The Health Care Debate: A Basic Understanding

For anyone who has been following the battle develop over the funding of health care over recent months, there seems to be some confusion. I have brought up the topic to some colleagues outside of the law school setting, and there seem to be two camps: the “Why does the federal government have any responsibility at all here?” camp, and the “My province best be getting the money it needs to guarantee my health care” camp. Although on its face, the debate seems simple, there is a deeper question here: why is this even an issue? Most people seem to know that health care is a provincial responsibility, so why are the “feds” involved at all? What are all these transfers we’re hearing about? If the federal government is basically just giving the provinces a gift of money to spend on health care, why shouldn’t they be able to scale the amount of that gift back?

Without getting too detailed, I decided to do my best to explain what the situation over funding health care actually is, why the federal government is suddenly hesitant to keep paying for as large a chunk of it as they have in the past, and why the provinces are crying foul.

Post World War II, two major things happened. First, the federal government found itself with a relatively large amount of money. As cruel as it is, the war was good for the Canadian economy. The second thing that happened was that the federal government found itself with a lot of tax room. During the war, the federal government essentially took away some of the ability to tax that the provinces had, and used it for the federal war effort. Naturally, after the war, the feds wanted to keep it – they had found a brilliant new source of revenue! This raised a problem: how do we give the provinces back the money that is technically theirs while keeping the tax power within the federal government?

The answer was transfers. The feds said, “Well, we can keep the tax power, but then give some of the money we raise back to the provinces.” Conveniently enough, this entire discussion was going on at a time where the idea of building a social welfare state was the novel concept of the day. Long story short, we ended up with the Canada Health Act, whereby the feds gave the money to the provinces to spend on health, which is a provincial responsibility, in exchange for meeting some minor federal demands. Nobody complained – the feds kept their tax power and their influence while the provinces got what amounted to grants to fund the biggest part of their budget.

Now, the feds want to cut back the amount of money they give to the provinces. The federal argument is that they can do what they want – it’s their money after all, and economic times are relatively tougher now than they were when the plan was first put in place. Besides, health is strictly a provincial responsibility, and the provinces shouldn’t rely on outside help anyway. Most of the provinces are saying that the minute the feds decided to use the Canada Health Act to influence the health care budget and some of its priorities, they signed up for the long haul. While health is their responsibility, the feds started this arrangement in the first place, and they have to be prepared to ride it out, good or bad.

Where we will end up is a different story. Will provinces be privatizing some health care to make up for the gap, or will they learn to manage with what money they have? Will taxes change? Will the feds decide, after all, to keep the money as is? These debates are still ongoing, but one thing is clear: unlike some legislative debates, this one will affect us all.

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