Politics·Analysis

Pharmacare plan presents fiscal problems that go beyond the price tag

Dr. Eric Hoskins' pitch for a national pharmacare program comes with a hefty cost estimate. It also could set up new conflicts between the provinces and Ottawa over health transfers.

Can Ottawa treat provinces equitably without treating them equally?

Minister of Health Ginette Petitpas Taylor speaks as Eric Hoskins, chair of the Advisory Council on the Implementation of National Pharmacare, looks on during an announcement in the foyer of the House of Commons on Parliament Hill in Ottawa on Wednesday, June 20, 2018. (Justin Tang/THE CANADIAN PRESS)

The federal Liberals will face some difficult financial choices if they plan to implement Dr. Eric Hoskins' pharmacare plan as it's written: they can either convince some provinces to take smaller transfers than others, or double the cost of the program by treating all provinces the same.

Hoskins estimates the annual price tag for a national pharmaceutical programs would be about $15 billion once it's fully implemented.

But paying for the program exactly as the doctor ordered could be problematic.

The practice with federal health transfers has been to send money to the provinces on a per capita basis. Hoskins' plan calls for a brand new pharmacare transfer that would fill the gap between what each province spends now on drug coverage and what it needs to reach the standard of national universal coverage.

But there's a wide discrepancy between provincial drug plans in terms of what they cover and how much they spend. That would lead to large differences in the transfer sums individual provinces would receive from Ottawa to implement a national pharmacare plan.

Unequal coverage equals unequal transfers

By 2027 — when Hoskins says a comprehensive pharmacare plan could be in place — the gap in per capita transfers could be quite glaring.

At the low end, Saskatchewan would get $344 per person. Ontario would be next at $393.

At the high end, Newfoundland and Labrador would need a per-capita pharmacare transfer of $794 to meet the desired national standard.

(The federal Department of Finance provided these numbers at CBC News's request.)

The gap isn't all that surprising. Newfoundland and Labrador has the country's oldest population and high rates of chronic disease. Its chronic financial problems means its current drug program is far less comprehensive than those operating in richer provinces.

The other Atlantic provinces face similar problems. So New Brunswick would receive the second-largest per capital pharmacare transfer — $759 — with Nova Scotia and Prince Edward Island rounding out the top four.

The per capita problem

These provinces have long argued that their acute geographic and demographic challenges need to be taken into account when calculating health transfers. But successive federal governments have stuck with the per capita model instead.

So Hoskins isn't just pitching a new national program. He also wants to break the mould of current federal policy when it comes to paying for it.

Canada already has a major transfer program that isn't calculated on a per-capita basis: equalization. In many ways, Hoskins' proposal to top up provinces to bring their drug spending up to a national average closely resembles the equalization program, which subsidizes provinces in order to maintain an average fiscal capacity.

But the variance in equalization payments between provinces — and the exclusion of the so-called 'have' provinces from receiving equalization payments — is a constant source of tension between Ottawa and the provinces. Alberta Premier Jason Kenney has vowed to hold a provincial referendum on equalization. Newfoundland and Labrador's Progressive Conservative Party campaigned on an identical promise.

Alberta Premier Jason Kenney is already threatening to turn equalization into a wedge issue. Pharmacare could be another federal-provincial flashpoint. (Mike Symington/CBC)

Using transfers as a political weapon

A provincial referendum on equalization would carry no legal weight (equalization is a federal program). But it shows the willingness of some premiers to use disparities in transfer programs as a political wedge issue.

One way around the problem would be to give every province the same per capita transfer. But doing that — while building the universal program Hoskins envisions — would entail giving every province the $794 per person Newfoundland and Labrador needs to keep up.

The Department of Finance estimates doing that would double the cost of the program — to $31.7 billion a year.

That's a price tag no government could sell. Even Hoskins' much lower price tag of $15 billion is tough pill to swallow, with Ottawa running annual deficits of $20 billion.

"I think this is a good time for us to show courage and boldness and do some nation-building," Hoskins said as he rolled out his report.

But nation-building requires willing partners. Hoskins is recommending the creation of a new needs-based transfer in an election year — when a bloc of newly elected Conservative premiers is explicitly working to defeat the federal Liberals. That could turn out to be a difficult sell.

About the Author

David Cochrane is a senior reporter in CBC's Parliamentary bureau. He previously wrote for CBC Newfoundland and Labrador.

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