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Wednesday, 24 November 2010
Page: 3665


Mr FLETCHER (5:37 PM) —If we cast our minds back to the period of approximately January to April this year, no hospital patient anywhere in Australia was safe. They would find themselves waking up groggy from the anaesthetic, somewhat confused, not sure where they were, to realise that there was an unexpected visitor plonking himself down in a casual fashion on their bed. Then they would notice to their horror that this unexpected visitor was surrounded by four or five camera crews and a collection of bustling journalists. I refer, of course, to the period in which the former Prime Minister, Mr Rudd, seemed incapable of passing a day without visiting several hospitals and just dropping in to chat with patients. Why was he doing this? He was doing it because he had dumped the issue of climate change and he was searching desperately for another issue to pursue. He was also, I suggest, increasingly conscious, in a somewhat guilty way, of the promise that he had made at the 2007 election that he would take over public hospitals from the states by mid-2009 if the position had not improved. Manifestly he had failed to deliver on that commitment.

The piece of legislation which the House is debating today, the Federal Financial Relations Amendment (National Health and Hospitals Network) Bill 2010, emerges from that frenzied period of political activity. I want to argue today that this piece of legislation badly underdelivers on the heady rhetoric which accompanied the policy announcements which were made in April this year. It is a piece of legislation which fundamentally undermines the clarity of the financial arrangements between the states and the Commonwealth embodied in the GST. I want to make three basic arguments. Firstly, this piece of legislation fails to deliver on the objectives which it claims to achieve. Secondly, it is complicated and uncertain and, as well as not doing good, there are good arguments that it does harm. Thirdly, one specific problem with this bill is that it undermines the federal-state financial relations embodied in the arrangements for the goods and services tax, which have worked very effectively since 1999.

Let me turn first to the failure of this legislation to deliver on its claimed objectives. The promises came thick and fast. This bill was supposed to get rid of waste, of duplication, of unclear accountability. It was in fact a historic reform, we were told. The then Prime Minister said, on 20 April:

… today we have reached an historic agreement to deliver better health and better hospitals for the working families of Australia.

For anybody who did not get the point, he went on to say:

This, ladies and gentlemen, is a very, very big reform of the health and hospital system of Australia.

He then went on to make reference to that large community of rather surprised patients upon whom he had been relentlessly and unexpectedly dropping in for a period of several months. He said:

I have spoken, literally to hundreds and hundreds and hundreds from the smallest hospitals in rural communities to the largest hospitals in our biggest cities and so much of what they have said has been the same …

It was not, ‘Please get off my hospital bed.’ It was apparently:

… please, please, please, fix our system for the future; please, please, please, get rid of the duplication, the waste in our system …

So does this bill, and the arrangements embodied within it, deliver on that promise to get rid of the waste and the duplication? The answer to that is no. It establishes arrangements of remarkable complexity. The governance arrangements and the interaction between many of the various entities which are established are left very unclear and we can have very little confidence indeed that there is going to be any systematic addressing of the current levels of duplication and unclear accountability.

We were also told when the announcement was made that there was a clear funding basis under which the Commonwealth would retain one-third of the goods and services tax receipts and that these would be dedicated to funding the Commonwealth’s contribution to the cost of hospitals. The press release which was issued on 20 April headed ‘Historic Health Reform’ contained the following statement:

The Commonwealth and seven states and territories have agreed to the Commonwealth retaining one third of the GST and becoming the dominant funder of the nation’s hospital system.

But the devil, as is so often the case, is in the detail. The precise figures are not in fact known. The figure of one-third is merely an estimate.

This reform was supposed to involve the Commonwealth taking over the hospitals. That, after all, was what Mr Rudd promised in the 2007 election. In fact, it is very clear from this package that the states will continue to operate the public hospital system, through the new local hospital networks. The COAG communique issued on 20 April makes it very clear that the Commonwealth is expressly excluded from any role in the operation of the local hospital networks.

We are also told that it is a virtue of these reforms that the Commonwealth will become the dominant funder of the nation’s hospital system. Those of us who were here in this place earlier this year can well remember the particular thrill, the tremor, which entered the voice of the then Prime Minister when he talked about the Commonwealth becoming the dominant funder. He seemed to find that a particularly satisfying expression. But the real question which is left unanswered is: why is this necessarily a good idea? How can we have any confidence at all that, if the Commonwealth becomes the dominant funder, it will in some way improve the operational performance of our health and hospital system? We know from recent experience, in areas as widely distributed as pink batts and Building the Education Revolution, that the Commonwealth government is not very good at operational performance. The officials who have most experience of running operational organisations are generally found at state level, not at federal level.

There are many other ways in which this piece of legislation does not live up to the grand promises which have been made about it. Mr Rudd described it as fundamental reform, and it is no surprise that he liked this package, because it allowed him to spend more money. But, despite the cherished beliefs of this government, spending money is not the same thing as reform. You have to demonstrate that you are going to be spending more money after you have intervened than before to make the case that you are delivering fundamental reform. So what we have here is a package which has been hugely oversold.

The second area that I want to address is that this package establishes a regime and set of arrangements which are complicated and uncertain. It creates new layers of bureaucracy, including the new national health and hospitals fund and new joint intergovernmental funding authorities. Then there are the various specialist bodies hanging off the sides of this arrangement, such as the Independent Hospital Pricing Authority and the National Performance Authority—lots of lovely new organisations filling out the organisational chart and gladdening the heart of any bureaucrat. But, as submissions to a number of inquiries have highlighted, there is a considerable lack of clarity about how all these organisations will work and interact. And there is a troubling degree of faith in the policy architecture and the capacity of complex bureaucratic structures to address every problem.

Let us just ask one simple question: if the objective of this package of reforms is to have the same people responsible for collecting the money and spending the money and, further, for those people to be sufficiently close to patients and to service delivery such that they make sensible decisions based upon what is happening on the ground, how is this rich, new ecosystem of authorities, networks and funds going to achieve that? The answer is that there is very little to satisfy us that it will. On the contrary, there is considerable cause here to suspect that we will see more confusion, less clarity as to accountability and rich, new possibilities for cost shifting and finger pointing.

Let us look at some of the submissions that have been made by respected authorities or stakeholders such as Catholic Healthcare. It has asked a very good question: ‘How is the private and not-for-profit hospital system involved in this set of reforms?’ What has been put forward is deeply unclear on that very important question. The Australian Medical Association asked in its submission: ‘What are the relationships between the multiple bodies which are created out of this package of reforms? What are the relationships between the Australian Commission on Safety and Quality in Health Care, the Independent Hospital Pricing Authority and the National Performance Authority?’ There is a distinct lack of clarity in what is being proposed.

The third area that I want to address in the brief time remaining is the impact of this package upon arrangements for Commonwealth-state relations, arrangements which were clarified and put on a much more sustainable basis with the introduction of the goods and services tax by the Howard government in 1999. This was a major and serious reform. It was not just an exercise in spending more money described as reform. The consequence of the introduction of the GST was to give the states a growth tax for the first time. Proceeds from the GST rose from $24.4 billion in 2000-01 to $44.5 billion in 2009-10. The policy intention was to allow the states to better manage key functions with greater certainty over their revenue base.

Unfortunately, this set of rushed through changes which the House is now considering will have the effect of comprehensively white-anting the GST policy architecture which was so carefully and painstakingly introduced by the Howard government. It is troubling indeed that these changes appear to have been made in a fashion which is inconsistent with clause 44 of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations 1999, which says:

All questions arising in the Ministerial Council will be determined by unanimous agreement unless otherwise specified in this agreement.

Instead of that unanimous agreement, we have the Commonwealth imposing its will and seeking to comprehensively change the GST arrangements in a way which is far from good for the policy of giving the states certainty and clarity as to their source of funding. Indeed, the impact of these changes on the GST revenue stream to be received by the states is uncertain and variable. According to the Commonwealth’s own documents, the share of the GST revenue that the Commonwealth will retain for the purposes of funding the new hospital arrangements will vary widely by state in 2011-12 between 50 per cent in the ACT, 40 per cent in Queensland, 30 per cent in New South Wales and 25 per cent in Victoria.

This is a package of purported reforms which is deeply flawed because it does not deliver on the bold objectives and claims that are made about it. On the contrary, it introduces complication and uncertainty and it offers manifest possibilities for continued cost shifting and playing of the blame game. Lastly, it has the not incidental but in fact quite serious consequence of materially damaging the arrangements under which the goods and services tax has, until now, provided the states with a degree of certainty as to their funding base, which in turn has allowed them to go about their jobs of delivering services to citizens in a more productive and efficient way. For these reasons, I would argue that the legislation before the House ought not be supported.