Canada - World Health Organization Regional Office for Europe

Health systems in transition Canada 73
their original reform objective (McIntosh et al., 2010). RHAs are required to
submit their own draft budget to the ministry of health for approval. Some
provincial governments explicitly forbid RHAs from running deficits, while
others permit budget deficits under certain conditions (McKillop, 2004).
The Canada Health Transfer is the latest iteration in a series of earmarked
federal health transfers to the provinces and territories. From the beginning,
federal health transfers have been the subject of considerable debate due to
differing perceptions concerning the appropriate level of health transfers and the
degree of conditionality (or lack thereof) that accompanies such transfers (Lazar
& St-Hilaire, 2004; Marchildon, 2004; McIntosh, 2004). Initially, federal health
transfers were introduced as a 50:50 shared cost transfer to support provincial
universal hospital insurance programmes beginning in 1958 and to support
provincial and territorial universal medical insurance programmes a decade
later. These transfers were eventually perceived by some as too restrictive in
terms of their exclusive emphasis on hospital and physician expenditures, and
by the federal government as overly risky from a fiscal perspective given the
rapid growth in provincial and territorial medicare spending.
By 1977, the federal and provincial governments negotiated the replacement
of the cost-sharing transfer with a less conditional block transfer – EPF – that
merged the health transfer with another transfer fund for higher education.
EPF gave the provinces greater flexibility. No longer required to spend federal
money on hospitals and medical care, provincial governments could apply
transfer funds to any category of health expenditure including the nonmedical
determinants of health. In return, the federal government was able to cap the
growth in its health transfers to the growth in the national economy rather than
matching the growth in provincial health spending (Coyte & Landon, 1990;
Ostry, 2006). However, there were other consequences, including the fact that
the portion converted into a permanent tax point transfer could not be taken
away in the event of provincial non-compliance with the conditionality in the
Hospital Insurance and Diagnostic Services Act or the Medical Care Act.
While the use of user fees in medicare in some provinces predated 1977,
their uses seemed to accelerate after the introduction of EPF. As a consequence,
in 1979, the federal minister of health ordered an external review by Justice
Emmett Hall as a “check-up on medicare” after his commission’s landmark
report of 1964. Concluding that extra billing and user fees were undermining
the principle of universality of access, Hall recommended that the federal
government take legislative action (Hall, 1980). A subsequent parliamentary
committee agreed with Hall and suggested that federal transfers be withheld,