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Are we finally seeing headway on hospital funding?

Toby Hall - ABC The Drum
March 2016

There are signs, however faint, that the federal Government is finally engaging with the states on the issue of public hospital funding. Is it time to get optimistic about the future? Toby Hall writes.

The impasse between the Commonwealth and the states on public hospital funding appears to have entered a new - and confusing - phase.

Rumours and speculation abound. And even among the chief players, it appears no one truly knows what's going on or who's talking to whom.

The Prime Minister and the NSW Premier seem to be hammering out a $7 billion short-term dealdespite the Treasurer not sounding too keen – and it seems no one's been on the phone to the Victorian Premier.

Nevertheless, the fact that the Prime Minister is at least engaged in a discussion with the states on this issue - and appears willing to put money on the table - is significant.

That's because, even if it is stop gap funding to squash the matter as an election issue – "kicking the can down the road" as some might like to call it – it's still a quantum leap from the position the federal government has taken over the last 18 months.

Since the 2014 Budget, the Commonwealth has been adamant: it will only increase its contribution to public hospital funding in line with inflation and population growth.

But this is well below what's needed for hospitals to manage the real growth in costs and everyone – including, it appears, the Prime Minister – knows it.

The Commonwealth's own intergenerational report argues there are a range of other important factors driving health costs.

People are living longer; the rising burden of chronic disease is leading to increasingly complex and costly care; and patients are demanding more and higher quality health care, particularly as technology develops.

If the signals – however faint and hard to read – are right, then it's the first time the Government has recognised that its current position is unsustainable and unfair.

It is recognition that as hospitals are starved of the funds they need, they will have no choice but to ration staff, beds and procedures, which means longer waiting times and poorer health outcomes.

And who will bear the brunt? Low income Australians because they carry a greater burden of disease and rely more on public health care.

Think about it this way, in St Vincent's public hospitals $1 million is the equivalent of about 1300 emergency department attendances or 4,330 dialysis treatments - and that's just the tip of the iceberg.

For every $1 million in funding we lose, there will be thousands of people who will either miss out or find themselves at the end of an extremely long queue.

It's also explicit recognition from the Prime Minister that the Commonwealth has a shared responsibility in managing the rising costs of public hospitals; a responsibility that it can't just walk away from.

Up until now, the Government's rhetoric has been that the buck stops with the states.

In his recent National Press Club speech, the Treasurer went to great pains to point out that the states and territories must shoulder full responsibility for the impending public hospital funding meltdown.

If that's changing, then we welcome it. Even stop gap funding is preferable to nothing.

Not just because it'll prevent hospitals from disappearing into the fiscal abyss come 2017, but because it will give us some time to try to convert a start into something more substantial.

Our view is that sustainable and fair public hospital funding can only occur via a long-term agreement between the Commonwealth and states and territories to share in real hospital cost growth.

Beyond that, both levels of government need to reach an understanding on a transparent and independent mechanism to determine and adjust funding levels in line with costs and activity. For example, through a national pricing authority or similar.

And finally, there needs to be incentives for both levels to improve efficiency, reduce preventable hospital admissions and better manage chronic illnesses.

Public hospitals can always become more efficient, but it is fantasy to imagine that belt-tightening alone is enough for hospitals to avoid financial crisis if no long-term solution is found.

State governments enforce efficiencies on our hospitals every year.

St Vincent's public hospitals in Melbourne and Sydney are required to reduce their costs by 1 per cent every year, which is roughly the equivalent of $11 million.

There are big opportunities for broader and deeper savings, but they can only be achieved through structural reform and by introducing different models of care.

For example, a relatively small number of patients are responsible for large amounts of hospital funding. Improved primary and community care programs for people with chronic conditions have the potential to significantly mitigate hospital cost growth.

A large amount of an individual's health care costs are expended during their last few years, with frequent hospital admissions. But most people with a terminal illness want to die at home, close to their families. Alternative models of end of life care have the potential to generate substantial savings.

Progress on these areas wouldn't just alleviate cost growth for governments, they'd also free up resources to improve healthcare access for our most vulnerable - people with mental illness, homeless people and Aboriginal and Torres Strait Islanders.

There are substantial savings - and deeper discussions - to be had, but they require governments working with hospital providers as equal partners.

It also requires the ongoing presence of a healthy and strong public hospital system.

And, at the moment, that's entirely in the hands of the Prime Minister.