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Reform of the Federation and health: Opportunities for change

“While we have a good health system, it is not good for all, and it can be made better.”

By Dr Linc Thurecht and Alison Verhoeven, Australian Healthcare and Hospitals Association 

As a contribution to the Reform of the Federation process, on 16 March 2015 the Australian Healthcare and Hospitals Association (AHHA) brought together over 130 health leaders to discuss the challenges and opportunities for change in the way health services are provided to all Australians.

The Prime Minister has called for a mature debate on the process of reforming the Federation. This Think Tank provided the opportunity for representatives with a wide range of perspectives to discuss how our health system could be alternatively structured to realise better health outcomes for all Australians.

Many issues were raised and debated on the day. But perhaps the threshold issue related to complexity in our current system. This results in the many known problems of accountability gaps, waste, confusion, amongst both consumers and providers, and a system that does not fully meet the health needs of large sections of our population.

But on this issue of complexity, a diverse range of solutions were canvassed, from a call for “one big idea to drive reform” as a catalyst for positive change, to a call for “radical change” due to the current “complexity providing an excuse for failure”. In contrast were proposals for a focussed set of “small ideas” to make incremental but meaningful and tangible change.

The challenge of managing chronic disease, both in terms of prevention and the need for integrated patient-centric care, was a constant theme raised. Those with chronic disease are not being served well by the current system, according to many commentators, and the cost burden is large with 36% of health expenditure being spent on the top four chronic diseases in Australia. The more strategic way we have responded to communicable diseases was contrasted to the current approach to chronic disease.

E‑health was also identified as essential in improving how the health system operates, and in particular, improving quality of care and patient safety. Information is the critical link on the handover between GPs and community care, primary and acute care and “needs urgent attention”. The importance of nationally consistent data collections to improve efficiency and accountability was also discussed.

Regional health care planning was seen as crucial in the provision of good health care – and localism was proposed in meeting the needs of communities as “we live in a community, not a health system”. Examples of success with the provision of integrated care and local community engagement were shared, as was the need to avoid a “postcode lottery of services”.

How the health system should be funded was a key focus of the day’s discussions. The prevailing view of Government that health spending is out of control was not widely accepted by participants, and it was noted that the Government’s fiscal strategy has been to increasingly shift the cost burden to the States and Territories and to consumers.
It was argued that “finance should serve good health policy, not the other way around”, and that while we do not have a “crisis in tax”, there are challenges to address, including the need to strengthen the tax base. The distributional impacts associated with reform of taxation need to be at the forefront of any proposed change.

Some characterised the health system as performing well, while there were also many calls for alternative models of health care with the patient at the centre. A view was expressed that to devise the best health system, we should not start with Federalism. It was also argued by some participants that health reform does not need to be linked to tax reform.

So what role should the Commonwealth play in health care?

National interest considerations relating to quarantine and health system regulation were accepted, though for one speaker, obvious areas for the Commonwealth involvement in the health system were “hard to find”. The possibility of devolving MBS and PBS responsibilities to the States and Territories was also canvassed. It was proposed that the Commonwealth’s role in health be re-cast to be that of a steward, concerned with strategic issues and ensuring accountability.

What to make of all this?

With a diverse range of delegates came a diverse range of views.

There was a unanimous agreement on the need for change in the way health services are provided. There was also an overall sense that the Commonwealth should devolve the majority of its health service delivery responsibilities.

But if this responsibility should be passed to States and Territories or even lower to provide a more focussed regional approach was not resolved. The Commonwealth could retain a role as an overarching steward of a new system of health service provision. Specific objectives, responsibilities and powers in this respect would need to be further explored.

More fundamentally, there was a view that a simple devolution of health delivery responsibilities is not enough. Providing a clear demarcation of responsibilities between levels of government and other ad‑hoc incremental change is only patching a system not well designed for the contemporary health needs of Australians. Alternative models of care with the patient at the centre and with a system of health care based on a core set of principles could be explored. This suggests that the Reform of our Federation process should not be based on legacy institutional arrangements.

With respect to funding of health services, the analysis presented did not suggest that we are in a fiscal crisis, though many participants noted that the Commonwealth’s decision in 2014 not to honour partnership agreement provisions for growth funding of hospitals presents an enormous challenge for the States and Territories.

The Commonwealth Government’s current approach to health funding is clearly pushing the growing burden of funding health care onto the States, Territories and individuals. Any changes to the tax system need to ensure the long term financial sustainability of healthcare providers, and that the distributional impacts of any increase in individual contributions to health care costs does not adversely affect the less well‑off.

The Prime Minister in his Sir Henry Parkes Oration last October called for a “measured debate” and noted that, “What’s needed now is not a final answer but a readiness to consider possibilities”.

The next formal step in this reform process is the release of the two Green Papers on Reform of the Federation and Reform of Australia’s Tax System. If these Green Papers are to be as visionary as the Prime Minister has called for, they need to do more than just propose the passing of a set of functions between levels of government.

A measured debate around all these issues must include the broad engagement of all health stakeholders, not just selected advocacy or private sector groups. It should build on the work done by the National Health and Hospitals Reform Commission, and take into account the very real health needs that are not being met adequately within our current institutional and funding arrangements.

And finally, it should consider new ways of doing things, not just a passing of the baton from one level of government to another, or worse, a palming off of responsibility to ensure high quality health services for all Australians.