MISSISSAUGA (Reuters) - Canadian health ministers met on Friday to discuss the best way to overhaul a creaking state-funded health care system, with the powerful provinces seeking more federal cash but resisting Ottawa's efforts to tell them how to spend it.

The meeting was the first between federal health minister Anne McLellan and her provincial counterparts since the release of an official report that recommended Ottawa pump up to C$6.5 billion ($4.2 billion) a year more into health by 2005.

The provincial ministers stressed the need for "flexibility" in health care, suggesting Ottawa leave them alone to spend the money as they see fit.

"Everybody agrees basically that there are categories where it should be spent, but you have to recognize the particular needs of the individual jurisdiction as to how that money will really be used," said Jamie Muir, the health minister for the east coast province of Nova Scotia.

Health care is a provincial responsibility in Canada, but part of the funding for it comes through transfers from the federal government, and the report recommended that Ottawa set up a monitoring system to ensure that new money was spent on items considered to be a priority.

Muir said the federal government needs to tell the provinces how much additional money will be available in the near term to help them plan health care budgets.

"It has to be sustainable and it has to be predictable... there has to be an escalator built in. The costs keep going up. We have to know and it's very uncomfortable to have this money just dropped in and then pulled back out," she said.

McLellan predicted she would be able to work out differences with the provinces.

"It's very clear that all Canadians, it doesn't matter where they live, are tired of federal-provincial bickering. They want us to work together. And I know that my colleagues and I will be able to do that," she told reporters.

"I have no doubt that we will be able to work together. I think we have many shared priorities."

The report from the government-appointed Royal Commission on the Future of Health Care in Canada, released in late November, set the scene for a significant overhaul of Canada's health care system by insisting more cash is needed.

Canada does not allow private healthcare for basic services such as hospital care, unlike European countries where a private system runs alongside a state-funded network, allowing those with private health insurance to jump lines.

But some provinces, including oil-rich Alberta, want the right to allow more private health care, an idea that the commission rejected.

The commission spent 18 months looking into Canada's 40-year-old "Medicare" system, which is beset by shortages of cash and doctors and ever-longer lines for treatment.

Its report said Ottawa should guarantee to pay at least 25% of primary health costs by the 2005-06 financial year. It said Ottawa currently estimated it would be paying around 15% of primary health costs in 2005-06.

The Liberal government takes enormous pride in Medicare and often compares Canada favorably to the United States, where more than 40 million Americans have no health insurance.

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