Pearls and Irritations

In the idealised Canberra model of Cabinet government a subject matter minister, supported and advised by her department, develops policy proposals which are considered by her Cabinet colleagues. If the proposals are approved, the minister and her department are responsible for implementing the proposals and administering any new programs that result.

This model assumes that the minister has the innate wit and subject matter interest to carry forward a policy agenda. It assumes that subject matter departments have the capability to provide effective support to a minister, and it assumes that the Prime Minister and his kitchen Cabinet and the departments supporting them do not have an over-riding policy agenda of their own.

How valid have these assumptions been in the case of health policy over the last 25 years?

Minister Hunt will be the eighth health minister to have come and gone since 1996.  Some of the eight have been engaged and interested in health policy, some have been profoundly uninterested and lazy, and others have been cyphers without the intellectual grunt and political standing to be effective.

Regardless of the capacity of the minister, as set out in my earlier article on this blog, the policy capability of the department of health to support them has been steadily reduced over the last 25 years.  In its current state the department cannot provide comprehensive strategic policy advice to its ministers and the government.

As the capability of the health department had declined, the Prime Minister and PMC have become increasingly involved in health policy issues.

The history of the negotiation of hospital funding agreements between the Commonwealth and the states is an illustrative example.

The 1998 Australian Health Care Agreements were negotiated between minister Michael Wooldridge and his state counterparts.  Wooldridge took a submission to Cabinet to seek approval for a negotiating package, which included a number of initiatives developed by the department such as a separate funding stream for mental health and palliative care services, as well as safety and quality.  Wooldridge held a number of reasonably positive meetings with state ministers, and a series of discussions at officer level were generally amicable and productive.

One of the issues the states had with the previous 1993 Medicare Agreements was the absence of any dispute resolution clause, and they proposed an independent arbitration mechanism.  When news of this reached PMC and the Treasury it generated outrage, and a posse of deputy secretaries was despatched to explain to the negotiating team in health how unacceptable this inclusion would be.  But apart from this intervention, central agencies were largely uninvolved in the process.

In the end the states insisted on the arbitration clause, and it was included in the final agreements which were signed by health ministers just before the Commonwealth government went into caretaker before the 1998 election.

Work on the 2003 agreements began in 2002 under health minister Kay Patterson, who had been promoted to the health portfolio after Wooldridge retired at the 2001 election.

A meeting of health ministers with Patterson in April 2002 agreed that Commonwealth/State relations in the health arena should focus on the provision of optimal care and health outcomes, regardless of jurisdictional boundaries, and that all governments should work co-operatively to improve the health and wellbeing of the community.  The ministers established nine reference groups to address key reform issues including the interaction between hospital funding and private health insurance; improving rural health; the interface between aged and acute care; the 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; and collaboration on workforce, training and education.

The groups’ report to health ministers at the end of September 2002 was well received by the health sector. However, the report had no impact whatsoever on the nature of the 2003 agreement.

When Patterson sought agreement from Cabinet on the offer to be made to the states she was overruled by the Prime Minister and the Treasurer.  The draft agreement which was put to the states on a take it or leave it basis in April 2003 included parsimonious indexation arrangements and no real reform measures.  It generated savings against the forward estimates of over $1 billion – and at least twice that over the five-year life of the agreements compared with a continuation of the 1998 agreements.  While the states protested vociferously against the proposed agreement, the financial penalties for not signing up compelled them to fall into line in August 2003.

From a health policy perspective, the important thing about this process was that the health minister and the health department were deeply involved in the preliminary consideration of health reform issues – even though they were sidelined when the serious business began.  In the next major renegotiation of the arrangements in 2009-10 the department of health and the health minister were largely irrelevant.

The Rudd government took office in late 2007 with a commitment to establish a National Health and Hospitals Reform Commission to develop a plan for reform of the health system.  Its final report was delivered on 30 June 2009, and included 123 recommendations covering almost every element of the health sector.  In relation to hospital funding, it recommended a move to activity-based funding and an ongoing increase in Commonwealth funding, starting with an increase to 40 per cent of the efficient price of services.  It also recommended that the Commonwealth assume responsibility for 100 per cent funding for primary care and aged care.

The Department of Prime Minister and Cabinet assumed responsibility for negotiating with the states and territories on implementing these recommendations.  First ministers’ departments in the states and territories cooperated enthusiastically, as this process gave them an opportunity to shape the agreements which provided about a quarter of state revenue without working through health departments.

There were numerous videoconferences and teleconferences as discussions proceeded, often involving first ministers’ departments, treasuries, and health departments.  At one of these the convening senior official from PMC thought that there were no health officials present, and expressed the view that real progress could be made in their absence.  Unfortunately several health department officials joined late, but just in time to hear this pronouncement!

However, all the substantive negotiations were carried out in a group consisting solely of officials from first ministers’ departments.  And when the time came for ministers to become involved it was first ministers who met in a two-day COAG extravaganza in April 2010, where the National Health and Hospitals Network Agreement (NHHNA) was signed by all jurisdictions except WA.

Subsequent renegotiations of these arrangements – the 2011 National Health Reform Agreement, the 2016 Heads of Agreement, and the 2020 National Health Reform Agreement – have all been led by PMC and taken through a COAG or national cabinet process.

It is understandable that central agencies want to be involved in consequential discussions involving a program now worth almost $25 billion annually in Commonwealth funding and $60 billion in total.  However, the agreements are about funding health care for millions of patients every year.  Health ministers and their departments should be leading these discussions to ensure that health considerations are given as much weight as fiscal ones.

Many years ago a colleague from PMC told me that health policy was too important to be left to the health department.  Her successors are now firmly in charge.