Health Minister Ted Flemming is defending the spending freeze in his department's budget this year despite a $35-million infusion of federal transfer payments earmarked for the health-care system.
The Alward government announced it is freezing spending in the Department of Health even though the Canada Health Transfer is jumping by six per cent, or roughly $35 million, this year.
Federal health transfers destined for New Brunswick will increase by $35 million for the next two years.
Flemming said the provincial freeze on health spending is designed to prepare for the day when the federal transfer payments stop growing at that pace.
"Just because the feds spend six [per cent more on health transfers], and we've been clipping along spending more than that, it has to stop," Flemming said.
"It's stopping. It has to be rationalized. You have to rein it in now or suddenly it's going to be gone and it's going to be catastrophic."
The health budget in 2012-13 was $2.5 billion and the provincial government received $629.7 million from the Canada Health Transfer, which accounted for 24.5 per cent of the department’s budget.
In 2013-14, Flemming expects to spend $2.5 billion and his department will receive $664 million from the federal transfer program, which will account for 25.6 per cent of the budget.
Instead of using that extra federal cash to expand the health system, Flemming said he will take the money and put it toward the existing health-care bill.
The health minister said the annual federal increase will stop in 2016 and after that the transfer payments will be based on a different formula. The annual increase will be tied to nominal GDP, but it is guaranteed to be at least three per cent.
Flemming has already been overseeing budget cuts in the province’s two regional health authorities. Both the Horizon Health Network and the Vitalité Health Network have reduced the size of their administrations and announced plans to shed jobs.
Tough budget choices
The Alward government introduced a tough budget last week that included a $478.7-million deficit and increased personal and corporate income taxes.
Premier David Alward promised in the 2010 election campaign that he would balance the budget within four years without hiking taxes.
He also pledged to increase health spending by three per cent annually.
Despite the election promise, Finance Minister Blaine Higgs was clearly proud last week to announce a freeze on health spending.
"For the first time in recent memory there will be zero growth in the province's health-care budget," he said.
Health care spending represents about 40 per cent of the provincial budget and more per capita than the national average, according to the finance minister.
On the national stage, Alward has pushed for more federal money to be sent to the provinces to deliver health care.
Alward was angry when the federal government announced in 2011 that they will stop the six-per-cent health funding increases after 2016.
"It is unacceptable that the federal government came forward with a unilateral proposal," he said at the time.