Moving Australia's health-care system into the 21st century

Abstract

Australians will need to decide in their forthcoming general election whether recently announced health reforms are a genuine break from the status quo. Tony Kirby investigates. In March, 2010, Australia's Minister for Health and Ageing, Nicola Roxon, announced sweeping reforms to the nation's health system aimed at making it sustainable amid growing costs and an increasingly ageing and dependent population. The reforms aim to put an end to the blame-shifting culture that has existed for decades between the Federal Government and the states and territories. Central to this is ensuring money earmarked for health is actually spent on health—replacing the current blank-cheque arrangement whereby states and territories receive federal funding for health, but distribute it how they see fit through bodies called Area Health Services. But while many agree reform is essential, cracks are appearing in the proposed package, and some believe the government has not gone far enough, or provided enough detail on its proposals. The crux of the reforms is that the Federal Government will take a 60:40 controlling stake in public hospitals, up from the 35:65 split it currently shares with states and territories. It is proposed that up to 200 Local Hospital Networks (LHNs) will be formed nationwide, each consisting of between one and four hospitals and run by health and finance experts with local clinician input. LHNs will be paid per service they provide, with the efficient cost price to be calculated by an Independent Hospital Pricing Agency. Rural loading will be added to compensate smaller and more isolated hospitals. The Federal Government wants the LHNs and the efficient pricing mechanism in place and operational by July, 2012. State and territory governments are currently drawing up proposed boundaries for each LHN. These reforms are not cheap. To finance them, the Federal Government will take back a third of each state or territory's Goods and Services Tax (GST) revenue, amounting to about AUS$50 billion a year. Only Western Australia (WA) is yet to sign up to this deal. Roxon remains locked in negotiations with the WA Government, hoping it will sign up to the proposals before the forthcoming general election. An efficient price is something which Jeremy Sammut, of Sydney's Centre for Independent Studies (a think tank), approves. “An efficient price will be complex to calculate but worthwhile to get greater financial transparency into the system”, he says. But he adds the reforms do not by-pass the state and territory health department bureaucracies responsible for hospitals. “State governments have insisted that their health departments remain system managers, and this means LHNs will be a third layer of bureaucracy, below regional area bureaucracies and the State departments”, he says. “The LHNs will have limited authority over budgets, and the big problem identified by disempowered clinicians—meddling by remote and ill-informed managers—will continue. Hospitals will probably remain dysfunctional at the administrative level until total operational, budgetary, and planning responsibility is devolved back to local hospital boards.” Sammut is not alone in his views. “The problems in public hospitals stem from the regrettable decision taken in the 1980s to abolish local hospital boards and replace them with centralised command-and-control Area Health Services”, says John Graham, Chairman of the Department of Medicine at Sydney Hospital and Sydney Eye Hospital. “This obliterated the tried-and-tested governance structure that allowed hospitals to manage their own affairs, unfettered by outside interference.” Graham, who has more than four decades of experience in Australia's public hospital system, says that state governments have increased spending on bureaucracy at the expense of the public hospitals themselves. “Desk cuts, not bed cuts, should be the priority. This cannot occur unless autonomous boards of directors are put back in charge of our public hospitals”, says Graham. “Our public hospitals must be allowed to once again become the great public institutions they used to be.” Graham adds that there is major concern among doctors and nurses that the reforms will just perpetuate the existing system but with a different name tag. Sammut argues that the Federal Government should be encouraging states and territories to address inefficiencies, since state bureaucrats will be in charge of budgets and service levels for each LHN. “However, this would mean the bureaucracy would have to eliminate itself—and that isn't going to happen”, he says. “States and territories will probably make up the difference between the efficient (minus bureaucracy) price and real price (with bureaucracy) by limiting services and capping budgets.” “The key focus of this plan is on who pays for what, and on what basis. Patients are not at the centre of this proposal”, says Lesley Russell, Menzies Foundation fellow at the Menzies Centre for Health Policy, University of Sydney-Australian National University. Russell, who has advised the current government, says real reform includes moving from paying for activity to paying for health outcomes. “We need to move away from fee-for-service towards a package which would ensure patients get the complete set of health-care services. Reward doctors for keeping patients healthy and out of hospital—not just treating the sick.” The Federal Government has announced sweeping antismoking legislation including plain packaging for cigarettes, but is yet to announce other major plans regarding preventive health. The reform package announced by Roxon has many specific targets and pledges, including more than $400 million to set up Medicare Locals, which will link up general practices within areas so that out-of-hours care, either face-to-face or over the telephone, is always available—even if a person's regular surgery is closed. Medicare Locals will also aim to provide coordinated care for services such as physiotherapy. Among the other pledges are promises to have all emergency department patients appropriately cared for within 4 h of presentation, which is to be phased in from January, 2011. A more ambitious target is to have 95% of patients given elective surgery within the clinically recommended time by July, 2012, using private hospitals if necessary. But there have been reports in the Australian media that states and territories have not signed up to this specific part of the reforms because of concerns that the financial burden for delivery will fall on them. Roxon has also pledged $1·2 billion for primary care, and a further $1·2 billion to expand and train the workforce, including more than $100 million on aged-care nurses, to reflect the growing demand in that sector. About 1300 more acute beds are planned thanks to a $1·6 billion investment, and 2500 additional aged-care beds are planned. Australian Medical Association (AMA) President Andrew Pesce says the AMA is supportive of many aspects of the reform package in principle. “The reforms provide a direct and transparent mechanism for hospitals to receive funding…Most funding will no longer pass through state governments in a way that will allow it to be reduced before it actually reaches hospitals”, says Pesce. “The creation of LHNs has the potential to move decision making closer to where health is actually delivered.” However, Pesce adds that the AMA would have preferred a single public funder of public hospitals, with clearly defined responsibilities for all levels of government. “We are worried that the reforms may simply provide different opportunities to blame and cost-shift”, he says. “As a doctor, I want to know who will be responsible if an LHN doesn't deliver on the services the community needs? Who will be responsible for fixing things that go wrong? To which minister do I write to have a problem fixed? That isn't clear under these proposals.” Pesce notes that state and territory governments will receive a large injection of new money to address hospital capacity, but wants to monitor progress through a bed-watch scheme, in which state and territory governments would report the actual numbers of beds in their hospitals each year. Mental health reform is causing most controversy in Australia. While Roxon has announced $124 million in new funding for mental health, experts, including Australian of the Year and mental health expert Patrick McGorry, have said this is nowhere near enough. Seeing the weakness in mental health policy, federal opposition leader Tony Abbott has thrown down the gauntlet to Roxon by putting forward his own $1·5 billion package for mental health, which would include 800 new mental health beds nationwide, and 80 new mental health treatment centres. Roxon says this would rip money out of the other reforms vital for strengthening the whole system. “The government has made no secret of the fact that we agree more needs to be done in mental health, but we don't believe that by identifying mental health as an area of need you should pull money out of other parts of the health system”, says Roxon. “I think the public are entitled to put a question mark over the credibility of the opposition in making an announcement like his with nothing else, no policy on primary care, no policy on workforce shortages, no policy on hospitals.” Abbott has pledged to introduce local hospital boards staffed by local health experts, and preserve the private health rebate (which the current government plans to means test) so that private care can remove some of the strain on the public hospital system. Just last month, Australia appointed Julia Gillard as its first female Prime Minister, after she challenged former Prime Minister Kevin Rudd's leadership. Knowing she has as yet no direct mandate to govern, Gillard has remained true to her word and called a general election for August 21. The health of the nation in the years to come will be central in this election campaign, and both Gillard and Roxon will be hoping that the Australian public have faith in the health reforms in their current format.