Bills Digest No. 225  1997-98 Health Care (Appropriation) Bill 1998

Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Introduction
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details

Passage History

Health Care (Appropriation) Bill 1998

Date Introduced: 28 May 1998

House: House of Representatives

Portfolio: Health and Family Services

Commencement: On Royal Assent

Purpose

To appropriate $29 655 056 000 to make a Commonwealth contribution over five years to the cost of health and emergency services that are currently or were historically provided by hospitals in the States and Territories.

Introduction

The Health Care (Appropriation) Bill 1998 has been introduced against a background of stalled negotiations between the Commonwealth and most States over a replacement for the current Medicare Agreements. To date, only Queensland and the ACT have accepted in principle the Commonwealth's offer for the next five years as contained in the proposed Australian Health Care Agreements. Although only a short piece of legislation, the Bill is, arguably, quite significant. For example, where an agreement is not in place between the Commonwealth and a State, the Bill provides the Minister for Health and Family Services with considerable discretion over the conditions under which grants of financial assistance are made for public hospital services.(1) The Bill provides also that payments of financial assistance may be made to entities other than a State, including a hospital or 'other person', which is a considerable departure from traditional and current arrangements.

The Bill provides that services provided in locations other than public hospitals may attract financial assistance from the Commonwealth. It is the type of service being provided ('health and emergency services that are currently or were historically provided by hospitals') which is important, rather than the location in which the service is provided. Finally, the responsibility of the States and Territories for the provision of equitable access to public hospital services, regardless of a patient's geographic location, is established by the Bill as an unambiguous condition for receipt of financial assistance.

In his Second Reading speech, the Minister stated that 'we are introducing this Bill today to provide certainty for the people of Australia who can rest assured that Commonwealth funding for their hospitals will not be stopped'.(2) However, early reaction to the Bill from the States has not been positive. The Health Ministers of New South Wales, Victoria, Western Australia, South Australia, Tasmania and the Northern Territory have been reported as warning that the Bill 'puts public hospitals and patients at risk, with the Commonwealth dispensing with a basic tenet of Medicare, namely security of funding'.(3)

Background

Funding for public hospitals is provided by both the Commonwealth and State and Territory governments. The Commonwealth's funding to the States and Territories for their public hospitals is underpinned by five-year Medicare Agreements, which articulate the principles of Medicare and detail the roles and responsibilities of each level of government. The current Medicare Agreements between the Commonwealth and each State and Territory will expire on 30 June 1998. The Minister for Health and Family Services, Dr Wooldridge, announced last year that the new agreements are to be renamed the Australian Health Care Agreements. This renaming reflects the intention to broaden the scope of the agreements beyond their current coverage.

Australian Health Care Agreements(4)

Discussions on the new agreements began in earnest on 23 May 1997 when Commonwealth, State and Territory Health Ministers agreed on five principles to underpin the negotiations on the new agreements. This was followed by agreement on a set of four 'building blocks' on 1 August 1997. Negotiations began to founder, however, on the issue of funding. The States and Territories rejected the Commonwealth's initial offer of a $1.7 billion increase in funding over the five years of the agreements. On 15 January 1998, the ACT became the first jurisdiction to agree in principle to the terms of the Australian Health Care Agreements, following the Commonwealth's offer of an extra incentive payment to target waiting lists for elective surgery. On 10 March 1998, the Commonwealth increased its original base offer by a further $1.1 billon over the five years of the agreements. This offer was rejected by the Health Ministers of the States and the Northern Territory and rejected for a second time at the Premiers' Conference on 21 March 1998. On 27 April 1998, Queensland and the Commonwealth reached agreement in principle on their Australian Health Care Agreement.

The Prime Minister has described the Commonwealth's offer under the Australian Health Care Agreements as a 'very generous increase of 15 per cent, in real terms, in health funding to the States over the next five years'.(5) However, in their submission to the Senate Community Affairs Legislation Committee, the Health Ministers of New South Wales, Victoria, Western Australia, South Australia, Tasmania and the Northern Territory argued that 'the Commonwealth's claims about its funding offer do not stand up to close scrutiny'.(6) This dispute between the different levels of government essentially revolves around the quantum of 'new' funding contained in the Commonwealth's offer, however, the States and Territories are also seeking an additional increase of $1.1 billion per year in the base level of Commonwealth funding under the new agreements.

Following the stalled negotiations over the Australian Health Care Agreements, the Minister for Health and Family Services, Dr Wooldridge, stated that funding by the Commonwealth for the provision of public hospital services will continue to be via Specific Purpose Payments (SPPs) and that 'in the case of any governments which have not signed an agreement by this date, the SPPs will require the relevant government to meet the health care principles of free public hospital care, admission on the basis of clinical need and equity of access'.(7) The power of the Commonwealth to grant monies to the States is set out in section 96 of the Constitution. SPPs are made under section 96 which provides that the Commonwealth Parliament may grant financial assistance to any State on such terms and conditions as it sees fit.

The Health Legislation Amendment (Health Care Agreements) Bill 1998 passed through the House of Representatives on 26 March and was referred by the Senate for consideration by the Senate Community Affairs Legislation Committee. The Committee held a public hearing on 5 May 1998 and tabled its report on the Bill on 29 May 1998. The Bill

To date, only Queensland and the ACT have reached agreement in principle with the Commonwealth over the Australian Health Care Agreements, although three other States have expressed an interest in continuing negotiations.(9) As a result, it appears likely that the Health Legislation Amendment (Health Care Agreements) Bill 1998 will now lapse. In its stead, and in order to satisfy constitutional requirements, the Bill has been introduced to appropriate SPP funding for public hospital services.

1998-99 Budget Funding

Despite only Queensland and the ACT reaching agreement in principle with the Commonwealth to date, the 1998-99 Budget provides for the appropriation of funding for the provision of public hospital services in all States and Territories. According to the Portfolio Budget Statements of the Health and Family Services Portfolio, outlays under the Australian Health Care Agreements in 1998-99 are estimated to be some $5.3 billion. This compares with an estimated outcome under the final year of the Medicare Agreements in 1997-98 of $4.9 billion.(10) Taking account of savings in the Medicare benefits Sub-program and increased funding in other Sub-programs, the Portfolio Budget Statements estimate that total increased funding over the first four years of the Australian Health Care Agreements will be as follows:

Source: Health and Family Services Portfolio, Portfolio Budget Statements 1998-99: 283

A further $600 million is estimated for 2002-03. In addition, funding of $750 million over five years ($150 million in 1998-99) is to be provided through the Veterans' Affairs portfolio to allow full cost purchasing of hospital treatment for eligible veterans.

Main Provisions

Clause 4 provides that the Minister for Health and Family Services may make grants of financial assistance for the purpose of:

• providing or paying for health and emergency services; or
• funding projects or programs which are designed to:

A significant provision of this clause is that grants of financial assistance may be made to entities other than a State. Grants may be made to a hospital or 'other person'. Another significant provision of the clause is that payment of financial assistance is not restricted to services provided in public hospitals.

The clause also provides that financial assistance is only payable during the five year period commencing 1 July 1998 and that the total amount which may be paid by way of financial assistance may not exceed $29 655 056 000.

Clause 5 provides for the terms and conditions of grants made under clause 4. Where an agreement is in place between the Commonwealth and a State (only Queensland and the ACT have agreed in principle to date) the conditions of the grant of financial assistance will be as per the agreement. Where an agreement is not in place, this clause provides that the Minister for Health and Family Services will determine the conditions which apply to a grant of financial assistance under clause 4. The provisions of clause 5 offer the Minister for Health and Family Services the discretion to determine:

• the amount of a grant
• the method for payment of a grant and
• the times for payment of a grant.

Clause 5 also provides that where a grant under clause 4 is made to a hospital or other person, the Minister may determine conditions.

All determinations made under this section are to be in writing. It does not appear that determinations made under this section are disallowable instruments.

The terms and conditions to be determined by the Minister are in addition to principles set out in clause 6.

Clause 6 provides that grants of financial assistance are not payable to a State unless the Minister is satisfied that the State is adhering to the three principles set out in the clause. While the Minister's Second Reading speech notes that the three principles specified in clause 6 are 'based on those applying under the existing Medicare Agreements'(11), principle 3, in particular, has been considerably broadened. The current Medicare Principle 3 requires that:

The proposed Medicare Principle 3 requires that:

There is thus an unambiguous requirement on a State under clause 6 to ensure the provision of equitable access to public hospital services, regardless of a person's geographic location, in order for that State to receive financial assistance under clause 4. Fourteen years of Medicare have proven unable to resolve the inequalities in geographic access to medical and hospital services. Given the closures of country hospitals in several States in recent years, the low numbers of the rural medical workforce and the complaints of the States about the quantum of funding to be provided by the Commonwealth over the next five years, questions can be raised concerning the ability of States to quickly put in place arrangements to ensure equality of access to services regardless of geographic location.

Concluding Comments

The Commonwealth draws on three separate heads of power as Constitutional authority for the Bill. The relevant sections of the Constitution are sections 51(xxiiiA), 81 and 96. This Bill does not appropriate funds for the ordinary annual services of the Commonwealth and, therefore, it may be amended by the Parliament as long as the amendment does not entail a further appropriation of money. If the amendment involves increased appropriations, section 53 of the Constitution requires that it be communicated as a request to the House rather than as an amendment passed by the Senate itself. As with other appropriation bills, the appropriation of funds under this Bill means only that the funds are available to be spent, not that they must be spent.

Due to the failure of negotiations between the Commonwealth and most States and the Northern Territory over the proposed Australian Health Care Agreements, some uncertainty exists as to how the funding and provision of public hospital services will proceed during the five years from 1 July 1998. The current Medicare Agreements and the proposed Australian Health Care Agreements detail the roles and responsibilities of each level of government in the funding and provision of public hospital services. The Bill will make funds available and provides the Minister for Health and Family Services with considerable discretion to establish, via determinations, the conditions under which financial assistance may be provided and the amount, frequency and method of payment. However, it can be argued that this falls short of a negotiated, agreed document which commits both levels of government to particular courses of action over the five year period. It is possible also that different conditions may be determined for different jurisdictions.

Further, in those jurisdictions which are not covered by an Australian Health Care Agreement, it is unclear exactly what may occur following a Commonwealth and/or State election. For example, a change of government at the Commonwealth level may result in a new set of determinations regarding the conditions under which financial assistance grants may be provided. A change of government at the State level may result in that State seeking to change aspects of the prevailing funding arrangements.

The Bill also provides that payments may be made to a State or a hospital or 'other person'. While it is likely that the Commonwealth's power under section 51(xxiiiA) of the Constitution enables such payments to entities other than a State, it would be a considerable departure from traditional and current arrangements, which involve payments by the Commonwealth to the States to assist the States in meeting the costs of providing public hospital services. This provision does, however, provide the Commonwealth with maximum flexibility to ensure that payments for public hospital services are still available should any jurisdiction(s) prove unwilling to accept conditions imposed by the Minister through determinations made under this Bill. However, such an eventuality raises some intriguing questions. For example, would a State which had refused to accept the conditions determined by the Minister, also seek to ban the public hospitals in that State from receiving direct payments from the Commonwealth? If a hospital did accept payments directly from the Commonwealth, would the State seek to withhold its own funds from that hospital?

While the comments and scenarios outlined above may be arguable, if any do eventuate, it is possible that the resulting situation may prove serious enough to prompt both levels of government to resolve the unsatisfactory and counter-productive split of their respective roles and responsibilities for the funding and provision of health services.

Endnotes

1. The Bill uses the description 'health and medical services of a kind or kinds that are currently, or were historically, provided by hospitals'. For brevity, this Digest uses 'public hospital services'.
2. House of Representatives, Debates, 28 May 1998, 3908.
3. 'New Bill puts hospital, patients at risk: States Medicare', AAP, 29 May 1998.
4. Further discussion of issues around the Australian Health Care Agreements and public hospital financing can be found in the Library's Budget Review 1998-99, May 1998: 71-77.
5. 'Transcript of the Prime Minister the Hon John Howard MP Press Conference, Prime Minister's Courtyard, Parliament House', Press Release, Prime Minister, 20 March 1998.
6. Senate Community Affairs Legislation Committee, 'Submission Number 10: States and Northern Territory Governments (joint submission)', Health Legislation Amendment (Health Care Agreements) Bill 1998, 4.
7. 'Health Care Agreements Legislation, the Senate and Labor', Press Release, Minister for Health and Family Services, 22 April 1998.
8. House of Representatives, Debates, 12 March 1998.
9. K Lawson, 'Signing Medicare agreement earns ACT $11m bonus', Canberra Times, 3 June 1998, 1.
10. Health and Family Services Portfolio, Portfolio Budget Statements 1998-99, Budget Related Paper No. 1.8, 110
11. House of Representatives, Debates, 28 May 1998, 3908.

Contact Officer and Copyright Details

Paul Mackey
4 June 1998
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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ISSN 1328-8091
© Commonwealth of Australia 1998

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Published by the Department of the Parliamentary Library, 1998.

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