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Tuesday, 15 February 2000
Page: 13483


Ms MACKLIN (8:47 PM) —The amendment Labor has moved tonight highlights in particular the government's approach to the funding of our public hospitals. As all members would know, around the country the public hospital system has been stretched to breaking point by the policies of this government and also by the policies of coalition state governments. All of us hear and read stories both from our local areas and in the daily papers about the crisis in our hospitals and the problems faced by hospital managements trying to rectify deep-seated problems with inadequate funding. Unfortunately, there are growing signs that the federal government is about to make the situation far worse. Recent statements by the Prime Minister are a clear indication that the government has abandoned its commitment to maintaining in full its grants to the states in health and education following the introduction of the GST.

The Prime Minister was on 3AW in Melbourne last Friday. Most people will remember the pasting the Prime Minister got from the Braybrook textile workers. In addition to ignoring the plight of these workers, the Prime Minister let it slip that the government will be providing less money to the states for health and education. The interviewer, Neil Mitchell, asked:

So you are providing less funding?

The Prime Minister replied:

No, we're, well we're providing, we're providing less dollars, but because the costs of operating will fall, the real financial position will be the same.

Unfortunately, nobody believes that. Of most concern is that this is a complete reversal of the Prime Minister's promise to the parliament on 12 November 1998. Asked then to guarantee that he would not cut special purpose payments to the states for essential health, aged care and education services, the Prime Minister said:

... we have no intention of using the route of specific purpose payments to take away through the back door what we are clearly giving in a very generous fashion through the front door ...

Obviously, he has completely caved in on that promise, just like on many other promises. Those who will suffer in particular will be our state health and education systems. To cut state funding in the way that has been foreshadowed would be a clear breach of the Prime Minister's promise to the Australian people and to state and territory leaders. We are already seeing the beginning of this new policy in the way the government has reneged on its commitments under the Australian health care agreements for grants to the states for public hospitals. These agreements were entered into in 1998, and they run for five years. The government knew what it was signing and, in particular through the Minister for Health and Aged Care, has always claimed that it would deliver the money it said it wouldthat is, about $5.9 billion would be paid under these agreements this year, accounting for about half the cost of running the states' public health systems. The Minister for Health and Aged Care is always claiming how wonderful these agreements are and boasting that they provide a total of $5 billion extra to the states spread over five years. It sounds like a large sum. But the minister's claim is very misleading.

The amount of funding required in the year 2003 to run our public hospitals, which service a population of what by then will be over 20 million, will be far more than was required to service the population of 17.5 million that existed when the previous agreement started in 1993. In addition, by 2003 there will have been 10 years of inflation, vast changes in medical technology and the introduction of many new drugs. The age profile of the community has also changed significantly. So, by that time, new burdens will have been placed on our public hospitals, which will also have aged themselves as this government fails to maintain adequate capital investment to make sure that the infrastructurethe buildings themselvesis kept up to date.

The minister's boast is, I would have to say, a cruel deception. The reality is that negotiations over the Australian health care agreements left the states several hundred million dollars short of what is required to continue to deliver services to a growing population. The starting point was manipulated, and the government has continually misrepresented the comparison between the new agreements and the former Medicare agreements by excluding funds which were provided separately in the past for services but are now rolled into the new agreements.

Whatever debates we might have had in the past about the starting point, there is now a new threat to the capability of the states to continue to service their populations. The Commonwealth has reneged on the agreements it entered into just 18 months ago. The original agreements provided for indexation of the grants to accommodate growing populations, an increase in demand on hospitals due to the ageing population and greater utilisation, and an increase in the costs of actually running hospitals. The basis for this third set of factors was not agreed prior to signing the Australian health care agreements. Instead, a process was specified for the states and the Commonwealth to negotiate on how the indexation of the grants for inflation in medical costs would occur. Last year, the Commonwealth adopted a hardline position and refused to grant the states any more than the 0.5 per cent default increase provided for in the agreements, to apply whilst negotiations occurred. This compared to the ordinary consumer price index of 1.75 per cent for the year to last March, which was less than the actual increase in costs experienced by hospitals for wages and materials. The inflation in medical costs is well documented as exceeding the ordinary consumer price index for a range of reasons, and the Australian Bureau of Statistics prepares specialist indices to measure cost movements in the health sector.

The states were understandably outraged at the Commonwealth's attitude, which was clearly driven by a desire to slam the brakes on funding for health from the Commonwealth. The states negotiated, unfortunately fruitlessly, but I am pleased to say that they maintained a unanimous positionLabor and coalition states and territories alike. They were disgusted with the minister's change of heart. Fortunately, under the agreement there was a provision for the appointment of an independent expert arbiter to determine the actual rate of indexation in case such a situation occurred. I say `fortunately', but as it has turned out, even though this expert arbiter was appointed, the minister has completely refused to take his advice. This clause was intended to prevent any deadlock by binding both parties to any dispute. But, as I have just remarked, the Commonwealth abused the process and has refused to accept the outcome. The states wrote to the Minister for Health and Aged Care on 26 May last year. They specifically asked him to make a commitment to the process and invited him to nominate the arbiterin a small way trying to get him to own the process. They were obviously well aware of the possibility that the minister would welsh on the deal.

The Minister for Health and Aged Care agreed to enter this process and nominated Mr Ian Castles, the Vice-President of the Academy of Social Sciences in Australia and a former head of the Australian Bureau of Statistics. Mr Castles is a very expert person and well suited to this role as an arbiter. The minister extended the terms of reference from the indexation of the 1999-2000 grants to enable Mr Castles to consider how the agreements might be indexed in the future. We will see, as my remarks go on, that this was a very significant change.

The arbiter duly called for submissions and reported on the due date of 31 October. He analysed the problem in great technical detail and considered all the arguments presented to him. He concluded that the Commonwealth was wrong in the views it expressed, and he made a clear recommendation that the best and most appropriate form of indexation was to increase the payments under the Australian health care agreements by the consumer price index plus 0.5 per cent. In the case of the 1999-2000 payments, this required an average national indexation of 2.25 per cent, based on the previous March quarter CPI figures.

But the Commonwealth refused to accept the umpire's decision. Two days before Christmas, when the minister knew he would get minimum scrutiny, the minister rejected the arbiter's report and announced he would unilaterally impose an outcome based on an average one per cent increase for the states. This left the states about $100 million a year worse off compared to the arbiter's recommendation of a 2.25 per cent increase. So in one stroke of this minister's pen, the Howard government sliced the equivalent of a major teaching hospital budget off their contribution to our public hospitals.

At the same time that this was going on, we now discover that the government have very happily allowed the private health insurance rebate to blow out by an incredible $500 million a year, which of course is money lost to the health budget.


Mr Lindsay —It is not.


Ms MACKLIN —It certainly is lost, and I will go on to describe the situation. The minister has described this as a fabulous result. He said it is a fabulous result that an extra $500 million—that brings it up to $2.3 billion—


Mr Lindsay —It takes pressure off the public system. That's what you wanted.


Ms MACKLIN —It is interesting that the member for Herbert interjects and says that this has taken pressure off the public hospital system. The problem with the member for Herbert's remarks is that there is no evidence of that whatsoever. He must live in some sort of cloud-cuckoo-land, because there is not a public hospital in the country that is not under pressure. I would love to go to the hospital in Townsville and tell them that they do not have any funding problems. They do not have any funding problems at all in Townsville because the pressure has been taken off as a result of the private health insurance rebate! They would think that he was a just a joke as a local member of parliamentsomeone who does not understand the pressure on his public hospitals.

This government has failed completely. The minister does not even bother to try to show that there has been any reduction in public waiting times as a result of the health rebate, because there has not been. On the one hand there is money pouring into subsidising the private sector, with no effect at all on the public hospital waiting lists, yet at the same time as that is happening the states are being cut back to the tune of $100 million in this year alone.

The $100 million lost to public hospitals as a result of this Scrooge-like Christmas present from the health minister is only the start of the problem. The funding deficit will grow and compound over the four years of the current agreements. Each year the gap will expand between the default indexation which the government has built into the forward estimates and the actual funding requirement of public hospitals simply to treat their current patients. In this bill, which gives effect to the amounts set out in the additional estimates, this government has allocated just $30.2 million to pay for the increase from the original default indexation and the minister's Christmas announcement. This is just a fraction of the money that was required, and the states are left $100 million underfunded. That is just for one year. It is $100 million they are owed by the Commonwealth as a result of recommendations from an independent arbiter. The choice the states are left with is to cut services even further than they have already been in recent years, or to find more state funds to prop up their hospitals and keep the doors open. And that is what is at the heart of this government's funding strategy. Once again the member for Herbert says, `Oh, go to the states.' That is exactly what is at the heart of this government's strategy: to maximise the pressure on the states to take up funding responsibility for health. The Prime Minister, as we heard on Friday on 3AW, let the cat out of the bag. He wants to backslide in specific purpose payments and commitments such as the Australian health care agreements and force the states to fund health and education through GST receipts. He has now made it very clear that that is what his plan is.

As the states know, and the hospitals in particular, this will not be the only impact the GST will have on hospital funding and their ability to deliver services. We have heard at length from hospital operators who fear the bureaucratic nightmare they face under the GST to track the separate costs they incur between those which attract the GST and those which do not so that they can later recover a portion of their budget. It is interesting also to look at what Mr Castles, the independent arbiter, concluded in this area, because he identified a further degree of complication that will arise because of the GST. Agreement has not been reached on the basis for indexing the Australian health care agreements in 2000-01 because no-one is sure of what the impact of the GST will be on the consumer price index and how relevant this measure will be to the movement in hospital running costs. Mr Castles concluded that it would be necessary to conduct a further inquiry into the impact of the GST on the cost of providing public hospital services and the CPI to determine what other ad hoc adjustments would be required to compensate hospitals for unintended consequences flowing from the impact of the GST on the consumer price index. Not unexpectedly, the minister once again dismissed this recommendation and said he would decide what adjustments to make. In other words, once again the states will be starved of funds by being denied the true cost of the GST, and the minister is not prepared to allow an independent expert to determine what they are really entitled to.

The only losers from this process are the vast bulk of the public who depend on our public hospital system. As a one-eyed supporter of private health, the minister pays little regard to this problem. However, he should not forget, and all the members of the government should not forget, that 70 per cent of the Australian population depend solely on the public system. We should also not forget that those with private health insurance, whose interests the minister is preoccupied with, also rely heavily on the public system. If you have private health insurance and have a major car accident, you are going to end up in the emergency ward of a major public teaching hospital. But that is not the concern of this government. They just want to palm the responsibility for that back onto the states and cut the specific purpose payments on the way through.

As I said at the outset, the Prime Minister has let the cat out of the bag. The states will lose health and education funding with the introduction of the GST. This will be on top of cuts to the indexation of funding to our public hospitals. In both cases, this is money that is desperately needed to make sure that our public hospitals are able to continue to do the job that they do so well, which is caring for patients and caring for those people who need the services that they deliver. It is an absolute outrage that these services, some of the most important services that we have in our community, are being so dramatically attacked by this government, whether it is in the government's decision to cut funding when the GST comes in or whether it is a result of this minister's decision to not meet the recommendations of an independent arbiter to make sure that hospitals have the funds that they need so that patients get properly treated. With that, I strongly support the amendment moved by the opposition to make sure that the message is brought home to the government about what the impact of their decisions will be on our public hospital system.