A mental health advocate in Newfoundland and Labrador is calling the new health arrangement with the federal government "very disturbing," but the province's health minister says it's a good deal.

"I was actually very concerned, not so much with the actions of the provincial government but with how this whole thing came about," Mark Gruchy, co-chair of the Community Coalition for Mental Health, said of the deal announced late Friday, just before the Christmas break.

Gruchy is president of the provincial NDP, elected in June 2016, and ran for the party in the 2015 election.

The 10-year agreement will see $160.7 million in new money sent to the province from Ottawa, but with strings attached. It has to be spent on home care and mental health care specifically.

Gruchy said he takes issue with the fact it was presented as a "take it or leave it" deal by the federal government.

He also criticized the prime minister's public appeal to provincial mental health advocates to pressure their governments to accept the deal.

To me it was pitting physical health against mental health, which is very backward. - Mark Gruchy

Gruchy said they couldn't oppose it anyway, as not-for-profit organizations dependent on government funding "who can't say anything because they're just hoping to stay open."

"I found that all very disturbing because to me it was pitting physical health against mental health, which is very backward," he told CBC Radio's On the Go.

Mark Gruchy is a St. John's lawyer and mental health advocate. (CBC)

'Foisted on weaker provinces'

Nova Scotia, New Brunswick and Newfoundland and Labrador finalized deals with Ottawa on Dec. 23. Other provinces have held off, not willing to agree to the terms.

Gruchy said Ottawa has "foisted this on weaker provinces financially," claiming the financial and demographic difficulties facing eastern provinces gave them no choice but to accept the deal.

He doesn't believe the new federal funding will improve mental health services in the province.

"I'm simply concerned that the mechanisms and health care realities that we are facing are such that that's not likely to happen to the extent that everybody is hoping that it will."

Health Minister John Haggie said the province's difficult financial circumstances were "part of the puzzle" in signing the deal.

John Haggie says the new health deal with the federal government will help improve home care and mental health services in the province. (Mark Quinn/CBC)

He told On the Go that historically, the federal share of health care funding has dropped since 1984 – from 50 to 20 cents on every dollar.

Haggie said the upside was that the federal government's targeted areas of home care and mental health care "align very nicely with our pressure points, particularly with care of the elderly."

"And as you're probably aware we have some significant challenges with addictions, which probably stem from mental health issues in youth. So the two areas of targeted funds line up very nicely."

Mental health traditionally underfunded

Both Haggie and Gruchy agree mental health care requires more attention, and more funding.

"Traditionally mental health services in most provinces in Canada have been underfunded," said Haggie.

There is a shortfall and there's no doubt about it. - John Haggie

They said mental health services in this province have received 5 to 5.7 per cent of total health care spending — and closer to 7 per cent in other Canadian provinces.

"I'd like to see that get dealt with. That would make a big difference right off the bat without any more money," said Gruchy.

"The kind of recommended target, if you listen to health economists and experts, is 12 per cent. So there is a shortfall and there's no doubt about it," said Haggie.

"Our challenge at the moment is given the fiscal hole we're in, from the recession and the difficulties with oil prices and the way the money from that has kind of evaporated, we are starting well behind in terms of being able to move money around freely."

Drifting health care funding

And Gruchy is concerned political pressure from "people who vote" will see the provincial government drift that federal funding from mental health care to home care for seniors, where the "pressing need in terms of money" is.

He said as health care spending is a provincial jurisdiction, the federal government has no real way to ensure the money is going where it has directed.

But Haggie said it will, and that part of the appeal of this new health arrangement is that for the first time, "the federal government budged on the idea of putting money in according to our demographic."

"So we will get money for home care which is based on the proportion of our population who actually would avail of home care, typically 65 or over. Similarly the mental health money is targeted primarily for youth."