On one side, the health package announced yesterday by the Prime Minister is just sleight of hand: reducing GST payments to the states and territories and using that to directly fund hospitals. That doesn’t provide more resources per se to hospitals. And, in any case, the Commonwealth could have under the status quo increased funding to hospitals in any case. So the only effective change from reducing the GST payments may be the split of the payments to the states, which is decided by the Commonwealth Grants Commission. Presumably the 30 per cent claw back will now be allocated among the states by a different formula – specifically through analysis and planning by the federal health department.
As an aside, I don’t think that a referendum would be needed for the Commonwealth to reduce payments of the GST – while the Intergovernmental Agreement signed under the Howard Government specifies that changes to the GST arrangements – paying GST receipts to the states and territories less an administration charge from the ATO – requires agreement of all states and territories, the GST legislation is an Act of the Federal Parliament which can be amended or repealed by the Parliament without reference to the states.
But where are real reforms, such as ensuring a price signal for the use of hospitals? Or reducing distortions between the use of private and public hospitals? Or the structure of medicare? The problems are well known and have been identified in previous reports, yet no action is proposed in areas which would make a significant difference. Getting incentives right is the key, and allowing full competition between hospitals without distortions by government funding – perhaps by providing funding through the individual (a form of voucher).
And then we find the forward to the policy states
The Third Intergenerational Report released this year showed that these pressures will only intensify as a result of the ageing of the population. In addition, demand for high standards of care will place pressure on the Government to increase expenditure, as will technological innovation.
Yet technological innovation does not necessarily increase expenditure – generally we observe technological innovation reducing costs. If patients are getting better care due to the technological innovation – perhaps new diagnosis techniques – why shouldn’t they pay for it? In general I’d expect that technological innovation would have two effects: a reduction in the cost of providing existing services and an increase in service quality.
The “solution” to the hospitals problem is for patients to pay for more of their services – perhaps through health insurance.
