Morgan Pendleton
201 238 446
Social Policy Dimensions of Federalism:
Federalism and Medicare
APST 3303 -  Bruce Foster
December 6th 2001

Social Policy Dimensions of Federalism: Federalism and Medicare

The current problems facing Medicare’s future in Canada are by no means new. The basis of the federal / provincial jurisdictional split regarding the social polices of Canada legally date back to then BNA act of 1867, while the concept of providing universal Medicare arose in the nineteen sixties. Canadian governments have struggled to marry up these two policies that seem united in the aspect of providing health for the individual, but are conflicting in the amount of powers granted to each level of government. These two social health polices came from two different eras, one of almost absolute federal power and little concern for individuals, and one of social humanitarian objectives with near disregard for costs.

Underlying the provinces motivation has been the increase of province building. The more resources the provinces are responsible for, the more leverage they have with the federal government, and with that;  power. Provinces will not give up this power for in Canada, regional culture is established by its’ unique needs and characteristics, which are shaped by the established institutions. Throughout the creation on Canada’s Medicare systems, there have been two reoccurring themes, the aforementioned balance of power within federalism, and the growing use of institutionalism. The laws and acts of Medicare have determined who will deliver what, and subsequent acts have focused on dealing the structure that has been created. Each act limits the scope of each level of government’s ability, setting precedence for the next health act. 

The first health policy regarding federalism comes from the BNA act, which regards health policy as a non-issue. The BNA act was meant to create an environment in which provinces would wither away and die, leaving space for the absolute law of a nationalist government. Among the “irrelevant” issues tossed to the provinces were education, welfare and health. At the time of writing, doctors and hospitals were places to die. Between blood letting and the horrors of pre-anesthetic surgery, professional medical treatment was a gamble at best. Health care and welfare were non-existent, and education was minimal. The fathers of federation foresaw a Canada where the provinces responsibilities were limited, and the powers weak. This came to an abrupt halt after the events they never could have dreamed of, the rampant social changes caused by the great depression and WWII. 

The first national health polices to be used on a federal basis were based on the Saskatchewan model (1947), which resulted in the Hospital and Diagnostic Services Act in 1957, and ultimately, the National Medical Insurance in 1966. Although opposed by a few provinces, by 1969 the Medicare system was set up, and by 1971, all provinces were on board. The provinces had jurisdiction over their own health care policy; however, the federal promise of a dollar for dollar match was too good an opportunity to pass up, especially when seen in the socially minded culture of the late 1960’s and the limitations provinces to acquire the necessary funds themselves.

This tactic did have some effects on the established forms of Canadian federalism. “Health Care was seen as a natural extension of hospitals, and as such, a provincial responsibility. …However the escalation in health care costs and disparities in provincial wealth soon involved the federal government in financing health services.”
 While the constitution stated that provinces controlled health, the payments of the federal government to the provinces to start building more hospitals created dependency. Now the provinces would have to maintain what they had bought (Or face the political consequences of closing a hospital) and had to rely on the federal transfers to keep up support. It didn’t last long.

Confirming original provincial fears, in 1977, the federal government cut cash transfer payments to the provinces. By releasing the Established Programs Financing Act, the federal government used its conventional power of expenditure to change the payments from cash transfers to a “lump sum” payment for health and education, which operated under two general laws. One, the money still had to be used to meet federally set goals in each sector, and two, any increases in funds would not come from costs of administration, but from real growth in the GNP. With the reduction of payments to the provinces, some power crept back into their hands. This decrease in dependency was complemented by an increase in “tax points”. This meant that the provinces could now tax its own citizens the same amount as was cut by the federal government, plus a yearly increase for inflation. While this created limited growth for the power of the provinces, it did wean them off the previously established dependency from the feds, creating a strange political scenario where one side lost power while the other failed to gain ground.  

Cuts to social transfers from the federal government continued throughout the next eight years. The less the federal government gave to the provinces, the less need there was for the provinces to obey, thus in 1984, the federal government (under the new PC government)  created the Canada Health Act, which outlined the required levels of service that had to be met by each provincial body to receive funding. This coercion to ensure the five key points of universal health care, moved the power to maintain national standards back to the federal government, based on law instead of payments. However, while it was never truly challenged, the “Act” was, again, outside of federal jurisdiction, and could only be enforced through financial penalties – dollar to dollar cut for every act of extra billing or user fees. 

Between 1980 to 1990, federal funding dropped by 45%, due to raising costs as the average Canadian became older, and a decrease in both federal and provincial revenues. The Federal government was again in the same trap of decreased power due to decreased funding, thus they employed the same strategy. In 1996 the Chrétien government created the CHST (Canada Health and Social Transfer), which, again packaged provincial funding (Cash and tax points) into a lump sum that could be used by the provinces for health, education and social services. 

“The elimination of extra-billing following the passage of the Canada Health Act was accompanied in some provinces with commitments to a system of binding arbitration, most governments have proved unwilling to accept judgments that run contrary to their own priorities.” This 1992 statement by Vayda and Deber, is in regards to provincial attempts to allow doctors to bill outside of Medicare after the Canada Health Act. Claiming a loss in funding, even after an increase in tax points, provinces and doctors turned to other methods of raising funds. In Quebec, a push was presented for a five-dollar charge for every non-emergency visit to a hospital, and the Alberta rainbow report suggested “user-cards” to closely track people’s use of the system. This push for policy alternatives from the provinces has appeared in more recent events such as Alberta’s Bill-11, a controversial bill that allows for private hospitals to operate on specific surgeries in the province. The latest move in the battle for funding and policy control has come in the form of the province’s 1999 agreement of social union.

“ Next was that the ten premiers emerged from talks with a united position. They wanted the federal government to agree that if it started any new social programs, even ones it paid the total costs of, any province could opt out and take the cash instead with virtually no strings. They would have only to spend the money in the same general area as the national plan. The provinces also made it clear that they wanted more of a say in the future about how the feds acted when they were stepping into provincial jurisdictions.” – CBC news Online

	The social union pact was a strong move for the provinces. Proposed by the provinces, it ties the hands of the federal government in changing funding, creating new programs that fall under provincial jurisdiction, and allows the provinces to create their own version of federal programs, so long as they have “similar” goals.  This latest agreement may well see the end of national standards, and the end of fed power. The federal government has to try to enforce universal standards across Canada; which can only be achieved by appeasing the provinces with cash transfers, with the Social Union transfer, cuts can still be made, but only with a full years notice. Politically, there is little reason for the federal government to continue to support the ten separate provincial plans. Federal funding currently represents 10 – 18% of health budgets, and there is little reason to believe it will go up, increasing the provinces role, and returning to the original belief of health care being a provincial issue.

In the long run, this should increase the true aspect of federalism, because the actions of the Canadian governments have increased provincial / federal equality by granting the provinces almost autonomous control over this major institution.  – Although in the true spirit (and not the letter) of the BNA act, provinces were never meant to have this kind of power. In the book Social Policy 2000, author T. Kent makes the argument that, 

“We cannot have, constitutionally, a national health service. We have ten provincial Medicare programs that are based on common principles, and are therefore consistent enough to provide the same kind of service to all Canadians”

 It was recognized then, and is still true today, that provinces suffer from the sparseness of a thin population in massive geographical areas. It takes the shear size of the federal government to offer such a complex program as national health care. Through it return of economies of scale, the federal government can uphold the 5 points of health care universality, and maintain it on a national standard if they were given power over it. As Kent notes, provincial jurisdiction creates ten separate health care polices, which offer the “same kind of service” to Canadians. However, can we trust that the provinces will want to, or even be to be able to, offer equal service across all the demographics of Canada ? Even under the federal government, massive equalization payments had to be made to balance quality between provinces…it is unlikely that any province would make those payments outside of a enforceable federation. This problem was foreseen, and is one of the reasons why the BNA act never meant the provinces to have any power in the first place.

Bibliography

Canadian Health Care and the State, E. Vayda and R.B. Deber, Naylor Ed. McGill-Queen’s University Press, 1992

Ottawa and the Provinces: The Distribution of Money and Power, Courhene, Conklin and Cook Ed. Ontario Economic Council, 1985

Second Opinion: What’s Wrong with Canada’s Health Care and How to Fix it, Rachlis and Kushner, Collins Publishers, 1989

Social policy 2000: An agenda, T. Kent, Caledon Institute of Social Policy, 1999

North American Health Care Policy in the 1990’s, King, Hyclak, Thorton, MacMahon Ed. Wiley Publishers, 1993

A framework to improve the Social Union of Canada. An agreement between the Government of Canada and the governments of the provinces and territories. Ottawa; Public Works and Government Services Canada; 1999.

Health Care Federalism and the New Social Union, Canadian Medical Association Journal, Kumanan Wilson, April 18, 2000

Who Wants to Pay for Health Care? Canadian Medical Association Journal, Raisa B. Deber, July 11, 2000
Class Notes –GERON / HLTH 245 - The Canadian Health Care System, Professor Trevor Smith, University of Waterloo, Fall 2001 (http://www.ahs.uwaterloo.ca/~hlth245/lecture002.pdf)