Health care ignited a debate for Barack Obama that risks derailing his ambitious policy agenda – if not his presidency. Prime Minister Stephen Harper, in contrast, has successfully hit the snooze button on the health file throughout his four years in power.
This is about to change.
On March 4, the Harper government is set to deliver a federal budget that aims to wrestle big deficits back to zero by about 2015 by scaling back spending. But along the way, there's a ticking bomb – the expiry of agreements governing three major transfers to the provinces that cover social programs, equalization and health care and cost Ottawa about $54-billion annually.
How Mr. Harper manages these arrangements – particularly on health, whose bite out of provincial budgets is huge and ever-growing – is shaping up as his greatest challenge.
“I think [health care]'s the No. 1 issue,” said Don Drummond, TD Bank's chief economist and a former senior official in the federal Finance Department. “It's the Pac-Man. It's eating everything else in people's budgets.”
Consider the numbers. In 1998, when governments starting increasing health spending again after a couple of years of restraint, the annual public health tab was $59.2-billion a year. It's now $128.6-billion.
Health-care costs are also growing as a percentage of the Canadian economy. They hovered around 7 per cent of gross domestic product in the 1970s, rose to 10.5 per cent in 2007 and are forecast to hit 11.9 per cent of GDP for 2009.
The fact that Mr. Harper has largely been able to sidestep the health-care policy quagmire is due to two large federal-provincial deals – one by the Liberals and one by the Conservatives.
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“It's the end of the discussion. C'est fini ,” Mr. Flaherty declared.
Not quite. Both deals expire in the fiscal year starting April 1, 2013 – right about when Ottawa promises to be on the verge of a balanced budget.
Mr. Flaherty has said he will not cut transfers to the provinces to balance the books, but what does that mean exactly? The 10-year health deal projects continued growth of about 6 per cent annually until 2013-2014. What rate of growth should the provinces expect after 2014?
John Abbott, CEO of the Health Council of Canada, says provinces need answers long before the deals expire. He predicts Ottawa will scale back the 6-per-cent yearly increases once the health accord ends and governments need to find ways to save money.
“Right now, provincial and territorial spending is growing beyond 6 per cent,” he said. “Is this sustainable? If you look at certain provinces, it is definitely not sustainable.”
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Surging cost of health care poised to play a role in Harper's spring budget - The Globe and Mail