AUSTRALIAN HEALTHCARE AND HOSPITALS ASSOCIATION
THINK TANK ON REFORM OF THE FEDERATION AND HEALTH
MONDAY, 16 MARCH 2015
*Check against delivery*
Thank you very much for inviting me to join in this conversation, which is coming at a very crucial time in the health care debate.
It’s a credit to the Australian Healthcare and Hospitals Association that you have been able to assemble such a cast of speakers from all sides, and I will be very keen to look at the ideas that emerge
I have had many conversations over the years about the nature of our Federated health care system, and more than I can count to remember that start with the phase, “If only..”
If only the Commonwealth had full responsibility for health, if only the Commonwealth ran and funded our hospital system, if only we abolish the states entirely, if only our system was more like, New Zealand, Canada, the UK ….if only.
“If only” conversations are important. They stretch thinking, challenge orthodoxies and promote furious argument, and just as often, much furious agreement. But the “if only” conversations all too often mask just how much we have already achieved in health reform – even with our multiple funders and multiple and overlapping responsibilities.
Politics is of course the art of the possible and I remain optimistic of the scope and capacity of our Federated health care system to continue to meet the needs of our population and to continue to ensure we have good health outcomes.
Federation and Health – Labor’s Record
In Medicine and the State, published in 1990, Ann Daniels comments:
"Throughout this century, governments everywhere have taken on more and more responsibility for provision of services; governments in Australia, traditionally the providers of economic infrastructure, have extended welfare-oriented services…
In the vanguard of the push towards more welfare state activities has been an enlarging concern for the health of the people and the provision of health services on an equitable, efficient and effective basis.
I’d argue that quote is a little misleading because rather than governments everywhere, it has really, with only a few minor tweaks, been Labor Governments which have driven the reforms in health through an expanded role for the Commonwealth.
Going right back to Curtin and Chifley, the history of health policy is of Labor governments establishing the mechanisms through which the Commonwealth could extend its reach to deliver uniform national health care.
Successive Labor governments have continually tested the boundaries to extend the Commonwealth’s role into areas not specifically prescribed to us to improve the co-ordination and delivery of health services beginning with the funding of hospitals and the conditions under which patients would be treated, to, in more recent years, training and preventive health.
Along the way, Labor has had to fight the senate, conservative state governments, reactionary high courts, and on a number of occasions, the medical profession to achieve reforms which, for the most part, have now become accepted as sensible and much needed health policy embedded in the nation’s social contract.
That last line of Daniels, “health services on an equitable, efficient and effective basis” sums up Labor’s approach to Health Policy from the Curtin and Chifley Governments, right through the Whitlam, Hawke/Keating and Rudd/Gillard eras to the position Labor has taken in resisting the unfair Budget measures of 2014, and the policy I am developing to take to the 2016 election.
At the same time we face an Abbott Government which also, in the long tradition of coalition governments, has abandoned cooperative federalism and, once again, sought to tear down Labor’s reforms and, in the process, taken a sledge hammer to commonwealth – state relations in health.
This fight began way back in 1941 when the Curtin Government came to power having campaigned on a platform that included a declared commitment to a national health service, free at the point of access.
It was of course another 33 years before that actually came into being as Gough Whitlam’s Medibank, and another decade, before, in its reincarnation as Medicare, it became entrenched.
Despite their initial failure to introduce a version of Britain’s National Health Service, Curtin, and then Chifley were still able to lay down the foundations of the modern, co-operatively funded health system we enjoy today.
In 1944, the Pharmaceutical Benefits Act was passed, providing for the first time for free drugs for patients.
The Act was struck down by the High Court a year later, in a case brought by Victoria at the behest of doctors, but the 1946 referendum granting the Commonwealth the power to legislate for, amongst other things, pharmaceutical, sickness and hospital benefits, and medical and dental services, effectively secured the introduction of the Pharmaceutical Benefits Scheme that we enjoy today.
It was of course the Menzies Liberal Government that in 1960 introduced the first co-payment into the scheme.
A year earlier the Hospital Benefits Act of 1945 had introduced the first national scheme to finance public hospitals under an arrangement that laid the foundations for hospital funding agreements that continue to this day.
Under this act, the Commonwealth paid the states six shillings a day for each patient occupying a bed in a public or private hospital, provided the patients in those public beds were not required to pay an additional fee.
The scheme came about because of two issues which show that in health policy, some things never change – public hospitals were going broke and the states didn’t have the revenue sources to pay for them!
Emboldened by its new constitutional powers, the Commonwealth had now embarked under Curtin and Chifley on an expanding role in the health sector.
But just to show, again, that some things never change, Labor’s requirement that public hospital treatment be provided free in return for the Commonwealth contribution was abandoned by Menzies, replaced by means testing which limited free hospital care under the coalition to pensioners and the very poor.
It’s also worth noting that in 1948 Chifley also passed the Mental Institutions Benefits Act that covered the states for the costs they previously charged relatives of mental hospital patients – again, in return for free treatment. This marked Commonwealth entry into mental health funding.
The next great advance in commonwealth involvement over health care was of course the Whitlam Government’s Medibank scheme.
Medibank’s reason for being was to provide adequate healthcare to all citizens regardless of their financial means, in particular the 17 per cent of Australians who at that time did not have, or could not afford private health insurance.
Medibank had to survive a double dissolution, a joint sitting of parliament and a high court challenge, as well as a campaign by doctors who feared it would restrict their incomes or amounted to a socialist takeover of medicine.
However, once the scheme did come into law, the Commonwealth was then able to negotiate agreements with state governments to integrate their hospitals into the system.
Again, these negotiations were protracted and difficult, with conservative governments in power in four of the six states, but despite this, Medibank began operation on October 1, 1975, just six weeks before the fall of the Whitlam Government.
The familiar pattern then reasserted itself, with the Fraser Government turning Medibank into a residual system for pensioners and others on low incomes before Bob Hawke restored it as Medicare.
Labor Reform – the Modern Era
There is a tendency in some quarters to argue that serious health reform effectively ended with the introduction of Medicare. There is also in the current context a tendency to equate cuts in health expenditure with healthcare reform and to argue Labor, in standing up for decent affordable universal healthcare in the face of these cut are somehow opposing reform.
This badly sells short the work done through the Health and Hospitals Reform Commission and enacted by my predecessors Nicola Roxon and Tanya Plibersek. I think it also, therefore, underplays the damage that has been done by the Abbott Government in abandoning these reforms.
No issue has done more to damage the standing of the Abbott Government, and destroy its legitimacy, than its lack of a coherent health policy and then its attempts to severely undermine the architecture of both heath care reform and universal health care. Measures it kept hidden from voters in the 2013 election campaign, but then unveiled in the May Budget.
The public outrage and political fight over that budget has, of course, been dominated by the GP Tax and, frankly, I’m astonished that the Abbott Government is still determined to pursue this.
We’ve now had a $7 GP Tax, a $20 GP Tax, a $5 GP Tax and GP Tax via stealth through a long term freeze on rebates. It’s been called a co-payment, then a modest co-payment, a price signal, a value signal and for one day, a modest contribution. The government is now pursuing what it calls “direct billing” which will enable bulk billing and GP copayments to coexist – opening the door for patients to now pay for the government’s $1.3 billion cut to GP services income.
Regardless of the name, or the method, the one thing that hasn’t changed is its aim – which is to fundamentally undermine universal health care, reduce bulk billing, deter people from seeing a GP and make patients pay more.
Fighting this has been a no brainer for Labor. It’s terrible health policy, bad for patients, bad for doctors, bad for health care and ultimately bad for the Budget. It’s a self-defeating policy which tries to make a short-term addition to the Budget at the cost of greater long-term health costs.
But the focus on the GP Tax has taken scrutiny away from other changes made to health in that Budget which are every bit as damaging.
Principally among these was the decision to abandon Labor’s agreement with the states to fund 50% of growth in the efficient price of hospital based activity over the next decade, not just inflation or population growth, a move which cut $57 billion out of the budget over the next decade.
In last week’s Intergenerational report this was the single biggest contribution to the savings claimed by the Abbott Government and yet, it is a complete fraud.
The growth in hospital costs will not magically be lowered as a result of this decision.
As the NSW premier, Mike Baird, said in a recent interview with Michelle Grattan,
“What happened last federal budget is not sustainable. That was, the commonwealth and the federal government said, ‘We are going to allocate a large part of the future growth in health costs from ourselves to the state governments.’
“The states do not have the capacity to meet those health costs on their own. The commonwealth has a critical role to play.”
In The Guardian on the weekend under the heading “Who is going to pay for our hospitals?” Lenore Taylor made this point to the Prime Minister:
Your last budget announced that, from 2017, the federal government’s share of hospital spending will grow each year in line with inflation and not by the previously promised 6% or more (which was calculated to help meet the actual cost of running hospitals). The budget claimed this would “save” $50bn over the next 10 years, but of course it didn’t “save” anything. It just hand-balled the cost on to the states.
Astonishingly, the Abbott Government made this change in the Budget in May with absolutely no discussion with the states. Just one month earlier at the regular COAG meeting with all the premiers and chief ministers it failed to tell any of them it was about to destroy their health budgets by ripping away $57 billion over the next decade.
This is the Abbott Government’s approach to federalism – no discussion, no consultation and certainly no co-operation or consensus.
But the changes went much further than just ripping out the funding, because at the same time the Government also tore up a series of agreements, years in the making and agreed by governments state and federal, Labor and Liberal, to not only place hospital funding on a secure basis, but use that funding to drive some real reforms that would not only improve patient care, but do so in a way that made hospitals much more efficient.
When Labor came into office in 2007 we faced a health and hospital system that had been badly neglected for a decade, funded by a model that neither encouraged efficiency, nor patient outcomes but certainly encouraged cost shifting.
So, right from the start Minister Roxon met with all her counterparts to discuss with them, how, in a co-operative fashion they could improve Australia’s health system.
This didn’t happen overnight, and it took almost three years of negotiations that began with a full slate of Labor governments, and ended with a lot of Liberal state governments.
And we did not do this in isolation.
The National Health and Hospitals Reform Commission (NHHRC) provided 123 recommendations for reform, not all of these we agreed with but we worked with health professionals, administrators, lobby groups and patients.
But at all times two things were clear – fundamental reforms were needed if we were to maintain a strong public health system, and this could only happen if these were driven by the Commonwealth, in close co-operation with the states and territories.
In April 2010, we reached an historic agreement for the Commonwealth to take on full funding and policy responsibility for all general practitioner and primary healthcare and aged care services.
Critically, this agreement also included funding of 50 per cent growth of the national efficient price of every public hospital service provided to public patients.
Not just the price of services, but the efficient price.
And, to underpin these reforms, that year’s Budget, amid some very straitened financial circumstances, included $7.4 billion over five years to introduce a National Health and Hospitals Network (NHHN) and fund more doctors, more nurses, more sub-acute hospital beds and shorter waiting times for elective surgery and emergency departments.
The agreement delivered better quality care in primary health, hospitals and aged care while putting in place a secure funding base for the health system and hospitals well into the future.
They were in short, the most significant reform to the health system since the introduction of Medicare and negotiated yet again by a Labor Government in co-operation with the states and territories.
So, three years of negotiations, three more years bedding down these changes, and after just six months in power, the Abbott Government throws that all away and says to the states, it’s not our problem.
A government which continually tries to justify its savage cuts to health by declaring health funding is unsustainable, dispenses with an agreed funding formula that would have reduces waste and duplication and lead to greater efficiencies in the longer term.
Instead, of ensuring scarce health dollars are used to deliver health services as effectively and efficiently as possible we’ve gone back to simply providing block funding to the states at levels which won’t even come close to matching the growth in demand for these services.
The training programs Labor funded to deliver the health workforce we need in the future and keep costs down is in complete chaos, with the colleges still unsure whether these places will even exist past July.
Preventative health programs that could keep people out of hospitals and also cut costs have been decimated.
The architecture for the electronic health record – stalled for the past 18 months and no transparency about what is to happen next.
The dismantling of the Medicare Local Networks, at a cost of some $200 million we estimate, for no clear policy reason other than they were created by Labor.
And their replacement with the so-called Primary Health Networks is just as a much a debacle as the rest of the government’s health agenda.
It’s now just over three months until they are supposed to start but the tenders have not been awarded, the people running the Medicare Locals don’t have a clue if they’ll have a job or a business and staff are deserting, taking with them years of expertise and ensuring the worst possible start.
And there are real concerns about just who will benefit most from these PHNs with the government openly encouraging private health funds to prompting suggestions they could be used to introduce US-style managed care plans and much greater access of private health insurers to primary care.
And of course there’s the GP Tax, the price signal to discourage patients from seeing a GP, again ensuring they are more likely to end up in the more expensive part of the system, the public hospitals, which are now not going to be funded for anything like the growth in demand.
It’s clear despite all the rhetoric about 50 year plans and federation white papers and intergenerational reports the only real agenda here is to slash costs, abandon reform, push cost on to the states and blackmail them into lifting taxes.
Of course this inevitably leads to the question of what Labor will do.
Although I must say it’s a sign of just how badly this government is travelling, and how united Labor has been since the election, that just 18 months out from a severe defeat, people are seriously asking what sort of Government Labor would be.
Well, when it comes to health I’d start by saying, look at our record.
As I have just spelled out Labor in government did embark on a substantial period of health reform through the Health and Hospitals reform process.
We achieved the highest rate of bulk billing in Medicare’s history
We invested more in public hospitals and established new efficient mechanisms to start to fund them into the future. We invested heavily in new medical research facilities, cancer centres in our regions, eHealth and upgrades to existing and new integrated GP clinics, primary and community health centres and Aboriginal Medical Services.
And yet we did this at the same time as Australia experienced its lowest rate of growth in health expenditure in 30 years.
If we are fortunate enough to be returned to government in 2016, Labor will continue on the path of cooperative federalism.
Labor’s Health and Hospitals reforms whilst not perfect were reform in the right direction.
Australia’s health care system, despite all its flaws and all of its achievements can only be reformed in cooperation with the States and Territories.
Labor will of course focus strongly on primary care because we know the stronger our primary care system the better Australia’s health outcomes are. That does not mean that we are always going to be in furious agreement with the medical profession as to how to get there. Labor’s history would show in fact that has often, not been the case.
But we also believe that the Commonwealth must and should play a role in prevention and in funding and reforming our public hospital system.
It is not a great revelation to Labor at least, to understand that we do have a population ageing, that we do have increasing chronic disease and we do need to ensure our health system can adapt, and continue to provide good health outcomes for our population.
But as we proved in government there are efficiencies to be had without doing fundamental damage to Medicare and fundamental damage to our health system.
Because Labor reform is founded on some basic, untouchable principles that are not open for compromise.
We will not and cannot support the erosion of the universal health insurance scheme that is Medicare, in all of the forms the government is trying whether it be a GP Tax through legislation or through the back door by regulation, or by destroying the value of the Medicare rebate or by taking away the mechanisms that assist the Commonwealth as the sole purchaser of primary care services, to keep a check on rising costs.
Every GP, nurse, surgeon, health administrator and patient I speak to is passionate about Australia’s health care system.
There is no shortage of ideas and I will be using, as I have been over the past 18 months, all the time available between now and the next election to continue to develop a policy that strengthens and sustain our health system well into the next generation.