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05 May 2016

The almost $2.9 billion restoration in funding for public hospitals goes nowhere near meeting growing demand, AMA President Professor Brian Owler said.

In what one health academic described as a “pea and thimble” Federal Budget, Treasurer Scott Morrison delivered no surprises in public hospitals funding.

There was no increase to the agreement negotiated at the 1 April Council of Australian Governments meeting to restore almost $2.9 billion over three years, from the billions cut in the 2014 and 2015 Budgets.

“The AMA welcomes confirmation of the almost $2.9 billion in COAG funding for public hospitals, but we see this as a down-payment only,” Professor Owler said.

“The States and Territories will need significant extra funding if they are to build hospital capacity to meet growing demand.”

Mike Woods, Professor of Health Economics at the University of Technology Sydney, agreed, noting that growth in total Commonwealth funding will be capped at 6.5 per cent a year for three years from 2017-18 – at a time when expenditure is forecast to rise by 9.9 per cent.

“This is very much a stop-gap measure to get the federal government through the upcoming election,” Professor Woods wrote in The Conversation

“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. 

“Health is the single largest expenditure item in all of their budgets. And expenditure has been growing at around 5 per cent in real terms over the past decade. This isn’t sustainable.

“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.”

Stephen Duckett, the director of the Grattan Institute’s health program, described it as a “pea and thimble” budget which attempted to erase memories of previous cuts under the Abbott and Hockey administration.

“The most significant apparent budget spend is on public hospitals. The deal reached with the Premiers on April Fool’s day is costed at almost $2.9 billion,” Dr Duckett said.

“This can be spun two ways: that it is almost a $3 billion injection into the public hospital system or that it is still an effective cut on what was promised by both Labor and Liberal prior to the 2013 election.”

The Australian Healthcare and Hospitals Association (AHHA) welcomed the Government’s shift away from its previous stance on funding based only on population and CPI growth.

While the return to activity-based funding based on a national efficient price was sensible, further work was needed with a focus on safety, quality and reducing preventable hospitalisations. 

“While the improved support for hospital funding until 2020 has provided some relief for the hospitals sector, concerted efforts will be required to reduce the increasing demand for hospital services,” AHHA chief executive Alison Verhoeven said.

“Savings flagged in the aged care provider funding of $1.2 billion over four years will also potentially impact on hospitals who traditionally pick up complex care when the aged and community care sector cannot deliver appropriate support to elderly people. 

“Unfortunately for the states and territories, and for Australians who rely on public hospitals, hospital funding remains a hole that is only partly plugged.” 


Maria Hawthorne

Published: 05 May 2016