Surplus Angst – Soaring Revenues and Health Care Demands

It is a strange phenomenon when strong fiscal management can be a political liability. But here we are. This is a unique day and age. The Canadian healthcare system can be described as having collapsed; doctors, nurses and allied health workers are trudging through the rubble, providing care in unforgiving circumstances.

Overview

Many factors contribute to this: an aging population, recruitment and retention woes, and a model that needs re-adjustment. Technological advancements with corresponding cost increases also factor in.

Therefore, when citizens see surplus budgets, or at a minimum, greatly reduced deficits, a common refrain is to spend the extra dollars on healthcare. That is understandable. There have been too many accounts of individuals in harrowing circumstances in overcrowded emergency rooms, waiting to be off-loaded from an ambulance, or an ambulance arriving woefully late, if at all. The immediate response is to call for more spending.

But provincial governments are continually spending more on health, year over year. Without fail. But money alone will not fix what ails the system.

Necessity is causing new approaches to take hold, which is encouraging. From increased utilization of nurse practitioners, physician assistants, virtual appointments where needed, non-urgent care venues to alleviate ER pressures, there is cause for optimism. Ensuring the labour supply does remain a Herculean challenge.

At the same time, as provinces try to manage expectations on the amount of new spending available, there can be public confusion about why Premiers and Health Ministers are calling for a greater federal contribution, if money alone is not the solution.

In a report entitled, National Healthcare Expenditure Trends, the Canadian Institute for Health Information noted, “Total health expenditure in Canada is expected to rise by 0.8% in 2022, following high growth of 13.2% in 2020 and 7.6% in 2021. Prior to the pandemic, from 2015 to 2019, growth in health spending averaged 4% per year.” (National health expenditure trends | CIHI)

 

Spending since COVID-19

The pandemic caused an inordinate spike in spending, and is an outlier, but even without COVID-19, expenditures would still have risen.

Let us first examine the rationale behind the call for more federal dollars. Healthcare is a provincial responsibility. But nearly half of every provincial government’s operating budget is dedicated to health spending. The number keeps rising every year too. 

When medicare was devised, a federal/provincial partnership ensued; but over the years, the scales have been shifted to the provinces. Despite significant health and social transfers from the federal government, the lion’s share of the cost burden rests with provincial governments. 

Back to the conundrum of enhanced provincial finances and healthcare woes.  Despite the understandable call for more spending, governments are right to be prudent. The post-COVID economic recovery has been substantial and the rapid rise in inflation has benefited government coffers. A recession could be on the horizon (BoC data needed). While it would be easy for provinces to increase operational healthcare spending today, the trouble is that current sky-high government revenues are not guaranteed to stay. 

But then what?

Governments will still spend increased amounts on healthcare; Premier Tim Houston won an election on virtually that issue alone and has a mandate to pursue that path. All the while working for a better arrangement from Ottawa.

But governments also need to be mindful that current overflowing coffers cannot be relied upon year-over-year. Fiscally conservative governments are right to be prudent, to pay down debt, which enables lower interest payments. Which, in turn, frees up funds to address the priorities of the public. 

New Brunswick, in previous years a fiscal basket case, is on a path to prosperity and the actions being taken will secure the province’s longer-term fiscal health. There is the normal hue and cry from interest groups decrying spending, but the truth is, a pragmatic approach and a cautious hand will pay dividends in the long run. 

Conclusion

It is encouraging that the temperature appears be lowering between the federal and provincial governments, with both levels of government optimistic that an agreement can be forged in the coming days. That is cooperative federalism at work, and a mark of true partners in the federation, advancing common objectives for the benefit of all. The old cliché is apt: “there is only one taxpayer.”

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