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Issue #1451      21 April 2010

Labor’s federal public hospital takeover

Privatisation & GST grab


Health and Aged Care Minister Nicola Roxon.

Prime Minister Kevin Rudd and Health and Aged Care Minister Nicola Roxon have presented their health plan as a simple federal takeover of the public health system from failing states and territories. Rudd says his government is committed “to lifting national standards through the establishment of the National Health and Hospitals Network, and improving access and timely care for all Australians in emergency departments and in public hospitals across Australia.” In reality, the plan’s aims are federal control of public hospital funding, cost cutting, privatisation and clawing back of GST money. The quality of health care comes a poor fifth to these other goals.

According to Rudd:

“The Australian government will for the first time become the majority funder of the public hospital system.

To deliver these changes, the Commonwealth will fund:

  • 60 percent of the efficient price of every public hospital service;
  • 60 percent of public hospitals’ recurrent expenditure on research and training functions;
  • 60 percent of the cost of maintaining and improving public hospitals infrastructure; and
  • Up to 100 percent of the efficient price of ‘primary health care equivalent’ outpatient services provided to public hospital patients over time.”

John Deeble was one of the principal advisers to the Whitlam Labor government when it introduced the original Medibank and to the Hawke government for Medicare. Commenting on the Rudd plan, he correctly noted: “There is nothing in the plan that would improve hospital care or access to it, or inject any extra money into public hospitals over the next 10 years.” Mr Deeble described it as “simply rebadging the part of the GST money the states and territories now spend on health as Commonwealth payments.”

Under the present federal-state arrangements, the states pay 60 percent and the federal government 40 percent of public hospital funding, with the states having responsibility and control over how they do this. When the GST was introduced there were promises that the states would then have enough income to adequately fund public hospitals, public education and a host of other services. This did not happen; the federal government did not uphold its contributions to these areas.

Under Rudd’s new plan, states give back 30 percent of their GST income to the federal government who then pays it back to the states. In the process the 40:60 balance of contributions is reversed, making the Commonwealth the major contributor to public hospital funding. It takes control and it places conditions on how the states spend the money. You give me your money, and then I’ll have control over it when I give it back to you! A neat sleight of hand if ever there was one!

The Victorian Premier Brumby is correct in pointing to the dangers of the federal government clawing back GST income. It should not be forgotten that the previous federal government took over the industrial relations system and the Rudd-Gillard team are moving in that direction with education – the national curriculum, national testing, funding according to performance, etc.

Funding not needs based

The government refers to covering 60 percent of “the efficient price of every public hospital service”. This is the casemix approach that is already in use to varying degrees in a number of states with adverse consequences such patients being sent home too early and having to be readmitted with avoidable problems. The federal government will allocate “activity-based” grants to local hospital networks. Networks that “overspend” will have to take measures to cut costs – hospitals will be forced to cut corners with procedures and send patients home too early.

It can also result in cherry picking – hospitals giving preference to certain types of procedures or patients who are more likely to come in at or under the set price. It can put smaller hospitals such as those in regional areas at a disadvantage if they do not have the economies of scale of a large hospital.

Public hospitals will not be funded according to needs but on a totally inappropriate measure of output. It treats patients as commodities and hospitals as businesses, and cost-cutting as the measure of efficiency. Patients do not come at a unit cost like an engine part in a car.

Main issues not addressed

The plan fails to address the public health system as a whole or provide additional funding in critical areas of need.

“…. the announcement of new direct funding of Emergency Departments indicates an understanding of the difficulties our patients encounter when sick, but fails to recognise that the main problem with delays in Emergency Departments is ‘access block’, the lack of empty beds into which patients requiring admission can be sent. Emergency Department doctors and the research have been pointing this out for years,” said Dr Woodruff, president of the Doctors Reform Society.

Dr Woodruff pointed out that the reasons for “access block” are predominantly a lack of federal funding and federal reforms in aged care and Medicare/GP/primary care. “There are not enough aged care places for patients who are in hospital and inadequate primary care leads to too many patients presenting to Emergency Departments and requiring admission with problems which good primary care could have treated.

“Both primary care and aged care are predominantly a federal responsibility … but instead of addressing these issues Mr Rudd’s treatment of the problem in Emergency is to give some minor funding to states contingent upon them meeting targets which are unachievable because there are no empty beds.”

The government is promising money for capital spending on new aged care facilities – such has through loans to the private sector at zero real interest rates, but not an extra cent for staffing of those facilities. At present there is a critical shortage of nurses in aged care as well as in public hospitals.

The extra money being offered in real terms is peanuts. The government’s announcements cover up what additional amounts would have been spent under the Commonwealth-States agreement. Increases are inevitable to cover not just rising prices but the rapid growth in Australia’s population – close to one million during the four-year period of government commitments.

The government’s plan and fixed price for procedures and services will not solve the problem of long waiting lists or understaffing and the highly stressful working conditions in public hospitals which are driving nurses and other health professionals out of the system. There are no provisions for extra nurses or aged care workers, only facilities.

“The public hospitals’ major problems are not about efficiency or management. They simply don’t have the facilities or the money,” Deeble noted. They have been starved of funds and the new plan will not see that situation rectified. The talk of setting an “efficient national price” for services is neo-liberal spin for reducing funding in real terms. It is not a question of a shortage of funds; it is about distribution of health funds.

Instead of giving public hospitals the money they need, the government will increasingly turn to and pay the private hospital system to treat public patients. The far more costly and less efficient for-profit, private hospital system is unsustainable without massive subsidies from the public purse.

Private system bleeding public hospitals dry

The plan does nothing to halt the blowout of multi-billion dollar government subsidies to private hospitals. Private health insurance premiums have just risen again by six percent.

“Nothing is to be done to address the taxpayer funded support of the growth of publicly funded private hospitals which attracts specialists away from public hospitals,” Dr Woodruff pointed out.

After 18 months of discussion on health reform the federal Labor government gave states and territories less than six weeks to agree to its federal takeover of public hospitals. Calling it “cooperative federalism” the states and territories were stood over, bullied, blackmailed and told to agree on the Monday (April 19) or face a referendum on the question. Extra dollars for specific services were dangled as carrots for those who signed on. These amounts were peanuts compared with needs.

The rush and referendum threat have a political component. During the last election campaign Rudd had promised a federal take over of the public hospital system if the states did not lift their game. At the time he knew full well that the states were never going to eliminate hospital waiting lists, increase staffing or solve the problems of emergency departments.

The solution to these problems lies beyond the reach of the states on their own. The federal government holds the key to many of the problems such as the shortage of aged care and mental health facilities that sees patients taking beds because there is nowhere else for them to go.

The referendum is the means of saving face at the next election in the event that a federal takeover did not take place.

The Rudd plan is yet another assault on Medicare and the public health system. The states, with their new health and hospitals networks will “fail”. It would then only be a matter of time before the federal government contracts out the management of the National Health and Hospitals Network to private sector operators.

Lost in all the debate are the key questions facing the public health sector, such as the lack of funding, the appallingly low wages and stressful working conditions of nurses and other health care workers. The $4 billion private health insurance rebate subsidy to private hospitals should be abolished and the money redirected to the public sector for the universal provision of the full range of services – preventative, primary, aged, mental health, hospital, specialist, dental and other services on the basis of need. 

Next article – Editorial – Capitalism is not concerned with meeting people’s needs

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