It was the top priority recommendation from the recent National Rural Health Conference in Adelaide, where delegates stated that high broadband speeds are crucial for facilitating new and emerging best practice models of healthcare.

As well as its importance for enabling improvements to healthcare, the NBN is critical for economic and social development, says Daryl Sadgrove, Chief Executive Officer of the Australasian College of Health Service Management,

In the article below, he says:

“It is a shame that our Opposition has decided to take such a short-sighted policy position on such a fundamental piece of infrastructure, which based on the current election polls, might be a decision which we all soon have to live with.

The NBN is a public good that drives our economy, provides a global competitive advantage, enriches relationships, entertains us and will be a major driver of reform in our healthcare system. The return on investment for these major investments are never realised in a political cycle, what we need is vision. “

This article was first published at the ACHSM blog.

 ***

The NBN: Too expensive or are we being shortsighted?

Daryl Sadgrove writes:

The impact of the Internet on Australian business over the last two decades has been profound.

The Australian Bureau of Statistics (2012) reported that Australian Businesses received orders valued at more than $189 billion in the 12 months to 2011, and this was primarily achieved using low speed broadband.

The introduction of a national high-speed broadband network in Australia is likely to open up a wide range of new opportunities for businesses and the economy as a whole. 

In a report to Telstra Corporation Ltd, Access Economics (2009) estimated that the net impact of introducing the NBN could contribute as much as $9.5 billion to the Australia’s gross domestic product (GDP) between 2008 and 2020, and although early days, it was suggested that the NBN could potentially have the single biggest impact on the economy of any government investment in the last two decades.

The NBN is likely to have a significant impact on the growth and sustainability of business in Australia.

The literature identifies two key mechanisms will drive business development; the first is by making existing production processes more efficient (i.e. by improving the quality and reducing the cost of inputs), and secondly by creating new business models that fundamentally change the way business is done (through the globalisation of markets, facilitating a better allocation of resources, and improved supply chain management).

The OECD (2008) says that “broadband facilitates the development of new inventions, new and improved goods and services, new processes, new business models, and it increases competitiveness and flexibility in the economy”.

Today we can see that businesses are already harnessing these benefits by conducting a wide range of activities using broadband including the recruitment of staff, marketing, ecommerce, supply chain management, communications, market research and even the creation of completely virtual businesses.

Of course the net benefits to business from the NBN will be contingent on the precise technology used, the approach used in the rollout, the regulatory framework adopted, as well as the prevailing economic conditions.

In consideration of recent media concerning the differing policy positions of the two key political parties regarding how the NBN should be rolled out, let me say that my support is squarely in the camp of the Labor party on this one. Although there may be short-term gains achieved by paring back the speed and access to the NBN, in the medium term the evidence suggests that our economy and productivity will suffer.

I believe we should stay on course to rollout a full fibre-to-the-premises (FTTP) strategy which aims to reach 90% of homes, schools and healthcare facilities achieving speeds of up to 100Mbps (supplemented by fixed wireless and satellite technology for those premises not reached by fibre).

This is in fact not the fastest speeds available (up to 1Gbps is currently possible), however 100Mbps was the level that most of the evidence suggests that the greatest returns on investment are achieved in the medium to long term.

If the Liberals do not take responsibility for providing fibre directly to the premises, all it will do is shift the cost to consumers and create an equity and access issue for those that cannot afford to connect fibre to their home, and hence a significant proportion of our population will not benefit from the social and economic opportunities that will evolve.

By having a reduced number of people participating in the evolving high-speed broadband digital economy, this in turn reduces the connectivity and ‘network’ benefits for us all.

The NBN and healthcare

As we are well aware the healthcare industry is facing a range of unprecedented challenges over the next 40 years.

In 2010-11 the healthcare industry represented a significant proportion of Australia’s GDP (9.4%), and the costs associated with its delivery continue to rise at an unsustainable rate of 8% per annum, which is almost three times the rate of CPI (AIHW, 2011).

Between 2010 and 2050 the population over the age of 65 will nearly double (Access Economics, 2010b) and more than 80% of healthcare costs are driven by those over the age of 65.

If we continue business as usual demand for health services are expected at least double over the same period. Based on current trends the proportion of GDP spent on healthcare will increase from 7.5% to 12.8% by 2050 (Treasury, 2010).

Escalating state health expenditure is predicted to overwhelm the budgets of most state jurisdictions by 2035, and the availability and distribution of the health workforce is expected to fall a long way short of current demand projections (Health Workforce Australia, 2012a).

Therefore considering the size of the healthcare sector and the significant financial and resources challenges expected, even modest improvements in productivity could be expected to have profound economic benefits for the healthcare sector.

The NBN enables a wide range of opportunities for the healthcare sector to achieve financial, productivity and societal benefits in the future. In 2003 Access Economics (2003) estimated that the net economic benefit of proving the NBN to hospitals without broadband would be $190 million over 10 years.

In addition to the significant economic benefits that could be achieved from the roll out of high speed broadband in healthcare, Access Economics (2003) suggested that the most significant gains would be made from the implementation of telehealth services.

Lobley (1997) outlined a number of potential cost savings from telehealth including reducing the costs of patient movement (ambulances, aircraft etc.), reducing the costs of moving staff (transport, travel and accommodation), reducing the opportunity costs of time spent travelling, reducing the rates of diagnostic testing, savings from more appropriate and effective care delivery, and reduced travel and service costs to patients (including out-of-pocket expenses).

In 2003 it was projected that the net cost savings from a limited range of telehealth services (including telepsychiatry, teleradiography, foetal ultrasound and staff education & training) to be nearly $2 billion. However unsurprisingly the study also showed that there were diminishing returns based on the extensiveness of the network (Access Economics 2003).

Following these early studies, Access Economics (2010b) was later commissioned to undertake a cost benefit analysis of introducing telehealth interventions (including telemonitoring and teleconsultation) in existing aged care programs.

After evaluating the financial cost benefits for only three sites, excluding costs related to the burden of disease, the benefits totalled $17.4 million (or a 61% return on investment), if burden of disease costs are included the total gross benefit of the trial increases to $26.9 million or a 249% return on investment (Access Economics, 2010b).

Despite these impressive gains, we must understand that telehealth services are not for  everyone. Botsis and Hartvidsen (2008) suggested that not all patients are suitable for telehealth including as alzheimer’s patients as they had difficulty using the technology and associated devices.

Nevertheless this shouldn’t preclude the wider use of such technologies for the majority of us. I know that I for one would be prepared to have 30-50% of my GP consultations conducted by videoconference. This would not only save my GP time and money, it was save ME time and money and also minimise the opportunity cost lost from the waste.

The evidence suggests that the implications of the NBN on the Australian economy, and particularly healthcare, are likely to be significant.

It is a shame that our Opposition has decided to take such a short-sighted policy position on such a fundamental piece of infrastructure, which based on the current election polls, might be a decision which we all soon have to live with.

The NBN is a public good that drives our economy, provides a global competitive advantage, enriches relationships, entertains us and will be a major driver of reform in our healthcare system. The return on investment for these major investments are never realised in a political cycle, what we need is vision.

I’d be interested in your thoughts.

 ****

References:

Access Economics (2003), ‘The economic impact of an accelerated rollout of broadband in hospitals’, report prepared for the National Office of the Information Economy, accessed 13/4/13, http://www.archive.dbcde.gov.au/__data/assets/pdf_file/0003/48351/Broadband_in_Hospitals.pdf

Access Economics. (2010b), ‘Telehealth for aged care’, Report to the Department of Broadband, communications and the digital economy, accessed 13/4/13, http://www.dbcde.gov.au/__data/assets/pdf_file/0014/131900/Telehealth-for-aged-care.pdf

Allens Consulting Group. (2010), ‘Quantifying the possible economic gains of getting more Australian households online’, Report for the Department of Broadband, Communications and the Digital Economy, Canberra.

Australian Bureau of Statistics. (2012), ‘Australian businesses connecting with the internet’, Media Release 26th June, accessed 7/4/13, http://www.abs.gov.au/AUSSTATS/abs@.nsf/Latestproducts/8166.0Media%20Release12010-11?opendocument&tabname=Summary&prodno=8166.0&issue=2010-11&num=&view=

Australian Institute of Health and Welfare. (2011), ‘Health expenditure Australia 2009-10’, Health and welfare expenditure series no. 46, pp77, accessed 13/4/13, http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=10737420254

Health Workforce Australia. (2012a), ‘Innovation and Reform Strategic Framework for Action’, accessed 13/4/13, http://www.hwa.gov.au/work-The rprograms/workforce-innovation-and-reform/strategic-framework-for-action

Lobley, D. (1997), ‘Economics of telemedicine’, Journal of Telemedicine and Telecare, vol. 3, no. 3, pp17.

OECD. (2008), ‘Broadband and the economy’, Ministerial Background report, accessed 20/4/13, http://www.oecd.org/internet/ieconomy/40781696.pdf

After its first year was dominated by ministerial resignations and scandals on one hand and large scale spending and staff cuts on the other, Campbell Newman’s government has now revealed its hand. The findings of the Commission of Audit have set the direction for public policy, public management and service delivery.

On Thursday in Croakey, Michael Moore wrote about the Government’s “Blueprint for Better Healthcare”, outlined that morning by Health Minister Lawrence Springborg at a function which, controversially, was pay for access, with funds raised going to the LNP’s coffers.

The radical changes to the delivery of healthcare in Queensland make a lot more sense now that we know the Government looks favourably on the recommendations its Audit Commission made.

Unfortunately, the Commission, headed by former Liberal Treasurer Peter Costello, has not released its full report. Only the executive summary was released to the press in a ‘lock up’, and it is unclear at the time of writing whether even Government backbenchers have access. The Government, in a strange approach to consultation, has simultaneously called for a debate and indicated it will publish the report and its response in six weeks’ time.

The interim report attracted heavy criticism from independent economists such as Professor John Quiggin. This criticism was not just directed at the report’s ideology but at its financial and statistical assumptions and accuracy.

Yet we know enough to say that the report is a sweeping blueprint not just for privatisation of state assets, but also for outsourcing (“contestability”) of government services. Page 11 of the executive summary effectively protects only the courts, police and emergency services from the outsourcing drive.

So, it’s now no surprise to see that health is slated for “contestability”. This is spun in the Blueprint as agnosticism towards the ownership of service providers, but its implications are both more far-reaching and also not subject to the mandate the Government says it will seek for privatisations of assets.

Like the cuts to public health, no clue was given prior to last March’s state election that this approach would dominate health. Yet the straws have been blowing in the wind. In January, I wrote that it was clear that a privatisation agenda was set to dominate health policy in Queensland.

Politically, this time, the Minister has the AMA on his side, but unions are promising “the mother of all campaigns”.

Federal Treasurer Wayne Swan has vowed to fight, claiming that the moves amount to a dismantling of Medicare. There has already been controversy over payments not made to Queensland because of a failure to meet agreed upon COAG targets. In a classic exemplar of the “blame game” over funding, the State calls this money a “cut” while the Feds decry the State for breaking its promises.

In this game, the Commonwealth probably has the best of the argument, but – as with Gonski – it would be fair to say that a co-ordinated national approach to policy now lies in tatters. Minister Springborg’s document gestures to the role of Medicare Locals, but his own Federal counterparts promise to abolish them if elected in September. The report reads as if bureaucrats have tried to harmonise the Government’s direction with national objectives. But it’s far from clear how successful they’ve been, owing to the unfortunate rhetorical sludge which characterises the writing.

So those who advocate a national approach to health reform must see this Blueprint as a setback.

We don’t know much – as yet – about how the Blueprint will be translated into practice. The paper is heavy on rhetoric, and also trumpets the government’s achievements in several areas which it did foreshadow in the campaign; a ban on “ambulance bypass” for instance. And a lot of small operational initiatives are interspersed with vague generalities about how the Promised Land will be reached.

One worthy aspect is the emphasis on transparency. It will indeed be necessary to judge the strategy by patient outcomes and other meaningful indicators.

But there are at least two red flags that should be flying.

First, the third point in the table contrasting the “old” and “the new” on p. 8 significantly calls for streamlined awards and agreements. It’s correct to observe that the award and classification structures in Queensland Health are complex and unwieldy, and that this was one of the causes of the payroll debacle.

Work has been done in the past on a more logical structure, including workforce reform which many would welcome. But there’s little indication that a competency based approach to scope of practice has really been thought through. There certainly is reason to believe that reducing pay rates and conditions might be part of the picture, particularly when considering that remuneration is normally lower in the private sector for nurses, Allied Health Professionals and other health workers.

The Government has also weakened employee protections in legislation rushed through Parliament last year.

Whether a further drift of doctors to private practice will be a result is a legitimate question.

Secondly, the paper emphasises – rightly – accountability and results. But overseas experience shows that outsourcing often cuts standards, and that contract and performance management eats up resources that might more optimally be directed to service provision. Problems of co-ordination are also rife, with contractualism replacing cooperative management. Add contracts for service delivery to the mix of local hospital boards’ responsibility for purchasing services and you have a recipe for the sorts of bureaucratic confusion and empire building the Blueprint rejects.

Something might have been learnt from outsourcing the design of the payroll system.

Peter Costello is now trumpeting the Audit Report as a template for other States and a Federal LNP government to follow. Even if that’s blowing in the wind (and it probably isn’t), we deserve better than to be told by Lawrence Springborg to “get on the train or get under it”. Change of this magnitude ought not to be done by fiat. But the train seems to have left the station.

• Dr Mark Bahnisch is a Fellow of the Centre for Policy Development and a Postdoctoral Research Fellow in the Centre Medical Education Research and Scholarship, School of Medicine at The University of Queensland. A sociologist, he has for many years been active in policy debates and in social consultation. He has recently been researching and publishing on Health Workforce and Health Services.

Far from preposterous, Dr Anstey’s proposal reflects the way private health insurance works in most countries which also have a public health system. Australia is unusual in that people with private health insurance are also covered by the public insurer Medicare. This means they are in effect insured twice. This would not necessarily be a problem if the private health system operated as a   self-funded system independent from public subsidies. However, in Australia private health care receives substantial government funding.  Medicare pays part of the medical costs of all private hospital services and people with private health insurance receive premium subsidies costing an estimated $4.5 billion a year.

The Government’s stated goal for these subsidies is to provide people with choice and to take pressure off the public hospital system. This only occurs to the extent that the subsidies prompt people to change their behaviour – shifting demand from the public to the private sector. There is little evidence that this has occurred. Research conducted during the period covering the introduction of the rebate shows that it had little or no impact on the numbers of people with private health insurance. The introduction of lifetime community rating (which imposes no cost on the public purse) has been proven as much more successful in encouraging uptake.

These findings were confirmed recently with the introduction of means-testing of the rebate which reduced or removed the premium subsidy for high income earners. Despite the private health funds’ that this would lead to up to 20% of people dropping their cover, the data from the first six months after the introduction of the means-test shows that the number of people insured has actually risen.

Dr Anstey points out the inconsistency of subsidising private health insurance in order to take pressure off public hospitals while still allowing people with insurance to use public hospitals as Medicare-funded patients. This is more than just a technical loophole, he estimates that even if a quarter of the total number of insured people admitted to public hospitals did not use their insurance, the cost to the public would be around $588 million a year.

His proposal to close this loophole is to force private health funds to take complete financial responsibility for their insured populations by requiring them to fully fund treatment in public hospitals. This would involve a compulsory register of all insured people which public hospitals could access and use to bill the relevant fund for treatment. It would also involve a requirement that private funds do not charge any out-of-pocket costs for people receiving care as public patients.

Of course, the crucial element of this proposal is that consumers should not be disadvantaged in any way or have their freedom of choice restricted by their insurance status. There are a number of reasons why consumers may choose to seek treatment in a public hospital, even if they have private health insurance. One may be to avoid the out-of-pocket costs associated with private care. Another may be due to the location of the hospital or the facilities available there. Regardless of the reasons, consumers should retain their right to receive care at no cost to them in a public hospital. Funding arrangements between hospitals and private health funds should be administrative only and occur at arms’ length from the provision of care. In fact, there would be no need for any medical or nursing staff to know whether or not a patient is being funded publicly or by a private insurer.

Paying private health funds subsidies for patients who use the public system undermines the objectives of the Government’s private health insurance policy and compromises the sustainability of the public hospital system. This proposal would close the existing loophole and stop funds from free-riding on the public system while preserving the rights of consumers to access care from either public or private hospitals.

Michael Moore writes:

The Premier of Queensland and his Minister for Health were quite upbeat about the launch of the “Blueprint for Better Healthcare”.  Although the argument was about patient centred healthcare, the framework of the launch was largely about economics.  The position is not hard to understand.  The LNP government is focussed on getting into surplus and health consumes more than a quarter of the budget.  The thinking is that if the services for patients can be delivered more efficiently, with less expenditure on overheads, there will be more money for frontline services.

After the opening speech by senior executive of Macquarie Capital – a major sponsor of the event – the two ministers emphasised the importance of reform in Queensland Health if the myriad of issues are to be managed effectively.

It is not surprising with an economic framework and the intention to move from “repair to recovery” that the issues were focused on hospitals, outsourcing to the private sector and key conservative values such as smaller government, lower taxation, better management and individual enterprise.  “We are not undermining public healthcare,” he stated, “we are finding innovative ways to deliver”.

The “Blueprint for Better Healthcare” is really a blueprint for better sickness care.  But politicians delight in talking in positive terms.  The Queensland Premier Campbell Newman and his Health Minister Lawrence Springborg were certainly upbeat on what they see as positives in health reform in their state.  In dismissing the protestors outside the $200 dollar lunch/launch Springborg provided a choice about either being “on his train” or “being under it”.  An interesting turn of phrase for a minister who has a choice himself about improving the care of people who have fallen underneath a locomotive or taking preventative action to stop people falling underneath it in the first place.

More than 500 people attended the lunch with private industry having an overwhelming presence.  And they were not disappointed.  Examples of services to be outsourced included pathology and radiation oncology.  But that is not enough.  More money for the private sector was in stark contrast to his attitude to grants to organisations which were often “little more than a gratuity”.  A portal will be established for the private sector to have better access to the bureaucracy “so they can negotiate the maze of bureaucracy” even though “we now have much less bureaucracy”.

In response to my question about the lack of prevention in the plan and how it contrasted with the sensible statements on obesity he had made that very morning in the Courier Mail, the Minister pointed out that he had a very wide portfolio and could not cover every issue in detail. However, the government was keen on encouraging individual responsibility recognising the level of obesity in Queensland.  Prevention should largely be the work of Medicare Locals however he was keen to work with them to deliver better primary health care.  Why?  He explained the Commonwealth failures at the primary health care level wound up his responsibility in the hospital system.

A close colleague of mine who sat with me at the Population Health Network table has recognised the importance of working with the elected government of the day – no matter where they are on the political spectrum.  Although she suggests the need to collaborate more and drip feed public health principles, I cannot help feeling that a rapid transfusion would be more efficient – providing better value for money.

My colleague had the following reflections on the launch:

In getting ready for my first official LNP function, I got dressed as corporately as I could. I pulled out the private sector high heels.  This is a new world order in Queensland.  “There’s a new train leaving the station” as Lawrence Springborg put it in his speech “and you can either be on it or under it”.  I was keen not to be under it!

Walking from the hotel carpark, I passed PSU and QNU protestors who included several of my former colleagues.  I probably knew more of them than the luncheon guests I was about to join.  But no point lamenting the past!  It is now time to get on board and work out how to work with this government for the health of Queenslanders.

I was adopting an optimistic approach and was keen to look for leverage points and understand how to speak the language of this government. After all the front page of our newspaper that morning headlined the minister’s possible plans to regulate the sale of junk food, perhaps acknowledging that solutions to the obesity epidemic lay beyond personal responsibility.

Wishful thinking!  There was none of that at this policy launch.  The premier first spoke of fiscal responsibility, returning the state to surplus, the failure of unions to responsibly represent their workers….  On health, he talked about outsourcing, co-sourcing, hospital in the home and the need for Queensland Health to return to its core business - ”looking after the sick”.

Lawrence Springborg spoke next.

The LNP’s “Blueprint for better healthcare” has six key values and a framework for delivery with four elements.  Prevention does not appear in the document.  The minister went on to speak about the alignment of the policy with core LNP values which included personal responsibility, small government and small bureaucracy.  He spoke with pride over the number of jobs cut from Queensland Health corporate office with a glint in his eye that even more cuts could be made.  He spoke about changing regulations to make outsourcing easier for health and hospital networks.

How interesting!  On the matter of obesity, he has chosen to invest in a hotline for one on one counselling – perhaps the easiest of the obesity strategy options to outsource - rather than tackle broader environmental determinants which often require less investment.  Reiterating issues from his speech to the Health Media Club he said there was no evidence of any previous investment in obesity prevention in Queensland actually working.  On this occasion he added that we were instead taking the WA Health approach , although there was no mention of any evidence of its effectiveness.

He spoke very little about Indigenous Health – around half a minute in the last few minutes of the talk – but he is interested in capacity building in this area.  Ironic given this is one of the workforces hardest hit by recent job cuts.

There were positives.  During question time he affirmed the government’s commitment to research and teaching irrespective of whether or not services are outsourced.  He announced an “innovation portal” through which he was keen to hear about ways in which the department could perform better.

Afterwards, those few of us with a population health background talked about the need to collaborate more and drip feed public health principles to the new administration.  We all had examples of how this had successfully been done in the past. 

The challenge in public health is to remain optimistic, defend areas that remain and look for opportunities to inform action in a collegiate, collaborative way.  Perhaps public health can even provide leadership.

After months of battle between the Commonwealth and Victorian governments on hospital funding, Federal Health Minister Tanya Plibersek dramatically intervened last Wednesday by announcing a A$107 million “rescue package” which would go directly to Victorian public hospitals.

Why did she do so, and what does it mean for health politics?

First, some background. In 2011, the Australian Statistician changed the way population estimates were calculated. As a result, population estimates were reduced in Victoria, New South Wales and Queensland.

Looking for ways to hold onto its tiny surplus, in late 2012 the Commonwealth used these new estimates to reduce payments to these states. Funds to Victoria were reduced by A$107 million, compared to what the state had been promised in the Budget. The amount was passed on to hospitals as a cut against their budget, and hospitals started to announce bed closures.

A war of words began. The Commonwealth pointed out (correctly) that it was still increasing its funding this year compared to last. The state pointed out (also correctly) that it still faced a reduction against what was promised. And the Greens and the Opposition weighed in, with a Senate committee established to review the issue.

The bailout

The A$107 million budget cut (the Commonwealth refers euphemistically to a reduction against the forward estimates) hurt the Commonwealth politically. Hospital CEOs announced budget cut after budget cut, blaming the service reductions on the changed Commonwealth funding parameters. Operating theatre lists were reduced, leading to deferrals of elective surgery.

Last week Minister Plibersek said enough was enough: the Commonwealth would pay the A$107 million directly to hospitals. The details have not been worked out (How is money to be allocated among hospitals? One lump sum to each or monthly payments?) and there is some doubt as to the Constitutional validity of the payments. Notwithstanding, some hospitals have already said they will reverse their cuts. Yet a couple have said they will not, suggesting they may be using the Commonwealth-state battle as an excuse, as the Commonwealth has argued.

The new funding bypasses the current funding arrangements, which state that Commonwealth and state funding should be pooled: the states – the “system managers” – should determine the final total flow of funds to each hospital, albeit with the Commonwealth share clearly identified.

The Commonwealth bailout, however, may not lead to any extra money for Victoria and its public hospitals. Although the details are not clear, at least part of the money is coming from redirecting funds already allocated to Victoria for national occupational health and safety reforms.

Even though there may be no net increase to Victoria’s total Commonwealth funding this year – the A$107 million paid to public hospitals may just be a pea and thimble trick – there is still a risk that other states will put out their hands for a similar deal.

The Senate hearings

Wednesday night’s drama continued into Thursday, the first day of hearings of the special Senate review of the cuts. Thursday’s second witness – Paul Gilbert, Assistant Secretary of the Australian Nursing Federation’s Victorian branch – dropped a bombshell near the end of his testimony:

“It has been put to me that there was one example where a health service proposed to deal with the cuts by way of not closing any beds or reducing theatre sessions and that that proposal was rejected in favour of one that closed beds and reduced theatre sessions. I think Minister Davis, as is his role, for the good of Victoria, in his view, ensured that the impact was as severe as it could be in order to generate the positive outcome.”

It’s hearsay and gossip, for sure, but it’s also symptomatic of the nastiness of the underlying politics.

Worse for the Commonwealth was the revelation it had not followed the Australian Statistician’s advice in its calculations after all. What I (and others) had previously believed was that the Commonwealth had used the Statistician’s new estimates of population growth, and that resulted in a reduced estimated population for Victoria, and reduced population growth estimates.

What is now clear is that the Commonwealth used the new estimates for the numerator, the new population, but the old method for the denominator or the base population from which growth was measured. Population growth was not calculated on a like-with-like basis using a consistent time series but, rather, the Commonwealth used one population point from the discarded series and one from the new. This was despite public advice from the Australian Statistician that the new population estimates should now be used.

Maths students are told to always show their workings, in order to demonstrate they have followed logical processes. In contrast, the Treasurer’s determination of the health grant is a sparse piece of bureaucratese with no clarity of how the numbers were determined. Hopefully one outcome from the Senate inquiry will apply more generally: that the bases for all future determinations be clear and transparent.

An end in sight for the blame game?

We need greater transparency so that rival claims of Commonwealth-state relations can be assessed fairly. After all, “Commonwealth money” and “Victorian money” have a common source: taxpayers who are also Commonwealth and Victorian voters.

One of the sad things about the latest round of the blame game is that it comes so near to a dramatic change in how hospital funding is determined. From the 2014-15 year and onward, Commonwealth funding to the states will be based on the number of patients hospitals treat.

There will be no need to estimate population growth money will follow the patient. From 2014-15 the Commonwealth will pay 45% of the cost of increases in patients treated, regardless of how the population has changed.

An independent umpire, the Independent Hospital Pricing Authority, will set the price for additional hospital treatment, and do this transparently, publishing the annual price together with its reasoning. So hopefully we have just one more year of argy-bargy.

Blame shifting won’t be eliminated in the new world, but a new, independent arbiter will help onlookers work out the truth behind the rhetoric.

** Stephen Duckett is Director, Health Program at the Grattan Institute. Stephen was a member of the consultancy team which advised the Independent Hospital Pricing Authority on the development of its 2012-13 pricing framework and sits on a number of working groups of the Authority.

This article was originally published on The Conversation. A reminder to Croakey readers that TC articles are freely available for republishing under a Creative Commons licence. 

The meeting was closed to the media but – in an example of how social media is transforming the way we all work – there were plenty of citizen journalists in action in the room. To get a sense of who was tweeting what, check this compilation from Australian Doctor magazine.

Steve Hurwitz, a medical student at Newcastle University and the public relations officer for the Australian Medical Students’ Association, was busily taking notes to compile the report below for Croakey readers.

I asked him to provide a straight summary of the presentations and discussions. If any speakers or other participants in the event would like to add to this report in the comments section, please do so.

***

Reporting on the National Medical Intern Summit

Steve Hurwitz reports:

The NSW Minister for Health, Jillian Skinner  

Jillian Skinner opened by emphasising the positives of the current situation, and the moves the Government has made to increase training in NSW. She highlighted that NSW Health has invested $100 million to create 927 internships in 2013.

She wants to “prevent the heart ache being repeated” and solve this issue “once and for all”, with projections suggesting we’ll need approximately 800 more internships in 2016.  There could be extra capacity found in services outside of hospitals since they are still largely under-utilised for training.

Workforce planning shows a shortage of doctors in 2025 if the status quo is maintained. If, however, productivity increases, we could have a surplus of doctors.

She noted the importance of trying to address this for international students because they are “vital to the Australian economy”.

***

The Federal Health Minister, Tanya Plibersek

Tanya Plibersek spoke for much longer than Mrs Skinner and encouraged the attendees to look at a broader picture – the whole system of medical training (the training “pipeline”) – so that we don’t just push this training problem down stream.

We also have a big problem approaching with an increasing number of doctors in the middle of their training (after internship and before specialist training).

Last year we faced a confusing situation where the Government couldn’t get a straight number on how many internships they needed to supply.

At the moment, the health system relies on too many short-term fixes, like paying ‘exorbitant’ fees for locums and flying doctors in from overseas. It’s not possible to run a health system like this. The interns coming through can help address this. She described the situation as a “good problem to have”.

Training places have significantly increased in medicine and nursing over the last 10 years and specialty training positions are continuing to increase. These increases have been for an important reason – we need these health professionals now and in the future.

The training in rural, regional and remote areas needs to increase. Over 70% of the new Commonwealth-funded training posts include at least one rural rotation. We need to work with the Specialist Colleges to move more training posts to rural and regional areas.

Ms Plibersek mentioned clinical placement charges, which is a change from the status quo of hospitals providing teaching pro-bono, but called for changes to be deferred until after the Independent Hospital Pricing Authority had properly considered the issue. She’s asked all health ministers to look at streamlining the funding of medical training.

***

Professor John Dwyer AO, Emeritus Professor of Medicine, UNSW

Professor Dwyer opened by recognising that the “right people are in the room” to address this problem. He stated that we can’t look at the internship problem without looking at medical education more broadly.

However, this education model needs to be cost efficient and enable the next generation of practitioners to deliver a different model of care.

He made some proposals, including:

1. Reduce medical programs that are six years to five years to help shorten the length of training (note, however that there are only three 6-year medical programs in Australia);

2. Include a ‘sub-internship’ within medical school, where students do the work of an intern and are paid a ‘student wage’ of $25,000 so that they graduate with general registration; and

3. Allow early streaming into specialties during medical school.

***

Summary of panel discussion

It was highlighted again that internships are just one of many years of postgraduate medical training.

The mandatory/core terms of internships were discussed, e.g. medicine, surgery and emergency. It was questioned whether these core terms limit expansion of the number of internships available to medical school graduates. Dr Joanna Flynn, the Chair of the Medical Board of Australia (MBA), said the board’s role is to protect the public. The MBA doesn’t want to create barriers, and there is lots of scope for increasing jobs.

It was pointed out that Emergency Department rotations are more effective than other rotations at identifying at-risk junior doctors.

Dr Michael Bonning, representing the AMA Council of Doctors in Training, said he believed early streaming of medical students should not be mandated, because not all students know what they want to do for the rest of their careers. He also said that countries with early streaming, such as the United States, haven’t found that it decreases healthcare costs. This could also lead to students failing to have a good understanding of the roles of GPs and other specialties, which would be detrimental to the healthcare system.

There was uncertainty about conscripting doctors into rural areas to meet rural workforce needs, as punitive measures don’t provide long-term solutions. The MBA said that emergency terms don’t necessarily need to be in emergency departments, just have experience somewhere (like a general practice) with emergencies/acute care.

Australia still lacks coordination of the training pipeline between medical school and the production of fully qualified graduates. This is both in terms of the numbers but also the Colleges often don’t recognise prior training and work of applicants.

***

Final messages from the panelists

1. We need to focus on the current internship issue without forgetting the whole training pipeline;

2. We need to link undergraduate training and planning with the specialist training Colleges;

3. Remove the gap created by unaccredited years between completing internship and starting specialist training, which aren’t recognised by the Colleges; and

4. The federal and state governments need to cooperate for long-term solutions.

***

Professor Stephen Duckett, Grattan Institute, Melbourne

Professor Duckett explored some of the economic arguments around interns. He said that they aren’t the only way to address healthcare needs.

He suggested that at the current “effective price”, the supply of interns is greater than demand and if there are productivity gains within the health system we could have an oversupply of doctors.

Purely relying on the output of doctors from medical school is an inefficient way to achieve our health system objectives.

Currently we pay a lot for the training of medical students. The private hospitals received a good deal from the government to take on interns – they got a 100% subsidy. It’s difficult to define what costs are attributable to clinical work and what are attributable to training.

***

Panel discussions

Some panelists were wary of taking a pure market based approach to healthcare because those forces can lead to perverse results.

Prof Justin Beilby, from Medical Deans Australia and NZ, said we need to match up education and workforce planning, including service models, so we are training the correct number of students in the correct way.

It was questioned why we only guarantee internships (for domestic, Commonwealth-supported medical students) when we actually need adequate numbers of training positions all along the training pathway.

Private hospitals’ roles in training were discussed. The additional internships that were funded by the Federal Government last year had a poor take up. Reasons for this were thought to include: the lateness of the offers (approximately one week prior to Christmas), the lack of public rotations, the bonds attached to them, and the locations of the internships.

While some private hospitals can provide opportunities through the whole training pipeline, it was thought preferable for interns to rotate through private hospitals as part of a larger network, so interns work in both public and private settings (including the community, e.g. general practices). While it is important to increase the quantity, we have to be careful not to decrease the quality of these places.

It was discussed that employers in all sectors have a responsibility for training and developing their employees.

Martin Laverty, the CEO of Catholic Hospitals Australia, said he would love to increase the number of available internships in his hospitals, having been able to find 70 internship places this year, at quite short notice.

We need to expand the rural training opportunities for vocational training so that people who want to work and live rural don’t have to return to the city to complete their training.

The panel considered whether interns are primarily training or providing a service. An academic in the audience cited submitted but unpublished data that interns spend 6.2% of their time in education.

It was highlighted that a short window of opportunity exists now to solve the internships problem for 2013.

If governments and the private sector don’t start working together early, at the end of the year, we’ll find ourselves with potentially hundreds of unemployed medical graduates.

***

Breakout summaries

The whole training pipeline needs to be considered and Colleges need to improve their recognition of prior learning. Assessment at the end of internship was considered; however, it is unclear how an effective system could be implemented.

The concept of a training wage for students doing a ‘sub-internship’ was contentious. However, the concept that interns are paid too much was strongly challenged. One attendee said that any new graduate in the public service is supervised heavily and still paid an appropriate income.

Obtaining general registration before graduating from medical school would require students to have prescribing rights, and workplace-based assessment would have to be improved. If students are providing a service, then they would require a wage. A well-defined set of responsibilities and a supervision framework would need to be developed.

***

The closing message from Jillian Skinner

This has been a good opportunity to make a start, and it shouldn’t be wasted. The discussions will be distilled into a paper that will be presented to the Standing Council on Health. 

****

• A related infographic from AMSA 

National health reform has failed to stop the unending fights between federal and state/territory governments – and patients are paying the price, according to many submissions to the Senate committee inquiry into implementation of national health reform.

At least two submissions (from the Australian Health Care Reform Alliance and Catholic Health Australia) suggest that the time may be right to revisit having a single funder for health.

AHCRA says:

“The continual abrogation of responsibility for hospital services by both the Federal and State governments does not serve the interests of consumers or help build a sustainable health system over the long term. AHCRA believes that the most appropriate funding system is one where there is a single point of accountability to maximise transparency and efficiency.

“This would reduce the potential for disputes over funding levels and responsibilities to occur and give the Australian public some certainty about the future of their hospital system. Given the difficulties the States and the Commonwealth are having in agreeing on funding formulas and processes for revising funding levels within the current system, AHCRA suggests that it may be timely to re-visit the debate over a single funder for all health services.”

The submission from Health Workforce Queensland says “the blame game is negatively impacting health service delivery in remote and rural communities as the divide of services and funding responsibilities become the focus rather than improved patient care with systematic improvement and integration between the local hospital and health services and the Medicare Local organisations”.

Medicare Locals have been left in the unenviable situation, the submission says, of having to pick up the pieces of cutbacks in state government funded services, without being adequately resourced to do so.

Don’t expect the blame game to end any time soon, reports Andrew McAuliffe, Senior Director, Policy & Networks at the Australian Healthcare & Hospitals Association.

***

Many questions about the future for national health reform

Andrew McAuliffe writes:

The public hearing in Melbourne yesterday of the Senate Finance and Administrative Affairs Committee Inquiry into the implementation of the National Health Reform Agreement has confirmed a healthy prognosis for the ongoing funding blame game.

The hearing was dominated by debate over who was to blame for service reductions following the funding reductions announced by the Treasurer in the October MYEFO.

The hearing coincided with the announcement that the Commonwealth would bail-out the Victorian health services that had been hit by the funding cuts, a move which comes after a concerted campaign in Victoria and more recently Queensland to highlight the impact on services and patients.

As has been discussed elsewhere (see this article by Professor Stephen Duckett, as well as his submission to the inquiry and the ones from the AHHA and Professor John Deeble), the debate of the appropriateness of the cuts relates to the application of updated quality control techniques by the Australian Bureau of Statistics following the last Census which resulted in the largest ever retrospective adjustment of population figures.

As always there were winners and losers under the adjustments with Victoria, New South Wales and Queensland hardest hit.

While was no suggestion that the ABS has done anything inappropriate with its calculations, the Treasury and DoHA officials came under significant pressure from the Coalition and Greens Committee members to explain why population figures had been used in a way that appeared to ignore the ABS recommendations as to how to manage the large technical adjustment that was required.

Treasury and DoHA responded that the various legislation and agreements that cover the health funding arrangements require payments to be made in set ways at set times.  This requires the use of the best estimates of population available at that time and those were the numbers that were used.

So in general terms it can be said that the letter of the Agreements has been followed, but it is clear that the Government’s now defunct commitment to a budget surplus benefited from the strict application of the terms of the NHRA.  Conspiracy theorist can form a queue to the right.

It is equally clear that the confidence of States and Territories and, more importantly, that of health service providers, in the National Health Reform process has been shaken.

Among the intentions of the NHR was the aim to achieve a transparent funding system and devolve management and responsibility of health services to a more local level.

The Victorian health system has been ahead of the game in this respect to governance with its system of local health service providers and local management Boards. It was apparent at the hearings that this maturity of the reform agenda in Victoria was directly reflected in the speed and transparency with which the funding cuts were passed on to the individual health services.

It could be argued that this is a demonstration of a successful reform rather than the cynical political ploy that the Commonwealth is painting it as, although it would be naive to think that the Victorian Government didn’t welcome the subsequent outrage from service providers and communities.

The Commonwealth’s stated intent to pay its bail-out money directly to hospitals is contrary to another component of the NHR, the establishment of the National Health Funding Pool into which the Commonwealth and State’s pay their funding shares.

The DoHA and Treasury officials defended this approach, saying it was appropriate as it was a one-off payment, where as the Prime Minister stated it was because she didn’t trust the Victorian Government with the money.

So while Victoria has had a temporary reprieve, there has been no resolution as to how the funding methodology will be applied in future years, what bail-outs will be on offer to other jurisdictions or what, if any hope, there is for any resolution to the ongoing blame game.

• Andrew McAuliffe is Senior Director, Policy & Networks at the Australian Healthcare & Hospitals Association

The latest round of the health blame game is in full swing, with service cuts to Victorian hospitals, and neither the state nor federal government taking responsibility. Commonwealth and Victorian health ministers Tanya Plibersek and David Davis met in Canberra on Wednesday for more talks, but were unable to come to a resolution.

Promises that the current round of health reforms would eliminate the blame game are yet to be realised. Even if the National Health and Hospitals Reform Commission had its way and the Commonwealth provided 100% of hospital funding, funds would still be scarce and local politicians facing cuts would blame the Commonwealth.

There will always be fights about money and funding in any health system in any country. These fights may be more politicised in Australia, given the structure of the federation and health-care funding arrangements. But rather than getting caught up in the political arguments, we should be looking more closely at how we can use the health-care resources we have to save more lives.

Time for real health-care reform

The real reasons why hospitals seem to be in continuous deficit are simply not yet being tackled by the current health-care reforms. Adjusted for inflation, public hospital expenditure in Australia increased by an average of 8.2% a year between 2009 and 2011. Yet there are no clear signs that productivity or health outcomes are increasing at the same rate.

The current health-care reform process is, nevertheless, very important, as it is making some “architectural” changes to the system that may alter the way we think about costs (through activity-based funding) and performance (through the National Health Performance Authority). More transparent measurement and reporting of costs, outcomes and performance is essential for progress, but reform still needs to go a long way before any real differences are made on the ground.

Workforce inflexibility

One of the key reasons for inefficiency in our health workforce is that doctors, nurses and allied health professionals are shackled by professional silos that dictate what tasks (prescribing, tests and procedures) they can and cannot do, regardless of their ability to perform these tasks.

Australia’s health workforce is also imprisoned by a fee-for-service system that discourages teamwork, discourages task-shifting, and creates the wrong incentives for treating burgeoning levels of chronic disease. If doctors were able to spend less time undertaking tasks that nurses or other health professionals could competently do, their time could be devoted to those who would benefit the most – at very little additional cost.

Though these inflexibilities are sometimes justified by arguments about maintaining safety and quality of care, this needs to be balanced against the additional illness and the lives lost from an inflexible workforce. Giving up a few tasks will not put doctors out of a job; after all, there are plenty of other patients on waiting lists for care.

Waste and over-diagnosis

Part of the problem is waste and over-diagnosis. Many activities in the health system are being undertaken with no or little benefit to patients. This includes screening for abnormalities that will never cause symptoms or death, or for which treatments may cause more harm than good (such asPSA testing for prostate cancer).

A study published recently in the Medical Journal of Australia found that 150 potentially ineffective or unsafe services were currently funded by Medicare. This type of inefficiency is inexcusable and hugely costly. Local data isn’t available but at least 20% of health expenditure in the United States is lost to waste.

Waste and over-diagnosis continue for a range of reasons. Psychological biases mean health-care providers are much more likely to trust their own intuition and past experience when considering treatment options than adopt new evidence, making behaviour change slow and difficult. The dissemination of new and existing evidence should be fundamental to clinical practice.

Optimistic bias is another reason health policymakers and clinicians are more likely to over-emphasise the likely benefits of new treatments and not think too much about the costs. This explains the regular Medicare cost blowouts and the march of technological advances into screening, new pharmaceuticals, and e-health. Arguments about the potential to save lives are pervasive, while arguments about costs are viewed as negative.

Other solutions

It’s clear we need to stop funding services and tasks that are of no benefit to patients. Releasing these funds and directing them to more cost-effective services will save more lives. This seems to be a no-brainer, yet Australia’s health system still struggles to make real progress in this area.

Though many health policy experts tend to discount the role of financial incentives, this is one area that deserves further investigation. But linking good performance to financial incentives seems a long way off; first, we need to routinely measure health outcomes and the value of services.

The most important and potentially most intractable issue is that measures to reduce workforce inflexibility, waste and over-diagnosis need to be led by clinicians and supported by governments if they are to work and be adopted.

It is not the blame game that causes inefficiency and leads to cuts in services. Seemingly random cuts to health services could be avoided if progress was made on the real issues facing the health system. Doing things differently and doing less can save lives.

** Anthony Scott is Professional Fellow and ARC Future Fellow at the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne. 

Anthony Scott receives funding from an ARC Future Fellowship, an NHMRC Partnerships grant with the Victorian Department of Health as a partner, and and NHMRC Centre of Research Excellence in Medical Workforce Dynamics. He consults for the Victorian Department of Health.

This article was originally published on The Conversation. A reminder to Croakey readers that TC articles are freely available for republishing under a Creative Commons licence. 

The missing billion? Revisions to health funding not unprecedented

Rebecca de Boer writes:

Part of Australian health policy folklore is the claims and counter claims about health financing that endure between State and Commonwealth governments as well as between Government and Opposition. Perhaps the most famous example was the claim in 2003-04 by the then Opposition that Tony Abbott ‘ripped one billion from public hospitals’, which still persists today.

The release of the 2012-13 Mid-Year Economic and Fiscal Outlook (MYEFO) at the end of last year reignited the debate about health funding. MYEFO notes that payments to the States for National Health Reform (NHR) funding differ from what was projected in the 2012-13 Budget. This is due to changes in the population estimates as a result of the 2011 Census and moderation to the Australian Institute of Health and Welfare (AIHW) health price index that reflect changes in medical inflation rates. Significant falls (up to 20 per cent, attributed to the high Australian dollar) in the price of medical and surgical equipment contributed to this. The difference between what was anticipated in the May Budget and MYEFO is around $1.5 billion over four years, as shown below.

MYEFO notes that the States will receive increased NHR funding in 2012-13 of $716.3 million compared with 2011-12 and that NHR funding is expected to grow at an average of 8.2 per cent across the forward estimates (p. 74). This reflects the Commonwealth’s commitment to provide $16.4 billion of additional funding over 2014-15 to 2019-20 (p. 74).

Clauses A32 and A33 of the NHR Agreement set out the transition arrangements for 2012-13 and 2013-14. In both instances, the funding will be equivalent to the previous National Healthcare Special Purpose Payment (SPP). Indexation will be the same as the former National Healthcare SPP growth factor, as outlined in the Intergovernmental Agreement, Schedule D, clause D24. The growth factor is a product of:

• a health specific cost index (a five year average of the AIHW health price index)
• the growth in population estimates weighted for hospital utilisation and
• a technology factor (the Productivity Commission derived index for technology growth)

Further recalculations in 2013-14 are likely as the Commonwealth’s contribution to public hospital services (a component of NHR funding) will be recalculated according to public hospital activity (clause A33, c).

Planned Commonwealth expenditure is outlined in the Budget papers. Any changes are reported in MYEFO with actual expenditure then recorded in the Final Budget Outcome for the relevant year.

Recalculations have happened before. In the 2003-04 Budget, the Howard Government revised down the forward estimates for public hospital expenditure by $918 million. The variation was explained as the result of a ‘greater proportion of public hospital services provided to non-admitted patients and a reduction in public hospital usage beyond growth resulting from demographic change’, partly attributed to greater use of private hospitals as a result of changes to private health insurance (p. 107).

Population changes were also cited as part of the reason for the revised figures in 2013-13 MYEFO. The ABS updated the Australian population estimates based on the 2011 Census, as previous estimates were too high (around 300 000 people).

Although the transition arrangements and indexation formula were agreed in the NHR Agreement, some States, notably Victoria and Queensland, are blaming the Commonwealth for cutting health funding. The reduction in funding from the Commonwealth is in addition to previous health budget cuts instituted by these Governments (see here and here). The Commonwealth was also criticised for making these cuts mid year, without consultation, and after most States had already set their health budgets.

The most recent controversy over health financing highlights that the ‘blame game’ is far from over. As has been noted previously it is unlikely to be resolved in the absence of structural reform or while there is more than one funding body. The practice of revising forward estimates is likely to continue as Governments update projected expenditure according to more accurate information (such as population estimates) or changes to policy.

Some of the debate about funding public hospitals may be diffused in 2014-15 when the Commonwealth’s contribution to public hospitals will be funded on an activity basis. Under this arrangement, a formal forecast of the Commonwealth’s contribution will be published before the start of the financial year (see clause A36 of the NHR Agreement). States will also be able request informal estimates of the Commonwealth’s contribution if estimates about service volumes are provided (see clause A37). But the underlying issues remain – demand for hospital services is increasing and expenditure on hospitals is projected to be around 80 per cent of the health budget by 2033. Unless there is a greater emphasis on primary care and prevention, predictions that there will never be enough hospital funding will persist.

The stoush between the Federal Government and Victoria and  Queensland over hospital funding has demonstrated the fragility of the health  reforms that were meant to eradicate federal-state blame-shifting.

Here, a former health administrator, Stephen Duckett, who  has held senior positions at both levels of government, examines the dispute
that has hit Victoria.

He says there is a way out.  But that would require good intentions on both sides — a quality not  readily available these days.

Dr Duckett  is director  of the health program at the Grattan Institute, and his article first appeared  in The Conversation today.

He writes:

As Victorian hospitals have announced bed closures, job  losses and elective surgery delays over the past six weeks, cuts to health
service budgets look set to significantly affect patient care in the state.

The cuts are a result of a mid-year adjustment in health  funding, costing Victoria more than $100 million in 2012-13, with significant
cuts in Queensland as well.

The 2012-13  Budget estimated that $16 billion would be allocated to the states for  health care; this was revised down by more than $400 million in the mid-year  forecast to $15.6 billion.

So who is to blame?

The Victorian government would have you believe it’s the  Commonwealth’s fault for revising its funding allocation.  The Commonwealth blames the state for passing  the shortfall on to hospitals.

Federal Health Minister Tanya Plibersek will fly into  Melbourne this morning to meet with her Victorian counterpart, David Davis to  discuss the cuts.

Why the funding shortfall?

Current funding agreements provide that Commonwealth grants  to the states for health care are adjusted based on estimates of health
inflation, population change and the impact of technological change. All this  is agreed.

What went wrong?

What went wrong is that estimates of population growth (and  to a lesser extent, health inflation) changed.

The source of population growth estimates is the Australian  Bureau of Statistics (ABS), which changed its method of population estimation.  The only accurate measure of the population occurs at the census, and even that  isn’t perfect.

To check the census estimates, the ABS conducts a survey to  verify what was reported, to check on people who have come back home after  being away on census night and so on. For the 2011 census the ABS changed its methods, which changed the census base-line.

Between censuses, the ABS makes “inter-censal” estimates by  adding births, subtracting deaths and taking account of population movements.

Obviously the beginning and endpoints of the inter-censal  estimates ought to reconcile with the census, but for 2011 they were 300,000 or so people out.

Some states were previously recorded as having a larger population than the new estimates (NSW 1.3%  over, Victoria 1.6% over, Queensland 2.4% over), with other states being  slightly under counted.

The question then becomes, should this be reflected  immediately in reduced funds to the states?

Treasury plot

Treasurer Swan, hunting desperately for money to contribute  to achieving a sliver of a surplus goal, announced the $400 million hit to the  budgets of the over-counted states as part of the October Mid-Year  Economic and Fiscal Outlook.

The affected states have cried foul. The changes have taken  place mid-year, with no discussion or forewarning. It was a plot hatched in
Treasury, with health experts kept in the dark.

In most states budgets had already been issued to hospitals  and so in passing on the Commonwealth hit, the political accountability was made clear.

Hospitals, forced to revisit their budgets, have been  required to find savings quickly and have implemented a full year of cuts over
the five months after Christmas, exacerbating the impact of the Commonwealth cuts.

The Commonwealth has mounted a contemporary version of the  Nuremberg defence: it is simply implementing the formula that’s been agreed. It points out (correctly) that most states have squeezed their budgets and so the Commonwealth-attributed cuts are unfairly getting all the opprobrium.

The Commonwealth also points out that it is actually increasing its total contribution to health care, especially post 1 July 2014
when new growth funding arrangements, based on sharing the costs of increases in both the volume of patients treated and their costs (replacing the current  formula for growth) kicks in.

All that is moot, of course, as the Commonwealth has well  and truly lost the propaganda war. The public believes the front-line hospital
workers and managers who are standing up and pointing out publicly what’s happening locally in terms of bed closures.

And the killer punch  is that they are saying this was our budget before the Commonwealth changes and this is what it is now. The dots are pretty easily connected.

Finding a solution

The public has little patience with the blame game, and rightly so. The Commonwealth will need some fast footwork to get out of this
mess. It may be too late for it to retrieve its position, but one strategy is  to offer the state a cost-neutral deferral.

In its search for significant budget savings, the Kennett government negotiated such a deal for Victoria in the early 1990s. The Keating
government accepted a proposal from then Health Minister (the late) Marie Tehan  whereby Victoria got an increase in funds in the first couple of years of the Commonwealth-state funding agreement, offset by reduced funding in the later years.

The Commonwealth has committed significant growth funds from 2014 onwards; it should not be beyond the wit of good-intentioned people to negotiate a way where both sides can claim victory.

But there are two main problems with this suggestion.

On-again, off-again cuts are a management nightmare. And the  current state of the Commonwealth-state morass may mean that good-intentioned people are now few and far between.