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PM’s tax plan no hospital fix

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The Prime Minister’s suggestion that states be given the power to levy their own income taxes will not fix the funding crisis hitting the nation’s public hospitals, according to AMA President Professor Brian Owler.

Professor Owler said public hospitals needed a significant ongoing increase in funding if they were to meet growing demand for their services, and it was “very unclear” how Malcolm Turnbull’s proposal to allow the states to impose income taxes would provide that.

Mr Turnbull has floated a radical change in the tax system under which the Commonwealth would cut its income tax take and allow the states to set their own income taxes while keeping the overall tax burden the same.

The idea, which has been rejected by the Opposition and received only lukewarm responses from State leaders, is due to be discussed at a meeting of Federal, State and Territory leaders and treasurers tonight before formal discussions at tomorrow’s Council of Australian Governments meeting.

The Prime Minister is under pressure to unwind $57 billion of cuts to public hospital funding unveiled by his predecessor Tony Abbott in 2014, and is expected to propose a short-term injection of up to $7 billion to help ensure the issue does not figure prominently in the forthcoming federal election.

But Professor Owler said that although extra money would be welcome, an extra $7 billion would not fix the long-term problem of inadequate Commonwealth funding.

And he said simply reallocating income tax responsibilities between levels of government was not an answer.

“Unless there’s going to be extra funding that’s put into health by the Commonwealth, I fail to see how this new policy is going to fix the problem of funding public hospitals,” the AMA President told ABC News 24.

Professor Owler said the policy was likely to exacerbate existing differences in access to care between the states, because New South Wales, Victoria and Queensland had a much bigger potential revenue base to draw on than smaller states like Tasmania and South Australia.

“While the larger states and territories might be okay, we know that the smaller states already struggle,” he said. “If you’re relying on income tax, we know that their economies and revenue would be much less, in a proportional sense, than the revenue raised from some of the bigger states. So I think we just create more inequality across the country.”

Instead, he has called for COAG use any breathing space created by a short-term injection of funds to engage in “a much broader, in-depth discussion about how we are going to fix the problem around Federal reform, about long-term funding of public hospitals.”

And he dismissed suggestions by Mr Turnbull that there needed to be a greater focus on improving hospital efficiency.

Professor Owler said that doctors and nurses had been working to improve hospital efficiency for decades, and had achieved huge improvements, such as in reducing patient length of stay.

But instead of supporting this process, the Abbott Government had axed the activity-based funding mechanism which was specifically designed to drive greater efficiencies, and the AMA President said the Turnbull Government should “get back” to some of those structural mechanisms.

Adrian Rollins