The Federal Budget was handed down just a week after the Victorian Budget, providing an opportunity to examine how they, together and separately, addressed some of the most pressing health and aged care reform issues.
It is clear that both levels of government could do much more to support community health service models, writes Leigh Clarke, CEO of the Victorian Healthcare Association.
Leigh Clarke writes:
Some weeks have passed since both the Federal and Victorian state budgets 2024-25 were handed down. As the dust settles and the various announcements are better understood, there’s an opportunity to pause and reflect on what is needed to deliver a modern healthcare system that meets current and future challenges.
Like many other healthcare systems around the world, Australia’s funding model and system of care is no longer fit for purpose. The system was designed for an era of acute episodic care predominately based on traumatic injury and disease.
But increasing demand for health services, driven in part by an ageing population and the rising burden of chronic disease, continue to show there is a need to think differently. We now have a greater understanding of the drivers of contemporary healthcare needs, and there is an opportunity for a renewed focus on funding models that encourage greater care in the community.
While solutions are never immediate nor straightforward, budgets can often provide insights into a government’s longer-term reform agenda, such as the Commonwealth’s commitment to primary care reform through the Strengthening Medicare initiative.
This year, both the Commonwealth and Victorian governments are pursuing reforms to various parts of the health and aged care systems. These reforms will take time to be fully realised well beyond the budget cycle and will require additional funding.
At a federal level, reforms to aged care and primary care continue to take shape. In Victoria, a discussion is underway on complex changes to the structure and governance of the public healthcare system.
The Victorian Healthcare Association (VHA) – which represents 95 percent of the $26.8 billion public healthcare sector – has been analysing the outcomes and longer-term implications of both budgets for Australian patients.
While we believe that a range of reforms, including to the way our health system is funded, is long overdue, we recognise that the current fiscal environment is tight.
This is what we learnt from both the Federal and Victorian state budgets and this is what we can expect for the future delivery of timely and high-quality care across the health system.
Strong investment in hospitals, but not enough over the long-term
The VHA welcomes the Victorian Government’s multi-year investment of more than $11 billion into the public healthcare system. This includes $8.8 billion in hospital operating funding, with a proportion allocated to address the ‘structural deficit’ in health budgets.
The structural deficit has been driven by inflationary pressures in our economy that have not been factored into the Victorian state budget. For example, we know that rising insurance premiums are having impacts across the entire economy, but it’s also a massive unfunded cost within the health budget.
This is only one example, with health services grappling with the increasing price of medical supplies and equipment; surgical procedures and a range of other operational costs.
It is therefore welcome news to see an increase in this year’s state budget to the price paid for healthcare. However, this funding comes with a caveat: the Government has imposed cost containment measures to reign in service-level expenditure that the VHA believes may offset the welcomed investment for some services, notably small rural health services.
When considering the total breakdown of funding across the forward estimates, it is only short-term relief for some services and no relief for others.
If we look at the overall picture nationally, it is worth noting that hospital funding arrangements as part of the National Health Reform Agreement are still under negotiation.
While we await to hear the outcomes of future hospital funding arrangements between the state and commonwealth, we were pleased to see some funding in the federal budget for out-of-hospital care as part of a $1.2 billion package.
Community health uplift a missed opportunity
A missed opportunity in this year’s state budget is the lack of recognition of the increasing role of Victoria’s community health services.
It was disappointing to see no new investment in community health services, given the important role they play in addressing thin primary care markets, prevention and promotion programs and disaster preparedness and recovery programs, as case examples. Nor was there any additional support for their hospital diversion activities.
If we want a sustainable healthcare system, hospitals, emergency and ambulance services must increasingly be preserved for acute and emergency care, a task that community health services are well-placed to take on.
The VHA believes the Victorian Government can and should seize the opportunity to invest in prevention and early intervention through greater funding of community health services.
All eyes are on Commonwealth investment in primary care
Last year’s Federal Budget was very much one for general practice – with a tripling of the bulk billing incentive and early evidence indicating bulk billing rates have already improved.
The Government commissioned a range of reviews to respond to the major challenge of workforce shortages, such as those focused on increasing workforce spread and enhancing scope of practice.
Given these reviews are yet to be completed, the VHA is hopeful that there may be more in store for the primary care sector between now and early next year.
In the interim, we continue to encourage the Commonwealth to look at the community health service model as a proven and scalable solution to fill existing gaps in our system of primary care.
Reforms to our aged care system will take time to progress
Without a doubt, aged care remains a significant work in progress for the Commonwealth with a new Aged Care Act and suite of reforms set to be rolled out over the coming years.
The Commonwealth is managing the roll-out of these reforms in a staged manner to ensure the sector has sufficient time to prepare and there are no unintended consequences like ‘exit block’ on other parts of the system.
The sustainability and financial viability of the aged care sector remains an ongoing issue that will not be resolved overnight.
The landscape for Victorian councils acting as a provider of aged care services has and will continue to evolve. A strength of Victoria’s system of aged care is the public sector residential aged care (PSRAC) sector and we’re keen to see how this system can play a role in supporting the Commonwealth’s efforts to reform aged care.
It should be noted that the Federal Budget does not include the Government’s response to the Aged Care Taskforce report published earlier this year, which is expected to have significant implications for the way aged care is funded. We understand that decisions around this are expected soon.
That said, the Federal Budget includes a $2.2 billion investment to deliver key aged care reforms and continue to implement recommendations from the Royal Commission into Aged Care Quality and Safety.
The Commonwealth has also begun an important conversation about the role of consumer contributions in aged care funding for those who have the means, as well as ensuring a strong safety net for those who need it.
As the roll-out of aged care reforms take shape, the Commonwealth will need to continue to progress this discussion with Australians with courage, openness and transparency.
Outcome of health service reform remains a known unknown
What remains to be seen is where the Victorian Government will land on reforms to the structure and governance of Victoria’s health system. The VHA looks forward to seeing the evidence to support large-scale reform within the independent Expert Advisory Committee’s final report to Government when it is made available.
Irrespective of the final design option, we know reform of any scale is not a cost neutral exercise. This means there will need to be greater investment to support change management and implementation over and above this year’s state budget.
Ultimately, the VHA believes that any reforms to the health system must be driven by patient and community needs with a view to improving health outcomes for all Australians.
A reformed healthcare system must do more than address fiscal imbalances – it must also provide a healthcare system that better meets current healthcare needs and sets us up to tackle future challenges.
This aspiration must transcend all levels of politics and ensure that governments prioritise their economies around the health and wellbeing of Australians.
You can read more about the VHA’s analysis in its State Budget briefing and Federal Budget briefing.
• Leigh Clarke is CEO of the Victorian Healthcare Association.
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