Bills Digest No. 162 2002-03
Health Care (Appropriation) Amendment Bill 2003
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Health Care (Appropriation) Amendment
Bill 2003
Date Introduced: 14 May 2003
House: Representatives
Portfolio: Health and Ageing
Commencement: Royal Assent
Purpose
To amend the Health Care (Appropriation) Act 1998
to:
- extend
the period of operation of the Act for a second five year period
- To appropriate $42 010 000 000 to make a Commonwealth contribution
over five years to the cost of hospitals emergency services during the
5 year period
- Alter the Act so that the definitions in the Act are consistent with
the Health insurance Act 1973, and
- Empower the Minister
to delegate to an SES employee in the Department of Health and Ageing
the power to make certain funding decisions about programs and projects
to States, hospitals or other persons.
Free, universal access to public hospital services is
one of the central principles of Medicare. Although public hospitals
are primarily the responsibility of the States and Territories, under
Medicare, the Commonwealth makes a substantial financial contribution
to them. With the introduction of Medicare in 1984 Commonwealth support
for public hospitals was provided under Medicare Agreements. The last
series of Medicare Agreements were negotiated in 1993 pursuant to the
Health Insurance Act 1973. At the time section 24 allowed the Commonwealth
and States to make agreements with respect to 'public hospital services'
and 'other health services', subject to certain standard 'heads of agreement'
listed in Schedule 2A of the Act.(1)
The last Medicare Agreement expired on 30 June 1998, at which time the Commonwealth sought
to negotiate new Agreements with the States and Territories. These new
Agreements were renamed the Australian Health Care Agreements, which are
discussed below. It is significant to note that the negotiations leading
up to the last Medicare Agreement were marked by a dispute over the role
of private health insurance and a requirement in the 'heads of agreement'
for States to commit to the Medicare Principles.(2)
Commonwealth support for public hospitals is now given
under the Health Care (Appropriation) Act 1998 (the 1998 Act).
These arrangements expire on 30 June 2003.
The 1998 Bill was introduced 'against a background of
stalled negotiations between the Commonwealth and most States over a replacement
for [existing] Medicare Agreements'.(3)
The Commonwealth had proposed the negotiation of Australian
Health Care Agreements (AHCAs) with each of the States involving a 'very
generous increase of 15 per cent, in real terms, in health funding to
the States over the next five years [to 30
June 1998]'.(4) But, negotiations were marked by
disputes with some States over the quantum of funding.
In the end, the 1998 Act allowed a $29bn appropriation
over five years 'to make a Commonwealth contribution … to the cost of
health and emergency services that are currently or were historically
provided by hospitals in the States and Territories'.(5)
Specifically, it provided for grants to States or to
hospitals or 'other persons' in relation to:(6)
- the provision of hospital based health and emergency services, or
- projects or programs to improve the efficiency and effectiveness
of, the demand for, or patient outcomes in relation to such health and
emergency services.
In general, it gave the Minister the discretion to determine:
- the amount of a grant
- the
method for payment of a grant, and
- the times for payment of a grant.
Payments to States were given under the auspices of 'specific
purpose payments' under section 96 of the Constitution. Section 96 provides
that the Commonwealth Parliament may grant financial assistance to any
State on such terms and conditions as it sees fit.
Grants to States were subject to conditions specified
in any AHCAs.(7)
Such grants required that a State adhered to certain
Health Care Agreement Principles:(8)
- public
hospitals services must be provided free of charge to public patients
- access to public hospital services must be provided on the basis
of clinical need and within a clinically appropriate period to public
patients, and
- people
should have equitable access to public hospital services regardless
of their geographical location.
These principles largely reproduced the principles applying
under Medicare Agreements. However, as the original Bills Digest noted,
Principle 3 created an 'unambiguous requirement … to ensure
the provision of equitable access to public hospital services, regardless
of a person's geographic location'.(9) Failure to provide equitable
access was not merely an aspiration but a precondition for payment under
the grant arrangement.
The original Bills Digest noted that the power to issue
grants to hospitals and 'other persons' was a 'considerable departure
from traditional and current arrangements'.(10)
Further details of the 1998 Act are included in Bills Digest
No. 225 1997-98.
The 1998 Bill provided the basis for the Commonwealth's
financial contribution to public hospitals and was notable for its flexibility.
The Bills Digest made the following comment:
For example, where an agreement is not in place between the
Commonwealth and a State, the Bill provides the Minister for Health and
Family Services with considerable discretion over the conditions under
which grants of financial assistance are made for public hospital services.
The Bill provides also that payments of financial assistance may be made
to entities other than a State, including a hospital or 'other person',
which is a considerable departure from traditional and current arrangements.(11)
Essentially, the 1998 Act moved from a framework of funding
direct to the States, governed by the Health Insurance Act 1973 and
the Medicare Principles, to a dual framework of direct and indirect funding,
governed by ministerial discretion and AHCAs:
The current Medicare Agreements and the proposed Australian
Health Care Agreements detail the roles and responsibilities of each level
of government in the funding and provision of public hospital services.
The Bill will make funds available and provides the Minister for Health
and Family Services with considerable discretion to establish, via determinations,
the conditions under which financial assistance may be provided and the
amount, frequency and method of payment. However, it can be argued that
this falls short of a negotiated, agreed document which commits both levels
of government to particular courses of action over the five year period.
It is possible also that different conditions may be determined for different
jurisdictions.(12)
In financial terms the 1998 Act contained two basic features:
(a) a five year appropriation from 1
July 1998 to 30 June 2003,(13) and
(b) a global financial limit of $31.8bn.(14)
As noted above, the present AHCAs run for five year periods,
expiring on 30 June 2003.
The next round of AHCAs would commence on 1 July 2003 and expire on 30 June 2008. At the end of each 5 year appropriation, the
1998 Act must be amended in order to ensure continued funding. The present
Bill is designed to provide for the next round of AHCAs.
The present Bill has been introduced into an environment
in which the States, Territories and Commonwealth are again at loggerheads
over their contribution to health care funding in Australia,
the reasons for this are explored more broadly below. Essentially, the
negotiation of the 2003-08 AHCAs between the Commonwealth and States and
Territories has stalled and there are no new agreements to take over from
the current agreements.
Discussions about the 2003-08 Agreements have been taking
place for some time. In April 2002 the Australian Health Ministers jointly
announced that the new agreements would be negotiated on the basis of
the following objectives:
- Commonwealth/State relations in the health arena should focus on
the provision of optimal care and health outcomes, regardless of jurisdictional
boundaries.
- It is in the best interests of all Australians for the Commonwealth,
States and Territories to work co-operatively to improve the health
and wellbeing of the community and the way in which health services
are provided.
It was proposed by the Australian Health Ministers that
the 2003-08 AHCAs should 'contain the principles, objectives and proposed
health outcomes designed to achieve those objectives'.(15)
In order to promote this outcome, nine reference groups were established,
each designed to consider a specific area of health policy and, after
such consideration provide recommendations and advice that would help
inform the development of the 2003-08 AHCAs. The nine reference groups
addressed the following policy areas:
- Interaction
between hospital funding and private health insurance
- Improving
rural health
- Interface between aged and acute care
- Continuum between preventative, primary, chronic and acute models
of care
- Improving indigenous health
- Improving
mental health
- Information technology, research and e-health
- Quality
and safety
- Collaboration on workforce, training and education
Each reference group was co-chaired by a non-government
clinical expert in that specific policy area and a senior government health
official. Membership of each reference group was selected by the co-chairs
on the basis of expertise. Each reference group had a sponsoring Minister.(16)
The development of the reference group and the involvement
of clinicians in the development of the next ACHAs was a significant shift
from the usual process. Arguably, it is surprising that clinicians have
never played a formal role in previous Agreements. Despite being ostensibly
about health, the AHCAs and their predecessors the Medicare Agreements
have been primarily about health financing and have had little to do with
health outcomes, consequently health care providers have had little involvement
in their negotiations.(17)
At the time of the announcement there was wide spread
optimism amongst health care professionals about the possibilities and
potential that such participation could bring with it. Numerous papers
were published in leading medical and health policy journals arguing that
even if the stated aims of the Australian Health Ministers were only partially
realised, there would be a substantial change in the relationship between
health care and health care financing in Australia.(18)
The stalling of the negotiations of the next AHCAs has
meant that this initial optimism has given way to a much more pessimistic
view. Some commentators have argued that the breakdown in negotiations
has little to do with rigorous debate about how to achieve the best health
outcomes for the Australian people and centres almost entirely on health
care financing.(19) Focusing around a number of claims and
counterclaims about the status of the Commonwealths and States and Territories
respective financial contributions to public hospitals the negotiations
of the next AHCAs echo previous negotiations in that any discussion about
the impact such significant amounts of money is likely to have on the
actual health status of the Australian population seems to be, strangely,
absent.
The Commonwealth has proposed, what it argues, is a 17
per cent real increase in funding, lifting its contribution to public
hospital funding from $32 billion to $42 billion.(20) The States
and Territories have rejected this offer, claiming that there has been
a decrease of approximately $1 billion dollars over the five year period
the Agreement is supposed to cover.(21)
According to the Department of Health and Ageing Portfolio
Budget Statement this decrease in previous estimates is due to a:
greater proportion of public hospital services provided to
non-admitted patients and a reduction in public hospital usage growth
beyond growth resulting from demographic changes. This change in usage
growth reflects in part the fact that more services are being provided
in private hospitals following the introduction of the Government's 30
per cent Private Health Insurance Rebate and Lifetime Health Cover.(22)
The savings are to be made over the life of the next
Agreements with the following table providing details of the $918.5 million
in savings:
| 2003-04 |
2004-05 |
2005-06 |
2006-07 |
| -108.9 |
-172.0 |
-264.6 |
-372.9 |
In what is becoming an increasingly predictable debate
the States and Territories have countered this argument by restating their
claim that public hospital waiting lists have not substantially decreased
since the introduction of the Commonwealths private health insurance incentives,
nor has there been a significant change in the number of admissions in
public hospitals (although private hospital admissions have increased
substantially).(23) Moreover, the States and Territories argue
that the decline in bulk billing has seen a rise in the pressure on emergency
departments of public hospitals and that the Commonwealth has failed to
take into account issues associated with the ageing of the population.(24)
According to data published by the Australian Institute
of Health and Welfare (AIHW), the States and Territories have been falling
behind in the amount they contribute to public hospitals out of their
own resources when compared to the Commonwealth. In their most recent
Health Expenditure publication, the AIHW points out that the State and
Territory share of public hospital funding has fallen from 45.4 per cent
in 1998-99 (the first year of the current ACHAs) to 43.4 per cent in 2000-01.
Conversely, the Commonwealths contribution to public hospital funding
has remained relatively stable over the same period (48.2 per cent in
1998-99 and 48.1 per cent in 2000-01), although it had increased from
45.2 per cent in 1997-98.(25)
The Commonwealth has made clear that the $42 billion
it has offered the States and Territories is the maximum amount that will
be offered under any new AHCA.(26) The Department of Health
and Ageing Portfolio Budget Statement 2003-04 provides further details
of the other conditions that the States and Territories must agree to,
these include:
The Portfolio Budget Statement goes on to state that:
States that meet these conditions and match the Commonwealth's
funding growth rate will receive 100 per cent of the funds available for
that State. States that meet the conditions outlined above but fall short
of matching the Commonwealth's growth rate, will receive 96 per cent of
the maximum available funding to that State.(27)
The States and Territories have thus far refused to sign
up to any new Agreement, arguing that public hospitals need a much higher
injection of funding.
Refusal to sign up to a new Agreement does not mean that
the funding runs out, any jurisdiction that does not sign on to a new
Agreement would receive the same level of funding set out in the 1998-2000
Agreement. However, failure to pass this Bill will mean that the Commonwealths
financial contribution to public hospitals in all States and Territories
will cease as of 1 July 2003,
the date that the current legislation ceases to have effect.
The gist of the proposed amendments is that there will
now be 2 appropriation periods:
(a) a five year appropriation
from 1 July 1998 to
30 June 2003, and
(b) a five year appropriation
from 1 July 2003 to
30 June 2008 (items
1, 2 and 4).
The proposed financial limit for the second appropriation
period is $42.01bn (item 5).
Effectively, there are two appropriations with separate
terms relating to the financial limit (item 5), parliamentary reporting
times (items 6 and 7) and grant conditions (item 8).
Item 9 proposes new section 7 that would
permit the Minister to delegate, subject to ministerial directions, certain
functions to a Departmental officer at SES level:
- the funding of 'projects or programs … ', and
- the
terms and conditions of grants in relation to such 'projects or programs
… '.
The Explanatory Memorandum explains that the estimated amount
of the grants covered under section 4(1)(b) are $359.8 million over the
five years from 2003-2008.
Included within these grants are:
- Pathways Home Program
- Mental health
- Palliative Care, and
- Hospital Information and Performance Information Program.
The Commonwealth draws on three
separate heads of power as Constitutional authority for the Bill. The
relevant sections of the Constitution are sections 51(xxiiiA), 81 and
96. This Bill does not appropriate funds for the ordinary annual services
of the Commonwealth and, therefore, it may be amended by the Parliament
as long as the amendment does not entail a further appropriation of money.
If the amendment involves increased appropriations, section 53 of the
Constitution requires that it be communicated as a request to the House
rather than as an amendment passed by the Senate itself. As with other
appropriation bills, the appropriation of funds under this Bill means
only that the funds are available to be spent, not that they must be spent.
Due to the failure of negotiations between the Commonwealth
and the States and Territories over the proposed Australian Health Care
Agreements, some uncertainty exists as to how the funding and provision
of public hospital services will proceed during the five years from 1 July 2003. The early optimism of clinicians
about the next AHCAs refocusing on improved health outcomes has given
way to the reality of the continued focus on health care financing.
The current AHCAs detail the roles and responsibilities
of each level of government in the funding and provision of public hospital
services. The Bill will make funds available and provides the Minister
for Health and Ageing with considerable discretion to establish, via determinations,
the conditions under which financial assistance may be provided and the
amount, frequency and method of payment. However, it can be argued that
this falls short of a negotiated, agreed document which commits both levels
of government to particular courses of action over the five year period.
- Previous agreements were made pursuant
to (repealed) section 24F of the Health Insurance Act 1973.
- Bills Digest Service, Medicare Agreement
Bill 1992, Bills
Digest 1993.
- Paul Mackey, Health Care (Appropriation) Bill 1998, Bills
Digest No. 225 1997-98.
- 'Transcript of the Prime Minister
the Hon John Howard MP Press Conference, Prime Minister's Courtyard,
Parliament House', Press Release, Prime Minister, 20 March 1998, cited
in Paul Mackey, Health Care (Appropriation)
Bill 1998, Bills Digest
No. 225 1997-98.
- Paul Mackey, Health Care (Appropriation) Bill 1998, Bills
Digest No. 225 1997-98.
- Health
Care (Appropriation) Act 1998,
paragraph 4(1)(b).
- Health
Care (Appropriation) Act 1998,
paragraph 5(2)(a).
- Health
Care (Appropriation) Act 1998,
section 6.
- Paul Mackey, Health Care (Appropriation)
Bill 1998, Bills Digest
No. 225 1997-98.
- Paul Mackey, Health Care (Appropriation)
Bill 1998, Bills Digest
No. 225 1997-98.
- Paul Mackey, Health Care (Appropriation) Bill 1998, Bills
Digest No. 225 1997-98.
- Paul Mackey, Health Care (Appropriation) Bill 1998, Bills
Digest No. 225 1997-98.
- Health
Care (Appropriation) Act 1998,
subsection 4(2).
- Health
Care (Appropriation) Act 1998,
subsection 4(3).
- AHCA Reference Group Report, 2.
- Details about membership and sponsoring
Ministers as well as the final report of the ACHA Reference Group Report
are available at http://www.health.gov.au/haf/ahca.htm
- John P Paterson, Australian Health care Agreements
2003-08: a new dawn? MJA, 177, 313-315.
- Michael A Reid, Reform of the Australian Health
Care Agreements: progress or political ploy? MJA, 177: 310-312.
- Peter Sainsbury, 'Umm… now, about
the crisis in the Australian health care system', Online Opinion,
22
April 2003.
- Explanatory Memorandum Health Care
(Appropriation) Bill 1998.
- Paul Strick, Worth Wades in as Minister loses
way, The Advertiser, Mon
5 May 2003.
Indeed the West Australian government is apparently so concerned with
the supposed decrease in funding on Monday 5 May it took out a full
page advertisement in the West Australian encouraging West Australians
to write, phone or fax the Prime Minister about their concerns with
public hospital funding.
- Department of Health and Ageing, Portfolio Budget
Statement 2003-04, page 106.
- AIHW, Hospital
Statistics, 2000-01.
- A general overview of Medicare can
be found on the Parliamentary Library e-brief Medicare -
Background Brief. A more detailed discussion of the decline in bulk
billing can be found in the Parliamentary Library publication The Decline
in Bulk Billing: Explanations and Implications. Also available is
a short publication responding to the debate about the universality
of Medicare:
Is Medicare Universal?
- AIHW, Health
Expenditure Australia 2000 - 01.
- Australian Health Care Agreements
2003-2008, Press Release, Prime Minister 23 April
2003.
- Department of Health and Ageing, Portfolio Budget
Statement 2003-04, page 99.
Amanda Elliot and Nathan Hancock
27 May 2003
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
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