Growing health costs will outpace federal health transfers to every province except Alberta over the next decade, says a report by parliamentary budget officer Kevin Page.

It’s more evidence that all provinces but one are facing a looming cash crunch, partly due to a new funding system announced by Ottawa late last year.

The new transfer scheme works out very well for Alberta, which will receive about a $1 billion more at the expense of other provinces.

Page predicts most provinces will have to tighten their belts on health spending over the coming decade.

In Nova Scotia, Page expects health costs to grow between 4.7 per cent and 5.7 per cent each year, yet federal health transfers to Nova Scotia will only grow by an average of 4.2 per cent per year.

All other provinces face similar situations except for Alberta, which Page said will see its transfer payments
increase by an average of 8.2 per cent annually while its health costs will grow each year by between 5.1 per cent and 6.1 per cent.

Finance Minister Jim Flaherty shocked provinces in December when he decreed the new health transfer plan. Payments from Ottawa would continue to increase by six per cent each year, but only until 2017. After that, transfer increases will be tied to GDP growth plus inflation.

Less well publicized was the fact the calculation formula was changed. Transfers will be made on a straight per-capita basis, rather than the current formula, which considers other factors.

The big winner in this change is Alberta. If the new formula were already in place, Alberta would have been $810 million richer last year while every other province would be worse off, The Chronicle Herald calculates.

In Nova Scotia’s case, the province would have received $22 million less during that same time period.

The numbers were reached by cross-referencing transfer data with Statistics Canada figures.

By the time the change comes into effect in 2014-2015, Alberta’s windfall will be close to $1 billion more than it would receive under the existing formula.

Provinces were guaranteed their funding levels will never go down. But because Alberta will take a larger chunk of the transfer pool, it will slow the growth of payments to every other province.

In January, Page released a report saying the provinces would be $31 billion poorer, and Ottawa $31 billion richer, by 2024 due to changing the escalator from six per cent to GDP growth.

Ottawa currently pays 20.4 cents for every dollar of government health spending in Canada. In Nova Scotia, it covers 20.16 cents of each dollar.

By 2036, Page predicts Ottawa’s share to drop to 18.6 cents per dollar. In the 1970s, Ottawa accounted for about 36 cents on the dollar in health funding.

(pmcleod@herald.ca)