The last of these can be spent however the receiving provinces see fit, while the first two are intended to support social and health services respectively.
[2] Unlike Equalization payments, which can be spent however the receiving provinces sees fit, the funds received as part of the Canada Health Transfer must be used by provinces and territories for the purposes of "maintaining the national criteria" for publicly provided health care in Canada as set out in the Canada Health Act.
[3] While the transfer is allocated on an equal per capita basis, the cash component is not because it takes into account the value of provincial/territorial tax points.
The formula is based solely on revenues and does not consider the cost of providing services or the expenditure need of the provinces.
As an example, a wealthy citizen in Quebec, a so-called "have not" province, pays more tax into the federal system and funds more equalization than a poorer citizen in Alberta that pays less federal tax, a so-called "have" province.
The payments are meant to guarantee "reasonably comparable levels" of health care, education, and welfare in all the provinces.
In addition, the ebb and flow of receiving or paying into equalization by the various provinces has moderated both recession and growth periods within individual provincial economies, which has increased long-term stability in the Canadian economy as a whole.