11/03/2010 - 00:00

Health reform targets states’ cash crisis

11/03/2010 - 00:00

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BUSINESS has been cautiously supportive of Prime Minister Kevin Rudd’s National Health Reform Plan, the centrepiece of which is a takeover of majority responsibility for hospitals as well as other structural reforms to the health system.

BUSINESS has been cautiously supportive of Prime Minister Kevin Rudd’s National Health Reform Plan, the centrepiece of which is a takeover of majority responsibility for hospitals as well as other structural reforms to the health system.

The proposed changes will mean that the Commonwealth government:

• becomes the majority funder of public hospitals;

• takes over all funding and policy responsibility for GP and primary health care services;

• dedicates around one third of annual Goods and Services Tax allocations currently directed to state and territory governments (referred to throughout this document as ‘states’) to fund this change in responsibilities for the health system;

• changes the way hospitals are run, taking control from central bureaucracies and handing it to local hospital networks; and

• changes the way hospitals are funded, by paying local hospital networks directly for each hospital service they provide, rather than by a block grant from the Commonwealth to the states.

While there has been much discussion about the plan’s benefits, the concept appears to play on one key strength and has one significant weakness.

The strength is the acknowledged financial clout of the Commonwealth, which appears to have the revenue growth required to match the rising funding needs of hospitals.

State health costs have been growing in Western Australia at a long-term average rate of between 7-8 per cent, well ahead of CPI and prompting concerns about where the money will come from to pay for a service that already represents more than one quarter of the WA budget.

But there is a major weakness.

The federal government has no experience in managing a system that would, overnight, make it responsible for hundreds of hospitals around the nation. While Mr Rudd’s proposal includes devolution to a network of local boards taking responsibility for small groups of hospitals, opponents suggest this could be done with a federal takeover creating a new layer of bureaucracy.

Chamber of Commerce and Industry WA chief economist John Nicolaou acknowledges that much of the Commonwealth takeover proposal is about the states’ inability to foot a rising bill.

“It does come down to financial capacity; the states have a narrow revenue base,” Mr Nicolaou said.

However, he was not yet totally sold on the idea.

“There are still more questions than answers in terms of the Commonwealth proposals.”

Mr Nicolaou said he wanted to see a much wider review of state and federal roles and responsibilities to ensure Australia had the most efficient system available to provide the services the community needed.

The Business Council of Australia issued its support for Mr Rudd’s move to a national funding model of our public hospitals.

But BCA president Graham Bradley said in a statement it would be important to ensure the establishment of local hospital networks did not add new layers of bureaucracy.

“It will also be important that commercial and business management skills are injected into the governance structures for these local health networks,” he said.

The BCA said it viewed health reform as one of the most important and challenging aspects of national policy, not just because of cost but also because it underpinned Australia’s productive capacity and individual wellbeing.

Maternity scheme

The business lobby was less respectful of federal Liberal leader Tony Abbott’s proposal to make so-called big business pay a levy to fund up to six months’ maternity leave for employees.

Mr Abbott wants to impose a 1.7 per cent levy on companies’ taxable income over $5 million in order to give new parents leave at their normal rate of pay for 26 weeks.

Australian Industry Group chief executive Heather Ridout voiced her strong opposition to the plan.

“The federal opposition leader’s proposal on paid maternity leave appears to aim high but the costs would be too great, it is not well-designed and overall it is unrealistic,” Ms Ridout said in a statement.

“It would be a deterrent to investment in Australia and would cause distortions in the tax system. It is further flawed, in that for the most part in the private sector it is the large companies that provide paid maternity leave anyway.

“As Mr Abbott has identified, paid maternity leave is an important community issue and it should be funded by the community.”

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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