In the Telegraph-Journal, AIMS Vice President of Research John Williamson argues that the fault for Atlantic Canada’s financial squeeze in healthcare lies more with our economic policies than with Ottawa’s funding formulas. When a young worker moves West, his federal health subsidy goes with him, rather than staying here. Read the full article on the Telegraph-Journal website.

Ottawa’s healthcare funding model is failing. That, at least, is what Atlantic Canada’s four premiers tell anyone willing to listen. They want Ottawa to direct more health dollars to our region because we have an older population and a shrinking workforce. The premiers say we’re being shortchanged.

Premier Brian Gallant believes federal health transfers, which are distributed based on the population of a province, should be increased to reflect New Brunswick’s rural and aging population. His demand was echoed last week by Nova Scotia. “We’ve all been clear that funding health care on a per capita basis doesn’t work for Atlantic Canada,” Premier Stephen McNeil said at a meeting with his Atlantic counterparts. They want a demographic “top-up” for our region’s aging populations.

Few deny health budgets are under financial pressure. This is true in Atlantic Canada and elsewhere in the country. What varies from one province to another are the number of young and older residents. Seniors account for 15.7 per cent of Canada’s population. According to Statistics Canada, New Brunswick and Nova Scotia are the greyest provinces. People aged 65 and older make up 18.3% of the population. P.E.I. and Newfoundland & Labrador aren’t far behind at 17.9 per cent and 17.7 per cent, respectively.

Medicare spending on young and older Canadians isn’t uniform. There is a greater cost burden on provinces with more seniors and fewer young people since the average 70-year-old consumes more healthcare than a typical 30-year-old.

But Atlantic Canada is hardly alone. Seniors account for 17.1 per cent of Quebec’s population and 17 per cent in British Columbia. The problem of aging populations and strained health budgets isn’t limited to the four eastern provinces. It also includes two large ones.

Each year, Ottawa transfers over $36-billion to the provinces and territories for health. New Brunswick will receive $754-million this year, Nova Scotia $943-million and P.E.I. $147-million. If these amounts seem small, it is because Atlantic Canada has a small population.

Canadians expect the federal government to design its funding programs in a manner than treats individuals similarly. That isn’t the case with a strict per capita healthcare formula.

If federal transfers to provincial governments ended with the population formula, our premiers would have a strong case for reform. But Ottawa’s role is larger than the provinces let on. Any discussion on health funding is incomplete without taking stock of the equalization program, which is a massive federal transfer to top up provincial budgets.

Ottawa’s equalization budget will exceed $17.8-billion this year and several billions will go to Atlantic Canada. Equalization evens out tax revenue differences among the provinces. Its purpose is to permit less wealthy provinces to offer social programs that are equivalent to services in other provinces at comparable tax levels.

New Brunswick and Nova Scotia will each collect $1.7-billion in equalization this year and P.E.I. gets $380-million. Equalization amounts are much higher than the health transfers because they are meant to boost a province’s entire budget.

Premiers are reluctant to link equalization to health spending. Yet, equalization implicitly accounts for our aging population and compensates Maritime provinces for having a less robust tax base due, in part, to having less economic activity and fewer young workers.

Provinces that receive equalization can spend those dollars however they wish. Ottawa doesn’t set conditions. If Premier Gallant wants to spend $38-million to bailout a failed shipyard up north, his government is free do so. But let’s not pretend that wasting tax money, which partially includes equalization dollars, on corporate welfare or a bloated public service doesn’t have a cost. It means fewer dollars are available for important social programs, like healthcare.

Canada’s generous equalization program means it is unlikely Ottawa will deliver a new demographics top-up to eastern provinces. Particularly when Quebec and B.C. would insist on being included, making it exceptionally expensive at a time when the federal government is running massive annual deficits.

This doesn’t mean there is nothing our premiers can do to improve their budget situation. The demographic and economic difficulties we face in Atlantic Canada are not caused by too many senior citizens. Instead, we have too few young workers due to a slow economy. Government policies are largely responsible for our stagnation.

Consider the following. We have higher business taxes than provinces elsewhere in Canada as well as our nearest competitors in New England in order to offer subsidies to handpicked companies. We shut down onshore natural gas development yet worry about long-term consequences to the workforce when young families leave to work in the exact same industries we won’t allow to operate here. To hire more government workers than the national average we impose the highest personal income tax rate in Canada and starting in July we will have the country’s highest HST rate.

These harmful policies are self-inflicted and contribute directly to our poor fortunes. New Brunswick experienced the largest exodus of its people in 35 years in the months after Premier Gallant enacted a moratorium on shale gas development.

Policies have consequences. Each time we lose a young worker to Saskatchewan that person’s health transfer goes to Regina and not Fredericton. Those that remain are older. The result of our anti-development policy is to increase the ratio of seniors to young workers, which drives up the province’s per capita health costs.

To slow and reverse the greying of Atlantic Canada, Mr. Gallant and his fellow premiers should instead adopt the pro-growth policies that provinces west of Quebec have already demonstrated work. Creating the conditions for growth isn’t as easy as going to Ottawa with a tin cup. But growth means job creation, more taxpaying workers, and young families that use fewer health services. Instead of being preoccupied with the number of seniors, we should be working to bring the kids home.

Read the full article on the Telegraph-Journal website.