Holdout provinces losing leverage on federal health deal

Opinion

Hey there, time traveller!
This article was published 23/01/2017 (3174 days ago), so information in it may no longer be current.

And then there were six.

The united front of provinces and territories formed last year to fight Ottawa over health-care funding is eroding before our eyes. Last week, Saskatchewan agreed to sign on to a deal that provides 3.5 per cent in annual funding increases and additional money targeted specifically to mental health and home care. The provinces had been seeking an annual funding increase of 5.2 per cent.

Now four provinces and three territories have agreed to the federal plan. That leaves just six remaining provinces — Manitoba, British Columbia, Alberta, Ontario, Quebec, and Prince Edward Island — holding out hope they can get a sweeter deal.

The fact is that Manitoba and the remaining holdout provinces appear to have built their campaign against Ottawa on a sand bar. And every time the tide comes in, it seems to wash away another member of the “united” front.

The remaining provinces are going to have to reach some sort of agreement very soon. Certainly, something will have to give before they need to set their budgets for 2017-18, which will be in March or April. If they have not signed by that time, the holdout provinces will get a 3.5 per cent increase in basic health transfers, but won’t share in the ancillary funding for home care and mental-health services. That will mean a loss of hundreds of millions of additional dollars for each holdout province.

For example, Manitoba expects to lose $38 million from health transfers in the next fiscal year when the escalator is set at 3.5 per cent. That would be offset, however, by an estimated $40 million in additional funding for mental health and home care.

Over the next decade, Manitoba estimates it will lose increasingly more each year, for a total of $2.2 billion in unrealized federal transfers, an amount that would be offset only partially by the $400 million it will receive in ancillary funding.

All of which leads to an important question: what is a smaller province such as Manitoba going to do to dig itself out of this predicament?

Premier Brian Pallister was not wrong to hold out on the health-funding deal offered by Ottawa. He doubled down on that when he also refused to sign a federal carbon-tax scheme being orchestrated by the Trudeau Liberals. Pallister’s sense of outrage was appropriate, given the circumstances.

In its decision to cut the health escalator from six per cent annually to just 3.5 per cent, the Trudeau Liberals are essentially adopting the strategy devised by the former Conservative government. It’s a strategy the Liberals denounced in opposition and promised to change during the federal election campaign.

The premiers had every reason to believe there were going to get a new deal, one that reflected the real year-over-year increases in the costs of providing health care. Instead, what they got was the same cold Tory gruel, repackaged by a Liberal government that didn’t have the guts to admit it was abandoning a core campaign pledge.

However, in this instance, occupying the moral high ground won’t pay the bills. The standoff strategy Pallister has employed to this point is rapidly falling apart. Saskatchewan Premier Brad Wall, Pallister’s chief ally in the New West Partnership internal trade pact, may have achieved a sweet deal for his own province, but he has profoundly weakened the position of the remaining holdouts.

Of course, Wall didn’t roll over for nothing. Saskatchewan got a reprieve from Ottawa on sanctions it faced for allowing citizens to pay for private MRIs. The deal in place requires MRI clinics to provide one free scan for every one purchased privately. Ottawa had threatened to cut Saskatchewan’s health transfer if it did not end the program; now, Wall has a year to figure out a way of fitting his two-for-one MRI scheme into the provisions of the Canada Health Act.

It’s not clear right now that Manitoba has a similar issue that could be used as a bargaining chip with Ottawa. As a result, it will be much harder for Pallister to create a face-saving scenario such as Saskatchewan’s.

To this point, Manitoba has fought a good and noble fight against an unfair federal strategy on health transfers. However, the time is fast approaching for Pallister to propose an alternate solution. Undoubtedly, negotiations are going on behind the scenes. It wouldn’t take a lot of additional money to turn this into a win-win scenario for the holdouts.

An extra half-point or so added to the escalator, which still gives Ottawa relief from the six-point annual bump it was paying before, would provide the holdout provinces with more cash and an opportunity to save face back home.

Of course, if Ottawa holds the line and picks off the holdout provinces one by one, then premiers such as Pallister will be left with only three things: a visible black eye, a compromised relationship with Ottawa, and a widening fiscal gap on health care.

For those of you scoring at home, that’s a “lose-lose-lose” scenario.

dan.lett@freepress.mb.ca