Federal takeover of health and hospital system

By Angela Dorizas

The Federal Government has unveiled its $30.9 billion overhaul of Australia’s health system, which is the most significant reform to the federation in its history.

Prime Minister Kevin Rudd has announced the establishment of a National Health and Hospitals Network to be funded nationally and run locally.

The national health and hospitals network will bring together the eight State run health systems, with one set of national standards.

The Commonwealth will take 60 per cent of the funding responsibility for public hospitals, investing one third of GST revenue – currently paid to the states and territories – in health and hospitals

That means the states and territories will be required to surrender around $90 billion in GST revenue. If they refuse, the Rudd Government will put the reforms to the Australian public in a referendum.

In his address to the National Press Club, Mr Rudd said his Government was embarking on the most radical reform to the health and hospital system since the introduction of Medicare.

“For the first time in history the Australian Government will take on the dominant funding role for the entire public hospital system,” Mr Rudd said.

“The Australian Government’s decision to take on the dominant funding role for the entire public hospital system is designed to end the blame game, eliminate waste and to shoulder the funding burden on the rapidly rising health costs of the future.”

The reforms also include a $18.7 billion Commonwealth takeover of funding responsibility for GP and primary health care services.

Local hospital networks will also be established with health and financial professionals responsible for running small groups of local hospitals. Instead of providing block funding grants to the states, the Commonwealth will directly fund hospital networks for each hospital service they deliver.

The reforms follow the release of the 2010 Intergenerational Report, Australia to 2050, which warned of increased health costs.

The Federal Government will present the reforms to the states and territories at the next COAG meeting to be held in Canberra on April 11.

“My message to them is simple,” Mr Rudd said.

“Work with the Australian Government, work with the doctors, nurses and other health professionals of Australia who want reform, work with the clinical leadership of our local hospitals who also want reform – and together deliver better hospitals and better health care for all Australians.”


Under the changes, the Commonwealth will fund:

  • 60 per cent of the efficient price of every public hospital service
  • 60 per cent of public hospitals’ recurrent expenditure on research and training functions
  • 60 per cent of the cost of maintaining and improving public hospitals infrastructure
  • Up to 100 per cent of the efficient price of ‘primary health care equivalent’ outpatient services provided to public hospital patients over time

Read the full policy document: A National Health and Hospitals Network for Australia's Future [PDF]

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