Alberta’s health-care spending is unsustainable

Without decisive reform, health-care costs will continue squeezing out other public service priorities

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Alberta’s health-care spending is growing at an unsustainable rate, and without decisive reform starting in 2026, the province’s so-called “health care deficit” will surge to a projected $3.8 billion within a decade.

Alberta’s annual “health care deficit” is the gap between current spending trends—about 4.7 per cent growth per year—and a more sustainable path of roughly 3.5 per cent. Between 2023/24 and 2025/26, that deficit grew from $1.1 billion to $2.7 billion and is projected to reach $3 billion by 2028/29 and $3.8 billion by 2035/36.

Over the past three years, Alberta health-care spending has risen by an average 7.1 per cent annually. That trajectory is not sustainable. Health care already consumes more than 40 per cent of total program spending and when costs rise faster than revenues, they squeeze out funding for education, infrastructure and other core provincial responsibilities.

Alberta governments have spent more than three decades trying to “bend the curve” on health-care spending. They have largely failed—not because the problem is misunderstood but because successive governments have not sustained the political will required. While the current government has taken modest steps to slow growth in the annual “health care deficit,” incremental measures will not deliver the savings or efficiencies required to secure the system’s long-term viability.

So what must the Alberta government do?

1. Withdraw from the Canada Health Act and fund innovation provincially

Alberta should use its fiscal strength to seek a fundamental reset in its relationship with Ottawa on health-care funding. The province should pursue a “grand bargain” that trades compliance with federal constraints for greater funding autonomy—an Alberta Accord on Health Care Transformation.

The Canada Health Act is outdated and constrains innovation. While provinces have constitutional responsibility for health care, Ottawa enforces national standards by withholding cash transfers from provinces that do not comply. Alberta should negotiate a bilateral agreement that replaces the Canada Health Transfer with the transfer of a portion of the federal Goods and Services Tax.

Under such an arrangement, Alberta would harmonize an up to five per cent federal Goods and Services Tax with a five per cent provincial sales tax. The result would be an up to 10 per cent Harmonized Sales Tax, with a portion of the net revenue, estimated at $5.8 billion in 2023/24, dedicated to closing the annual “health care deficit.”

This approach would align revenues more closely with provincial responsibilities, improve transparency for taxpayers and give Alberta the flexibility to experiment with new models of health-care delivery.

2. Reform how health care is paid for

Payment reform is increasingly unavoidable. Think tanks such as the Fraser Institute and the Montreal Economic Institute have long called for changes that include activity-based hospital funding, reduced reliance on fee-for-service physician compensation, and a larger role for private delivery of publicly funded surgeries.

Alberta has taken tentative steps in this direction. They are not enough.

One area requiring immediate attention is the Alberta Health Care Insurance Plan Schedule of Medical Benefits. Alberta should establish a permanent expert advisory panel to review insured services, assess value for money and recommend which services should remain publicly funded and which new treatments merit coverage.

Fee schedules should be transparent, regularly updated and responsive to technological change. Savings generated through improved efficiency should flow back to Albertans.

3. Diversify health-care revenue streams

Closing Alberta’s growing “health care deficit” without new revenue sources is unrealistic.

The province eliminated health-care premiums in 2008. The move delivered short-term political gains but reduced fiscal discipline. Those premiums generated roughly $1 billion annually and provided a stable, predictable funding stream.

Reintroducing a progressive, income-based health-care premium beginning July 1, 2027, could raise approximately $1.3 billion per year. Low-income Albertans would be exempt, and revenues would grow alongside the provincial economy, providing a more reliable foundation for long-term planning.

Taken together, funding autonomy, payment reform and revenue diversification offer a credible path toward restoring Alberta’s fiscal health and closing the “health care deficit.”

Absent bold action, the Smith government risks allowing that deficit to widen further, undermining the province’s long-term fiscal sustainability. The era of incremental experimentation is over.

2026 must mark the start of decisive action.

Lennie Kaplan is a former senior manager in the fiscal and economic policy division of Alberta’s Ministry of Treasury Board and Finance, where, among other duties, he examined best practices in fiscal frameworks, program reviews and savings strategies for non-renewable resource revenues. In 2012, he won a Corporate Values Award in TB&F for his work on Alberta’s fiscal framework review. In 2019, he served as executive director to the MacKinnon Panel on Alberta’s finances—a government-appointed panel tasked with reviewing Alberta’s spending and recommending reforms.