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Patients pay for hobbled hospitals

WA health complaints are hysteria: premier - Featured Image

Since the Commonwealth’s unilateral changes to public hospital funding announced in the 2014-15 Budget, the AMA has highlighted the impact of dramatically reduced funding on an already underperforming public hospital system.

In May 2014, the Australian Government walked away from the National health Reform Agreement, abandoning its promise to make public hospital funding sustainable and contribute an equal share towards growth in public hospital costs.

From July 2017, the Commonwealth will instead limit its contribution to public hospital costs based on a formula of the Consumer Price Index (CPI) and population growth only. This represents the lowest Commonwealth contribution to public hospital funding since the Second World War.

According to Treasury, the indexation change will reduce Commonwealth funding to the states and territories by $57 billion between 2017-18 to 2024-25.

The CPI measures changes in prices faced by households only, and is not an appropriate measure of increases in hospital costs. Increasing funding on the basis of population growth does not address cost increases associated with changing demographics, or the costs of new health technologies.

The Finance and Economics Committee resolved last year that the Commonwealth’s contribution to public hospital funding must be sufficient to address real increases in actual costs of the goods and services used by hospitals, and provide for demographic change – not only for population growth, but also for changes associated with ageing and health needs.

The Government’s ongoing justification for its extreme health savings measures, including cuts to public hospital funding, has been that Australia’s health spending is unsustainable.

This is simply not substantiated by the evidence.

The Government’s own figures show that health spending grew by 3.1 per cent in 2013-14. This is almost 2 percentage points lower than the average growth over the last decade (5 per cent). The previous year (2012-13) growth was even slower – just 1.1 per cent, which was the lowest annual increase since Government began reporting on health spending in the mid-1980s.

Clearly, total health spending is not out of control. The health sector is doing more than its share to ensure health expenditure is sustainable.

There have now been two years where growth in health expenditure has been well below the long-term average annual growth of 5 per cent over the last decade.

As part of this slowdown, growth in Commonwealth funding for public hospitals in 2013-14 was just 0.9 per cent, well below inflation and virtually stagnant. This is off the back of a 2.2 per cent reduction in Commonwealth funding of public hospitals in 2012-13.

This austerity has come at a cost, and has been reflected in the performance of our public hospitals. The AMA’s Public Hospital Report Card 2016 shows that, against key measures, the performance of our public hospitals is virtually stagnant or, in many cases, declining. This is the direct effect on patient care of reduced growth in hospital funding and capacity.

The most recent data shows waiting times are largely static, with only very minor improvement. Emergency Department (ED) waiting times have worsened. The percentage of ED patients treated in four hours has not changed, and is well below target. Elective surgery waiting times and treatment targets are largely unchanged. Bed number ratios have also deteriorated.

The Commonwealth’s funding cuts are already having a real impact as a result of almost $2 billion being sliced from programs to reduce emergency department and elective surgery waiting times.

But the most acute impact will be felt from July next year, when the new funding arrangements take effect.

Without sufficient funding to increase capacity, public hospitals will never meet the performance targets set by governments, and patients will wait longer for treatment, putting lives at risk.

Despite these warnings, we have yet to see a solution to the serious and rapidly approaching crisis in public hospital funding.

This is a crisis that has been created by political and budgetary decisions. It is one that will require political leadership to resolve.


– Brian Owler