Ontario's government has expressed strong opposition to the Carney government's plan to slow the growth of health-care transfers, insisting the minimum annual growth rate should remain at five percent. However, according to analysts from the Fraser Institute, Canadians should be skeptical of provinces demanding more federal funding. In a controversial stance, they argue the federal government should not just slow transfer growth but actually reduce health-care transfers to provinces.
The Current Transfer Framework
According to the recent federal budget, health-care transfers to provinces will continue growing at five percent annually until the 2028-29 fiscal year. After this period, when current funding agreements expire, the growth rate is scheduled to drop to four percent or potentially lower. This calculation excludes additional support for hospital construction through the newly established federal Health Infrastructure Fund, which allocates $5 billion over three years beginning next fiscal year.
Why Reduction Makes Sense
The analysts present several compelling arguments for reducing rather than merely slowing the growth of health-care transfers. First, they note that additional federal funding will not resolve Canada's fundamental health-care challenges. Despite Canada's medicare system ranking among the most expensive universal health systems in the developed world, Canadians experience some of the poorest access to physicians, medical technologies, and hospital beds, along with the longest waiting times for medical care.
Second, the federal government faces serious financial constraints. Federal borrowing through 2029-30 is projected to reach $321.7 billion—more than double what the previous Trudeau government had originally planned for those five fiscal years. Consequently, annual interest payments are expected to increase from a projected $55.6 billion to $76.1 billion over the same period. At $54.7 billion this fiscal year, interest payments already exceed health transfers to provinces, representing taxpayer dollars that cannot be allocated to programs and services.
A Precedent for Success
The analysts point to a historical precedent that supports their position. In 1995, the Chrétien government not only reduced federal transfers but also restructured how those transfers were delivered to give provinces greater flexibility in addressing their unique needs. By moving toward smaller, less prescriptive grants for welfare programs, the federal government provided provinces with both the incentive to control costs and the freedom to reform programs.
The result was a period of significant policy innovation that reduced both welfare dependency and government spending on social assistance. The same approach could be applied to health care today, the analysts suggest.
The Path Forward
By freeing provinces to reform their health-care systems and providing stronger financial incentives for innovation, the federal government could help improve health care while simultaneously restoring its own fiscal health. Provinces might look to emulate countries that deliver more and better universal health care for the same or fewer dollars.
Canada requires a more ambitious approach to health-care reform, one where Ottawa redefines its relationship with provinces and provinces recommit to improving health care for patients and families. The analysts conclude that governments make better choices when they must bear the full costs of their decisions, suggesting that reduced federal involvement might ultimately spur the innovation Canada's health-care system desperately needs.
The commentary comes from Nadeem Esmail and Grady Munro, analysts at the Fraser Institute, who argue that by freeing provinces to reform their health-care systems, the federal government will help improve health care and restore its own financial stability.
