Public finances and health funding: a balance is possible

July 26, 2016

The Institut du Québec (IdQ) released its study entitled Is the Budget Balance Fragile or Robust? Quebec Faces Health Funding Challenges.

According to the study, following years of tight budgets, it should now be possible for the Quebec government to limit annual growth in health spending to 4.2% and maintain all social services at the same level, while still maintaining a balanced budget.

The IdQ researchers used the latest Quebec budget data to produce their own projections and determine whether the province’s budget balance is fragile or robust, in the medium and long terms. They measured the budgetary impact of various scenarios, including growth in health spending better adapted to needs in the long term, weaker economic growth than forecast, and a return to annual growth of 6% in federal health transfers. In all the scenarios analyzed, the IdQ presumed that spending on education (3.3%) and other social services (2.8%) would keep pace with inflation and the increase in clientele – in other words, neither cutbacks nor reinvestment.

“In the medium and long terms, health spending in Quebec should increase annually by about 4.2% to properly meet the needs of an aging population,” says IdQ Director Mia Homsy, co-author of the study. “This rate of growth exceeds those observed since 2013 and those forecast until 2017, which range between 2% and 3% and which the IdQ considers insufficient in the long term.”

“With annual growth in health spending of 4.2% rather than an average of 2.9%, the budget balance is more fragile, but can be sustained in the long term,” says IdQ President Raymond Bachand. “On the other hand, annual growth of 5.2% in health spending, as in the past, could lead to a return to substantial deficits.”

Some caution is necessary, however, for 4.2% annual growth in health spending creates a balanced budget that cannot be described as robust, because it remains dependent on sustained growth.

“If the federal government does not revert to 6% growth in the Canada Health Transfer, as was the case between 2006 and 2016, it will cost Quebec more than $13 billion over 10 years. This would jeopardize the balanced budget if the economy slowed,” notes Bachand. “Annual 6% growth in federal health transfers would make it possible to meet Quebec’s healthcare needs, while sustaining a balanced budget in the medium term.”