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Livio Di Matteo: Why incentives-based federalism should be the future of federal health transfers


The recent federal and provincial health ministers’ meeting in Vancouver ended without an agreement on increasing health transfers, and negotiations appear to have broken down and taken an acrimonious turn. The provinces have been asking for increases to the Canada Health Transfer that would raise the federal share of provincial health spending from 22 percent to 35 percent.  Given that for 2022-23 the Canada Health Transfer to the provinces is expected to be 45.2 billion dollars, such an increase would amount to an additional cash transfer of over 25 billion dollars. This is a well-travelled road and the federal response to such requests usually begins with the mantra that if one includes the value of tax point transfers for health to the provinces brought in decades ago, then the federal share of provincial health spending is already at 35 percent—even though everyone knows the value of those tax points were incorporated into provincial own source revenues years ago.

However, the real bone of contention appears to be the federal insistence that any increase to the Canada Health Transfer be accompanied by the condition that a set of common national indicators be developed and applied to allow for monitoring of outcomes, and one expects measurement of whether the federal government is getting value for money and ultimately political credit. Predictably, the provinces, and Quebec particularly, have responded that this is an intrusion in their affairs given that they already have their own indicators. Given that health is a provincial jurisdiction, having the federal government set conditions to which the funding is tied is seen as an intrusion. 

Historically, the provinces have displayed an affinity for the federation from Star Trek; that is, a federal government that observes but does not intervene in provincial affairs. Conditions on funding are considered a form of intervention. Though it is curious that the provinces do not display a similar attitude when it comes to their municipal grants.

In the end, the federal end of the current round of negotiations is being led by a health minister trained as an economist. As Minister Duclos knows, economics is ultimately about how people respond to incentives and simply handing over money without any conditions creates a perverse set of incentives. Simply handing over more cash to a set of provincial health systems in a country that has one of the highest health spending-to-GDP ratios in the developed world means business as usual. The provinces can take the money and not necessarily fix health care and then still blame the federal government for insufficient funds.

After all, the enhanced transfers of the 2004 Health Accord with its 6 percent annual increase escalator that lasted until 2017 was supposed to buy fundamental reforms and transformative change. And yet, twenty years later here we are facing similar issues of physician and nurse shortages, crowded ERs, and lack of access to timely care. The pandemic and its aftermath have only worsened the situation but are not the cause.

The federal government is not going to simply hand over the cash. It realizes that health is ultimately a provincial responsibility and therefore any political fallout from increased wait times and lack of access will land at the feet of the provinces. The premiers can blame Ottawa all they want for the current crisis and claim that increasing transfers are needed to solve the health systems problems, but the public knows that health is a provincial responsibility given they provide provincial health cards when they seek medical services.

And Ottawa does have a point that if the provinces can send assorted cheques to their residents and run surpluses then they should be able to find the money for health care. Ontario is a case in point with rebates for vehicle registrations and a two-billion-dollar surplus. Then there is Quebec, which is providing cash payments of up to $600 to help Quebecers fight inflation. However, Ottawa is being somewhat disingenuous on this point given that they have provided more than their fair share of rebates and monetary enhancements to Canadians.

Is there a way ahead? Well, there is nothing preventing the federal government from coming up with its own indicators based on available provincial data and creating a new grant that would complement the existing Canada Health Transfer, which would remain operating as it has. Let’s call the new grant the Canadian Health Enhancement Transfer, or if we are feeling more whimsical, CHTPlus, and make it available to those provinces that are willing to comply with its terms. It could set the measurement indicators and set priorities for the money. We could add a new term to the Canadian federalism lexicon: incentives-based federalism. 

CHTPlus could for example set a target of so many physicians or nurses or hospital beds per 100,000 population or target increases in those indicators. It can tie the funding to increases in surgeries for specific procedures or reductions in wait times. It can base some of the enhanced funding on population indicators like share of population over age 65. In short, it can construct a formula and tie the amounts of a new block grant to the formula and tie future amounts and increases to fulfillment of the targets. Provinces will have an incentive to enact change and exhibit improvements and they can decide how to make those changes. 

The existing CHT would continue. This would be new money tied to improved outcomes. Provinces that feel they are being subjected to domineering federalism can decline the new grant and find their own way ahead. And, of course, the federal government needs to resist pressure by standing firm and not allowing provinces to lobby and opt-out from the conditions and still get the cash as a special case. Will this work? We won’t know until it has been tried. However, unless the federal government caves in and hands over more cash with few or no strings attached, this is probably the only way forward. 

Adam Owen: Accepting more immigrants than we can handle is not actually compassion


Immigration Minister Sean Fraser recently announced a plan to welcome half a million new permanent residents annually to Canada by 2025. 

A laudable goal, and one that plays to Canadians’ positive attitudes towards newcomers and the diversity that has become a core part of our identity over the last sixty years.

A recent Environics survey of 2000 Canadians showed 69 percent support for current immigration records; cynically you might argue this is aided by humanitarian tales of Afghan and Ukrainian refugees and the positive press generally around immigration, but it’s likely more reflective of national pride in something Canada has historically done better than our peers. 

Beyond tolerance, we take delight in the cultural variety and economic benefits that accompany every new Canadian. It is a part of every elementary school student’s curriculum and an article of faith for many Canadians.

But while the minister’s plans are worthy of praise, that faith could be jeopardized by the troubling reality of capacity gaps in our ability to properly welcome new immigration. 

In too many areas, Canadian institutions and economies fall short of being able to effectively empower new Canadians, ultimately disadvantaging them and those who are already here. 

Consider the backlog of immigration files our government already has on its hands. 

Of the 2.6 million total applications for temporary or permanent residence or for citizenship in backlog, nearly 1.5 million fall outside the government’s own service standards.

Of the 40,000 refugees Ottawa committed to resettling in August of 2021, fewer than 23,000 had arrived by this past October. Procedural and bureaucratic barriers have left key allies hiding in fear—victims of an all too Canadian prioritization of process over results.

And then there is the deficit of our intergovernmental relations, the most glaring example being Quebec’s insistence on limiting its own immigration and being as unwelcoming as possible to specific communities. Beyond Quebec, a rise in provincial sovereignty movements across the prairies weakens the federal government’s ability to direct national immigration with a centralized strategy. In a sluggish economy with little growth, the new Canadian who could have been a tool could become a crutch if dropped arbitrarily, absent of a bigger picture. 

The list goes on. Our inability to recognize foreign credentials and work experience. A lack of accessible family doctors. And let’s hope the children of these new Canadians don’t get a sore throat or runny nose.

But the most pressing hurdle is our country’s housing gap. According to a Scotiabank report released in January, Canada’s population-adjusted housing stock is the lowest in the G7.

Provincial and federal governments seem to appreciate the severity of the issue; each making semi-regular announcements on policies to get more housing built. But whether we have the labour and materials needed to build sufficient housing to service our current needs is an open question—even before accounting for an additional million Canadians every two years.

Taken together, a picture emerges that’s difficult to stomach: eager newcomers being dropped into communities that can’t support them, by bureaucrats so behind schedule and without the time or apparatus to consult with provincial partners, that foresight and planning is an afterthought.

Imagine the disappointment they will feel, navigating that process. And imagine, too, the potential for our sunny disposition to newcomers to grow into something less welcoming. 

As more Canadians see their housing options dry up, it will be tempting for elements of both political fringes to position immigration as a scapegoat. With gaps in our ability to set immigrants up for success, the government would make it even easier for that message to resonate with disaffected Canadians.

Of course, one silver lining of rapid immigration increases in the near term is it will give us the opportunity to identify and fix these problems before the challenges that face us in the decades ahead. Even the most conservative accepted forecasts for climate change point to mass waves of migration from extreme weather and resulting conflicts. 

Large parts of Canada, blessed as we are with a geography that will be insulated from climate change’s worst effects, will almost certainly see much of that migration. Our ability and willingness to accept the world won’t determine whether they will come (they will), but it will determine what kind of a country we will be; whether we are the beacon our teachers taught us we were, or something worse.

This government’s intent to increase immigration is a fulfillment of one of the best myths we have about ourselves, but to stay true to that ideal, this government must uncharacteristically go beyond the announcement and fix the creaking institutions and economies that immigrants deserve to be welcomed with. 

Failure to do so isn’t fair to tomorrow’s Canadians or today’s.