Ottawa warned of consequences of shrinking health transfers

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Ottawa is being warned that front-line health services for Canadians will be on the chopping block unless the federal government backs away from plans to shrink the size of yearly increases for health transfers.

In the run-up to a key meeting Monday in Victoria between federal Finance Minister Jim Flaherty and his provincial and territorial peers, Ottawa is provoking swift reaction from several provincial capitals for signalling a desire to move away from annual 6-per-cent increases for health transfers.

The provision has been in place since 2004, but the Conservative government is letting the provinces know that increases of that size should no longer be expected beyond the 2015-16 fiscal year.

Ottawa has been warned repeatedly by outside observers – including the Parliamentary Budget Officer – that the rise of federal government spending in recent years is unsustainable over the long term.

But the provinces also face health-care costs that are eating up an ever-growing portion of their own budgets in spite of health transfers from Ottawa that have grown by 6 per cent a year since 2004.

Pressed in the House of Commons by the NDP on Tuesday, federal Health Minister Leona Aglukkaq would not commit to keeping health transfers at existing growth rates.

"We will continue to increase funding for health care in a way that is balanced and sustainable," she said, noting federal health transfers have grown from $19-billion to $27-billion a year under the Conservatives. "As the Minister of Health, one of my goals is to make sure that there is more accountability in the way that money is being spent."

But Ontario, Quebec and the Atlantic provinces are arguing that Ottawa has not addressed the fact that these federal transfers cover a shrinking percentage of provincial health-care costs.

"There is no question that [scaling back the rate of growth]will have an impact, and it will have an impact that people will notice," Ontario Health Minister Deb Matthews told reporters. "People who need health care are counting on the federal government to live up their responsibility."

While federal Conservatives indicated during the 2011 election campaign that they were committing to 6-per-cent increases only until 2015-16, Ontario government officials pointed to an interview Mr. Flaherty gave to the CBC during the campaign.

"We will keep it at 6 per cent for whatever the duration of the agreement is," Mr. Flaherty said last April, adding that the length of the new accord will be negotiated with the provinces. "It could be two years, five years, whatever."

Christine Elliott, the deputy leader of the Ontario Progressive Conservatives who is married to Mr. Flaherty, said the reality is the federal government cannot afford to continue with the 6-per-cent increases.

"It's not unreasonable to expect [transfer payments for health care]should be tied to GDP growth," Ms. Elliott told reporters.

The premiers of Canada's four Atlantic provinces held a news conference this month to call on Ottawa to cover 25 per cent of all provincial health costs. They argued that Ottawa currently foots only 20 per cent of the bill while costs rise in Eastern Canada due to a growing population of older residents.

Nova Scotia Premier Darrell Dexter told The Globe and Mail on Tuesday that he wasn't going to "take all that seriously the pre-positioning" done by Ottawa in advance of negotiations. But he said the federal government should be upfront if it intends fundamentally to change its approach to health-care funding.

He noted that the Romanow Commission on health care had called for Ottawa to pick up 25 per cent of health costs.

In subsequent comments to reporters, the Nova Scotia leader noted that health-care funding must be discussed in the context of the many other federal transfers that need to be renewed.

"It doesn't really matter where I lose [federal money] it all comes out of the budget," Mr. Dexter said.

Federal Conservatives appear to have an ally in B.C. Health Minister Mike de Jong. In an interview, he said he shares the federal government's alarm about the rate of growth in health-care spending, but that offloading will not solve the problem.

"I think everyone understands this is the biggest single fiscal pressure the provinces, the federal government and the territories face," he said.

Saskatchewan Premier Brad Wall, speaking on behalf of Alberta Premier Alison Redford and B.C. Premier Christy Clark, said they want to maintain the 6-per-cent increase. There might be an opportunity to use GDP as a measure, he said, but wondered if there was another way to calculate health-care transfer payments to the provinces that could be connected to innovation. Ms. Redford is hosting a New West Partnership meeting Tuesday.

"The New West Partnership is determined to go into these meetings, not only discussing percentages and money, but the focus has to be about better health care," Mr. Wall said.

With reports from Justine Hunter in Victoria, Dawn Walton in Calgary, Oliver Moore in Halifax and Rhéal Séguin in Quebec

Pension expert rallies support for CPP

A former chief actuary of the Canada Pension Plan is urging federal and provincial finance ministers to revive their efforts to expand the government pension as the best way to boost retirement savings for Canadians.

Bernard Dussault, a pension consultant who was the CPP's chief actuary from 1992-1998, is among six pension experts that issued a call in support of CPP expansion Tuesday along with the Canadian Labour Congress.

Reform of the CPP is on the official agenda for the meeting, as is a new privately-run option supported by Ottawa and the provinces called a Pooled Registered Pension Plan (PRPP).

But Mr. Dussault says another voluntary savings option simply won't work.

"This [PRPP]is not provoking much enthusiasm," he said in an interview. "Something more has to be done."

- Bill Curry