Reforming Canadian Healthcare

The provinces are responsible for administering and delivering healthcare in Canada and while provincial jurisdiction may appear odd, it was not of major concern when the Fathers of Confederation ratified the British North America Act in 1867. Following several years of debate, however, the Judicial Committee of the Privy Council declared the provinces responsible for administering and provisioning healthcare. The federal government is responsible for public health, in addition to providing healthcare to certain groups, including First Nations, Inuit, military personnel, and federal inmates. It does provide funding to the provinces via the Canada Health Transfer, which is supposed to assist them with costs and ensure some degree of equivalency between provincial healthcare systems.

Former Saskatchewan Premier Tommy Douglas, widely recognized to be the “Father of Medicare,” fought ardently for the implementation of a publicly funded healthcare system. In 1962, one year after his departure from provincial politics, Saskatchewan began providing public healthcare and, shortly thereafter, so too did Alberta. Former Prime Minister John Diefenbaker, in 1958, announced the federal government would fund 50 per cent of provincial healthcare, and eight years later, then Prime Minister Lester B. Pearson ratified this motion.

As a result, Ottawa’s role in healthcare funding is controversial and has been a major policy issue in Canada. Indeed, without federal funding, there would be significant disparities among the provinces in terms of quality, yet, despite these concerns, healthcare innovation is provincial jurisdiction.

The debate over federal funding remerged following the expiration of the Canada Health Accord, established in 2004 under Paul Martin’s tenure as Prime Minister of Canada. It guaranteed six per cent annual increases in funding for healthcare and was supposed to help with deficiencies, such as high wait times. Stephen Harper’s government recently committed to a six per cent increase until 2017, after which the government will fund based on inflation-adjusted economic growth (although the level of funding will not fall below 3 per cent). This development has prompted critics to demand the government return to guaranteeing the six per cent increase, arguing that underfunding issues could worsen the system, and more worrying, allow new issues to emerge.

However, despite funding increases, very little has changed in terms of quality. Kelly McParland of the National Post, for instance, notes the lack of progress in reducing wait times. Moreover, citing the Health Council, he noted that homecare services for seniors are inadequate, primary care is insufficient, and prescription drugs are unaffordable. For example, as reported by the National Post, the federal government has given $41 billion in extra healthcare funding since 2004, yet in 2010 Canada ranked last of 11 countries in wait times.

McParland is not the sole critic. Indeed, there are several reports revealing the shortcomings of Canada’s healthcare system given the amount of money spent on it. Funding, therefore, is not necessarily the issue. There needs to be real reform of the Canadian healthcare system: Ottawa should retain its role, however, the provinces must consider new healthcare models as a means of strengthening their programs. Perhaps the first step ought to be reforming the Canada Health Act to be less restrictive in terms of delivery requirements. The Act requires that healthcare be publicly administered, greatly restricting any partnership with private entities. France, on the other hand, embraces a two-tier system, which typically performs highly in comparison to healthcare systems administered by other rich, democratic countries, in terms of both cost and outcome.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

Shifting responsibility: Equalization and government spending

Canada’s equalization program, through which the federal government mandates the richer provinces to subsidize their poorer equals, is central to Canadian federalism. Whether the provinces receive or contribute to the scheme determines their “have” or  “have not” status, and political battles over transfers seldom end peacefully.

Although it is understandable that the beneficiary provinces defend the equalization program, taking a closer look reveals the current scheme reduces fiscal accountability in recipient provinces, which compared to the contributing provinces, have a generally bloated public sector (in addition to other perks, such as lower tuition averages and higher teacher-student ratios).

Equalization ensures that poorer provinces are able to provide quality public services to their residents by assessing each province’s ability to pay for a basket of services and using this information to determine whether they will receive from, or contribute to, the program.

An oddity of the scheme is that overlap exists between equalization recipients and net contributors. In 2012, for example, Ontario received roughly $3 billion in transfer payments, while its taxpayers paid over $6 billion toward the program. Even recipients “contribute” to their own transfers: last year, Quebec paid nearly $3 billion toward equalization and took in over $7 billion. In fact, because Ontario receives equalization payments, most of the funds transferred by the program come from its recipients.

The incentive structure of Canada’s equalization program discourages accountability, since the provinces can treat the money they receive from equalization as though it came from thin air, despite the fact that their residents contributed to the scheme via taxation. Furthermore, the provinces are not limited in spending this money and, in some cases such as Nova Scotia’s, use the funds to pay the interest on provincial debt.

The effect is that public sector spending increases in recipient provinces, who justify their spending habits on the premise that “someone else is covering the cost.” Consequently, recipient provinces spend more per capita than the “creditor” provinces. For instance, the net beneficiaries of equalization–Atlantic Canada, Quebec, and Manitoba–there are, on average, more registered nurses, regulated childcare spaces, and residential care beds per resident, as well as lower tuition rates at post-secondary institutions.

Studies published by both the Fraser Institute and the Frontier Centre for Public Policy demonstrate the relationship between equalization and public sector outcomes. In Super-sized Fiscal Federalism, for instance, Mark Milke shows how the recipient provinces outperform the creditor provinces on thirteen of nineteen indicators of public goods provision, whereas the net contributors provided more services in only three categories.  One of these areas, for example, is the number of physicians per capita: in 2011, four of the six provinces receiving payments had more doctors proportional to their populations than Alberta, the biggest giver.

Therefore, although equalization is intended to ensure comparable public services across provincial borders, it actually results in significantly better-funded services in poorer provinces with lower costs.

This inverse relationship between public expenditures and provincial wealth seem to be the result of equalization and its effect on provincial spending incentives. Although the idea of providing comparable levels of public services is noble, Canada’s experience illustrates how equalization transfers preclude accountability. In essence, the recipient provinces have weaker incentives to take responsibility for their spending and, instead, encourage public sector growth that may very well be unsustainable should payments cease.

Michael Sullivan is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

Emphasizing the Importance of Senate Reform

The Senate expense scandal has placed the upper chamber in the political spotlight, which it rarely occupies. Unfortunately, however, controversy regarding improper expense claims, although deserving of full attention, overshadows an important discussion Canada needs to have: Senate reform.

Conceived with the noblest of intentions, the Canadian Senate serves as a forum for ‘sober second thought’ removed from the popular interests that dominate the House of Commons. At present, however, partisanship riddles the upper-chamber, which has become ineffective and unaccountable. This, in conjunction with the current controversies, has led many observers to rally for its abolition.

Abolishing the upper-chamber is a poor alternative that would damage intrastate federalism and remove balanced representation from the Canadian federation. Should the Senate operate as an elected chamber, however, it could continue serving a vital role.

Intrastate federalism is the idea that provinces, cantons, or regions should receive formal representation at the federal level. Similarly, balanced representation is the notion that representation should be equal among all provinces. Most federations, such as the United States and Australia, employ some form of intrastate federalism and balanced representation. Canada, for instance, achieves intrastate federalism and balanced representation through the Senate such that each ‘region’ has twenty-four seats.

In the Canadian Senate, lesser-populated provinces receive a greater distribution of seats to balance their representative against provinces with larger populations and, thus, greater representation in the House of Common, such as Ontario and Quebec. An elected Senate, therefore, is particularly important for Atlantic Canada, which possesses 30/105 seats (28.5 per cent of the Senate representing 6.95 per cent of the country’s population).

The Senate’s current structure, however, does not facilitate balanced representation, as it lacks legitimacy.

If each province’s electorate, for instance, chose Senators or if the provincial legislature appointed them, the upper-chamber would achieve greater legitimacy. These reforms would re-establish Senators as representatives of the provinces and their constituents, rather than partisan Prime Ministerial appointments. With this newfound legitimacy, the Senate could perform legislative functions with real merit, as opposed to acting as a ‘rubber stamp,’ which it currently does.

There are, however, two common criticisms of an elected Senate.

The first is that an elected Senate, such as the United States’ Senate, is more likely to create gridlock in Parliament. Nevertheless, the Senate’s constitutional function is to provide a check on majority governments in the House of Commons. This could also change the nature of debate within the House of Commons, since a truly representative Senate would compel Members of Parliament evaluate legislation with additional rigor before submitting to the upper-chamber.

The second criticism is that constitutional reform is difficult to achieve. While this is true, the Senate’s current state is unacceptable and inaction will only perpetuate the status-quo.

Ultimately, the Senate continues to serve an important role in the Canadian legislative process. The Canadian political system depends on its ability to achieve intrastate federalism and balanced representation, both of which would suffer were it abolished. Reforming the Senate, as a result, is a conversation Canadians need desperately to have, regardless of its difficulties.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute