The Canada Health Transfer disconnect

Whereas the Council’s 2012 report dealt both with the change in the CHT escalator and the impact of various options for the transition from equalized to equal per capita funding, this paper takes the transition to equal per capita funding as a fait accompli and focuses exclusively on the impact of the change in the funding escalator formula. [...] While the extremely limited role the federal government played in the design and operation of the system suited the constitutional interests of the provinces, the clear separation of funding and delivery had the effect of insulating the federal government from the consequences of changes in federal funding. [...] In the 1970s, in the wake of the first oil crisis; in the 1980s, in the wake of the 1981 recession; and again in the 1990s successive federal governments looked to medicare funding for program spending “savings” to address fiscal problems. [...] Impact estimates – Council of the Federation and the Parliamentary Budget Offcer Both the Parliamentary Budget Offcer and the Council of the Federation have prepared estimates of the impact of the change on Canada’s fiscal arrangements and on the relative fiscal health of the provinces and territories on one hand and the federal government on the other. [...] Any estimate of the relative impact of the change is highly sensitive to the time period over which the impact is measured and the underlying assumptions with respect to economic growth.iv The assumption underlying the projections of both the PBO and the Council of the Federation is for nominal economic growth of 3.9% over the 2014-2025 period.