Bills Digest No. 162 2002-03
Health Care
(Appropriation) Amendment Bill 2003
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
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Health Care (Appropriation) Amendment Bill
2003
Date Introduced: 14 May 2003
House: Representatives
Portfolio: Health and Ageing
Commencement: Royal Assent
Purpose
To amend the Health Care (Appropriation)
Act 1998 to:
- extend the period of operation of the Act for a second five
year period
- To appropriate $42 010 000 000 to make a Commonwealth
contribution over five years to the cost of hospitals emergency
services during the 5 year period
- Alter the Act so that the definitions in the Act are consistent
with the Health insurance Act 1973, and
- Empower the Minister to delegate to an SES employee in the
Department of Health and Ageing the power to make certain funding
decisions about programs and projects to States, hospitals or other
persons.
Free, universal access to public hospital
services is one of the central principles of Medicare. Although
public hospitals are primarily the responsibility of the States and
Territories, under Medicare, the Commonwealth makes a substantial
financial contribution to them. With the introduction of Medicare
in 1984 Commonwealth support for public hospitals was provided
under Medicare Agreements. The last series of Medicare Agreements
were negotiated in 1993 pursuant to the Health Insurance Act
1973. At the time section 24 allowed the Commonwealth and
States to make agreements with respect to 'public hospital
services' and 'other health services', subject to certain standard
'heads of agreement' listed in Schedule 2A of the
Act.(1)
The last Medicare Agreement expired on 30 June
1998, at which time the Commonwealth sought to negotiate new
Agreements with the States and Territories. These new Agreements
were renamed the Australian Health Care Agreements, which are
discussed below. It is significant to note that the negotiations
leading up to the last Medicare Agreement were marked by a dispute
over the role of private health insurance and a requirement in the
'heads of agreement' for States to commit to the Medicare
Principles.(2)
Commonwealth support for public hospitals is
now given under the Health Care (Appropriation) Act 1998
(the 1998 Act). These arrangements expire on 30 June 2003.
The 1998 Bill was introduced 'against a
background of stalled negotiations between the Commonwealth and
most States over a replacement for [existing] Medicare
Agreements'.(3)
The Commonwealth had proposed the negotiation
of Australian Health Care Agreements (AHCAs) with each of the
States involving a 'very generous increase of 15 per cent, in real
terms, in health funding to the States over the next five years [to
30 June 1998]'.(4) But, negotiations were marked by
disputes with some States over the quantum of funding.
In the end, the 1998 Act allowed a $29bn
appropriation over five years 'to make a Commonwealth contribution
to the cost of health and emergency services that are currently or
were historically provided by hospitals in the States and
Territories'.(5)
Specifically, it provided for grants to States
or to hospitals or 'other persons' in relation
to:(6)
- the provision of hospital based health and emergency services,
or
- projects or programs to improve the efficiency and
effectiveness of, the demand for, or patient outcomes in relation
to such health and emergency services.
In general, it gave the Minister the
discretion to determine:
- the amount of a grant
- the method for payment of a grant, and
- the times for payment of a grant.
Payments to States were given under the
auspices of 'specific purpose payments' under section 96 of the
Constitution. Section 96 provides that the Commonwealth Parliament
may grant financial assistance to any State on such terms and
conditions as it sees fit.
Grants to States were subject to conditions
specified in any AHCAs.(7)
Such grants required that a State adhered to
certain Health Care Agreement Principles:(8)
- public hospitals services must be provided free of charge to
public patients
- access to public hospital services must be provided on the
basis of clinical need and within a clinically appropriate period
to public patients, and
- people should have equitable access to public hospital services
regardless of their geographical location.
These principles largely reproduced the
principles applying under Medicare Agreements. However, as the
original Bills Digest noted, Principle 3 created an
'unambiguous requirement to ensure the provision of
equitable access to public hospital services, regardless of a
person's geographic location'.(9) Failure to provide
equitable access was not merely an aspiration but a precondition
for payment under the grant arrangement.
The original Bills Digest noted that the power
to issue grants to hospitals and 'other persons' was a
'considerable departure from traditional and current
arrangements'.(10)
Further details of the 1998 Act are included
in Bills
Digest No. 225 1997-98.
The 1998 Bill provided the basis for the
Commonwealth's financial contribution to public hospitals and was
notable for its flexibility. The Bills Digest made the following
comment:
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. 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.(11)
Essentially, the 1998 Act moved from a
framework of funding direct to the States, governed by the
Health Insurance Act 1973 and the Medicare Principles, to
a dual framework of direct and indirect funding, governed by
ministerial discretion and AHCAs:
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.(12)
In financial terms the 1998 Act contained two
basic features:
(a) a five year appropriation from 1 July 1998
to 30 June 2003,(13) and
(b) a global financial limit of
$31.8bn.(14)
As noted above, the present AHCAs run for five
year periods, expiring on 30 June 2003. The next round of AHCAs
would commence on 1 July 2003 and expire on 30 June 2008. At the
end of each 5 year appropriation, the 1998 Act must be amended in
order to ensure continued funding. The present Bill is designed to
provide for the next round of AHCAs.
The present Bill has been introduced into an
environment in which the States, Territories and Commonwealth are
again at loggerheads over their contribution to health care funding
in Australia, the reasons for this are explored more broadly below.
Essentially, the negotiation of the 2003-08 AHCAs between the
Commonwealth and States and Territories has stalled and there are
no new agreements to take over from the current agreements.
Discussions about the 2003-08 Agreements have
been taking place for some time. In April 2002 the Australian
Health Ministers jointly announced that the new agreements would be
negotiated on the basis of the following objectives:
- Commonwealth/State relations in the health arena should focus
on the provision of optimal care and health outcomes, regardless of
jurisdictional boundaries.
- It is in the best interests of all Australians for the
Commonwealth, States and Territories to work co-operatively to
improve the health and wellbeing of the community and the way in
which health services are provided.
It was proposed by the Australian Health
Ministers that the 2003-08 AHCAs should 'contain the principles,
objectives and proposed health outcomes designed to achieve those
objectives'.(15) In order to promote this outcome, nine
reference groups were established, each designed to consider a
specific area of health policy and, after such consideration
provide recommendations and advice that would help inform the
development of the 2003-08 AHCAs. The nine reference groups
addressed the following policy areas:
- Interaction between hospital funding and private health
insurance
- Improving rural health
- Interface between aged and acute care
- Continuum between preventative, primary, chronic and acute
models of care
- Improving indigenous health
- Improving mental health
- Information technology, research and e-health
- Quality and safety
- Collaboration on workforce, training and education
Each reference group was co-chaired by a
non-government clinical expert in that specific policy area and a
senior government health official. Membership of each reference
group was selected by the co-chairs on the basis of expertise. Each
reference group had a sponsoring Minister.(16)
The development of the reference group and the
involvement of clinicians in the development of the next ACHAs was
a significant shift from the usual process. Arguably, it is
surprising that clinicians have never played a formal role in
previous Agreements. Despite being ostensibly about health, the
AHCAs and their predecessors the Medicare Agreements have been
primarily about health financing and have had little to do with
health outcomes, consequently health care providers have had little
involvement in their negotiations.(17)
At the time of the announcement there was wide
spread optimism amongst health care professionals about the
possibilities and potential that such participation could bring
with it. Numerous papers were published in leading medical and
health policy journals arguing that even if the stated aims of the
Australian Health Ministers were only partially realised, there
would be a substantial change in the relationship between health
care and health care financing in Australia.(18)
The stalling of the negotiations of the next
AHCAs has meant that this initial optimism has given way to a much
more pessimistic view. Some commentators have argued that the
breakdown in negotiations has little to do with rigorous debate
about how to achieve the best health outcomes for the Australian
people and centres almost entirely on health care
financing.(19) Focusing around a number of claims and
counterclaims about the status of the Commonwealths and States and
Territories respective financial contributions to public hospitals
the negotiations of the next AHCAs echo previous negotiations in
that any discussion about the impact such significant amounts of
money is likely to have on the actual health status of the
Australian population seems to be, strangely, absent.
The Commonwealth has proposed, what it argues,
is a 17 per cent real increase in funding, lifting its contribution
to public hospital funding from $32 billion to $42
billion.(20) The States and Territories have rejected
this offer, claiming that there has been a decrease of
approximately $1 billion dollars over the five year period the
Agreement is supposed to cover.(21)
According to the Department of Health and
Ageing Portfolio Budget Statement this decrease in previous
estimates is due to a:
greater proportion of public hospital services
provided to non-admitted patients and a reduction in public
hospital usage growth beyond growth resulting from demographic
changes. This change in usage growth reflects in part the fact that
more services are being provided in private hospitals following the
introduction of the Government's 30 per cent Private Health
Insurance Rebate and Lifetime Health Cover.(22)
The savings are to be made over the life of
the next Agreements with the following table providing details of
the $918.5 million in savings:
|
2003-04
|
2004-05
|
2005-06
|
2006-07
|
|
-108.9
|
-172.0
|
-264.6
|
-372.9
|
In what is becoming an increasingly
predictable debate the States and Territories have countered this
argument by restating their claim that public hospital waiting
lists have not substantially decreased since the introduction of
the Commonwealths private health insurance incentives, nor has
there been a significant change in the number of admissions in
public hospitals (although private hospital admissions have
increased substantially).(23) Moreover, the States and
Territories argue that the decline in bulk billing has seen a rise
in the pressure on emergency departments of public hospitals and
that the Commonwealth has failed to take into account issues
associated with the ageing of the population.(24)
According to data published by the Australian
Institute of Health and Welfare (AIHW), the States and Territories
have been falling behind in the amount they contribute to public
hospitals out of their own resources when compared to the
Commonwealth. In their most recent Health Expenditure publication,
the AIHW points out that the State and Territory share of public
hospital funding has fallen from 45.4 per cent in 1998-99 (the
first year of the current ACHAs) to 43.4 per cent in 2000-01.
Conversely, the Commonwealths contribution to public hospital
funding has remained relatively stable over the same period (48.2
per cent in 1998-99 and 48.1 per cent in 2000-01), although it had
increased from 45.2 per cent in 1997-98.(25)
The Commonwealth has made clear that the $42
billion it has offered the States and Territories is the maximum
amount that will be offered under any new AHCA.(26) The
Department of Health and Ageing Portfolio Budget Statement 2003-04
provides further details of the other conditions that the States
and Territories must agree to, these include:
The Portfolio Budget Statement goes on to
state that:
States that meet these conditions and match the
Commonwealth's funding growth rate will receive 100 per cent of the
funds available for that State. States that meet the conditions
outlined above but fall short of matching the Commonwealth's growth
rate, will receive 96 per cent of the maximum available funding to
that State.(27)
The States and Territories have thus far
refused to sign up to any new Agreement, arguing that public
hospitals need a much higher injection of funding.
Refusal to sign up to a new Agreement does not
mean that the funding runs out, any jurisdiction that does not sign
on to a new Agreement would receive the same level of funding set
out in the 1998-2000 Agreement. However, failure to pass this Bill
will mean that the Commonwealths financial contribution to public
hospitals in all States and Territories will cease as of 1 July
2003, the date that the current legislation ceases to have
effect.
The gist of the proposed amendments is that
there will now be 2 appropriation periods:
(a) a five
year appropriation from 1 July 1998 to 30 June 2003, and
(b) a five year
appropriation from 1 July 2003 to 30 June 2008 (items 1,
2 and 4).
The proposed financial limit for the second
appropriation period is $42.01bn (item 5).
Effectively, there are two appropriations with
separate terms relating to the financial limit (item
5), parliamentary reporting times (items
6 and 7) and grant conditions
(item 8).
Item 9 proposes new
section 7 that would permit the Minister to delegate,
subject to ministerial directions, certain functions to a
Departmental officer at SES level:
- the funding of 'projects or programs ', and
- the terms and conditions of grants in relation to such
'projects or programs '.
The Explanatory Memorandum explains that the
estimated amount of the grants covered under section 4(1)(b) are
$359.8 million over the five years from 2003-2008.
Included within these grants are:
- Pathways Home Program
- Mental health
- Palliative Care, and
- Hospital Information and Performance Information Program.
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 the States and Territories 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 2003. The early optimism
of clinicians about the next AHCAs refocusing on improved health
outcomes has given way to the reality of the continued focus on
health care financing.
The current AHCAs 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 Ageing 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.
- Previous agreements were made
pursuant to (repealed) section 24F of the Health Insurance Act
1973.
- Bills Digest Service, Medicare
Agreement Bill 1992,
Bills Digest 1993.
- Paul Mackey, Health Care
(Appropriation) Bill
1998,
Bills
Digest No. 225 1997-98.
- '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, cited in Paul Mackey,
Health Care
(Appropriation) Bill 1998, Bills
Digest No. 225 1997-98.
- Paul Mackey, Health Care
(Appropriation) Bill
1998,
Bills
Digest No. 225 1997-98.
- Health Care (Appropriation) Act
1998,
paragraph 4(1)(b).
- Health Care (Appropriation) Act
1998,
paragraph 5(2)(a).
- Health Care (Appropriation) Act
1998,
section 6.
- Paul Mackey, Health Care
(Appropriation) Bill
1998,
Bills
Digest No. 225 1997-98.
- Paul Mackey, Health Care
(Appropriation) Bill
1998,
Bills
Digest No. 225 1997-98.
- Paul Mackey, Health Care
(Appropriation) Bill
1998,
Bills
Digest No. 225 1997-98.
- Paul Mackey, Health Care
(Appropriation) Bill
1998,
Bills
Digest No. 225 1997-98.
- Health Care (Appropriation) Act
1998,
subsection 4(2).
- Health Care (Appropriation) Act
1998,
subsection 4(3).
- AHCA Reference Group Report,
2.
- Details about membership and
sponsoring Ministers as well as the final report of the ACHA Reference Group
Report are available at http://www.health.gov.au/haf/ahca.htm
- John P Paterson, Australian Health care
Agreements 2003-08: a new dawn? MJA, 177,
313-315.
- Michael A Reid, Reform of the Australian Health
Care Agreements: progress or political ploy? MJA, 177:
310-312.
- Peter Sainsbury, 'Umm now,
about the crisis in the Australian health care system',
Online Opinion, 22 April 2003.
- Explanatory Memorandum Health Care
(Appropriation) Bill 1998.
- Paul Strick, Worth Wades in as Minister loses
way, The Advertiser, Mon 5 May 2003. Indeed the West Australian
government is apparently so concerned with the supposed decrease in
funding on Monday 5 May it took out a full page advertisement in
the West Australian encouraging West Australians to write, phone or
fax the Prime Minister about their concerns with public hospital
funding.
- Department of Health and Ageing,
Portfolio Budget
Statement 2003-04, page 106.
- AIHW,
Hospital Statistics, 2000-01.
- A general overview of Medicare can
be found on the Parliamentary Library e-brief Medicare -
Background Brief. A more detailed discussion of the decline in
bulk billing can be found in the Parliamentary Library publication
The
Decline in Bulk Billing: Explanations and Implications. Also
available is a short publication responding to the debate about the
universality of Medicare:
Is Medicare Universal?
- AIHW, Health
Expenditure Australia 2000 - 01.
- Australian Health Care Agreements
2003-2008, Press Release, Prime Minister 23 April 2003.
- Department of Health and Ageing,
Portfolio Budget
Statement 2003-04, page 99.
Amanda Elliot and Nathan Hancock
27 May 2003
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 2003
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