Rudd’s big bang hospital reform

Kevin Rudd says his health reform package is bigger than the introduction of Medicare as he commits to taking on the dominant funding role for the entire national public hospital system.

Kevin Rudd has announced a National Health Reform Plan that will see the Federal Government become the majority funder of public hospitals.

The key aspects of the reform are:

  • The Commonwealth will lift its share of public hospital funding from 35% to 60%;
  • It will meet 100% of all GP and primary care services;
  • The states will now only have to pay 40% of their health budgets;
  • The funding changes involve the states surrendering 30% of their GST revenue. The Federal Government would put this into a National Hospital Fund for new hospital networks that would replace the area health services.

Under the new proposed funding arrangement there will be no cap on a hospital’s annual budget. Instead they will get paid an ‘efficient price’ for every service they provide with tough mechanisms of accountability.

An ‘efficient price’ means there will be a uniform national price for all hospital services (such as a hip replacement). These payments would be set by an independent umpire ‘at arm’s length from the Federal and State Governments’.

The price will be adjusted to recognise particular circumstances and health care needs – for example, people living in rural Australia and indigenous Australians.

The efficient price is a formula to reduce waste and increase the number of services provided for each dollar invested.

The Federal Government says it will insist on a set of national standards and transparent reporting in the health system.

Responsibility for hospital management will be devolved to Local Hospital Networks made up of small groups of local hospitals that collaborate to deliver patient care, manage their own budget and are held directly accountable for their performance.

Responsibility for the negotiation of industrial agreements and awards will lie with the State Governments.

Many positives but some unanswered questions

Brett Holmes says there are many positives in the plan.

‘There is now clear accountability by the Commonwealth for the system into the future and it rids the system of the blame game and incentives for cost shifting.

‘There is much greater clarity for public hospitals about what is expected of them and certainty about their budgets, which will be based on real measures of activity.

‘There is greater transparency in quality and safety issues, which will provide nurses with opportunities for better staffing.’

However, Brett says there are still unanswered questions that have consequences for nurses.

‘How will the cost of “quality” be factored into the cost of care? How will labour costs be factored into the cost of care? What mechanisms will operate to ensure that prices reflect the cost of safe staffing levels? How will the outcomes of bargaining be funded?

‘Until we know the answers to these questions, the impact on those at the frontline of health will not be known.’

Brett says he and other ANF Branch Secretaries raised these issues during a meeting with the Prime Minister.

‘We also raised the need for the Government to fix the problems in aged care in order to be able to balance the care of the aged in acute care and residential care.

‘Kevin Rudd acknowledged our issues and indicated there would be further announcements and discussions in the near future.’

New poll shows strong support for Rudd’s reform and for nurses

Research commissioned by the ACTU shows strong support for Rudd’s health reform. Key findings include:

  • 45% say the quality of the health-care system in Australia is getting worse and only 17% say it is getting better. 38% say it is staying the same.
  • The need to improve Australia’s hospital and health-care system is the top issue of concern with 91% rating it very or extremely important.
  • Funding hospitals nationally, but having local boards of doctors, nurses and other health professionals who manage the day-to-day running of hospitals has 76% support with 5% opposing.
  • Creating national standards for the delivery of care to hospital patients has 86% support.
  • The poll finds strong support for more health workers, with ‘having enough doctors, nurses and other health professionals’ the most worrying health-care issue.
  • 82% of respondents agree the Government should try to attract more qualified nurses and other health-care professionals by improving pay and conditions in the sector.

What the experts have to say

Establishing local health networks should make the health system more responsive and accountable to communities and clinicians. It will make accessing the health system easier and less complicated for patients and hopefully improve services.

The new funding arrangements will ensure that the health system is funded on a long-term and sustainable basis.

The introduction of activity-based funding is welcome but it is important that the costings reflect the full cost of services, including nursing care.

Ged Kearney, Federal Secretary of the Australian Nursing Federation

The Government’s announcements on hospital reform are bold and deserve widespread support. They are a step in the right direction.

The Government is challenging, quite correctly, the special interests of State Governments and their health bureaucracies. What is needed next is for the Government to find the political will to challenge other stronger special interest groups, particularly among the providers – the AMA, the Australian Pharmacy Guild, pharmacy companies and the private health insurance funds.

John Menadue, Centre for Policy Development

The AHHA has strongly advocated for improved national consistency of hospital funding along with greater transparency and accountability, as the key to driving better service quality and planning. We welcome the proposed moves in this direction.

Cydde Miller, Policy and Networks Manager for the Australian Healthcare and Hospitals Association (AHHA)

The announcement of an Australian health and hospitals network constitutes serious reform.

However, while this is a step in the right direction, there is no single magic bullet for Australia’s health system and it is important to be realistic about what the plan might achieve.

Importantly, the plan rids the system of the blame game and incentives for cost shifting due to different levels of government paying for different parts of the health system.

Stephen Leeder, Professor of Public Health and Community Medicine at the University of Sydney and Director of the Menzies Centre for Health Policy