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Yes, you are missing something. Drugs.

Drugs not used in a hospital are not covered by the Canada Health Act but they are a significant area of expenditure. All provinces except Quebec operate a Catastrophic Drug Claims plan (Trillium Drug Benefits in Ontario)and sometimes have a Senior's Drug Plan (Ontario Drug Benefits). New Brunswick does not have a public drug plan for seniors but does have a Seniors plan operated by Medavie Blue Cross at the province's behest which has been in operation since the 1970's though the premiums and expenses appear on Medavie's income and balance sheet, not the provincial governments.

Quebec (bless it) has a mandate on employers to provide drug coverage according to the provincial formulary and if you don't have drug coverage for whatever reason, whatever your age, you have to contribute to the RAMQ.

There is nothing standard about non-hospital drug coverage in Canada and this is the one area where provincial health policies differ and therefore budget expenses differ.

I tried to get two jobs at Health Canada and therefore developed a passing interest in Transfers, as "Knowledge of the Department and of the Branch" is a merit criteria you are guaranteed to see in any Health Canada recruitment process. The Canada Health Act does not cover drugs outside of hospitals and transfers under it are not geared to non-hospital drug use (except for a wink-and-nudge bit that is operationally irrelevant). Health Canada oversees health transfers but only according to the Canada Health Act.

Transfers under the Canada Health Act are justified by the Spending Power, the Government of Canada can raise taxes by any means it wishes and spend in any area it wishes, including provincial jurisdictions. It just can't enact immunization mandates or build hospitals or enact any other direct regulatory laws. Section 36 is irrelevant to the exercise of the Spending Power.

Determinant: Interesting points. Drugs are about nine percent of public health sector expenditures in Canada - but Ontario and Quebec are actually the biggest per capita spenders in the public drugs category while BC is the lowest.

Cost differences - interesting that the most populous provinces have the lowest spending - economies of scale?

Different demographics would also be a factor. More sick people would mean more spending even at the same level of care.

It depends where public drugs are going.

Drugs used in a hospital are covered by public health plans and always have been, that's the Canada Health Act in action. Drugs used at home are at the whim of provincial policy. There is wide policy difference here and you have to break the statistics down to see what is going on.

It also depends on the provincial use of Blue Cross plans. Canadian Blue Cross plans are non-profit and Canadian health policy has customarily relied on them to provide drug coverage through employment and individual policies. Traditionally Blue Cross plans had no-medical access to drug coverage on individual plans. They also subsidized their individual line with their group revenues. Provincial health policy relied on their existence. Alberta, Saskatchewan and the Maritimes still have this system, BC generally does not, Ontario's Blue Cross system is weird and Quebec's was made irrelevant by the RAMQ. Ontario and Quebec have two Blue Cross companies, one for group and one for individual business. There is no cross-subsidization.

Some provinces don't have full-service health systems in province, New Brunswick and PEI don't. Specialty care is often provided in Halifax or in Montreal. As a juvenile diabetic I had an endocrinologist in Ontario. I have no idea how the costs for my Toronto visit would be credited. I would show up on Toronto's expense report but I was paid for by New Brunswick. Easy to get confused in the aggregation.

New Brunswick is the same size as Scarborough population-wise.

BC has also had a notable effort to trim the public formulary through rigorous clinical trials of efficacy. Shangwen would have been delighted. The pharmaceutical manufacturers screamed blue murder.

Further, we don't have symmetrical equalization in Canada. That means that transfers are based on a "base case" and there are no penalties for exceeding them. You can tax more and pay for more. In Australia, but contrast, the Commonwealth controls Income Tax and Corporate Tax totally, the States are dependent on Commonwealth transfers to a degree unconscionable in Canada. The Commonwealth not only provides transfers but enforces uniform transfers, excess mineral revenues are deducted from a state's transfers. Alberta's oil revenues would be automatically redistributed across Australia under their system. NEP? Australia is ten chapters ahead.

Hi Livio -- Could a different metric be used to determine if "reasonably comparable levels of public services" are being provided "at reasonably comparable levels of taxation"? I don't think comparing per-capita spending really tells us a lot. Instead, what about comparing health outcomes or access to care. (Or per capita physicians or nurses...) For example, the Fraser Institute argued last December that wait times for the same procedure can range from 14 weeks in Ontario to 44 weeks in PEI. [http://www.fraserinstitute.org/research-news/display.aspx?id=2147484001] That sure doesn't sound like "reasonably comparable levels of service"!

Also: You've provided a neat graph to show different levels of spending across provinces compared to the provincial average. What about a comparable companion graph for different levels of taxation? Again: The constitution specifically references "comparable levels of taxation" so it would seem that any challenge or argument on this front needs to compare taxation levels as well as outcome/service delivery.

David: Thanks for the comments. I will be putting up graphs similar to Fig 2 for own source revenues and transfer revenues next chance I get.

No discussion of Canadian health care spending is complete until you factor in the ongoing attempt by CADTH/CDR/whatever else they're calling themselves to completely centralize and federalize Canadian health care spending.

Please look into what CADTH is doing these days. They go directly to doctors and instruct them on how to treat patients. Via the CDR, they centralize all drug formulary decisions. Of course, a province doesn't HAVE to go along with the CDR, but not doing so arouses suspicions of being in bed with pharmaceutical companies.

CADTH has been trying to create a provincially-equal health care spending regime for years. The question people need to ask is whether it is reasonable to expect all provinces to spend the same? It sounds nice and egalitarian, but is it realistic? I know I spend a significantly different amount of my income on health care than my neighbor does. If differences exist at an individual level, why not at a provincial level, too? Regional differences are important - that's what federalism is all about.

Ryan - For the benefit of those of us who aren't as familiar with these entities, it would be nice to have full names.

From the Google:

CADTH - Canadian Agency for Drugs and Technologies in Health
CDR - Common Drug Review

I think my initial comment was deleted, but if it comes up twice I apologize.

I especially like your comment about cost and demographic differences. There may be something like an economy of scale in health care, but I would think it has as much to do with density as size. Less populated city centres may have to pay a premium to attract high skilled physicians.

Demographics are important to keep in mind as well. It may well be that BC and Ontario have younger and/or more active populations. This would decrease health care costs. Different provinces could also have initiatives which impact health but don't necessarily fall under health care costs. By this I mean things like sports subsidies or health awareness initiatives. I am not sure if this is that case, but it is the first place my mind goes. I had more to say initially, but don't want to type it all out again. I may as well claim that my first comment was much better and more insightful too while I am at it :).

Thank you for posting this


I'm not sure section 36(2) is completely a dead letter, since it was intended to constitutionalize the equalization payment system (certainly I would think a court would try to give it some meaning). I would think a federal government would run into constitutional difficulties if it tried to abandon equalization entirely.

That said, nothing in section 36 commits the federal government to implementing any particular program, it merely restates the general principles of the (then-existing) equalization program and commits the federal government to those principles while leaving the specific enactment of those principles up to political actors (as it really has to be, since the courts are just not equipped to create or administer an equalization program). In that light, any federal government program that is reasonably consistent with those general principals is highly unlikely to be successfully challenged.

As to the argument that differences in health expenditures might be a basis for a challenge, it's hard to see that since the language only speaks of "reasonably comparable" (not, I note, the same) levels of service (not spending) and taxation. Unless there was clear evidence that the level of service in, say, Ontario was clearly not comparable to that in, say, Newfoundland, and the level of taxation was significantly higher (neither of which, I think, is plausibly true. Quite the contrary, the level of service is probably lower and tax rates are generally higher in Newfoundland).

It's also worth noting that there's nothing in the 36(2) which actually requires provinces to provide reasonably comparable level of public service (or which requires or allows the federal government to compel them to do so), it merely requires that they have "have sufficient revenues" to do so, if they so desire.

Very late to this party, but I would think the explanations for differences would vary. For Quebec, I suggest lower rates of pay are the cause (linguistically captive labor market); for MB/SK/AB, above average wage rates. NL may be a distortion related to providing care to remote communities.

It's important to note that "spending" is not a centrally-allocated quantity. Many goods and services in HC are not capped: physician visits and drugs in particular are not capped. So the spending is driven by consumption, and is not a budget. For outpatient care and most hospital costs, those amounts are fixed.

Breaking costs out into per-cap of physician billings and drugs on the one hand, and most other costs on the other, might give a clearer idea, in the latter case, of real systemic differences in resource allocation.

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