An exercise in utility: the politics of health care transfer penalties and the Trudeau Liberals

Health is a tricky policy area. It falls under provincial jurisdiction constitutionally but has historically been jointly administered with the federal government. The latter’s main role is mostly to help fund healthcare with large sums of cash sent to provinces through the Canada Health Transfer (CHT), as outlined under the Canada Health Act (CHA). The CHA specifies the conditions and criteria with the provincial and territorial governments must conform to in order to receive CHT funds.

But the extent of federal authority in health care doesn’t stop once it hands over the funds. The federal government has the ability to deduct funds from a province’s CHT if the province is suspected of not complying with the CHA’s provision regarding universality.

To date the amount deducted by the federal government has been $10.1 million or 0.003% of all transfers since 2003. This in spite of large user fees in Quebec, and numerous documented violations in Ontario. The haphazard application of deductions has been noted by health professionals, like the Canadian Doctors for Medicare, who declared that the federal government was playing “hot potato” with CHT deductions. The former Conservative government was particularly reluctant to become involved in health delivery by being proactive in penalizing provinces that infringed on the CHA. Under the previous government, the power to deduct funds from the CHT was an enforcement mechanism that had a reasonable amount of bark, but very little bite.

In contrast, the current Liberal government has taken a more aggressive approach to CHT deductions. In October 2016, the Quebec government was handed a letter by Health Minister Jane Philpott informing the province that it faced CHT deductions if its user fee practices continued, which saw the Quebec government shortly afterward announce its decision to abandon all user fees by 2017. In December 2016, the Saskatchewan government also received notice for deductions due to its MRI user fees.

This approach squared with the Liberals commitment to take a more active role in health care, as well as shoring up the Liberal government’s negotiating position during CHT negotiations that began around the same time as the deduction notices were issued. Moreover, the Liberals strong-arm tactics with Quebec and Saskatchewan seems consistent with their strategy during CHT negotiations where they once again broke from the recent tradition of unconditional transfers by demanding that a portion of the CHT be earmarked specifically for palliative care and mental health. One could almost read all of this as the Liberals cleverly using the threat of CHT deductions to support their very well-defined political agenda on health care.

The important question to ask is whether we are OK with the use of these tactics.

On one hand, it’s tough to argue against the federal government taking a more active role in defining national healthcare standards, especially if it means providing funds to cash-strapped provinces. Provinces have consistently shouldered much of the burden in health care delivery, so federal support that comes with strings attached could signal the beginning of a more robust health system. Federal involvement has a proven history of nation-building through leadership in policy areas like health and the economy. If it means that less-than-savoury negotiating tactics are pursued to achieve this end, then arguably it’s a pill worth swallowing. There is no indication of whether the Liberals will actually follow through on the deductions they threatened, so this may ultimately be a case of harmless posturing.

Alternatively, the use of CHT deductions in such a politicized way could set a precedent for its use as a purely political tool, undermining its credibility as a valid enforcement mechanism in such a large and important policy sphere. If there is unequal treatment for provinces in enforcing CHT deductions and it is used purely as a bargaining chip in negotiations, it may breed resentment, which is rarely productive for intergovernmental relations.

So what do you think? Should the federal government use all the tools at its disposal to pursue its health care agenda, even if they risk upsetting the provinces and undermine the credibility of CHT deductions? Or does fair and proper enforcement of health standards matter more than short-term political gains? Post your thoughts below.

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About the author: Andrew Seto is completing his second year at Carleton University in the Masters of Public Policy and Administration program. He is Editor-in-Chief of the Carleton Perspectives on Public Policy Journal. This year he was awarded the C. Mervyn Beckstead Scholarship in Public Administration.