Speech - The Second Reading




"The Second Reading"




I move that this Bill be now read a second time.

The Federal Financial Relations Amendment (National Health and Hospitals Network) Bill 2010 will implement the key financial elements of the National Health and Hospitals Network reforms. These reforms are among the most substantial improvements to Commonwealth-State relations in memory. They are all about getting better value for all Australians from the money we invest in health.

The changes will recast health funding between the Commonwealth and the States, making the system more sustainable in the face of rising health spending. They will dedicate around one-third of GST revenue to health and hospital services and guarantee growth funding to the States of at least $15.6 billion over the period from 2014‑15 to 2019-20. The changes will deliver value for money by creating a new system that provides funding according to efficient prices - what particular health services should cost, not by writing blank cheques.

In April this year, COAG, with the exception of Western Australia, reached an historic agreement on health reform — the establishment of a National Health and Hospitals Network. This represents the most significant reform to Australia's health and hospital system since the introduction of Medicare and one of the largest reforms to service delivery since Federation. We need to reform the health system so that future generations can continue to enjoy world class, universally accessible and affordable health care.

The truth is that while Australia has one of the best health systems in the world, it is under significant and growing pressures. Australia's health and hospital system faces significant growth in demand as our population ages and as a result of emerging technologies. On the basis of current trends, health and hospital spending would consume all tax revenues collected directly by state governments by 2045‑46.

Mr Speaker, we need reform to end the blame game and cost shifting. We want to provide national leadership on health and hospitals, but also allow greater control at the local level. That's why we are committed to working with State and Territory Governments to deliver the National Health and Hospitals Network.

Our reforms focus on three key objectives.

First, they will reform the governance of our health and hospital system and ensure funding sustainability for the future. The Commonwealth will take responsibility for funding the majority of Australia's health and hospital system. We will implement system wide reform to health services across the country. We will strengthen governance, report on performance transparently and put in place new national standards.

Second, these reforms will deliver better access to high quality integrated care that is patient-centric. We will deliver health care that is designed around the needs of patients, not the needs of the health system. And we will focus on prevention, early intervention and providing care in the community. Patients should only be in hospital if they need to be there for clinical reasons.

Third, these reforms will provide better care and better access to services for patients right now, through increased investments in hospitals, better infrastructure, and more doctors and nurses. The Commonwealth's $7.3 billion investment will deliver immediate health and hospital service improvements, as well as supporting the new health network.

This Bill deals with the funding elements of the reforms. Under the National Health and Hospitals Network, the Commonwealth Government will become the majority funder of Australian public hospitals. The Commonwealth will fund 60 per cent of the efficient price for all public hospital services, and 60 per cent of capital, research and training in our public hospitals. We will also take full funding and policy responsibility for general practitioner and primary health care services and for aged care services. To reduce cost shifting and better integrate hospital and community settings, we will, over time, also move to fund 100 per cent of the efficient price of primary health care equivalent outpatient services. This investment is fully funded over the forward estimates, wholly consistent with our fiscal strategy and does not add to the Budget deficit. Fiscal responsibility is a key component of these reforms.

We will establish an Independent Hospital Pricing Authority to determine how much it will cost to deliver hospital services funded by the Commonwealth efficiently. Funding paid by the Commonwealth in the future will be based on how much the independent authority says that it should cost. This will ensure that taxpayers receive the best value from investments in health care and will drive greater efficiency in the delivery of health services.

Funding Arrangements

This Bill amends the Federal Financial Relations Act 2009 to implement these major reforms.

The Bill creates a National Health and Hospitals Network Fund through which payments will be made to the States or joint inter-governmental funding authorities for the States out of:

  • funding sourced from the previous National Healthcare Specific Purpose Payment;
  • an agreed amount of GST revenue, retained and dedicated to health and hospital services; and
  • additional top-up funding to be paid by the Commonwealth from 1 July 2014. As the Commonwealth takes on greater responsibility for financing growth in health and hospital costs through these reforms, top-up funding will apply when spending growth exceeds the growth in the GST and funding sourced from the existing National Healthcare Specific Purpose Payment.

Each State's dedicated GST revenues will be allocated to health and hospital services in that state. This will be revenue-neutral for both the Commonwealth and the States over the forward estimates. The amount of GST to be dedicated to health and hospitals services will then be fixed from 2014-15, based on 2013‑14 costs indexed for the GST growth rate.

From 2014-15, an additional Commonwealth top-up payment will be provided, reflecting that hospital costs have been growing at close to 10 per cent per annum in recent years and are expected to grow at around 8 per cent per annum over the medium term. This means that hospitals costs are expected to outpace growth in GST, of around 6 per cent per annum over the medium term, as well as growth in the existing National Healthcare Specific Purpose Payment.

Consistent with the National Health and Hospitals Network Agreement struck between the Commonwealth and the States, the Bill guarantees that Commonwealth top-up funding will be at least $15.6 billion over the period 2014-15 to 2019-20, provided that all States and Territories are participating in the reforms. States will be no worse off in the short term, and significantly better off over the longer term, under these reforms. The Bill preserves the existing federal financial relations arrangements for Western Australia until it becomes a signatory to the National Health and Hospitals Network Agreement.

In addition, the Bill introduces a new process to protect Western Australia's existing healthcare funding. The process includes requiring the Western Australian Premier to agree to any change to the existing financial arrangements which would result in a substantial financial detriment to Western Australia.

Payment Arrangements

The Bill also deals with payments out of the National Health and Hospitals Network Fund. The National Health and Hospitals Network Fund, along with the other governance arrangements set out in the National Health and Hospitals Network Agreement, will ensure transparency around the services being provided in individual hospitals, the cost of these services, and who is paying.

The price the Commonwealth pays for hospital services will be determined by an Independent Hospital Pricing Authority. This Authority will be independent of all levels of government. One of the first tasks for the Authority will be to advise the Government on appropriate transitional arrangements to new efficient price settings.

Each Local Hospital Network will be funded for the services it provides and the information on the funding provided will be transparent to communities. All payment flows through the National Health and Hospitals Network Fund will be transparently reported in Commonwealth Budget papers.

Impact on Federal Financial Relations

The introduction of the National Health and Hospitals Network represents a significant change to Australia's federal financial relations. The Commonwealth is becoming a majority funder of the Australian hospital system and taking full funding and policy responsibility for primary health and aged care. This will improve three broad elements of Australia's federal financial relations.

First, the gap between what the States are currently required to pay and their revenue raising capacities, referred to as vertical fiscal imbalance, will be reduced over time. This will help to secure the funding base for health and hospital services into the future.

Second, roles and responsibilities between the Commonwealth and the States have been clarified. This will reduce duplication of activities and improve coordination.

Finally, those States experiencing a more rapidly ageing population should receive a greater benefit from the Commonwealth's increased funding responsibilities due to higher growth in demand as their population ages— this will reduce horizontal fiscal imbalance over time.

As a result, these reforms will put Australia's federal financial relations on a more sustainable footing for the future and allow us to better manage health expenditure growth. These changes will deliver value for money from our spending on important health services. I commend the Bill to the House.