told me, a 5.2 per cent annual increase is the amount of money needed to deal with an aging population and to make sure that the federal contribution to provincial health budgets doesn’t fall below 20 per cent. “It used to be a 50-50 split,” he pointed out.

Fair enough. Except that split was back in the 1960s and 1970s, when the federal government was mainly covering hospital insurance and a small number of other costs. Since then the system has become significantly more complicated, while government support for provinces has also improved in many ways—not just with the substantial CHT, but through tools like tax points. While the provinces brought their number, so did the government: 2.7 per cent. That’s the annual average growth rate of provincial health spending between 2011 and 2015, according to the Canadian Institute of Health Information. In other words, the provinces are actually spending less on health. The logic is tough to argue: with slow economic growth and provincial health spending down, how does a government commit to increasing the funding more than 5.2 per cent every year?

Federal health officials were jacked up about their offer for another reason, too: in spite of the hard line on the escalator, they had pried $5 billion in new funding for mental health out of Finance Minister Bill Morneau. That might not sound like a tough job after Morneau blew the deficit up in year one to $30 billion, but his second budget is set to be more sober. He is under heavy assault from every minister demanding cash to pay for Liberal promises, from infrastructure to military procurement, so he’s sent out a message that budget 2017 will not be the piñata it was last year. Health officials told the provinces that if they don’t take the money it will go to other programs, instead of covering mental health for over half a million young people under the age of 25. The classic one-time offer.

The provinces, of course, called the bluff and lined up, united, skewering the government for imposing a solution, trying to strong-arm them in one day and generally for acting like, well, like Stephen Harper. OMG! Mic drop. The Harper card was played.

The problem is, suggesting that Trudeau is similar to Harper hardly elicits fainting spells. Trudeau’s personality may be diametrically opposed to Harper’s, but Trudeau has never shied away from key parts of the Harper legacy. Instead he has openly poached it. He used the Harper targets on greenhouse gas emissions, adding a national price on carbon to reach them. He used the Harper corporate tax rates, he closed Harper’s European free trade deal and followed the basic Harper desire to greenlight pipelines. Trudeau campaigned on the same child care benefit philosophy as Harper—that is, cutting cheques to families as opposed to the old Paul Martin idea of a national child care strategy—only he means-tested the cheques. The Liberals long ago decided to use the Harper engine; they just changed the design of the political car.

If the stakes weren’t so high and the issue not so crucial, the health minister’s mock anger over the negotiation process would have been dismissed as lousy dinner theatre. And that’s another point. You have to willingly suspend your disbelief to even call the process a negotiation in the first place. That’s just a convenient euphemism. There is no give and take in a health negotiation, just government give. How the provinces and territories have convinced themselves that they can hold the federal government hostage while they are getting billions of dollars remains one of the great Canadian paradoxes, but the debate over shared responsibility, which has real depth to it, has devolved into this kind of Kabuki.

For some perspective, I went back and read an excerpt from Paul Martin’s biography Hell or High Water, where he talks about negotiating the 2004, “fix-for-a-generation” health deal, which was, of course, the genesis of the now mythical six per cent health-transfer escalator. Martin was a staunch believer in the federal government’s responsibility to provide universal health care, and that belief empowered the provinces to force him to live up to his philosophy. Martin wrote about the five “gruelling days” of negotiation, how pizza was delivered to 24 Sussex during the marathon sessions, how Alberta remier Ralph Klein would slip out across the river to gamble in Gatineau, and how each side used the public to negotiate a better deal. “While the premiers went after us in public, we knew we had the resources to address most of their real concerns,” Martin wrote. “Despite the public posturing, the serious negotiations went on behind closed doors.” They eventually got a deal and Martin’s goal was met: “The issue of funding was disposed of for a decade.”

Reading that gives a clue to what all governments want: to stop the endless squabbling over money. Martin did it one way. Harper did it another. Trudeau now has to find a way to stop the bickering and lock in a long-term funding deal before he loses his credibility with the provinces. On this issue, it is in the federal government’s political interest to get a deal fast.

So what now? The clock is ticking. Morneau must put his budget to bed soon, so this should be wrapped up in January. If it isn’t, it becomes a giant problem for Trudeau that will loom over every other issue, and hand the provinces a big stick. Naturally the provinces want another meeting to keep the negotiations going. They will go as long as possible, because every gathering gives them a crowd of reporters listening to them blame the federal government for their health care problems. It is perfect scapegoat politics. No wonder the government is not keen to host another get-together. What’s the incentive to go back into the room for protracted talks with the same health ministers who will scream until they get what they want?

In any case, a senior official told me the prevailing view is that the provinces will soon realize they can’t turn down the money and they will accept the offer. And sure enough, New Brunswick has just broken ranks and “>cut a bilateral deal with Ottawa. That’s the first crack in the provincial alliance. New Brunswick has an aging population and so Premier Brian Gallant took an extra $230 million over 10 years in support for the province’s seniors, along with the old Harper nominal GDP formula on the escalator. Already Quebec is furious with the move. As Pierre Trudeau might say, “The cat is among the pigeons.”

The federal government could continue this route, use the 3.5-per-cent escalator or the Harper formula, and then set up a kind of health fund that provinces can apply to for home care and mental health money. Politically it pits the provinces against each other and breaks the log jam, but the truth is, the federal government doesn’t really want to cut 13 different deals. It would screw up standards, targets and get way too complicated. They want one single deal.

That leaves three options.

Call the first the skinny-basic option. Forget the new offer and revert back to the Liberal platform, which is the Harper escalator of three per cent plus $3 billion in home care over five years. Morneau has already said that’s the de facto status quo, although no one believes he is willing to play that kind of hardball. Still, if he wants to book the budget, he could certainly do that.

The second is the Harper play. He could just impose the deal that was on offer. The provinces and territories would gripe but, in the end, suck it up. The downside of this is that it would create a lot of bad blood, and there is the nagging issue of the national carbon price, which Manitoba won’t sign onto until they get a good health deal. So closing one deal could unravel another. Very dangerous.

The final alternative, but I think the least likely, is to pull a Paul Martin marathon, and try to hammer out some deal over a series of brutal negotiation days. For the government, that’s a no-win. Politics aside, they can’t afford to fund both a 5.2-per-cent escalator and give money to home care and mental health. They would have to surrender on their key health priorities and their philosophy of targeted money. Justin Trudeau likes to put consultation on the menu, but I don’t see him as the head waiter to the provinces.

Bickering with the provinces over money and jurisdiction is as Canadian as hockey, but it will end soon on the health care file. What will likely happen? The government bends a bit on the transfer, maybe puts the floor at four per cent for five years, adds some upfront money on home care and mental health so the provinces and territories get their money faster, and that’s the final offer. The provinces and territories will complain, stamp their feet, and then take the money and run.

These are the sick politics of health care. Somewhere, Stephen Harper must be smiling.

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