Ideas@TheCentre
Short cut to public hospital efficiency
After the irrelevancies of the silly season ('Should Julia have worn the pants-suit to the flood emergency?') it's a relief that the focus is about to switch back to the core business of government – public administration.
According to last Saturday's Weekend Australian, Prime Minister Gillard will simplify Kevin Rudd's hospital reform plan at next week's Council of Australian Government meeting.
If the report was correct, the Commonwealth will no longer become the 'majority funder' of public hospitals.
Instead of paying for 60 per cent of the 'efficient' price of each public hospital services, the Commonwealth will only pay for 40% of efficient price. Because no significant increase in Commonwealth health spending will be needed to fund the new federal payment system, Canberra will not have to claw back 30% of the state's GST revenue.
The Department of Treasury is said to have been closely involved in the re-jigging of the government's policy. There is much to recommend the modifications.
The efficient cost is to be determined by an independent national hospital pricing authority. Setting a national price is a very complex task. But this was always the best feature of the Rudd Plan because financial transparency and accountability will be promoted.
When federal funding is exclusively delivered at the efficient price, state governments will either have to cut the waste and reform their bureaucratic hospital systems, or bear the extra cost of providing hospital services inefficiently.
What Treasury seems to have realised is that this policy outcome can be achieved unilaterally, simply by converting existing federal funding into an 'efficient' payment. A looming brawl with state premiers over the allocation of the GST can be entirely avoided.
The revised approach broadly resembles the National Competition Policy of the 1990s, which also used federal payments to promote market-based reform in government utilities.
The goals here are not as ambitious in terms of structural reform – no one is yet talking about privatising public hospitals.
But during an era when billions of taxpayer's dollars are blithely wasted on batts and broadband, any policy which supports the efficient use of scarce resources is a welcome change for the better.
Dr Jeremy Sammut is a Research Fellow at The Centre for Independent Studies and the contributing editor of No Quick Fix: Three Essays on the Future of Australian Hospital System which was published by the CIS last October.
