2. If necessary, is it within the constitutional jurisdiction of parliament to amend the Canada Health Act to specifically include new requirements in the program criteria?
Federal Spending Power
You have also asked whether, assuming that Bill 11 complies with the terms and conditions of the current Canada Health Act, the federal government has the constitutional authority to amend the Act in order to respond to Bill 11. We believe that the Act may be amended validly by the federal government, and would withstand constitutional scrutiny. Just as the present Canada Health Act is constitutionally valid notwithstanding that it imposes conditions on federal funding, likewise any amended Act that followed a similar model would likely pass constitutional muster.
The resulting amendment must be made with an eye to the constitutional authority that underpins the Act, namely the federal spending power. An amendment could permit the federal government to withdraw funding from provincial health care, if a province violated the new conditions under the amended Act. It must be noted that with the diminishment of transfer payments under the Canada Health and Social Transfer, the incentive for provinces to stay within the public medicare system is diminishing. Therefore, although the federal government has authority to amend the Canada Health Act, the degree to which this would influence provincial policy has yet to be determined.
The constitutional basis for the Canada Health Act lies in the federal spending power.20 Although not explicitly provided for in section 91 of the Constitution Act, 1867, courts have inferred the federal spending power from the federal power over public property and public debt under section 91(1A), the taxing power under section 91(3), and the federal appropriations power under section 106. The spending power is significant, as it provides the federal government with the power to place limitations and conditions on areas that constitutionally fall within provincial jurisdiction, such as health.21 The constitutional validity of the Canada Health Act, therefore, relies upon it being based on federal spending power, rather than upon federal regulatory jurisdiction. The federal Act essentially sets out a number of terms and conditions that the provinces must meet, in order to be eligible for federal cash contributions towards provincial health insurance costs. These conditions also constitute a valid exercise of the federal spending power. As one author notes: “Because compliance with the conditions set out in the Act is entirely voluntary (the only penalty is the withholding of federal funds), the legislation is constitutionally unobjectionable.” 22
Breadth / Extent of Spending Power
The Supreme Court of Canada has yet to address explicitly the depth and breadth of the federal spending power. However, a broad consensus exists among most constitutional scholars that the federal government can spend federal money any way it chooses, including for the purposes within provincial legislative jurisdiction, and can impose whatever qualifications it wishes on these expenditures. As Professor Hogg, the pre-eminent constitutional scholar in Canada, states:
It seems to me that the better view of the law is that the federal Parliament may spend or lend its funds to any government or institution or individual it chooses; and that it may attach to any grant or loan any conditions it chooses, including conditions it could not directly legislate. There is a distinction, in my view, between compulsory regulation, which can obviously be accomplished only by legislation within the limits of legislative power, and spending, or lending or contracting, which either imposes no obligations on the recipient…or obligations which are voluntarily assumed by the recipient (as in the case of a conditional grant, a loan or a commercial contract). There is no compelling reason to confine spending or lending or contracting within the limits of legislative power, because in those functions the government is not purporting to exercise any peculiarly governmental authority over its subjects.23 [emphasis added]
As noted above, the Supreme Court of Canada has not dealt conclusively with the federal spending power. In part, the lack of jurisprudence is the result of the provinces choosing not to litigate the use the federal government has made of this authority over the years.24 Nevertheless, the few decisions by the Supreme Court that deal with this issue in passing strongly supports the constitutionality of conditional grants made by the federal government to the provinces for provincial purposes.
In Reference Re. Canada Assistance Plan (B.C.), (1991), 83 D.L.R.(4th) 297 at 326,625 the Supreme Court of Canada considered a constitutional challenge by the Government of British Columbia to federal legislation that amended the Canada Assistance Plan. The provincial government objected to these amendments, which would alter the federal government’s obligations under the original agreement by placing limitations on its contributions to the financially stronger provinces in Canada. The Supreme Court upheld the federal legislation, noting that federal authorities lawfully could take unilateral steps to limit federal contributions under a federal-provincial agreement authorised by the Canada Assistance Plan. Sopinka J., for a unanimous court, addressed an argument put forward by an intervener, who asserted that the federal spending power should not extend beyond the field of federal legislative competence. Sopinka J. held at page 326:
The written argument of the Attorney-General of Manitoba was that the legislation ’amounts to’ regulation of a matter outside federal authority. I disagree. The Agreement under the Plan set up an open-ended cost-sharing scheme, which left it to British Columbia to decide which programmes it would establish and fund. The simple withholding of federal money which has been previously granted to fund a matter within provincial jurisdiction does not amount to the regulation of that matter. Still less is this so where, as in this case, the new legislation simply limits the growth of federal contributions. In oral argument, counsel said that the Government Expenditures Restraint Act ’impacts upon [a] constitutional interest’ outside the jurisdiction of Parliament. That is no doubt true, but it does not make the Act ultra vires. ’Impact’ with nothing more is clearly not enough to find that a statute encroaches upon the jurisdiction of the other level of government. [emphasis added]
According to Professor Hogg, this statement is a “rather clear affirmation” of Parliament’s power to impose conditions on its grants to provinces for use in fields of provincial jurisdiction. Hogg goes on to state that so long as federal intervention does not extend beyond the granting or withholding of funds, the courts should not find a constitutional trespass on provincial jurisdiction. One should note, however, that the limitation discussed in Reference re. Canada Assistance Plan simply involved limiting the funds available to the provinces; the court did not address the situation in which more substantive conditions are placed on a federal transfer.
Another significant case in this area is Eldridge v. British Columbia (Attorney General),  3 S.C.R. 624. There, the Supreme Court of Canada discussed the division of responsibilities for health in Canada among the two levels of government. The Court indicated that hospital insurance and medicare programs fall within the exclusive jurisdiction of the provinces. However, the Court went on to discuss the role of the federal government in health matters, arising out of the spending power:
This [provincial jurisdiction] has not prevented the federal Parliament from playing a leading role in the provision of free, universal medical care throughout the nation. It has done so by employing its inherent spending power to set national standards for provincial medicare programs. The Canada Health Act, R.S.C., 1985, c. C-6, requires the federal government to contribute to the funding of provincial health insurance programs provided they conform with certain specified criteria. (The constitutionality of this kind of conditional grant, I note parenthetically, was approved by this Court in Re Canada Assistance Plan (B.C.),  2 S.C.R. 525 at p. 567).
Although in obiter, this statement by the Supreme Court is a strong indication that Canadian courts perceive conditional grants by the federal governments to provinces to fund areas of provincial jurisdiction as constitutionally valid.
Lastly, in Winterhaven Stables Ltd. v. A.G. Canada, (1988), 53 D.L.R.(4th) 413,26 the Alberta Court of Appeal undertook an extensive review of the federal spending power, and rejected the appellant’s characterization of a number of federal Acts, including the Canada Health Act, as legislation relating to matters within exclusive provincial jurisdiction. The Court of Appeal instead held that the legislation in question established “legitimate national standards.”27 As well, the Court of Appeal considered whether the pressure on provinces to participate in shared-cost programs amounted to improper federal control of provincial matters, and concluded that the federal government could impose conditions on financial transfers to the provinces, so long as these did “not amount in fact to a regulation or control of a matter outside federal authority.”28 As characterized by the Alberta Court of Appeal:
[T]he legislation under review is not legislation in relation to provincial matters of health…but is legislation to provide financial assistance to provinces to enable them to carry out their responsibilities.
Parliament has the authority to legislate in relation to its own debt and its own property. It is entitled to spend money that it raises through proper exercise of its taxing power in the manner that it chooses to authorise. It can impose conditions on such disposition so long as the conditions do not amount in fact to a regulation or control of a matter outside federal authority. The federal contributions are made in such a way that they do not control or regulate provincial use of them.29 [emphasis added]
This judgment reinforces the conclusion that the federal government clearly has constitutional authority to place limits or conditions on the funding grants made under the Canada Health Act. Specifically, so long as these amendments are not characterized as nothing more than a federal attempt to regulate matters falling exclusively within provincial jurisdiction, the amendments should withstand a constitutional challenge. It appears likely on the basis of the case law set out above that all limitations on federal spending under the Canada Health Act short of direct regulation or control of provincial health care would remain constitutionally valid.
As a result, the federal government likely possesses substantial flexibility in introducing any future amendments to the Canada Health Act. In our opinion, it would be within the federal government’s constitutional authority to provide a more explicit definition of “medically required” that would even more clearly confirm that this term does not simply mean the provision of the minimum medical services required by a patient, but rather requires that all patients requiring medical attention with identical medical conditions are entitled to receive equal quality of care regardless of their ability to pay. This type of amendment arguably would be easily supported as a codification of a definition already implicit in the Act, and would reinforce the five criteria enumerated in the Act. In addition, such an amendment would allow the federal government to withdraw funding from the Alberta government for violating the requirements of the Act with its Bill.
Another approach to future amendments could extend section 8 of the current Canada Health Act. This section already institutes a requirement that the health insurance plan of a province be administered and operated on public and non-profit basis, in order for a province to be eligible for federal funds. In our opinion, future amendments to the Act could simply incrementally extend these existing requirements to require that hospitals themselves operate on a public and non-profit basis. One could argue that this extension simply expands the current, constitutionally valid, limitations set out in the Act. Once again, it should be emphasized that a province would have complete constitutional jurisdiction to operate a system of private hospitals with its borders. However, the federal government would not be compelled to fund such operations under the Canada Health Act.
Lastly, in amending the Canada Health Act, it is important to recognize that the remedial provisions under the Act provide a strong basis for the courts’ interpretation of the Act as an exercise of the federal spending power. Specifically, as discussed above, the Act permits the federal Minister to withhold federal contributions from a province that has violated the Act’s terms and conditions. This section must remain the central remedial provision of the Act, in order for it to maintain its constitutional validity as an exercise of the federal spending power.
In our opinion, it is within the constitutional jurisdiction of Parliament to amend the Canada Health Act to include in the program criteria either or both of the following:
- (a) an express requirement of public ownership and operation of hospitals; and/or
- (b) a definition of “medically required” that expressly distinguishes solely on the basis of the presence or absence of an underlying medical condition, or otherwise prevents “ability to pay” from determining the quality or availability of medical services to persons with similar medical conditions.
3. Does the federal/provincial Social Union framework agreement legally constrain the federal government from taking action?
You also have inquired whether the Social Union Framework Agreement operates to prevent the federal government from introducing amendments to the Canada Health Act, without first negotiating these changes with the provinces. Based on a review of the Agreement, and the law relating to intergovernmental agreements more generally, it appears unlikely that the Social Union Framework Agreement would alter the federal government’s rights and obligations under the Canada Health Act. Not only is the Agreement cast in quite open-ended terms, but intergovernmental agreements themselves are significant more for their political consequences, than their legal effect.30 This section reviews in brief the implications of the Social Union Framework Agreement in the context of Bill 11 and the legal enforceability of intergovernmental agreements. It will first address the federal obligations that arise from the Agreement, and then turn to discuss whether the federal government could seek to enforce these obligations against the Alberta government in response to Bill 11.
Federal Obligations under the Agreement
The first relevant provision of the Social Union Framework Agreement reads as follows:
5. The federal spending power - Improving social programs for Canadians
Social transfers to provinces and territories
The use of federal spending power under the Constitution has been essential to the development of Canada’s social union. An important use of the spending power by the Government of Canada has been to transfer money to the provincial and territorial governments. These transfers support the delivery of social programs and services by provinces and territories in order to promote equality of opportunity and mobility for all Canadians and to pursue Canada-wide objectives.
Conditional social transfers have enabled governments to introduce new and innovative social programs, such as Medicare, and to ensure that they are available to all Canadians. When the federal government uses such conditional transfers, whether cost-shared or block-funded, it should proceed in a cooperative manner that is respectful of the provincial and territorial governments and their priorities. [emphasis added]
The Agreement also provides that the federal government will consult with provincial and territorial governments “at least one year prior to renewal or significant funding changes in existing social transfers to provinces/territories, unless otherwise agreed…”. Likewise, it requires that all governments provide advance notice and offer to consult prior to implementing a major change in a social policy or program. It also requires the federal government to work collaboratively with all provincial and territorial governments to identify Canada-wide priorities and objectives, and not to introduce any new initiatives without the agreement of a majority of the provincial governments.
These general requirements indicate that in order to adhere to the Agreement, the federal government may have to inform Alberta and all other provinces of any intentions it may have to amend the Canada Health Act, and offer to consult with these governments prior to implementing these changes. However, one should note that consultation arrangements are not explicitly detailed in the Agreement. Therefore, arguably the federal government could enter into minimum consultation arrangements, by simply requesting written submissions from the provincial governments, for example, and still adhere to the language of the Agreement.
The Social Union Framework Agreement also sets out guidelines for dispute avoidance and resolution. Part 6 of the Agreement reads:
6. Dispute Avoidance and Resolution
Governments are committed to working collaboratively to avoid and resolve intergovernmental disputes…. Dispute avoidance and resolution will apply to commitments on mobility, intergovernmental transfers, interpretation of the Canada Health Act principles and, as appropriate, on any new joint venture. [emphasis added]
This section goes on to state that “Sector Ministers” should be guided by a process of dispute avoidance, sector negotiations and decision review, as appropriate. Specifically, the Agreement outlines mechanisms for dispute avoidance, which involve: “information sharing, joint planning, collaboration, advance notice and early consultation, and flexibility in implementation. With respect to sector negotiations, the Agreement requires that negotiations for dispute resolution will be based on joint fact-finding and will involve a written joint report. As well, these negotiations may utilize third party review as required, with all reports and fact-finding made available to the public upon request of any of the parties involved. Lastly, decision review allows any government to require a review of a decision or action one year after it enters into effect, or when changing circumstances justify.
Although placing general obligations on all levels of government to cooperate with respect to the implementation of social programs and funding arrangements, the language of the Agreement once again is quite general and broad. The details of the dispute resolution process, for example, are not set out. The broad and general language of this Agreement does not appear to raise any substantial obligations or commitments that would prevent the federal government from taking action in this case. In addition, it is important to recognize that the operation of this Agreement has no effect on the federal government’s constitutional jurisdiction to amend the Canada Health Act. However, the federal government may wish to remain in compliance with the Agreement, and therefore should follow the cooperation and negotiation requirements outlined above, before introducing amendments to the Act. The federal government retains complete constitutional authority to alter its spending powers with respect to provincial programs. Therefore, although politically the federal government may be wary of unilaterally amending the Canada Health Act as a result of the Social Union Framework Agreement, legally it possesses the grounds to do so.
In analyzing the effect of the Social Union Framework Agreement in these circumstances, it is important also to recognize the treatment of intergovernmental agreements more generally by the courts. The lead case of Reference re. Canada Assistance Plan (B.C.) provides some direction with respect to the enforceability of these commitments. As discussed above, in this case the Supreme Court of Canada considered a constitutional challenge to the federal government actions, which involved a unilateral amendment to its agreements with the provinces relating to social transfer payments. The Supreme Court of Canada upheld the legality of Parliament’s unilateral actions. According to Choudhry, there are three possible ways to interpret this decision:
First, a narrow reading would hold that the agreement did not specify the levels of payment, leaving this matter to federal legislation. Thus, the agreement was not breached, and the question of legal enforceability was not decided. A second, and slightly broader, reading of the decision would be that the agreement was binding but could be discharged by conflicting legislation. The Court made it clear that “the government could not bind Parliament from exercising its power to legislate amendments to the Plan. To assert the contrary would be to negate the sovereignty of Parliament.” Until Parliament or a provincial legislature did enact conflicting legislation, governments would be bound to comply with the terms of the agreement and could be held accountable to the court. The third, and broadest view, however, seems to be that the agreements only created political, not legal, obligations:
[I]t must be remembered that this is not an ordinary contract but an agreement between governments… In lieu of relying on mutually binding reciprocal undertakings which promote the observance of ordinary contractual obligations, these parties were content to rely on the perceived political price to be paid for non-performance.31
This statement by Sopinka J. indicates that courts perceive intergovernmental agreements to be a different creature than a standard private contract. As a result, it may be possible to argue that such agreements should not be legally enforced. The broad language of the agreement may be useful in this regard. The context of the Agreement arguably indicates, at most, a broad commitment by all governments in Canada to a cooperative approach to the implementation of social programs. Therefore, the legal effect of such an Arrangements would be minimal.
The Agreement as a Tool of the Federal Government
In reviewing the implications of the Agreement on the issue at hand, one also should note that some observers argue that the federal government could resort to both the substantive and procedural requirements of the Social Union Framework Agreement as a means of responding to Alberta’s Bill. Michael L. Rachlis in A Review of the Alberta Private Hospital Proposal,32 for example, argues:
One of the Social Union Framework Agreement’s principles is to “ensure adequate, affordable, stable and sustainable funding for social programs.” However…evidence from the United States and Alberta demonstrates that for-profit care cost more than not-for-profit care. Therefore, more for-profit care would lead to a less affordable and sustainable health care system. The Social Union Framework Agreement also refers to ensuring access “…to essential social programs and services of reasonable comparable quality.” Again, however, the American experience indicates that for-profit acute care is, in general, of poorer quality that not-for-profit care.
Choudhry argues that perhaps these commitments could be used to respond to privatization efforts, for example. Nevertheless, one again must recognize the likelihood that these commitments may be more useful in a political, rather than a legal arena. In addition to these substantive provisions, if public statements by Federal Health Minister Rock are correct, Alberta also may have violated the letter and spirit of the Agreement, by failing to give all other governments advance notice of a major change in the provision of its health care. Rachlis also notes that it may be possible for the federal government to rely on the dispute settlement mechanisms outlined above, to call for a review of Alberta’s actions in this matter. He argues, in part, that Alberta may find it difficult to refuse such a review, because the province has called repeatedly for such a mechanism to resolve medicare disputes. Once again, legally such a call by the federal government would have little effect. Nevertheless, politically the federal government may be more comfortable with making such a call, before unilaterally acting to amend the Canada Health Act.
- 20. Peter Hogg, Constitutional Law of Canada, looseleaf, 3rd ed. (Toronto: Carswell, 1996) at 6-16.
- 21. The provincial jurisdiction in relation to health is found in section 92(13) of the Constitution Act, 1867, which grants the exclusive power to legislate in relation to “property and civil rights in the province.” Section 92(7) gives provinces jurisdiction regarding the “establishment, maintenance, and management of hospitals…in and for the province, other than marine hospitals” under section 92(7); while section 92(16) provides for the provincial power to legislate with respect to “generally all matters of a merely local or private nature in the province.” These provisions have been interpreted as providing the provinces with a general jurisdiction over public health matters, including the power to regulate the medical and other health professions, medical practices, health and hospital services, health insurance, medical and health education, and workplace health and safety.[See Schneider v. R.,  2 S.C.R. 112; R. v. Morgentaler,  3 S.C.R. 463 at 490-91].
- 22. Martha Jackman, “The Constitutional Basis for Federal Regulation of Health” (1996) 5 Health L. Rev. No. 2, 3-10, at para. 5.
- 23. Hogg, supra note 23 at 6-17 - 6-18.
- 24. See Claude Forget, The Harmonization of Social Policy in Fiscal Federalism, in M. Krasnick (ed.), Fiscal Federalism (Toronto: University of Toronto Press, 1986), 97 at 109. Some observers suggest that, from the provincial perspective, to attack the constitutionality of federal spending on provincial areas of jurisdiction would be recognized as “biting the hand that feeds.” (see: Dale Gibson, “The Canada Health Act and the Constitution” (1996) 4 Health L.J. 1-33 at para. 75).
- 25. See also Y.M.H.A. Jewish Community Centre of Winnipeg v. Brown,  1 S.C.R. 1532, where the Supreme Court of Canada upheld federal legislation that placed conditional grants with respect to employment training.
- 26. Leave to appeal refused (1989), 95 A.R. 236 (note) (S.C.C.).
- 27. Winterhaven Stables Ltd., at 433.
- 28. Ibid., at 434.
- 29. Ibid., at 434.
- 30. For a discussion of the legal status of intergovernmental agreements, see: S. Choudhry. “Enforcement of the Canada Health Act” (1995-97) 41 McGill L.J. 463 at 503.
- 31. Ibid., 503-504.
- 32. Online: Caledon Institute of Social Policy www.caledoninst.org/full115.htm