John Menadue. The Blame Game in health

Jun 3, 2014

Attempts to resolve the Commonwealth/State blame game have been unsuccessful and expensive. Time and time again federal governments try and buy off state criticism by spending more taxpayer’s money without any real improvements in the delivery of health services.

This futile blame game is not surprising in a federation where there are nine departments of health for a population of 23 million.

Over many years there has been confusion about the role of the Commonwealth in hospitals. In 2007 John Howard offered to underwrite community organisations prepared to take over State hospitals. (The issue at the time was the Mercy Hospital in Launceston.) In 2009 in his book Battlelines, Tony Abbott said that a Commonwealth withdrawal from hospitals would be a ‘cop out’. It would be “anachronistic and inefficient”.  Kevin Rudd threatened to take over State hospitals if a satisfactory arrangement could not be made with the States but backed down even though opinion polling showed strong support for a Commonwealth takeover of State Hospitals.

The Abbott Government now seems intent on winding back the commonwealth’s role in health. It is proposing a reduction of $80 billion in school and hospital funding over the decade to 2024-25.As a result the states are into the blame game again

The budget announcement is a major breach of faith between the Commonwealth and the States.

  • The Commonwealth has unilaterally cut $1 billion from State budgets from 2017.
  • The Commonwealth will no longer honour an agreement to fund some growth in State hospital costs. The Commonwealth had pledged to partly fund this growth in State hospital costs, provided those costs were based on efficient costs determined by The Independent Hospital Pricing Authority. (We know that there are major differences in costs not only between hospitals but also within hospitals.) This increase in funding based on improved performance by State hospitals has now been abandoned.
  • Furthermore, by sharing the costs of hospital growth for the first time, the Commonwealth had a direct interest in containing hospital costs by making primary care work better and reduce hospital admissions.

Following this threatened withdrawal of $80 million to the states, the Prime Minister went on the front foot in describing the federation as ‘dysfunctional’. He said that we needed to ‘fix the federation’ and to ensure that ‘the states are sovereign in their own sphere’.

I can understand his frustration with the federation, but his proposal would take us backwards in a quite dangerous way. His comments on federalism are quite contrary to what he was saying several years ago and now derive more from ideology about ‘state rights’ than common sense and a modern view of our economy and society.

As Michael Keating in his five part series on this blog, pointed out, there are good reasons for the pre-eminence of the national government in many fields.

  • Unlike the 1890s before federation we now have a national market in almost all key aspects .That national market has to respond to growing global pressures and competition.
  • Responsibilities of the federation have grown enormously since federation. In the 1900s for example pensions did not exist.
  • The national government’s dominance of taxation is clear-cut and will not be reversed. That domination is essential for good economic management.


But that still leaves us with the fact that many commonwealth and state functions are inter-related. Those inter-relationships must be sensibly managed.

Personally, I would favour a Commonwealth takeover of all state health functions and particularly hospitals. We need national leadership and clear responsibility. In an optimal situation I would like to see the states abolished altogether and replaced by a smaller number of consolidated local governments.

But that is not going to happen, short of a major crisis. That is why I have proposed what I have called a ‘Coalition of the willing’. In such an arrangement the Commonwealth should offer to set up a Joint Commonwealth/State Health Commission in any state that will agree.  That Commission would be jointly funded by the Commonwealth and the State. There would be one pool of money. This joint commission would plan the delivery of health services in the State and so provide more cohesive hospital and non-hospital health services. It would be a small planning and funding commission with little or no net increase in bureaucratic overheads. In any event any small increase in these costs would be minimal compared with the enormous present costs of commonwealth and state systems duplication and the costs arising from lack of integration between commonwealth and state services. For example the Productivity Commission estimated that 750,000 state hospital admissions could be avoided annually if there were effective interventions in the three weeks before hospitalisation. Those interventions are in the hands of the commonwealth that funds general practise

In such a joint funding and planning arrangement the delivery of health services would continue through existing health agencies, Commonwealth, State and local government. The new Commission would be jointly appointed by the two governments and with agreed and transparent dispute resolution arrangements. In the event of a disagreement, the Commonwealth position should prevail as it would be the chief funder.

Tasmania and SA should be obvious starters for such a joint commission given their size and difficult financial position. Hopefully success in one State would then encourage other states to swallow their pride and improve their health services by cooperating with the Commonwealth in a joint commonwealth/state health commission.

In March 2007, I set out this proposal in more detail – click on ‘Website’ above, then ‘Health’, then ‘A Coalition of the Willing, March 2007’.

I still believe that this is the most sensible and practical way to solve the commonwealth/state impasse and blame game in health. This proposal could also be applied in the education field to resolve the disputes and the blame game in education between the commonwealth and the states.

I think most Australians are sick of the blame game in health. The problem can be resolved but, in the first instance it requires a political agreement between the commonwealth government and any state that wants to cooperate. With such political agreements implementation would be relatively easy. Politics is the hard part.

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