Bills Digest no. 109 2007–08
Health Care (Appropriation) Amendment Bill
This replaces the 23 May 2008 version of this Digest to
include a minor technical amendment requested by the Department of
Health and Ageing
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
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Health Care (Appropriation) Amendment Bill
introduced: 15 May 2008
House: House of Representatives
Portfolio: Health and Ageing
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
The purpose of this Bill is to
increase the appropriation to State and Territory governments under
the Australian Health Care Agreements (AHCAs) by $10.25 billion
dollars. This will ensure continued funding for State and Territory
health care systems during the ACHAs negotiations scheduled for the
later half of 2008.
The AHCAs are five year bilateral funding agreements between the
Commonwealth and the States and Territories to provide public
hospital services. Under the AHCAs, the Commonwealth and the States
and Territories share funding but management of the services is
delivered by the States and Territories. The AHCAs are the key
funding mechanism for State and Territory health care systems,
namely public hospitals. There is provision in Health Care
(Appropriation) Act 1998 (the Act) for other health care
programs to be funded provided they improve service delivery or
Historically, negotiations have been protracted, and at times,
the States and the Commonwealth have been at loggerheads over the
proposed contribution levels, with the States and Territories
claiming during the last negotiations that the Commonwealth share
of funding has declined. The current AHCAs are due to expire on 30 June 2008.
This appropriation reflects the commitment made at the Council
of Australian Government (COAG) meeting on 26 March 2008, where the
Commonwealth Government undertook to provide an immediate
allocation of one billion dollars to the public hospital system,
with 500 million to be provided before 30 June 2008. It is intended that this
money would be used by the States and Territories to relieve
pressure on public hospitals.
Of the $10.25 billion appropriated by the Bill, $9.7 billion is
to be spent under the AHCAs and $0.5 billion to be spent on public
from the $0.5 billion, this money is to be paid to the States and
Territories during 2008-09, based on 2007-08 payments plus
indexation. The terms and conditions of the current AHCAs remain
unchanged and will be rolled over for the 2008-09 financial
As the terms and conditions of the current AHCAs have been
rolled over, the indexation is calculated according to (weighted)
population figures which take into account demographic
characteristics such as ageing and the Commonwealth Wage Cost Index
1. The predicted
expenditure of $9.7 billion for 2008-09 is not dissimilar to the
annual funding estimates under the 2003-08 ACHA. Expenditure for
2007-08 is estimated at $9.2 billion.
The second reading speech gives some indication of how this
money is to be spent. The Minister for Health and Ageing, Nicola
Roxon, notes that an additional year s funding for mental health,
palliative care and the hospital information and performance
program established under the current Agreements will be
Paper 3 notes that the $9.7 billion is to be spent on the provision
of public hospital services free of charge to eligible persons
. Given that the
current terms and conditions of the AHCAs apply to this
appropriation, the way the money is allocated to public hospital
services is likely to remain unchanged.
This appropriation has failed to generate significant
commentary. The Australian Medical Association noted that there was
merit in buying a year s grace before negotiating the
Menzies Centre for Health Policy acknowledged the additional
funding while the AHCAs were being negotiated but its analysis
focussed on the Health and Hospitals Reform Fund.
This appropriation effectively ensures the continued funding of
health and hospital care provided by the States during the
negotiations of the AHCAs. It may also mean that the findings of
the National Health and Hospitals Reform Commission can be
incorporated into the new AHCAs.
It appears that the protracted negotiations that have marred
previous AHCAs have not re-surfaced. The States and Territories have not
expressed any concerns about this appropriation or the injection of
$500 million to be spent before the end of this financial year. The
Commonwealth has not outlined its expectations for how the $500
million is be provided (publicly at least), apart from relieving
pressure on public hospitals. This lack of detail may yet lead to
concerns emerging from the States and Territories, for example,
that the additional $500 million will be used as a bargaining tool
during the AHCA negotiations.
As one of its election promises regarding health care, the Rudd
government proposed the single biggest reform in a quarter of a
century . Apart
from ending the blame game , Labor committed to investing $2
billion in a National Health and Hospitals Reform Plan to provide
assistance for immediate reforms and improve health services for
Although not linked directly to the National Health and Hospitals
Reform Plan, this appropriation is seen as recognition of the need
for the Australian Government to move towards a proper share of
Government funding for public hospitals .
In the post-Budget context, many of the media statements
released by the Government have focussed on the increased
expenditure for health and hospitals, listing the spending
priorities as demonstration of the Government s commitment to
health and hospital system for the future. This allocation is considered by the
Government to be a part of this.
Despite increases in expenditure for the health care system
overall, questions may be raised about how States and Territories
can address the challenges facing the health care system when the
funding is comparable to previous years. At this stage, there does
not appear to be any incentives for States and Territories to
innovate or find efficiencies in this interim year. Furthermore,
given the significant health workforce shortages it remains to be
seen how States and Territories can make significant inroads on
waiting lists or broader health care reform in service
Failure to pass this Bill will limit the Commonwealth s
contribution to public hospitals (for example the additional $500
million for public hospitals) and that the Commonwealth s
contribution to all States and Territories will cease as of 30 June
The current standing appropriation expires on 30 June 2008 and
is capped at $42,010,000,000. The amendments to the Bill would
extend the current 5 year appropriation to 6 years and would
appropriate from the Consolidated Revenue Fund an amount not
exceeding $52,260,000,000, being an increase of $10,250,000,000 to
the current appropriation.
This item extends the appropriation period from five to six
years. As a result of this amendment, the appropriation period is
from 1 July 2003 30 June 2009.
The amendment to this paragraph increases the appropriation that
can be made under the Act to $52,260,000,000.
Under Subsection 4(1) of the Act the Minister can grant
financial assistance to a State, or a hospital or a person for a
range of services including:
- Health and emergency services
- Projects or programs that are designed to improve the
efficiency and effectiveness of health and emergency services or
improve patient outcomes.
The financial assistance is only payable during
the appropriation period.
Budget Paper No. 3 outlines the rationalisation of around 90
Specific Purpose Payments to five or six new national agreements.
The reform of payments for healthcare is due to be implemented from
1 July 2009, which reflects the proposed date for implementation of
the new ACHAs.
It also notes that the Commonwealth is moving away from a
prescriptive funding model to a rigorous focus on the achievement
of outcomes .
Although this additional funding remains subject to the framework
agreed to in the 2003-08 AHCAs, it is likely that the Commonwealth
will be watching the performance of State and Territory public
hospitals (and health care systems) closely prior to the
negotiations of the AHCAs. While the additional money is no doubt a
welcome addition to the State and Territory health care systems,
the negotiation of the AHCAs and future budget priorities will
reveal the extent of the Government s commitment to reform of the
financing of health care and the health system more broadly.
. See, for example, the Australian Health
Care Agreement between the Commonwealth of Australia and the State
of Western Australia 2003-08, http://dpl/Books/2006/AUST_HealthCareAgreement03-08WA.pdf
Rebecca de Boer
5 June 2008
Bills Digest Service
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