Hospital reform looks sickly but the blame game is fit as a fiddle

WHEN Kevin Rudd promised to "end the blame game" over public hospitals before the 2007 federal election, political considerations were driving his health reform agenda. The strategy was to satisfy growing community concerns about the quality and quantity of public hospital services by offering voters a can-do alternative to the tiring Howard government.

With the finalisation of the new federal health agreement, the Gillard government has delivered something less than the "bold" set of reforms Rudd promised.

Rudd's original reform plan in April last year was billed as "the most significant reforms to our health and hospitals system since the introduction of Medicare". The centrepiece was the promise of a new national funding system that would have seen the federal government become the majority funder and ultimately assume responsibility for paying for 60 per cent of the cost of each in-patient public hospital service.

While critics claimed the approach was too hospital-centric, the primary focus on the financing of public hospital care was warranted. State governments have perennially blamed long waits for elective and emergency treatment in public hospitals on underfunding by the commonwealth.

The theory behind the Rudd plan was that once the commonwealth footed 60 per cent of the efficient price of hospital care, the states would no longer be able to blame problems on Canberra's parsimony. Instead, they would have to address waste in their highly bureaucratic public hospital systems. However, the plan broke down because the states refused to give up one-third of their GST revenue.

The result is the watered-down Gillard deal that will see the commonwealth ultimately provide 50 per cent of all new funding for public hospitals. In 2008-09, the commonwealth's share of public hospital funding was 39.6 per cent, compared with the state's 51.2 per cent. By 2020, it looks as if the commonwealth will instead be paying for about 44 per cent of the efficient cost of each in-patient hospital service as determined by the Independent National Hospital Pricing Authority.

The new pricing arrangements are a step towards a more transparent and accountable health system as the government has claimed. Yet the underwhelming impression one is left with is that the reforms are primarily an exercise in money shifting between state and federal budgets.

This impression is reinforced by another dud aspect of the deal. This is the promise of greater local control of hospitals and the replacement of the centralised command-and-control management model employed by state health departments.

The promise made to public hospital staff across the country was that hospital management would be devolved by requiring the states to set up local hospital networks. Yet the intention always was that state health departments, which are stacked with public sector union members, would remain the system managers in charge.

This is crucial to whether the deal will do much to improve waiting times. Not only will the states continue to provide most of the funding. State health bureaucracies will continue to determine budgets and set service limits based on whatever money the state governments are willing to pour into public hospitals.

At best, the introduction of an efficient national hospital price will drive improvements in public hospital performance if state governments can cut out the bureaucratic fat and redirect more resources to the front lines. But this is a huge reform task and there are serious question marks over whether state politicians have the will and ability to accomplish it. The likeliest outcome is the local hospital networks will become just another layer of bureaucracy. If so, then the same centralised bureaucracies that have mismanaged public hospitals will continue to determine how many public hospital services the community ends up receiving. And the commonwealth, as the minor funding partner in the system, will continue to be open to charges by the states of underfunding .

I therefore suspect that hardy perennial of Australian politics, the blame game over health and hospitals, is far from dead.

Jeremy Sammut is a research fellow at The Centre for Independent Studies.