Finance Committee on May 17th, 2012

[Daniel MacDonald]

That's right.

[The Chair, Conservative, James Rajotte]

—and in terms of health.

The simplest way of transferring from the federal government to the provinces is to base it on the number of Canadians who live in that province on an annual basis.

[Daniel MacDonald]

The purpose of the Canada health transfer is to be a contribution towards the financing of public health systems, but within the provinces. That's why the withholding provisions of the Canada Health Act are applied to it: that's its purpose.

[The Chair, Conservative, James Rajotte]

The second thing is, could you clarify the moving average of nominal GDP? From one of the conversations, I think this may be an issue. Perhaps you could clarify it for the committee. I think I have a fairly good understanding of it, but I wonder whether you would clarify it for us.

[Daniel MacDonald]

Do you mean in terms of what the three-year moving average is?

[The Chair, Conservative, James Rajotte]

Yes.

[Daniel MacDonald]

The three-year moving average that's going to be taken will be for the year for which you are estimating a payment and the two prior years. Of course, you're not going to have actual data for all of that.

[The Chair, Conservative, James Rajotte]

And the two prior years take prior years into account as well?

[Daniel MacDonald]

That's right. You have a three-year moving average, so some of your data points are going to be common as you move three times. You will have an updating of the data as you go.

[The Chair, Conservative, James Rajotte]

Okay. I appreciate those clarifications.

Monsieur Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

The current figures, 6% over the next three years and 3% in subsequent years, are obviously the result of a government decision. In the past, however, the manner in which payments were established was generally determined following a federal-provincial health summit. Negotiations were conducted there and led to an agreement that might cover a number of years. Is that correct?

[Daniel MacDonald]

I'm not too aware of the deep history. I know that the 2004 accord was negotiated. I'm not familiar with all the history prior to that.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I was there during the negotiations in 2004. I obviously didn't take part in them, but I was there in another capacity.

The objective of negotiations such as those of 2004 was to enable the provinces and territories—although we are talking about the provinces in this case—to meet to determine health care spending projections and to try to agree with the federal government on necessary funding, eventually with certain structural adjustments on their part to demands that would be made of their health budget.

I am simply trying to see how the Canada Health Transfer previously correlated with spending projections and whether we are currently straying from that objective or process.

[Daniel MacDonald]

In the press release of December 2011, there was a table that set out what the past growth rate in provincial and territorial health expenditures has been, and it contains a projection for going forward.

We now have most of the provincial and territorial budgets, which have indicated, I think it would be safe to say, that in most cases the provinces and territories are aware of the significance of health spending for their overall budget and budgeting and that most of them are putting plans in place to target lower growth rates.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

That's not really what I asked you, except for the end of your answer. I am talking about the Canada Health Transfer. Negotiations used to be held to try to determine projections. Various measures were negotiated to lower costs, structural measures that took future projections into consideration. The approach presented to us here does not take into account projected health spending. It imposes a minimum threshold in this area which could be beyond what the projections suggest for the next 6 to 10 years.

Is it a fair assessment?

[Daniel MacDonald]

I would simply say that I wouldn't know which data you're referring to that in the next three to six years would indicate a particular profile of future provincial and territorial health expenditures. We are aware of what provincial actions are from their budgets.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

We can extrapolate health care spending projections, based especially on the aging population and the data we have on spending for the past 10 or even 20 years. That will not necessarily be very different or considerably lower than what we have seen to date.

Excluding the three territories, we see that the lowest annual spending growth, by province, in the past 10 years, has been 6.1% and that the highest has been 10%. The parliamentary budget officer is projecting average annual growth of 5.5% for the country as a whole, with variations, for the following 10 years, again based on the figures that we have.

[Daniel MacDonald]

I think the Parliamentary Budget Officer, for the purpose of the long-term projection and for the purpose of presenting a scenario that was taken out over a very long period of time, took an average of expenditures and I think indicated that that's what he was doing and it was getting paired against a particular assumption for GDP.

With respect to extrapolation of past provincial and territorial spending growth figures into the future, and the range that you suggested, I have information here from Prince Edward Island indicating that they will cap health care spending growth at 3.5% in subsequent years. Quebec is indicating a target of no more than 5% annually. Ontario is targeting an average of reduced health-spending growth of 2.1% annually over the next three years. Saskatchewan and British Columbia have also indicated very clear targets.

My intention in reciting that is simply to show there is a realization by provinces and territories, they've known this, that they have to take actions, and they are. So extrapolating past behaviour to the future, I think what we're seeing from provincial and territorial budgets is that in fact there is a change.

[The Chair, Conservative, James Rajotte]

Merci.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I want to thank the witness for his candid responses.

I want to make it clear that given this formula, it's very clear to me and to most Canadians that there will be increases for the next five years of 6%, and thereafter a minimum increase of 3% for the Canadian health transfer for many years to come. Increase means increase means increase. I want to make that clear. For whatever reason, some people don't understand that an increase is more, it's not less.

Having said that, you made a very good point about budgets that have been projected by the provinces. What is really surprising to me is that as the federal government gives a contribution toward health care--because it is, as you said, simply a contribution--of 6% every year as an increase, the provinces' own budgets show they are not spending 6% more. You went over a number of numbers--two point something, three point something.... So in fact the average of provinces, when you look at all of their budgets, is a 3.8% increase, and the federal government is giving them 6% over the next five years.

Am I accurate with that number--it's an average of about 3.8% that they're projecting to spend?

[Daniel MacDonald]

That is correct. That's the average we've taken from the budgets that are in so far.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you.

In essence, the federal government is being quite generous in moving towards 6% predictable, stable funding so the provinces can plan ahead. And as we've indicated, their own budgets say they're not spending 6% anyway. But we're going to increase it anyway. We're going to make sure there's a floor of 3% after the next five years, which to me is a good plan.

I have a family, five children. I know when I have to spend money on certain things, I cannot spend more than I actually make. I can't earn $1,000 a month and spend $1,500 a month. So taxpayers also are cognizant that they pay every dime that the government pays out. It is taxpayers' money that gets paid out. It's not some government bottomless pit.

So when taxpayers are able to afford to pay more, they will pay more, because not only is there a 3% floor, it's going to go according to growth of economy. That would mean there is potential in the future, even with that floor of 3%, for taxpayers to actually even be paying more than 3% if the economy grows more than 3%.

Am I accurate in that?

[Daniel MacDonald]

If the three-year moving average of GDP fails to attain the 3% floor, it will be 3%, yes.

[Shelly Glover, Conservative, Saint Boniface, MB]

If it is more, if the economy actually grows more than the 3%, let's say it grows 6% in that year, how much will the Canada health transfer be?

[Daniel MacDonald]

It depends on your three-year moving average, but it would be more than 3%.