National Health Reform Agreement: what might it achieve?

Parliament house flag post

National Health Reform Agreement: what might it achieve?

Posted 4/08/2011 by Anne-marie Boxall

After nearly four years in government, an 18 month independent inquiry into the health system, a Prime Ministerial listening tour of the nation’s hospitals, several fraught Council of Australian Governments (COAG) meetings and one unsuccessful attempt, the federal Labor Government has finally secured a health reform deal with all states and territories.

The National Health Reform Agreement announced this week is essentially a detailed implementation plan for the Heads of Agreement on National Health Reform, which was negotiated at COAG in February 2011. Most commentators agree that the scope of reform has been scaled back over time. The reforms outlined in this Agreement and the earlier Heads of Agreement are less extensive than those outlined in the April 2010 National Health and Hospitals Network (NHHN) Agreement (for a summary of the changes made to the NHHN Agreement see here). The contentious proposal to hold back GST from the states in order to fund reforms has disappeared (this was the main reason Western Australia refused to sign up before). Other discarded reforms include plans for a Commonwealth ‘take over’ of primary health care and to become the majority funder of public hospitals.

While most commentators and stakeholders have welcomed the Agreement, some have also been critical of its narrower scope. According to Professor John Dwyer, a health policy expert, the Agreement is “a reform package in a financing/accounting sense rather than a system sense, and that's its big weakness”.

It is true that large sections of the Agreement are devoted to public hospital financing, in particular to explaining how the Commonwealth will move from block funding public hospitals to an activity based funding (ABF) system. COAG first committed to ABF in 2008, so this proposal is not new. What is new is the detail on how ABF will work in practice. The Agreement, for example, explains how states will go about budgeting for public hospitals under an ABF system, and how ABF will affect other Commonwealth funding streams to the states for health care.

The new Agreement also provides considerable detail on how funding will flow between the Commonwealth, state and territory governments and Local Hospital Networks (LHNs). It explains how a National Health Funding Pool will be created, with separate bank accounts for each state and territory. The main objective of this reform is to make financial flows from both levels of governments to LHNs more transparent, thus taking some of the heat out of the ‘blame game’ in health.

Details on the role of the Independent Hospital Pricing Authority (IHPA) are also spelt out in this Agreement. As well as determining ABF prices, the IHPA will play a role in determining what constitutes a public hospital service; this is important because the Commonwealth has committed to funding a greater share of public hospital services but not other state funded health services. The IHPA will also get involved in resolving disputes between governments over cost shifting and cross border funding arrangements.

The Agreement also provides some additional detail on the new governance and performance monitoring arrangements. The National Health Performance Authority (NHPA) will, for example, maintain the MyHopsitals website currently run by the Australian Institute of Health and Welfare (AIHW), and will compare performance data for LHNs and Medicare Locals in order to identify best practice. Sharing data is a vital part of performance monitoring and arguably one of the key weaknesses with existing arrangements. The Agreement sets out principles for data sharing between levels of government and agencies (for example the IHPA, NHPA, Australian Commission on Safety and Quality in Healthcare, AIHW, and COAG Reform Council). It also commits governments to develop more formal data sharing arrangements through a National Health Information Agreement. The need to develop such an Agreement suggests that data sharing between governments and agencies is likely to be an ongoing point of contention.

There are also some changes to local governance of public hospitals outlined in the Agreement. Importantly, LHNs will have separate bank accounts and will receive Commonwealth funding directly from the National Health Funding Pool. This means that they will have greater funding certainty and more flexibility in budgeting than they do now. There will still be limits because the state government, which remains the majority funder, will be able to shift its funds between LHNs, if necessary.

So when all is said and done, what is the Agreement likely to achieve?

The changes outlined in public hospital financing are seen by many to be genuine reforms (see for example here and here). By shifting to ABF and committing to fund a set proportion of expenditure growth, the Commonwealth will become a much more active partner in public hospital financing. But, while the states and territories will continue to own, operate and manage public hospitals, (in many ways their proportion share of funding is arguably a peripheral issue), they will continue to be the dominant partner.

By establishing national governance agencies and a performance and accountability framework, the Commonwealth is indicating that it wants to be more active in ensuring that health care providers deliver high quality care. However, the Commonwealth’s role will still be limited to overseeing, encouraging and cajoling health care providers (this includes the states, Medicare Locals and private hospitals) into achieving performance standards because the Commonwealth itself does not deliver hospital care.

The Federal Opposition has claimed that the only reason an agreement was reached was because the Commonwealth capitulated to the states. Given the starting point for negotiations on reform –Kevin Rudd's threat to takeover public hospitals unless the states lifted their game – some degree of compromise on behalf of the Commonwealth was probably needed to restore co-operative relations on health care between the two levels of government. The work that has gone into establishing formal processes that will allow the two levels of government to continue to work on some of the most contentious aspects of health care should also be beneficial. In a federation like Australia where health care is a shared responsibility across the Commonwealth and the states, co-operation between governments is essential. Reforms that facilitate this are likely to yield longer term benefits.

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




refugees asylum immigration Australian foreign policy Parliament climate change elections women social security Indigenous Australians Australian Bureau of Statistics Employment Sport illicit drugs people trafficking taxation Medicare welfare reform Australian Defence Force higher education welfare policy United Nations Asia income management Middle East criminal law disability Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget health financing gambling school education forced labour aid statistics Australian Electoral Commission WADA emissions trading Australia in the Asian Century steroids detention Private health insurance OECD ASADA labour force transport Law Enforcement Australian Federal Police Industrial Relations people smuggling dental health National Disability Insurance Scheme Australian Crime Commission slavery Senate election results Papua New Guinea Australian Public Service International Women's Day corruption Afghanistan Fair Work Act child protection debt federal election 2013 parliamentary procedure poker machines ALP New Zealand Newstart Parenting Payment 43rd Parliament political parties Census constitution High Court skilled migration voting Federal Court terrorist groups Higher Education Loan Program HECS youth paid parental leave Aviation environment foreign debt gross debt net debt defence capability customs doping health crime health risks multiculturalism aged care Gonski Review of Funding for Schooling sex slavery sea farers Special Rapporteur leadership United Kingdom UK Parliament Electoral reform politics banking firearms public policy violence against women domestic violence mental health China ADRV terrorism social media pensions welfare ASIO intelligence community Australian Security Intelligence Organisation governance public service reform Carbon Pricing Mechanism carbon tax mining military history employer employee fishing by-election European Union same sex relationships international relations coal seam gas family assistance planning United Nations Security Council Australian economy food vocational education and training Drugs Indonesia children codes of conduct terrorist financing money laundering Productivity asylum seekers early childhood education Canada Population Financial sector national security fuel disability employment Tasmania integrity science research and development Australian Secret Intelligence Service sexual abuse federal state relations World Trade Organization Australia accountability housing affordability bulk billing water renewable energy children's health health policy Governor-General US economy export liquefied natural gas foreign bribery question time speaker superannuation expertise Senators and Members climate Intergovernmental Panel on Climate Change Department of Agriculture Fisheries and Forestry food labelling Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets health reform Indigenous constitutional recognition of local government local government consumer laws PISA royal commission US politics language education baby bonus Leaders of the Opposition Parliamentary remuneration health system Australia Greens servitude Trafficking Protocol energy forced marriage rural and regional Northern Territory Emergency Response ministries social citizenship human rights citizenship Defence High Court; Indigenous; Indigenous Australians; Native Title ACT Indigenous education Norfolk Island External Territories emissions reduction fund; climate change child care funding refugees immigration asylum procurement Indigenous health e-voting internet voting nsw state elections 44th Parliament 2015 ABS Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories workers Bills anti-corruption fraud bribery transparency corporate ownership whistleblower G20 economic reform innovation standards NATO Members of Parliament Scottish referendum Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly public health smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine regional unemployment asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies trade unions same-sex marriage disorderly conduct retirement Parliament House standing orders public housing prime ministers election timetable sitting days First speech defence budget submarines Somalia GDP forestry world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission regulation limitation period universities Ireland cancer gene patents genetic testing suspension of standing and sessional orders animal health live exports welfare systems infant mortality middle class welfare honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Constitutional reform referendum Rent Assistance competition policy pharmaceutical benefits scheme obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements administrative law small business Breaker Morant homelessness regional engagement social determinants of health abortion Youth Allowance Members suspension citizen engagement policymaking federal election 2010 workplace health and safety Trafficking in Persons Report marine reserves hearing TAFE Victoria astronomy resources sector YMCA youth parliament alcohol Korea rebate Australian Greens presidential nomination Racial Discrimination Act entitlements political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing Hung Parliament political education social inclusion Social Inclusion Board maritime early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin Iran sanctions Norway hospitals

Show all
Show less
Back to top