Pharmacare plan presents fiscal problems that go beyond the price tag

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 differencesin 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 pharmacareplan 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 Labradorwould need a per-capitapharmacare transfer of$794 to meet the desired national standard.

(The federal Department of Finance provided these numbers atCBC 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 aper-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.

Using transfers as a political weapon

A provincial referendum on equalizationwould 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. Hoskinsis 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.