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Will the buck stop with Rudd on fixing the hospital system?

The key question is whether the new prime minister regards the hospital system as having been fixed. AAP Image/David Crosling

One of the key platforms of the first Rudd government was to reform the health and hospital system. The key message from then-prime minister Kevin Rudd was that the health, and particularly hospitals, system would be “fixed” within two years of the 2007 election.

If the health system didn’t improve – and hospital waiting times weren’t reduced – by his deadline, he’d hold a referendum to propose that the Federal government take responsibility for public hospitals. “I’ll work cooperatively to get our hospitals fixed. But in the end, the buck will stop with me,” Rudd promised.

Six years on, what’s the status of Rudd’s health reforms? And can they be resurrected?

Rudd’s vision

The first Rudd government established a comprehensive review of the health system through the National Health and Hospitals Reform Commission (NHHRC) and the prime minister and his health minister Nicola Roxon undertook over a hundred public consultations around the country on health reform.

The final meeting of the Council of Australian Governments (COAG) before Rudd’s demise was held in April 2010. With the exception of Western Australia, the Commonwealth and states/territories agreed to the following key reforms to the Australian health system:

  1. The Commonwealth would become the majority funder of Australian public hospitals, by funding 60% of the agreed cost of all public hospital services delivered to public patients such as operations, scans and therapies

  2. Over time, the Commonwealth would have funding and policy responsibility for all GP and primary health care services, and aged care services, including those run by states

  3. Responsibility for hospital management would be devolved to new Local Hospital Networks in order to increase local autonomy and flexibility so that services are more innovative and responsive to local needs. The Commonwealth would also have a role in overseeing the arrangements at state and territory levels

  4. Local Hospital Networks would be paid on the basis of a nationally set price for each service they provide to public patients under Local Hospital Network Service Agreements with the states. Small regional and rural hospitals would continue to be paid through block funding

  5. New, higher national standards and transparent reporting would provide information about the national, state and local performance of the health system.

New structures to support these reforms included a national independent pricing authority and a national health performance measurement authority.

The Commonwealth also agreed meet the cost increases from the growth in population and demand, with a additional A$16 billion guaranteed for hospitals through to 2019, even if it’s more than required to meet actual costs increases.

To finance the new arrangements, the states and territories (with the exception of Western Australia) agreed to the Commonwealth’s retaining a proportion of the GST revenue, in recognition of its increased funding responsibilities.

Kevin Rudd: In the end, the buck will stop with me.

This was an extraordinarily favourable deal for the states. While giving up some GST revenue, they in fact would have rid themselves of the all-consuming health financial burden.

The “takeover” of hospitals was reduced to the Commonwealth having a seat at the table when distribution of hospital funding was determined – not a lot of control, especially as the hospital budgets by and large were to be set via the independent pricing arrangements.

Nevertheless, taking WA’s lead, the other states quickly walked away from the COAG agreements. The whole process was seen as a shambles and perceived as yet another Rudd failure.

Gillard’s watered-down version

By the February and August 2011 COAG meetings, the Gillard government and all states and territories agreed on a revised health reform agenda. Key changes to the April 2010 arrangements included:

  • No “takeover” of primary care by the Commonwealth, with the existing responsibilities remaining and creation by the Commonwealth of Medicare Locals to coordinate primary care and work closely with local hospital networks

  • No role for the Commonwealth in state and territory hospital network planning and a requirement that these networks and Medicare Locals work closely and meet joint performance measures

  • No “redirection” of GST revenue to the Commonwealth.

The Commonwealth’s provision of an additional A$16 billion for hospital funding was preserved.

There were also some important additions to the 2011 agreement, including:

Gillard’s reforms include performance targets for emergency department throughput. Image from
  • A list of performance criteria for the health system and its various components. This set specific performance targets for emergency departments’ throughput, appropriate waiting times for elective surgery and specific measures for improving health outcomes for indigenous people for children and chronic diseases

  • A focus on health policy for the prevention of disease and injury and the maintenance of health, not just treatment of illness. This was the basis of establishing the National Health Prevention Agency

  • An emphasis on coordination and integration of appropriate services for older Australians and people with complex care needs.

The Gillard reform was certainly a watering down of the Rudd April 2010 agreement, itself a a shrunken version of the original Rudd commitment. Nevertheless, the Gillard outcome at least brought peace across the health sector for a short period and focused attention on making the changes work.

Rudd redux

While it’s impossible to predict how the new Rudd government will approach health policy, there is considerable commonality between the first Rudd and the Gillard reforms. This would suggest further radical structural reform is unlikely in the immediate future.

The question that remains is whether the new Prime Minister will regard the system as having been fixed in his original 2007 terms.

The first series of reports from the National Health Performance Authority (NHPA) suggest that improvements in some key areas such as emergency department waiting times have been patchy at best. While there have been some improvements (such as in Western Australia) in emergency department waiting times, others have stayed much the same.

Radical structural reform is unlikely. Image from

Given the significant boost in Commonwealth funding for hospitals (the A$16 billion is on top of inflation growth) the public could reasonably expect a quicker return on that investment. While the primary care sector has been given a big structural boost through Medicare Locals, the changes at service levels are not yet apparent.

The big problem that has not been “fixed” is the blame game. It is not clear which level of government is accountable for what and the opportunities for buck passing between the Commonwealth and states are even greater. The Commonwealth will say it has put more money in and the states will say they are tied up new bureaucratic structures that restrict their flexibility.

But is difficult to see what Rudd could do to change the arrangements. First, the current arrangements are set out in agreements between the Commonwealth and each of the states and territories. Changing these agreements would be at best a medium-term proposition.

Second, the case that the health system needs fixing is harder to argue given all the structural changes that have taken place and the perception that these need time to bed down.

Perhaps it will be a wait and see game. But I don’t expect health reform will be high on Rudd’s list of policy priorities – I expect he’d be happy to call it done.

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