Is the Conservatives 3%+ limit on annual health care spending reasonable?

On the eve of federal-provincial healthcare negotiations the federal government has unilaterally announced that after 2014, federal health transfers to the provinces will be capped at 3% or the rate of growth in the economy, whichever is higher. According to  Finance Minister Jim Flaherty, anything more would be "unsustainable".

Taxpaying citizens may well consider this to be a reasonable limit. After all, simply feeding an endless provincial appetite for healthcare money may discourage provincial health care systems from making needed reforms. The federal government cannot be expected to go into permanent deficit just to help provincial governments to avoid change.

Nevertheless, there are at least three considerations that make me question the government's claim of reasonableness. They  concern the constitution, the historical context, and the question of the government's ideological agenda.

First,  it is a matter of constitutional fact that the provinces are weighed down with 90% of the responsibility for health care and its attendant costs, but only get 50-60% of the revenue. Even if a global cap on growth in spending of the magnitude that Flaherty envisions were necessary,  it might be reasonable for the federal government's share of that spending to be higher.

Second, historically we need to ask whether the demographic bulge that occurred after the Second World War would have been cared for nearly as well had the federal government restricted itself to 3% spending growth. Would there have been as many hospitals, schools, teachers, doctors and nurses caring for our children? If not, why should we apply that restriction when the same demographic bulge is again in need of more extensive health care?

Third, we should be aware that this  government is a little too comfortable with the idea of squeezing the provinces fiscally, and then not strictly enforcing the Canada Health Act (all  in the name of respecting provincial autonomy, of course). The effect will to be encourage the privatization and profit orientation of health care, the consequences of which are not likely to be less expensive for Canadians overall (even if it is less expensive for them qua taxpayers).

In sum, we can defend the interests of both the single taxpayer and our single payer system for essential medical services. We need not be as fiscally hamstrung as the Finance minister avers.