OTTAWA—Senior defence officials were warned that a fight with provinces and hospitals over soldiers’ medical costs, including threats not to treat military personnel, could mean “negative exposure” weeks before it erupted on the federal campaign trail.

The caution is in a briefing note obtained by The Canadian Press through the access-to-information law that outlines the military’s seemingly ham-fisted attempt to limit the amount it would reimburse hospitals to care for troops.

The fight exploded into public view in October, putting the Liberals on the defensive two weeks before the federal election. The restriction was quickly rolled back, though work on a new scheme among the federal government, provinces and hospitals continues.

As a rule, Canadian Armed Forces provides health care for its members. However, because the military closed many of its hospitals in the 1990s, those in uniform often turn to provincial hospitals for services that are not offered or readily available within the Forces.

In such situations, the federal government is responsible for reimbursing the hospital in the same way that provinces reimburse each other when a resident of one seeks treatment in another.

Under the Canada Health Act, members of the Canadian Armed Forces are not eligible for provincial health coverage.

The problem, according to the Aug. 28 briefing note prepared for Jody Thomas, the Defence Department’s top bureaucrat, and chief of the defence staff Gen. Jonathan Vance, is that “no billing constraints were imposed on hospitals and care providers” in the 1990s.

The result: two internal Defence Department audits found hospitals were charging on average twice as much to treat Forces personnel as they charged for civilian residents. It was in this context that the military in May 2019 put a cap on how much it would reimburse for treatment.

The hope at the time was that the measure would save $24 million per year, according to the briefing note. Yet not only does that appear to have been an exceedingly optimistic assessment, the move actually threatened to raise costs while resulting in unintended consequences.

“Currently, it appears that the hospitals want the CAF to pay at least interprovincial rates (agreement between provinces for out-of-province patients) though it is assessed that a different negotiated solution is needed as this could actually increase overall costs,” according to the note.

Many hospitals were caught completely by surprise, the note added, with some threatening to reject military patients and others warning without providing details that the change threatened their financial viability. Some civilian hospitals close to military bases treat a lot of military personnel.

“Regrettably, second- and third-order effects have resulted which threaten service access, member direct billing, our credibility as a reliable bill-paying client and, importantly, risk to confidence that the CAF is taking care of their personnel,” the note says.

It was at this point that officials warned the dispute had become “a pressing issue with potential for negative exposure if not resolved.”

However, the conflict remained unresolved until Global News reported on it Oct. 8. The Global report said Ontario Health Minister Christine Elliott had written to Ottawa about the change and that some hospitals were preparing for a shortfall in the millions of dollars.

The next day, Prime Minister Justin Trudeau promised military personnel would not suffer as a result of a battle over money between the federal government and the provinces even as the military rolled back the reimbursement restrictions.

“Since then, the province and Ontario hospitals have received correspondence from the federal government that hospitals can seek claim reimbursement from the CAF’s insurance partner per the original rate schedule,” said Ontario Health Ministry spokesman David Jensen Tuesday.

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“We understand that Ontario hospitals are now in the process of working with CAF’s insurance partner to seek this reimbursement.”

Defence Department spokesman Daniel Le Bouthillier said changes to the reimbursement scheme remain a possibility pending consultations and negotiations with provinces and territories, but that there is no timeline for such a move.