Australia has a universal public health system the broad principles of which are described in the introduction to the National Healthcare agreement.
This National Healthcare Agreement affirms the agreement of all governments that Australia’s health system should:
• be shaped around the health needs of individual patients, their families and
communities;
• focus on the prevention of disease and injury and the maintenance of health, not
simply the treatment of illness;
• support an integrated approach to the promotion of healthy lifestyles, prevention
of illness and injury, and diagnosis and treatment of illness across the continuum of care; and
• provide all Australians with timely access to quality health services based on
their needs, not ability to pay, regardless of where they live in the country. (paragraph 4, COAG Reform Council 2011)
The funding and governance of the Australian public hospital system was under review in the period covered by the case study, 2010-2011. The debate effectively started with a big push for national hospital reform by the Commonwealth Labor government in 2010. This account will go up to the end of the reform process but will not include any changes made by the Commonwealth Liberal government elected in mid-2013.
To understand the funding and governance of the Australian Public Hospital System it is necessary to understand a little of Australia’s broad political system and its history.
Australia was formed as an independent nation on 1 January 1901 when six British colonies, New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia formed a federation. Legislation was passed in the British
Parliament to allow this federation to govern in its own right as the Commonwealth of Australia (Australian Government n.d.). This national government is referred to as either the Commonwealth government or the Federal government. Elections for this level of government are always referred to as Federal elections. The colonies changed from being separate colonies answering to Britain to states of the new
Commonwealth. By 2010 the Commonwealth of Australia was made up of the six original states, three self-governing territories (Australian Capital Territory, Norfolk Island and Northern Territory), and seven territories governed directly by the
Commonwealth. Sections 51 and 122 of the Australian Constitution define the issues upon which the Commonwealth government can pass laws for the benefit of the nation (Australian Government n.d.). In practice the two onshore territories, the Australian Capital Territory and the Northern Territory, act as states with similar powers and responsibilities.
Matters governed by Commonwealth law include defence and foreign affairs, trade commerce and currency, immigration, postal services, telecommunications and broadcasting, air travel, and most social security and pensions (Parliament of New South Wales n.d.). Personal income tax is also under the jurisdiction of the
hospitals; conservation and environment; roads, railways and public transport; public works; agriculture and fishing; industrial relations; community services; sport and recreation; consumer affairs; police; prisons; and emergency services (Parliament of New South Wales n.d.). The Commonwealth is involved in some State
responsibilities such as health and education, as a provider of funding. Negotiations between the Commonwealth and State/Territory governments are done through the Council of Australian Governments (COAG).
The main source of revenue for the States is the Goods and Services Tax (GST), a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia (Australian Taxation Office 2012). It is collected at the point of sale and distributed to the states and territories according to the recommendations of the Commonwealth Grants Commission (CGC) (Commonwealth Grants Commission 2015). The goal of the CGC recommendations is to ensure that each State has the capacity to provide services at national average levels at average levels of efficiency. The underlying concept is that citizens in different States should have access to equal standards of government services. This process is referred to as Horizontal Fiscal Equalisation (HFE) (Department of the Parliamentary Library 2002). The States and Territories have full control over how they spend the GST distributed to them, they are not strictly bound to providing those services used in the modelling and
calculations related to the distribution process.
Medicare is a universal health insurance scheme funded by the Commonwealth. it provides free or subsidised healthcare services to the Australian population. It is partly funded by revenue raised by a levy of 2% on all taxable income, the balance comes from consolidated Commonwealth revenue. Medicare collection is done by the Australian Taxation Office and Medicare payments are administered by the Commonwealth Department of Human Services. According to their website, Medicare covers:
• free or subsidised treatment by health professionals such as doctors, specialists, optometrists and in specific circumstances dentists and other allied health practitioners
• free treatment and accommodation as a public Medicare patient in a public hospital, and
• 75% of the Medicare Schedule fee for services and procedures if you are a private patient in a public or private hospital. This does not include hospital accommodation and items such as theatre fees and medicines.
(paragraphs 2-5, Department of Human Services 2015)
The benefits payable under the legislation covering Medicare are documented in the Medicare Benefits Schedule (Australian Government Department of Health 2014). Typically, the Medicare benefit for a health service is set at a percentage of the Scheduled Fee, an amount determined by the Government to be appropriate for the service. There is no requirement for private practitioners to limit their charges to the schedule fee and many charge far more. The principle challenge for public hospitals when dealing with Medicare is that payment is made after the fact on the basis of services provided.
The complexity of the funding and governance of the Australian health system and the fragmentation of responsibilities was identified as a major weakness and source of inefficiency in a 2015 OECD report (OECD 2015).
There are four main political parties at both the Commonwealth and State levels of government in Australia:
• Australian Labor Party.
Centre-left party, formally linked to the Australian labour movement. Held government at the Commonwealth level 2007-2013.
• Liberal Party
Centre-right party, typically in favour of lower taxes and smaller government.
Typically governs in coalition with the National Party.
• National Party
Founded to represent the interests of rural Australia, originally called the Country Party.
Typically governs in coalition with the Liberal Party.
• The Greens
Formed more recently than the other parties. Frequently holds the balance of power in government, particularly in the upper houses such as the Senate.
Relations between the Commonwealth and the States/Territories are complicated by the potential for different parties to hold power at the two levels of government. The States and Territory governments are often dominated by the party not in power at the Commonwealth level, particularly if one party has held power at the
Commonwealth level for several electoral cycles. At the beginning of 2010 the Labor party was in its first term of government at the Commonwealth level after several terms of Liberal/National party government. Table 3-2 below shows which political parties were in power at the State and Commonwealth level between January 2010 and December 2011. The changes of government in Victoria in November 2010 and New South Wales in March 2011 changed the balance of the negotiations between the Commonwealth and the States.
Table 3-2: Political parties in power in Australia 2010 and 2011
Jurisdiction Time Period Governing Party
Commonwealth January 2009-December
2011 Australian Labor Party
Australian Capital Territory January 2009-December
2011 Australian Labor Party
New South Wales January 2009-March 2011 March 2011-December 2011
Australian Labor Party Liberal/National Party Northern Territory January 2009-December
2011 Australian Labor Party
Queensland January 2009-December
2011 Australian Labor Party
South Australia January 2009-December
2011 Australian Labor Party
Tasmania January 2009-December
2011 Australian Labor Party
Victoria January 2009-November
2010
November 2010 to December 2011
Australian Labor Party Liberal/National Party Western Australia January 2009-December
2011 Liberal Party