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Future of public hospitals up for grabs at leaders’ retreat

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Radical plans that could see the Federal Government dump all responsibility for public hospitals onto the States or pay for hospital treatment through a Medicare-style benefit scheme are up for discussion when Prime Minister Tony Abbott meets with his State and Territory counterparts at a special leaders’ retreat later this week.

The Prime Minister called the retreat to discuss reform of the Federation, and the division of responsibility for health services, particularly the funding and operation of public hospitals, is expected to be a central plank of the talks.

Since coming to office, the Abbott Government has engaged in a high-stakes stand-off with the States and Territories over public hospital funding. In its first Budget, it disowned funding guarantees made under the National Health Reform Agreement and reduced the indexation of post-2017 funding to CPI plus population growth, ripping $57 billion out of the public hospital system over 10 years.

The move is seen as part of a broader gambit by the Federal Government to pressure the states into looking at alternate sources of revenue, including increasing the GST or broadening its base.

Treasurer Joe Hockey last week increased the pressure on the States by declaring that each level of government should be responsible for raising the revenue needed to pay for the services they provide.

Mr Hockey said reforms discussed at the leaders’ retreat must include “the States taking responsibility for their own budgets in order to ensure they can afford their ever-increasing expenditure – such as the costs of their public hospital systems as our population ages”.

The tactic has echoes in the Government’s current strategy – likened by AMA President Professor Brian Owler to introducing a patient co-payment “by stealth” – to freeze the indexation of Medicare rebates until mid-2018, forcing many practices to cut bulk billing and introduce or increase patient charges in order to remain financially viable.

The AMA is a fierce critic of both policies, and Professor Owler – who will deliver a nationally-televised address to the National Press Club Wednesday – warned of an “impending crisis” for the nation’s public hospitals unless more money was injected into the system.

Professor Owler said public hospitals were facing a “perfect storm” of increasing demand, missed performance targets and major funding changes.

“The combination of these factors will have devastating consequences for our public hospital system,” he told the AMA National Conference in late May.

State and Territory leaders, particularly NSW Premier Mike Baird, are similarly outraged by the Federal Government’s tactic. Mr Baird warned earlier this year that the States simply “do not have the capacity to meet those health costs on their own”.

The Queensland Government estimates the Commonwealth’s decision to claw back public hospital finding will leave the State $11.8 billion worse off by the middle of next decade, with serious consequences for the quality and availability of care.

“Unless these federal funding cuts are reversed, there will be a shortfall in funding for Queensland hospitals – and a resultant decline in the quality and timeliness of services – from July 1, 2017,” it warned.

It is in this heated atmosphere that the leaders are expected to discuss ideas for future hospital funding, including those prepared by the Department of Prime Minister and Cabinet.

In its Green Paper it makes five suggestions, including the Federal Government shifting full operational and funding responsibility for public hospitals onto the States and Territories, the creation of an MBS-style hospital benefits scheme, jointly funded individualised patient care packages, or the establishment of a single national or regional agencies to purchase health services.

Grattan Institute Health Program Director Professor Stephen Duckett and colleague Peter Breadon said introducing a Hospital Benefits Schedule was a promising idea that could see a return to shared incentives by exposing both the Commonwealth and States to the cost of growing demand for hospital care.

Although many of the factors forcing health costs up have little to do with the structure of the Federation, the Reform of the Federation Green Paper 2015 said improving the way the health system was funded and operated could improve prevention and care while making better use of funds – particularly by providing funding on the basis of outcomes rather than activity.

Professor Owler said that, whatever the funding model that might be developed, it needed to ensure public hospitals were given the resources they need to meet the growing demand for care while also providing the quality teaching and training that the next generation of doctors required.

He said that pushing responsibility for public hospital funding back to the States and Territories without providing them with the means to generate more revenue would be “irresponsible”.

Mr Baird declared public hospital funding was the most significant finance issue facing the States and Territories, and Professor Owler said he was particularly concerned about prospects for the smaller jurisdictions, some of which had areas of significant disadvantage and inequitable access to care, but which had limited revenue-raising capacity to fund improvements on their own.

“If the planned changes [announced in the 2014 Budget] go ahead, there will be serious consequences for frontline clinical services,” he said.

Adrian Rollins