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A Canadian Press article written in partnership with Humber College’s StoryLab and published by major media outlets recently reported that growth in federal health transfers exceeded increases in health spending in all provinces. The implication is that the provinces are complaining for no reason, since Ottawa has increased its contribution.

The article says the team scrutinized decades of provincial public accounts and federal transfers and that the results contrast sharply with the rhetoric saying that the federal government is not contributing adequately to the increase in provincial health spending.

According to StoryLab, federal transfers to the provinces have increased by 212 per cent between 2004-2005 and 2022-2023, compared with 158 per cent for provincial health spending.

But is that really the case?

Between 1995-1996 and 2004-2005, the federal government withdrew significantly from health transfers as part of a drive to clean up public finances. In 2004, the first year of existence of the Council of the Federation, the provinces argued the fiscal imbalance between them and Ottawa required an immediate injection of funds. It was against this backdrop that a health pact was signed in 2004, which led to a major catch-up: in just one year, from the 2004-2005 fiscal year to 2005-2006, the Canadian health transfer increased by 33 per cent.

In this context, the starting point is of crucial importance in StoryLab’s analysis. If it had started in 2005-2006 instead of 2004-2005, the conclusion would have been reversed.

In fact, provincial health spending increased by 141 per cent between 2005-2006 and 2022-2023, compared with 133 per cent for the Canada Health Transfer. The growth in provincial spending also exceeds the growth in the federal transfer if we extend the analysis to the current year (2024-2025): on an annual basis, the growth in provincial spending then reaches 5.3 per cent, compared with 5.1 per cent for the federal transfer.

If the comparison is limited to the last 10 years, from 2015-2016 to 2024-2025, and even taking into account the improvements in Ottawa’s 2023 proposal (and signed by Quebec at the beginning of 2024), which increased the transfer and guaranteed a minimum growth of five per cent per year for five years, provincial spending still has grown faster on an annual basis than the federal transfer, at 5.3 per cent compared to 4.8 per cent.

If we compare only the last five years – which takes us up to one year before the pandemic (2019-2020) – the result is still the same: provincial spending has grown by 6.5 per cent per year, compared with 5.2 per cent for the federal transfer.

In all cases, the gap between the growth of the federal transfer and the growth in health spending is greater in Quebec than for the provincial average, as Table 1 shows.

This is because the federal transfer increases in blocks at a set rate, for example, at a minimum rate of three per cent or five per cent. The transfer is then converted to a per-capita amount and finally paid to the provinces according to their population. So, as Quebec’s demographic weight decreases in the Canadian federation, the federal health transfer grows at a slower pace in Quebec than for the average province.

The differences of a few percentage points each year may seem trivial, but given that the gap accumulates over time, considerable sums are at stake.

When the provinces ask for increased federal funding for health care, it is not so much because they are looking back, but because they are looking ahead. In this respect, the figures from the Office of the Parliamentary Budget Officer leave no room for doubt: this independent body projects an average annual growth in provincial health spending of 4.5 per cent between 2025 and 2040, compared with 4.2 per cent for the federal transfer.

After falling in the late 1990s and early 2000s, the share of federal funding in total health spending increased from the mid-2000s onwards because of the 2004 health agreement. However, since the end of this agreement, growth in the federal transfer for health has been limited to the rate of growth in nominal GDP, subject to a floor of three per cent.

Although this floor has been raised to five per cent from 2023-2024 until 2027-2028, it is not surprising that there is a downward trend in the share of federal funding. Again, there is a simple explanation: the growth in provincial health spending exceeds the growth in the Canada Health Transfer paid by Ottawa. It’s mathematical.