Re-commit to Public Financing of Canada’s Health Care System

The CFNU’s goal is to move toward a federal contribution of 25% of public health care budgets.

Impact of December 2011 health financing formula

The federal government’s decision to move from equalized funding to equal per capita funding, along with the change to eliminate the annual 6% escalator to a formula based on the rate of growth of Canada’s GDP, will result in substantial reduction in federal funding.

Beginning in 2017, all provinces and territories will begin to experience a substantial widening between health care costs and the value of transfer. The Council of the Federation estimated that the decision taken by the Federal government in December 2011 would reduce health transfers to the provinces and territories by $43.5 billion from 2014-2015 to 2023-2024.

However, it should be noted that, based on the expected low rate of labour force growth and Canada’s recent productivity performance, the 3.9% growth assumption may be overly optimistic. It is more likely to be in the realm of 3.3%. It is our estimation that when the new funding formula is implemented in 2017, provinces and territories will see an annual shortfall of approximately $10.7 billion.

By 2024, the Federal share of provincial/territorial health care spending will have dropped from the current 22% to less than 19% of GDP. Let’s remember the time when health care suffered its most dramatic cuts in 1996, when federal funding for health care was between 10 to 11% of provincial health care spending.

Impact of demographic shifts on allocations among provinces and territories

The new CHT formula does not take into account the additional pressures placed on health care costs due to an aging population. Nor does it accommodate for differences in the rate of population growth or in age and gender composition of the populations – factors that will drive differences in health care costs among provinces.

We estimate that overall health care costs in Canada will increase by 5.3% annually between 2017-2018 and 2024-2025, costs that will greatly exceed the rate of growth of federal transfers.

Impact of new funding arrangement

Funding that is not available to support health care translates into service reductions. The change in funding will affect health services critical for an aging population.

In July 2015, the Canadian Federation of Nurses Unions published a paper prepared by Hugh McKenzie titled, “The Canada Health Transfer Disconnect: An Aging Population, Rising Health Care Costs and a Shrinking Federal Role in Funding.” This report provides an in depth analysis and demonstrates how the loss of federal transfers will affect four important areas: home care, community health care centres, long-term care (LTC), and nursing care in each province.

The announced cuts to health care transfer rates must be repealed and replaced with a funding formula that takes into account the costs of delivering health care and requires accountability on the part of all.

Fast Facts:

  1. Health care costs are estimated to increase by 5.3% annually between 2017-2018 and 2024-2025
  2. We estimate that provinces and territories will see an annual shortfall of approximately $10.7 billion after cuts are implemented in 2017