Accounting for Aging in the Canada Health Transfer Allocation

This document concentrates on the changes to the Canada Health Transfer (CHT) allocation and the most effective way to evenly distribute the CHT budget across provinces. Three main formulas were considered throughout the study: the current allocation under the Ten Year Plan to Strengthen Healthcare, the upcoming equal-per-capita cash approach, and a theoretical needs-based approach that focuses on an age-adjusted formula. The current allocation includes two parts, a cash payment given to each province using a process involving “have” and “have not” provinces, and a tax-point-transfer that coincides with the revenue generated by that province for that fiscal year. The CHT cash portion is made on an equal-per-capita basis. Starting on April 1st 2014, CHT payments will be allocated on an equal-per-capita cash basis only. This new formula treats every single Canadian on an equal basis, and funds each province solely based on their percentage of the total Canadian population. No other variable is taken into consideration, and tax-point-transfers will be completely removed from the formula. The needs-based hypothetical approach uses an age-adjusted formula to distribute the CHT payments to each province based on the existing age structure of the population in that province. In this approach, the need is based on the age variable. It has been found that, the needs-based approach more evenly distributes the CHT payments across provinces and has the highest number of provinces benefiting from the formula. Although age has a high correlation with health expenditure, it should be acknowledged that other variables, such as level of mobility and disease prevalence, might also determine the “need” of a population