The Federal Budget’s increase in the Commonwealth’s contribution to public hospital funding is very much a “stop-gap” measure that defers the issue of escalating cost, Professor of Health Economics Michael Woods says.
As expected, the Commonwealth’s contribution to public hospital funding reflects the agreement negotiated at the April COAG [Council of Australian Governments] meeting that restored $2.9 billion in federal funding over three years, says Professor Woods, from the Centre for Health Economics Research and Evaluation (CHERE) at UTS Business School.
The states will receive an estimated $17.9 billion in 2016-17. Expenditure is then expected to increase by 9.9% in real terms over the period 2016-17 to 2019-20, with growth in total Commonwealth funding capped at 6.5% a year from 2017-18 for the following three years.
“This is very much a stop-gap measure to get the federal government through the upcoming election,” Professor Woods says.
“The underlying problem for the states is the escalating cost of delivering public hospital care. The issue may have been deferred, but it hasn’t gone away.”
'The issue may have been deferred
but it hasn’t gone away'
“This isn’t sustainable,” he says. “Over the next three years the incoming federal government, of whatever political persuasion, will need to sit down with the states and territories and agree on reforms to reduce the rate of growth of health expenditure."
Health Minister Sussan Ley says in her Budget statement that there will be “broader talks with the states and territories about longer-term funding arrangements”.
The Department of Health says in its Budget fact sheet that the total increase in the Commonwealth contribution to public hospital funding is $3.9 billion over the three years of the forward estimates -- $2.9 billion from the agreement with the states, and the remainder from the annual change in price and services based on state and territory hospital data. It says this takes the total Commonwealth investment to $95 billion out to 2020.
The cap on overall indexation “will encourage the states and territories to do all they can to reduce costs and improve efficiency”, it says.