This week Queensland joined the ACT in signing the new Medicare agreement. It means the other five states and one territory have two months in which to sign up before the present five-year agreement expires. Those that have not signed are holding out for an extra $5.5 billion in Commonwealth funding for their public hospital systems over five years, compared to the $2.9 billion extra on offer. In the meantime the two that have signed yet bonuses for signing early. The longer the others wait, the less they will get, according to Health Minister Michael Wooldridge.
The impasse, and the breaking of ranks by the ACT and Queensland, show how unsatisfactory the Medicare arrangement is. It is no accident that the ACT and then Queensland signed up. Both had an electoral agenda. The ACT signed before February’s election and has received $3.3 million in bonuses in six weeks. Queensland, which must go to the polls in the next few months, got an immediate access to $15 million in bonuses. Both Governments got the benefit of extra cash at election time. But it is absurd to have a funding system based on bribes and punishments for states that sign up late. If the funds are properly and fairly worked out among the states in the first place, there should be no room for bribes and punishments.
Which polity will be next to crack? Presumably the Commonwealth, for the same reason that the ACT and Queensland cracked early: an election in the wind. The other states can hold out for more money, blackmailing the Commonwealth into avoiding a crisis on election eve. Presumably, the Commonwealth will not end funding on July 1, leaving public patients in the street.
The fundamental problem is that the level of Government spending the money (the states) does not have the responsibility for raising that money. It is mainly raised by the Commonwealth. In all, $43.2 billion was spent on health in 1996-97, according to figures issued last month by the Australian Institute of Health and Welfare. Of that 46 per cent was spent by the Commonwealth, 23 per cent by the states and 31 per cent by the private sector. The split for public hospitals, which is what the Medicare agreement is all about, is less skewed at 40, 35, 25. None the less, the Commonwealth is providing most of the money. The trouble with this imbalance is that when things go badly, the states can easily blame the Commonwealth for not providing the money, while taking the credit for any good things in the system. And from the Commonwealth perspective, it can duck the blame for catastrophes in the public hospital system by blaming poor state management.
Reform is needed. Responsibility and funding power must reside in the same hands.
One of the ironies of this situation is that the process of macro federal-state financial reform has been on the back-burner in the month since the Premiers petulantly walked out of the council of Australian Governments meeting that was dealing with both Medicare and general federal-state finances. Any hope of a general reform which would broaden the tax base to give the states access to the funds they need to run the services they ought is now postponed.
In the meantime, other reforms to deal with equally pressing matters of health funding are also in the air. The Federal Government has still not accepted the foolishness of its subsidies to the hopelessly over-regulated private-health-insurance industry. It is providing $1.4 billion over four years in subsidies through the tax system in an attempt to keep and entice people into private insurance. In the past year it has blown $400 million in tax breaks to low- and middle-income earners to stay or join private insurance to no avail. The number in private insurance continues to fall. The absurdity of the Government’s scheme should have been obvious. If it had picked a million people out of the phone book and given each of them a $400 private-health-insurance policy, there would have been more people in private insurance than the way it went about it. It should have put the money straight in to public hospitals. But ideology prevented it. It should give the private insurers freedom to tailor their product to the risk people present; to insure the gap; and to get their customers to help contain health costs.
At present Australia is still doing well on a world scale on the provision and costs of health care, but present trends are in the wrong direction. More public and private money has to come in to the system and mechanisms for efficiency and cost control must be put in place.