P.E.I.'s health care spending will have to be reined in with fewer cash transfers coming from the federal government, say the province's finance and health ministers.

While health transfers will increase three per cent next year, they are still less than what P.E.I. used to receive, said Finance Minister Wes Sheridan.

Health Minister Doug Currie has the largest spending department in the provincial government with a budget of about $578 million for health care and administration.

"There's no question, it's a challenge. I mean, we've got pressures, we've got aging populations here in the province and we've got high volumes of chronic disease," said Currie.

But the federal government is lowering the increase to health transfers to three per cent because of a new per-capita funding formula.

Under the old system, P.E.I. would have received a six per cent increase in the coming year, said Sheridan.

"No question, health is down. We're down, we're off about $4.5 million from what it would have been under the old formula," he said.

Can't keep pace with spending

But cash transfers from Ottawa are at a record high, said Minister of National Revenue Gail Shea.

The Canada Health Transfer accounted for $92 million in 2005-2006.

In 2014-2015, that number is $131 million.

The Canada Social Transfer has gone from $39 million to $51 million in the same period.

Equalization payments were $277 million in 2005-2006 and will come to $360 million in the next fiscal year.

That means, in 2005, P.E.I. got a total of $408 million in federal support. Next year, the province will see $542 million.

While federal transfers have increased $135 million from 10 years ago, it's not enough to keep pace with P.E.I.'s spending.

And Currie and Sheridan say they have to control health care costs.

"We can't continue to grow at six and a half to seven per cent. It's just not sustainable. We recognize that," said Currie.

Sheridan said the aging demographics makes spending control a tough job for the health department.