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Issue #1446      10 March 2010

Rudd’s plan for hospitals

Cost cutting towards privatisation

Prime Minister Kevin Rudd, his deputy Julia Gillard and Health Minister Nicola Roxon have been busy this week pushing their proposed changes to health and hospitals funding. Doubters and opponents are being warned to “get with the program”, to use the PM’s words. If state premiers do not fall into line with the new arrangements at next month’s Council of Australian Governments meeting, Rudd will seek a mandate to impose the commonwealth takeover at the next federal election. A referendum is being threatened. The Liberals are among the opponents but they have their own version of a “fund federally, manage locally” model. The problem being described is real enough. The report that sparked the media blitz – A National Health and Hospitals Network for Australia’s future – says what we all knew:

“For more than half a decade, almost one in six elective surgery patients and one in three people attending emergency departments have been waiting longer than the recommended time for treatment.”

The report now admits the federal government’s share of health funding with the states has slipped from the aspirational 50/50 to around 35 percent at present. Underfunding is not identified as the main problem, however. The problems pointed to are an ageing population, increased cost of treatments, rising levels of chronic disease and buck-passing, funds-wasting “bureaucracy”.

As in other “reform” debates, the ageing population concept is given scant attention. Proceeds from the massive increases in productivity in the economy in recent decades should have been more than enough to meet an older population’s health needs and the cost of more complex treatments. But those monies were diverted into the private profit share of national output. Increased emphasis on primary health care that all governments and authorities give lip service to is not projected to do anything about certain categories of chronic disease. As the report points out, “ … the cost of type two diabetes is projected to increase by more than 520 per cent from 2002–03 to 2032–33.”

The claim is that the real obstacle to progress and the reason why states will not be able to foot their future health bill is their own “bureaucracy”. To relegate state “bureaucracies” to a minor overseeing role and to put an end to the state/federal “blame game”, the Commonwealth is proposing to stop giving block grants from GST revenue to the states and move in with the following commitments to meet:

  • 60 percent of the efficient price of every public hospital service provided to public patients;
  • 60 percent of recurrent expenditure on research and training functions undertaken in public hospitals;
  • 60 percent of capital expenditure, both operating capital and planned new capital investment, to maintain and improve public hospital infrastructure; and
  • over time, up to 100 percent of the efficient price of “primary health care equivalent” outpatient services provided to public hospital patients.

The “efficient price” for a service would be determined by an “independent umpire” within the federally run system. An “efficient price” would initially take into account state factors before moving to a national “efficient price”. Local networks of hospitals run by “governing boards” would control the funds given directly to their hospitals. The “boards” would include clinicians. It says the local community would be consulted, in some unspecified manner.

Funds would be allocated on the basis of services provided, rather like the unpopular “casemix” system imposed by the Kennett government in Victoria in the 1990s. Thus a major part of the backlash to the grand Rudd scheme is that hospitals in many regional areas would have to close or amalgamate if funds were doled out purely according to the number of services provided.

Rudd is unmoved by these protests. Like the “education revolution”, the health changes are said to be about transparency and accountability. Implied is that state governments have been conspiring with greedy and mediocre health professionals in the public hospital system to dud the people of proper health care in the same way teachers are alleged to be standing in the way of improved education standards.

The local hospitals “governing board” concept sounds very like the mechanism imposed in some Australian education systems to get local school bodies, and their communities, to manage the finances and even the hiring-and-firing of teachers. In this scenario in the US, for instance, private companies sometimes move in to take charge and they end up with a school that is “publicly funded, privately run”. In this instance, hospitals are to be “funded federally, managed locally”.

Private management of public hospitals is not a new concept in Australia but it may be about to get a new lease on life.

Private health insurance is set to take a more prominent role in the system. Local networks are to be allowed to sub-contract procedures to private hospitals. The changes being discussed to Medicare to make health provision a matter for individual insurance management should already have caused warning bells to ring. If hospitals charge more than the “efficient price” and the states are too cash strapped to help out, private health insurance for the “gap” becomes inevitable.

Though dressed up as a massive cash injection into the health system, this is first and last a cost cutting exercise. The report is full of big figures – “over the first five years of the reforms, approximately $90 billion in GST revenue will be dedicated to health and hospital spending, invested through a new National Hospitals Fund,” for example. But there also is the telling admission that “The reforms are consistent with the government’s fiscal strategy as it is fully funded over the forward estimates and consistent with returning the budget to surplus by 2015-16, while keeping the share of taxation to GDP on average below 2007-08 levels.”

There was always going to be a day of reckoning for the billions spent on shoring up the economy during the economic crisis. In recent decades, health has always been a target of successive governments for privatisation as part of their overall agenda and now they have budget balancing added to the mix. The savings the federal government is seeking in the health system will not come through efficiencies; it will come by shifting the burden onto working people who will have to insure – “self provision” in the neo-liberal jargon – to pay for their health needs in an increasingly privatised system. The more the community becomes aware of the plans of the government and the Coalition “alternative”, the more decisively it will reject these policies.   

Next article –  Editorial – Australia must toughen stance on state terrorism

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