Better medicine for all in single-source funding

So the Rudd-Gillard plan to reform federal-state relations in health is going into risky territory. It is a complex problem that has dogged Australia's health system like a chronic disease. Any changes will be difficult to sell to a public traditionally sceptical of healthcare reform.

In his weekly column Tony Abbott's response to the platform went something like this: "Voters won't let federal Labor do to Medicare what state Labor has done to public hospitals." He questioned the detail of the ALP's single-funder health model.

Predictable, and sad. Predictable because every health minister appeals to the public's fear of losing Medicare to stymie any new Opposition health policy. Sad because Abbott engages in the very blame game he claims to avoid by blaming state Labor for public hospital disasters.

In fact neither Labor nor Liberal should be blamed for the dysfunctional relationship between state and federal governments in health. It is the system itself that engenders discord, inefficiency and waste.

The problem is that states fund public hospitals whereas the commonwealth runs Medicare, the Pharmaceutical Benefits Scheme, indigenous, aged care and mental health services. Dual funding easily takes the focus away from patient care and towards cost-shifting between governments.

Both state and federal health departments have been guilty of shunting patients across funding boundaries, not to improve patient care but to minimise their own costs.

At any one time between 800 and 2000 elderly Australians are in public hospital beds due to insufficient commonwealth funding of aged care facilities. By contrast, the states have been guilty of closing state-funded hospital outpatient clinics, transferring the cost of specialist follow-up toMedicare.

But these problems may be overcome with improved lines of communication between federal and state bureaucracies. What will never be resolved is the effect of federalism on the relationship between the public hospital and other areas of the health sector.

In effect, having public hospitals run by the states has allowed them to become largely disintegrated from the rest of the health system.

A patient with a chronic disease lives most of their life in contact with the commonwealth-run parts of the health system. He or she receives free medicine from the PBS, sees their GP for regular checks-ups (funded by Medicare) and when it all gets too much will benefit from residential aged care.

But if the patient gets sick enough to need hospitalisation, enter the state-run public hospital. Costly inefficiencies occur at every interface between public hospitals and other health services.

There is abysmal integration of IT systems between general practice and state hospitals, leading to the loss of important information and unnecessary repetition of expensive tests. Hospitalisation for chronic disease costs millions of dollars each year yetthere is complete funding and administrative separation between public hospitals and disease prevention efforts.

Abbott is wrong to assume that the Council of Australian Governments is a sufficient or effective method to tackle these problems. COAG meetings are a blunt instrument, too irregular and infrequent for good health policy making, with no mechanisms to hold the states accountable for their use of the health dollar.

What is required is a national health council to oversee spending of the health dollar in all health sectors. This has a number of advantages over COAG. First, it would be dedicated to health policy making. At COAG, creating good health policy comes a distant second when bickering over transport or water policy supervenes.

Second, a national committee would be able to set policy objectives for public hospitals and make funding contingent on achievement of quality goals. Finally, the interface between public hospitals and other health services will improve if the funding arrives from one source.

There is already evidence for success of such bodies. In the 1990s Bob Hawke and Nick Greiner created the National Competition Commission to oversee the implementation of national competition policy.

The NCC regulated state funding for reforms based on adherence to the terms of the policy. This increased the fiscal power of the commonwealth, but the states were kept happy because the NCC was accountable to COAG and not to Canberra.

The Business Council of Australia has referred to the NCP as a model for reform in all sectors (including health) where responsibility and funding are jointly shared.

The main criticism of this model is that it doesn't solve the problems of federal and state governments bickering over where funding comes from. In fact it does just that.

A national health council would determine the total funding requirements for all health services in a state and the proportional contribution from the state and federal government to cover those costs. Direct funding of services by the council would remove any incentive to cost shift. Any burden of increased funding would be shared by both governments, not one.

As yet the ALP's plans are long on rhetoric and short on substance. But the idea of significant structural reform to federal-state health funding is a laudable one. There is no need for the public to fear such changes. Far from being an attack on Medicare, successful reform of this area will be an important step in preserving quality, universal health care for all Australians. Isn't that what Medicare is all about?

Nick Coatsworth is a public hospital physician and author of Australia's State of Health in the summer edition of the Centre For Independent Studies' Policy magazine.