In 1977, for the feds to be able to justify cutting back on their cash payments, the basic idea was to find a different source of financing for the provinces. And the provinces were quite keen on the idea that they would get a transfer of taxing powers from the federal government.
What this involved was a reduction by the federal government of the personal income taxes and a reduction in the corporate income tax. That allowed the provinces then to increase their taxation, generating additional revenue for health care without putting an added burden on the typical taxpayer when they take into account both the federal and the provincial taxes.