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NSW considering Rudd's health shake-up -

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TONY JONES, PRESENTER: The New South Wales Premier Kristina Keneally joined us in the studio just a
short time ago and explained that she would make a decision on whether to back the federal health
reforms after consulting her Cabinet this Friday.

Kristina Keneally, thanks for joining us.

KRISTINA KENEALLY, NSW PREMIER: Thank you.

TONY JONES: Let's start with the basics. Are you prepared in principle to give up 30 per cent of
your GST revenue as part of Kevin Rudd's hospital plan?

KRISTINA KENEALLY: Well we are concerned about the proposal in terms of what it might mean going
forward for our state budget and the other services that we are rightly expected to deliver as a
State Government in other areas and that's why we're having a very detailed look at it.

Now what I intend to do is have a special Cabinet meeting on Friday where it will be focused solely
on the health reform. My Cabinet as a whole will consider the proposal.

The Treasurer will provide us with a briefing based on the analysis being done right now from
Treasury so we can make a decision as a Cabinet, as a Government, about whether this proposal
represents the change that's right for New South Wales.

TONY JONES: OK, but in principle you've no basic objection to giving up GST money in order to get a
better deal for health and hospitals in your state?

KRISTINA KENEALLY: It does come down to: is there any money in here for New South Wales? It also,
though - we want the pooling to be on the table, whether it is a pool for certain aspects or in
fact we would say the best outcome is a pool whereby the states, the territories and the
Commonwealth put their money into a pooled arrangement.

We believe it should be on the table. What I do know ...

TONY JONES: Do you think it's not transparent at the moment, is that what you're saying? That
something might be hidden from you?

I mean, you want to know exactly what's there, what's available and see all that transparently put
out in front of you before you make a decision - is that what you're saying?

KRISTINA KENEALLY: Well we also think that it would be easier for the taxpayers to see where the
money's coming from. It would be easier in terms of administering the health system. Let me give
you an example of what I'm talking about.

In New South Wales we pay people centrally. We pay the salaries of our health workers centrally.
Under an arrangement whereby money is coming from the Commonwealth, some money's coming from the
state, some money's coming from the Commonwealth directly to the local hospital network, it would
then need to go Commonwealth, local hospital network, back to the state so then we could put the
money back out in terms of salaries.

We don't think that that practically is the best outcome for our hospital system. We want to reduce
bureaucracy, we want to reduce red tape. We want to make this system simpler for the people who
work in it and for the people who use it.

TONY JONES: OK. The Victorian Premier John Brumby today's categorically rejected being part of any
deal which involves taking GST money. He says this is a GST clawback and it adds no new money to
the system. Now, do you agree with him or not? Or do you simply not know?

KRISTINA KENEALLY: Well we're doing a detailed analysis now. And each premier needs to make a
determination for their state, for their state budgets and for their health systems. Victoria and
NSW have different hospital systems, but we do share some of the same concerns, and as I've
outlined, one of the things that we would like to see on the table at COAG is a pooled funding
arrangement.

I know from my discussions with other state and territory leaders that that is a concern that many
of us share.

TONY JONES: But you don't see currently whether or not there's new money available from the Federal
Government - is that what you're saying?

KRISTINA KENEALLY: We certainly acknowledge that the Commonwealth have made a number of
announcements in recent days, some of which have only been in the last few days and we acknowledge
that. We're now looking at those to determine if they provide the money that's necessary, and I'll
give you an example.

The emergency department announcement that was made outlines funds to reach a four-hour target in
emergency departments. We certainly welcome that.

But at first blush, it would appear there's not enough for New South Wales to actually meet that
target, because how do we meet that target?: we need more beds in our hospitals.

The only way you get people, particularly in category three triage, into - out of a hospital
emergency department in four hours is that you've got beds for them to go to. That's a significant
investment that would be required to meet a four-hour target.

We're happy to put our hand up to be part of that, but we're not yet confident the funding's there
to make that happen.

TONY JONES: OK, did you see this coming, this GST arrangement? Because John Brumby said it came
completely out of the blue, that it wasn't mentioned at any time in any discussions, on or off the
record in any meetings between the Prime Minister and his people and him.

Does this come as a shock to you as well, that the Government wanted to take GST in order to do its
hospital plan?

KRISTINA KENEALLY: Brumby - Premier Brumby is accurate. The first time that this was presented to
us is when the Prime Minister announced his plan.

TONY JONES: And did that come as a shock?

KRISTINA KENEALLY: Well certainly it was an unexpected announcement by the Prime Minister. I
understand that the Commonwealth is working with scarce dollars. We all are. And that's why we have
sought, from a New South Wales perspective, to work cooperatively, to work towards reform, to try
and get more money into the system.

Now that we have the full proposal from the Commonwealth we can do the detailed analysis as
required. We only have a week in which to do it. But I'm determined.

I've got my Treasurer, my Health Minister, there are agencies doing that. We're going to a special
Cabinet meeting on Friday to give a final evaluation of this plan.

TONY JONES: OK. You would know that there's a serious dispute now between the South Australian
Premier Mike Rann and John Brumby.

Mike Rann is actually calling John Brumby the patron saint of lost causes, and basically saying
he's gonna spoil this for everybody unless he gets on board. What do you say?

KRISTINA KENEALLY: Look, as someone who was trained in theology, I couldn't tell you who the patron
saint of lost causes is, but - I'm not sure there is one.

But I will say this: this sort of negotiation is one that we all should be participating in in good
faith. We should all be seeking to get the right outcome here for individual states and for
Australia. The Australian people expect nothing less of us as first ministers.

TONY JONES: But what do you think about what John Brumby is doing? Because he seems to be taking
the lead, saying, "I reject it completely and there's no new money here and you're gonna have to
drag me kicking and screaming into any kind of agreement with the Federal Government."

I mean, is he handling this appropriately? I mean, do you agree with Mike Rann?

KRISTINA KENEALLY: This isn't as simple as saying is Rann right, is Brumby right, is Kevin Rudd
right, is Kristina Keneally right?

As a leader, your job is to make the best determination in what's the best interests of the people
who you represent. That's what I'm doing. That's the work that my Cabinet is undertaking now.

And when we go to COAG we will go there with a position that we're confident in and that we can say
to the people of New South Wales, "We have made a determination the best interests of this state
and this is why."

But I'm not going to rush to judgment and I certainly wasn't going to do that without having the
full proposal from the Commonwealth. The Commonwealth have made a number of announcements in just
recent days on emergency departments, on aged care. These are key parts of the health system. They
are key demand drivers on our hospital system.

TONY JONES: Well they are. I mean, extra federal funding is being offered here for elective
surgery, as you say: aged care, diabetes care, doctor training, etc., etc. Have you been about to
calculate what that extra money actually means for your individual state budget?

KRISTINA KENEALLY: Well we've been provided with a breakdown by the Commonwealth. We're going
through that now to determine what that money does mean and if it is adequate to meet the targets
that the Commonwealth have set.

TONY JONES: Are you clear yet on what more you actually want? I mean, you talked about mental and
dental care. Neither of those are included in this package at this stage. The Government itself
admits they need to do more, but it's not there. Will you be demanding to see the detail, the
dollars for mental health care and for dental care?

KRISTINA KENEALLY: Well we're certainly interested and in fact concerned about what might happen
with mental health, as well as with dental health. But mental health is a good example of where the
integration between primary care and hospital care is fundamentally important.

If they aren't integrated, you can end up with poor outcomes for those patients. And when we talk
about integration, that's what we mean: we need to see not just a hospital system, but we need to
see how this works for the whole of the health system.

What puts pressure on a hospital is people can't access primary care, particularly after hours, or
people who are more appropriately cared for in an aged care bed can't access it so they stay in a
hospital bed. Now, if you're going to structure a hospital system to run efficiently, you need to
have the incentives aligned appropriately, the financial incentives in particular, so that those
who control primary care and those who control aged care actually have an incentive to get people
out of a hospital and cared for in what is a cheaper form of care.

And, also a better form of care for that patient. We aren't yet entirely confident that this
proposal represents that integration, but we're doing the work, the hard work that's required to
determine if it is.

TONY JONES: OK. What about extra funding, for mental health care in particular? Because it actually
represents 13 per cent of the total burden - or more than 13 per cent in fact - the total burden of
disease and injury in this country and yet only eight per cent of total State and Federal
Government spending - there's a five or 5.5 per cent gap here.

That's a lot of money that - extra money that would be needed to actually bring it in line with the
reality of how bad the disease or the disorders are.

KRISTINA KENEALLY: Well I think you've made an excellent point there: that in areas like mental
health, in areas like aged care, are we getting enough new money coming in in the first four years
and then after when the new financial arrangements really kick in?

Will there be real new dollars flowing into the system and will they meet the demand that is
currently there in the system?

TONY JONES: As John Brumby just says: there is no new money available in what he's seen. Do you
feel differently? I mean, you've looked at it; it's a bit more complicated than what he's saying?

KRISTINA KENEALLY: Look, there is certainly and undeniably money that's been announced in the last
few days that represents Commonwealth - additional Commonwealth investment. That's in those first
four years.

That's money that's available should this plan be agreed to. If you look forward to post when the
GST new arrangements kick in, it would appear, at first analysis, that the only new money that
comes in is if you assume hospital growth - the spending grows faster than the growth in the rate
of the GST.

So, that's when new Commonwealth investment kicks in, if you assume that that happens. But, if you
also assume, as the Commonwealth has argued, that their responsibility for primary care, their
responsibility for aged care will actually reduce demand on hospital systems, you can't necessarily
assume the same rates of growth in hospital spending.

And so for us it's about modelling that, it's about asking what are the assumptions that are
operating here that allow claims to be made that there is new funding in this system for us.

TONY JONES: Those are incredibly complex judgments, finally. Do you think the Federal Government is
rushing this through, because there are people, experts like Doctor John Dwyer and others who are
saying you need much more time to consider these reforms? They're much too important to rush
through. What do you think?

KRISTINA KENEALLY: This is a complex reform. These are complex questions that states are being
asked to consider, that the Australian public is being asked to consider. I would certainly urge
all state and territory leaders, including the Commonwealth, to not let this fail simply because
it's complex.

This proposal shouldn't fall over at the first hurdle simply because all of the complexity has not
yet been resolved.

TONY JONES: But what about this timetable that's been put forward? Next Monday is COAG. Is the
timetable too accelerated for the states to accept?

KRISTINA KENEALLY: It's a very tight timeframe - it is. And that's why on Monday I called on the
Commonwealth to provide us with all of the detail as quickly as possible.

I'm pleased that they did that. That afternoon we were provided with that information. I've got my
people working right through the week, right round the clock in some cases.

TONY JONES: But is that enough time? We're nearly out of time ourselves in this interview, but is
that enough time, or will you, as John Brumby is predicting, need weeks or even months to consider
this?

KRISTINA KENEALLY: Well as I said, my Cabinet will make a determination on Friday and I won't
pre-empt that. I'll say this though: there is a lot of work we need to do between now and then,
having received the full complement, the full proposal from the Commonwealth on Monday, we need to
do a lot of work to prepare for next Monday's COAG.

TONY JONES: And finally you've spoke to Kevin Rudd about this today, presumably. I mean, what are
you actually saying to him? Are you saying this is too rushed?

KRISTINA KENEALLY: Well, I have spoken with the Prime Minister last night and on a number of
occasions and our senior officials are meeting daily. We are pursuing these concerns. We recognise
- and I must say we do recognise there are areas of consensus.

There are areas of consensus across the country and that all first ministers want change to the
health system. For NSW, there are areas where we have consensus with the Commonwealth. We want
reform.

And so areas around governance and local hospital networks, there's much agreement and there's ways
that we can progress that forward. For us it comes down to the integration of care and the
financial arrangements.

TONY JONES: Yes, the money - you need more, is what you're saying?

KRISTINA KENEALLY: I think all health systems across the country need more money. The Commonwealth
has recognised the need for more money in the health system. The question for all states and
territories in the lead-up to COAG: does this proposal represent the new money that's required?

TONY JONES: Kristina Keneally, we thank you very much for coming in to join us on Lateline.

KRISTINA KENEALLY: Thank you.