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Bills Digest No. 225 1997-98
Health Care (Appropriation) Bill 1998
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
Health Care (Appropriation) Bill 1998
Date Introduced: 28
May 1998
House: House of Representatives
Portfolio: Health
and Family Services
Commencement: On
Royal Assent
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.
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)
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
provides the basic framework for agreements between the Commonwealth and
the States for the provision by the States of acute health services to
public patients free of charge in return for Commonwealth financial assistance.(8)
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:
| 1998-99 |
1999-00 |
2000-01 |
2001-02 |
|
241.9
|
308.8
|
437.5
|
524.0
|
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.
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:
improve patient outcomes; or
improve the efficiency and effectiveness of, and/or
reduce patient demand for, hospital services.
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:
To the maximum practicable extent, a State will ensure the provision
of public hospital services equitably to all eligible persons, regardless
of their geographical location (emphasis added).
The proposed Medicare Principle 3 requires that:
Arrangements are to be in place to ensure equitable access to such
services for all eligible persons, regardless of their geographic location
(emphasis added).
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.
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.
- 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'.
- House of Representatives, Debates, 28 May 1998, 3908.
- 'New Bill puts hospital, patients at risk: States Medicare', AAP,
29 May 1998.
- 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.
- '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.
- Senate Community Affairs Legislation Committee, 'Submission Number
10: States and Northern Territory Governments (joint submission)', Health
Legislation Amendment (Health Care Agreements) Bill 1998, 4.
- 'Health Care Agreements Legislation, the Senate and Labor', Press
Release, Minister for Health and Family Services, 22 April 1998.
- House of Representatives, Debates, 12 March 1998.
- K Lawson, 'Signing Medicare agreement earns ACT $11m bonus', Canberra
Times, 3 June 1998, 1.
- Health and Family Services Portfolio, Portfolio Budget Statements
1998-99, Budget Related Paper No. 1.8, 110
- House of Representatives, Debates, 28 May 1998, 3908.
Paul Mackey
4 June 1998
Bills Digest Service
Information and Research Services
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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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