Within the next few days – perhaps on Wednesday – the federal health minister, Tanya Plibersek, will announce a large bailout package for Tasmania’s hospitals. But further systemic reform – such as the single-funder arrangement called for by all major health players, including the state government and the Australian Medical Association, has again been rejected. Without this longer-term reform, Tasmanian hospitals are likely to find themselves in crisis again as soon as this one-off cash injection is spent.

People involved in the discussions expect Canberra will offer a package of about $100 million, to be spent over a period of years. The Denison independent, Andrew Wilkie, negotiated the bailout and originally asked for $400 million. Speculation that such a large amount might still be paid appears to be unfounded.

The Tasmanian government, and Mr Wilkie, have insisted that the bailout should be exempted from the Commonwealth Grants Commission GST redistribution process, under which states which receive more than their population share of specific-purpose funding from Canberra have their GST docked, dollar for dollar, to compensate. Mr Wilkie’s failure to negotiate an exemption from this process for the Royal Hobart Hospital redevelopment money – together with the federal government’s failure to offer it and the state government’s failure to insist – is one of the most significant drains on the state’s capacity to fund services. If that package had been negotiated more wisely, last year’s cuts would not have been necessary.

This time, they have learnt their lesson. The state government is now insisting on an exemption and Mr Wilkie has talked with the government leader of the House of Representatives, Anthony Albanese, about how this might be put in place. But experts in the Grants Commission process say the money will still be paid to a Tasmanian government entity, and unless the federal treasurer orders a formal exemption, the money will be lost in the form of lower GST payments. The treasurer, Mr Swan, previously refused to make such an exemption in the case of the Royal Hobart Hospital money.

Ms Plibersek has her own concerns. She is determined that money intended for hospital services is not siphoned off to fund other elements of the ailing state budget. She will try to insure against this by paying the money not to the state government but to the three regional Tasmanian Health Organisations which, under the new health reform structure, actually run the hospitals. This means the money cannot flow until at least 1 July, when the THOs become legal entities.

The THOs will be required to spend this money on the purchase of services from the public hospitals they run, and possibly from private hospitals in their areas.

The involvement of the private sector is highly probable. Some public hospital beds, closed because of the state cuts, will be able to be re-opened fairly quickly but there will still not be enough. Alongside this public shortage is a very large private surplus: there has been an under-investment in public beds and an over-investment in private ones.

Purchase of services from private hospitals by the public sector is nothing new. In 2008-09 the state already provided private hospitals with about seven per cent of their revenue through the purchase of services. And this was done efficiently. An exhaustive and high-quality report by the Productivity Commission has shown that private hospitals are as safe as public and, in the elements over which they have control, as economically efficient. They do not, though, employ most of the doctors, who bill patients directly and have almost total pricing power. Any substantial increase in demand could be expected to result in surgeons and anaesthetists putting up their fees, in response to the laws of the market. This inflationary trend would not pose such a problem if doctors were employed either by the public system or by the private hospital operators.

State and federal politicians have never been able to acknowledge that the new system of activity-based (or Casemix) funding, to be introduced from 1 July, cannot be directly applied to private hospitals. The Casemix system, by which each hospital service is allocated a pre-determined price, does not include an element to cover capital expenditure or depreciation, nor an allowance to recognise the reasonable expectation of private investors for a return on their investment. If the package does not recognise this, it will struggle to meet its objectives.

Because the Plibersek-Wilkie package will not ensure long-term security, hospitals may have difficulty in spending the money in the wisest and most efficient way. Elective surgery beds may be opened but to address current demand and the massive backlog of untreated patients, they will need to recruit significant numbers of doctors and nurses. Some sacked nurses will be able to be re-employed. But others, and more particularly the doctors the state will now need, may be difficult to attract if they know the money – and their jobs – will disappear within a couple of years.

A single-funder system – a species of which was proposed by Kevin Rudd – would give public hospitals, for the first time in many decades, a way to do their job adequately and efficiently into the future. It would probably involve the Commonwealth becoming the owner of public hospitals and becoming solely responsible for their funding, with the state giving up the amount of money it currently spends on its hospitals. The Commonwealth – the only level of government with the resources to ensure adequate funding – would then be responsible for making sure the system functioned properly. Shortcomings could no longer conveniently be blamed on someone else.

But the present federal government, wishing to convince the electorate that it has ‘done health’ and that the sensible but minor reforms it is now putting into place will fix the system, rejects any such long-term approach out of hand. $100 million is welcome and absolutely necessary but the real task, once again, has been comprehensively squibbed.

Martyn Goddard has worked in national health policy, mostly in the consumer sector, for over 15 years. Before that he was variously a journalist and documentary producer at the ABC in Sydney and Melbourne, a feature writer for The Sydney Morning Herald and a magazine editor.

Martyn Goddard on Tasmanian Times

Health Professionals’ Chorus of Approval For Trial of A Single Funder Model

Paul O’Halloran MP
Greens Health spokesperson
Friday 8 June 2012

The Tasmanian Greens today welcomed renewed Federal interest in the State’s health system as an opportunity to re-set the flawed current model of how health care is provided to Tasmanians.

Greens Health spokesperson Paul ‘Basil’ O’Halloran MP said that, if the rumours prove true, the Federal cash injection could be one of the most expensive Band Aids in the State’s history, if a long-term solution is not included in the package.

“Any Federal cash injection, on its own, will be a wasted opportunity to really turn around the health system. We need a long-term solution front and centre of any confirmed Federal package,” said Mr O’Halloran.

“Of course, the Greens roundly welcome any extra funding that helps ease suffering and help the State achieve its targets, especially for elective health, but a Band Aid fix, however costly, won’t do it on its own.”

“The big picture is that this could be a huge, once-in-a-lifetime opportunity to re-set Tasmania’s health service to deliver world-class health service.”

“The combination of up-front cash, if true, combined with a Federally-implemented package of structural and policy reforms could make our health system the best in the country.”

“But while there has understandably been a lot of excitement of the possibility of big cash figures flowing into the health system in the next few weeks, there has been a deafening silence over what comes next.”

“After the Greens’ health care stakeholders’ roundtable, late last year with made clear, with their unanimous support for a trial of the single funder model, this long-term solution should be front and centre.”

“Following Mr Wilkies’ announcement today of the still-unconfirmed millions supposed to flood Tasmania’s health system, these same health professionals are again reiterating the need for long-term policy solutions.”

“This is a case of most of Tasmania’s health care establishment backing the Greens on the need to trial a single-funder model, one of several long-term policies the health system badly needs,” said Mr O’Halloran.

Greens Health Stakeholders Forum_Summary Report_Nov 24 2011: here

First published: 2012-06-08 04:03 PM