Six percent, until it’s not six percent

The Finance Minister shows his hand on health transfers.

Under Ottawa’s plan, funding for health would climb from $30-billion in 2013-14 to $38-billion per year in 2018-19. Mr. Flaherty told reporters health transfers will continue to increase at 6 per cent a year until 2016-17 before moving to a system that ties increases to the growth in nominal Gross Domestic Product, which is a measure of GDP plus inflation.

The finance department release is here.

See previously: What did the Conservatives promise on health transfers?




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Six percent, until it’s not six percent

  1. Can someone explain to me the logic of tying health care spending to GDP?

    Do people get sicker as the economy grows and healthier as it shrinks?  I would have thought that the correlation would have been the opposite of that.

    • The logic is that he’s expecting low, no or negative growth from here on in.

      Usually known as ‘broke’

      And promises otherwise are soooo last May.

    • I think the technical term for this is ‘cunning plan’. 

    • The logic is that tying it to GDP is what the government can afford. 

      If you ask the patients, or the provinces, they’ll all ask for a private room for every hospital, with a personal masseuse and a personal chef.  They’ll ask for ER house calls and ambulance by chopper.

      When you divorce the payer from the patient, there is no logical amount that should be spent.  Every patient will want the absolute best care available in the world.  There is no proper way to determine what to spend.  That’s one of the bizarre aspects of a socialist system, nobody knows what should be spent.

      The only thing you can do is figure out what you think is affordable. 

      • We can well afford health care, so stop pretending we’re Somalia.

        And stop pretending anyone ever asked for massages and chefs.

        Always, you guys go over the top.

        • As usual, you completely miss the point. The exaggeration was for effect. The point remains the same. There exists no meaningful method to determine the funding level because there is no market. There is no way to rationally determine what an adequate funding level would be, they simply keep on throwing whatever money they have at it until they have none left.

          • LOL of course there’s a market….but yes, life is complex and difficult.

            I’m sorry there is no easy answer for you

            No one ‘throws money’ at anything….that must be more of your ‘exaggeration for effect’

          • What on earth are you talking about?

          • Have you noticed the Cons use of ‘throws money’ – - it denotes things they object to funding – aboriginals, the poor,
            healthcare etc.  Money spent on things they like – money jolly well spent – it’s right out of Dickens.

          • Congratulations Jan and Emily, I can now educate you on the common English expression, “throw money at”, which has the same meaning whether said by conservatives, liberals, or anybody else.  Use it all you like, the rest of us know what it means. You’re welcome.

            http://idioms.thefreedictionary.com/throw+money+at

          • @s_c_f:disqus 

            Bad enough when you don’t understand answers….beyond the pale when you don’t understand your own questions.  LOL

          • Yep, this is the point where you spout off something that is completely unrelated and entirely nonsensical, as a way of saving face.

          • Has it occured to you that you have nothing to offer on this subject,

          • Aren’t you a nasty twit! Go back to your playpen.

            But first, I have an English lesson for you below.

          • @s_c_f:twitter 

            Again, you’re ‘exaggerating for effect’

          • No, I’m not this time.

          • @s_c_f:disqus 

            I think you’re done here. Ciao

          • No, I’m not done. I’m sure you’re not going far, no need to say goodbye.

      • I really think you need to survey beyond Peter MacKay’s immediate family before you make these ridicuous generalizations.  You are just spouting nonsense on this subject, this is a new low for you.

        • You are so classy. You and Trudeau should sign up to a lesson in civility. I make a perfectly sensible comment and you act like the wicked witch of the west. Get yourself a valium.

      • Is nominal GDP really “What the government can afford”?

        Is there that close of a correlation between nominal GDP and government revenues?

        • Generally speaking, yes. Government revenues will, in the absence of any major changes in taxation rates, rise with a rising GDP at the same rate as the economy as a whole. There will be variations, since some things such as corporate tax returns will vary depending on where we are in any particular economic cycle, or what is happening to natural resource prices. On the whole, however, nominal GDP and government revenue growth should track pretty well.  It would be hard to imagine a scenario in which government revenue consistently grew faster than nominal GDP over the long run, unless tax rates were consistently being raised.

        • Yes.

          I don’t know the general correlation coefficient though.

          Corporate income taxes are highly correlated. Income taxes are somewhat correlated – wages can rise when companies do better, companies hire when GDP is higher. Sales taxes are correlated since increased GDP means increased sales. Most government fees collect more revenue as economic activity increases (eg duties). Even property taxes are correlated since increased economic activity often raises property values.

          If government revenues are not correlated to GDP, that would pose a serious problem, since GDP is the primary indicator whether people can afford to pay those revenues.

          The European debt crisis is caused by the fact that GDP has dropped so much that government revenues have dropped even more (due to the correlation), and bank revenues have dropped due to bad loans (both to governments and to real estate developers). Bankrupt governments can no longer afford their debt. Neighboring governments cannot afford to bail out the bankrupt governments and the banks. All of this is caused by the drop in GDP from the recession.

          Personally, I don’t see how it’s possible to come up with a figure any other way. On the one hand, the health system is in bad shape. On the other hand, I don’t think it can be fixed by money alone, and in fact, I would expect that more money spent would result in less reform.

          But in general, in a socialist system, it is impossible to know what “should” be spent, the system is far too complex to come up with a number through central planning. Not only that, philosophically there is no real number that exists, nobody can know what the population as a whole believes is too much or too little.

  2. The logic is, of course, that you can’t simply continue to increase health care spending at a rate higher than the growth in GDP or government revenues. If you were to do so, at some point, there would be no money left for any other functions of government.  Putting some reasonable cap on the growth in health care costs may be arbitrary, but it is really the only long-term solution. If we want to live within our means we have to find a way to do so – even in the world of health care providers.

    • Or, you could just grow the economy.

      • Butif your spending is in excess of that growth rate, however, high, you still run into the same problem – health care spending absorbing a perpetually greater share of government spending until it replaces all other functions. That model is simply not sustainable.

        • That’s a very large “if” there, however, and even then that only applies *if* it stays that way over the long term.  Over the short term, deficits are possible and can be made up.

        • Oh gee, and here Cons have been telling us we’re outdoing the entire G8.

          Guess not, huh?

          Course, we could can the jets and jails….cuz if Harper plans a cutback on health, try not to be anywhere near him when he announces that, K?

          • And where has anyone suggested a “cutback” in health spending?  The proposal is for constant increases in line with the growth in the economy and government revenues. That’s not a “cutback” in any sense. It is in line with the type of fiscal responsibility that has made Canada a leader in the G8.

          • You’re assuming continual GDP growth.
            That’s also something unsustainable.

          • It’s a cutback if the GDP doesn’t grow…and it ain’t gonna.

            So spare us the pompoms

          • The GDP is growing, and he has specifically promised a minimum increase in the unlikely chance it doesn’t meet minimum performances at some time over the proposed period.

          • @MikeRedmond:disqus 

            We have zippo for a growth rate…and we know what his promises are worth.

    • The logic fails because GDP drops precipitously if people aren’t healthy enough to work.

      Health is a limiting factor on GDP. To turn around and make GDP limit health in return is a death-spiral sentence as soon as either of them starts to drop.

      I sincerely hope the boomers keep this decision in mind during the next election.. after all, which way is GDP likely to go when they retire.. and when are they most likely to need the health care system they’ve been paying into all of their lives.

      • There is no evidence that simply spending more money on the health care system will increase overall levels of health.  The US spends more per capita on health care than does Canada and their life expectancy and most other measures of general health are lower than those of Canada. France spends a smaller proportion of its GDP on health care than Canada but by most measures provides better care.  Simply spending more is not a guarantee of better outcomes – but it is a pretty good guarantee of insolvency.

        • Simply spending more is no guarantee of better health care, but neither is spending less, and I can tell you for sure which one is more likely to leave people unhealthy.

          • Of course, no one is suggesting “spending less”. The health care budgets, if Mr. Flaherty’s proposal is accepted, will continue to increase in real terms. Just not as quickly as before, and within a manageable range in the long term.

          • So.. he’s going to be spending as much as if he’d simply agreed to 6% increases? No?
            Then that’s spending less isn’t it?

            Pretty simple concept: Under the first plan, spending would be up here, under Flaherty’s plan, spending is down here. One of those is “less”. What is it about that concept that gives you difficulty?

          • I suppose it would be “spending less” than if someone had proposed 20% annual increases and he only  agreed to 10% increases?  The logic of saying that spending more is actually spending less escapes me. At some point a country has to live within its means. Increasing health care spending more each year than the economy or government revenues grow is simply unsustainable.  

        • Good grief, such tired old talking points, I don’t know how you can even offer them at this point.

    • That is the standard Conservative line isn’t it?  Talk about being trapped in a thinking box. 
      There are all kinds of costs savings strategies – i.e. a national drug strategy, but this government seems bent on not facilitating anything meaningful.  And dictating to the provinces. – who the hell does Harper think he is? 

      • He’s not “dictating to the provinces”.  They are free to run their health care systems as they wish, or raise taxes as they please to fund them. If any of them think it is sustainable to double health care budgets every 10 years – which is what a 6 per cent a year increase in perpetuity would do – they can do that.  Where they will get money for schools, roads, universities, or anything else is the question.

  3. I wonder whether future Prime Minister Carney will stick to this plan.

  4. Oh how the left will moan and cry.

    What do you mean we can’t just spend more? Just raise taxes on rich people!

    • No, can the jets and jails.

      • OK, we’ll empty the jails and tell the convicts that they can live at your place, the halfway house for everybody.

        • As you already know, we don’t need all the new jails Harper is planning….crime is dropping, not rising.  Has been for years.

          • Let me know when you have a point.

    • Start raising money for your quadruple bypass.

  5. Repeat from Ibittson G&M:

    “Why 4 per cent? It has a lot to do with Europe and Pierre Trudeau.

    Ottawa and the provinces fought over health funding in the Seventies, too – they fought over everything, back then – but Trudeau and the premiers ultimately came up with a deal that lasted for years. In 1977 both sides agreed to an incredibly complex formula, the essence of which was that federal funding for health care would increase annually at the rate of the nominal increase in the gross domestic product averaged over the previous three years.
    In other words, take the rate of inflation, add the rate real of economic growth – which, combined, equals nominal GDP – average that number over three years, and Bob’s your uncle. Within the Conservative government, according to sources, nominal GDP growth is generally favoured as a reasonable basis for future increases in health-care transfers once the current commitment of annual increases of 6 per cent expires in 2016. John Wright is CEO of the Canadian Institute for Health Information, a non-profit corporation funded by all levels of government that compiles data on health care nationally. He believes the 1977 formula is “the most logical” basis for a new agreement. “It was funded that way in the past, and it would seem to be reasonable going forward,” he said in an interview. Federal government revenues generally increase at same rate as nominal GDP. As Ottawa struggles to eliminate the deficit, Mr. Wright believes, increasing transfers at the same rate that revenues increase, and no more, just makes sense.”http://m.theglobeandmail.com/news/politics/john-ibbitson/on-health-care-funding-2-2-probably-does-equal-4/article2270491/?service=mobile 

    • Except when the GDP goes down, and the population goes up.

  6. Requires further analysis. Of which the legacy Black-Asper-Peladeau press will
    give us plenty.
    The only positive thing that immediately pops up is that maybe we can put that
    whole “unsustainable” thing away with this year’s Christmas decorations… no?

    • Oh no, I’m sure the next word we’ll hear a lot about from the Cons is ‘privatization’

  7. Geez Wherry, what’s with that post up there where you insinuated the government was breaking a promise to keep transfers at 6%, and now we’ve got them at 6% until the next election.

    Promise kept.  So it was all much ado about nothing.

    • The govt promised it would go on longer than that. Flaherty just reneged on it

      • That, of course, is simply, and easily demonstrably, untrue.

        • Right here on ths site, I’m afraid

      • No, they didn’t.

        • Right here on the site I’m afraid

          • No, they didn’t. As Trudeau would say, you’re full of…

          • Yawn

            And here is how the Sun reported the situation.The Liberals, Tories and NDP all committed Friday to maintain the current 6% compounding increases set out in the 2004 Health Accord. And while the Liberals officially promised to keep the payments increasing beyond 2014, when the accord expires, both Conservative and New Democrat party officials confirmed their parties’ pledge to do the same beyond the deal’s expiry date, too.The official Conservative election platform actually included no mention of the 6% escalator, but in a news release sent out 17 days later, the Conservative campaign referenced the promise three times.

            http://www2.macleans.ca/2011/12/14/what-did-the-conservatives-promise-on-health-transfers/

          • Is that supposed to be evidence?

            You’re posting the fact that the Conservatives promised to exend 6% beyond 2014, and now they’ve confirmed they will extend 6% to 2016, and your point is what, exactly?

            Are you trying to prove my point for me now?

            You do realize that 2016 comes after 2014? This is basic arithmetic.

          • She’s awesome, isn’t she?

          • Yes, “awesome” is one way of putting it.

  8. I’m not normally a fan of Harper’s approach to governance, but I have to say that this sound eminently reasonable. They have promised 6% for the duration of the current mandate, and in the next election, the electorate can decide whether they want to go along with increases in accordance with GDP growth, or some other rate if another party decides to promise that.

    And health care costs, to be sustainable in the long run, can only increase at the rate of growth of the economy. I think we should in general be focusing on ways to increase productivity–not necessarily privatizing the insurance aspect, but certainly the delivery.  Ultimately, health care is a provincial responsibility, and I don’t think the federal government should be playing such a significant role in funding it.

  9. It seems obvious to me that this is just another rung in the plan to condition Canadians to viewing everything as a “logical” business model (think of Harper’s handling of 
    Attawapiskat.)  To my mind, the “thing” is that business models almost always serve their masters, the wealthy. Will the middle and lower classes willingly accept that their real role is to increase profits that won’t necessarily be “trickled down” to them? 
     I have always willingly accepted that I pay higher taxes, but enjoy social benefits that others (re:the US) do not. I don’t accept that our system just waves a “welcome/free money” banner to the greedy and indolent. Most people are fair minded and enjoy working; it creates a sense of satisfaction and self worth.

     My Mother is an old woman and has voted Conservative all her life. But even she can’t understand the way society is giving everything back to the wealthy. She says that all the gains people struggled for: a shorter work week, benefits, security – are sliding backwards as people work longer hours, with more part time jobs with no benefits, with more CEO’s making bigger bonuses using profit models that lay off more staff. It’s interesting how old age has changed her views.  While Canadians adapt to viewing government as a “business”, the Conservatives will be able to promote their own ideological view of tough on crime/ ready for war. But this business model is also tainted by entitlement: Look at the pork in Clements riding; MacKays helicopter rides and luxurious hotel accommodations. Where is the consistency? What of the blatant disregard of Conservative ethic lapses?

     The bottom line? If it’s good for “business”, then no matter what, it’s justifiable.

     The Liberals were sleazy dogs and made their own bed. But they managed finances as well if not better than this crop, were more willing to admit mistakes and “do the right thing” and quite frankly, I prefer their sleaze to the Conservatives. Even Chretien would have come clean and rolled some heads with something as dirty/nasty as the Irwin Colter affair. 
     ”Free speech?” Peter Van Loan may have carried the day with that line of shit, but in sinking to the lowest common denominator, he shares an outlook with the lazy opportunists and easy money criminals the Conservatives continually warn us are undermining our system.

     If hypocrisy were fruit, we’d live in a cornucopia

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