Australia’s Health-Care System

As indicated above, health care epitomizes the overall trajectory of Australian federalism and indeed the trajectory of federalism more universally (Dardanelli, Kincaid, Fenna et al.

2019). At Federation, it was implicitly made an exclusive power and responsibility of the states. The only related authority granted to the Commonwealth in the Australian Constitution was that over quarantine (s.5iix). By the late 20th century, however, the Commonwealth had come to play the dominant funding and policy-making role in the field. That role was reflected by the success of the Labor Party, after much resistance, in introducing a form of universal public health care—abortively first in the form of Medibank, 1975, and then more lastingly in the form of Medicare, 1984 (Grayi99i).

This was facilitated constitutionally by the 1946 social services amendment giving the Commonwealth authority to legislate, for, inter alia, ‘the provision of... pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorise any form of civil conscription)'. However, it was the Commonwealth's financial power that was crucial to the development of a national health-care system. Ever since the 1942 wartime takeover of the income tax system, the Commonwealth has controlled revenues far in excess of its allocated tasks and a high-level of vertical fiscal imbalance has prevailed. Increasingly the Commonwealth took advantage of its surplus revenues to direct state activities through conditional, or ‘tied', grants (Fenna 2008). As Gough Whitlam (1985, p. 716), whose Labor government (1972-75) introduced Australia's first national health insurance system, later put it:

The main constitutional legacy of our federalism was the precedent for wider use of the Australian Government's financial powers. It was commonplace before the Labor Government came to office for tied grants under Section 96 of the Constitution to be made to the States.

What had never before been attempted was the use of those grants to achieve far- reaching reforms in education, medical services, hospitals.

Public health care in Australia is now delivered through a complex arrangement in which the roles and responsibilities of the Commonwealth and state governments are deeply entangled. In this system of ‘cooperative federalism', both levels of government have roles in policy and regulation across the spectrum of health-care services, including prevention, primary care, hospital and emergency care, and out-of-hospital and community care. Funding roles and responsibilities are also closely entwined, but responsibility for service delivery lies predominantly with the states and the non-government sector.

2.1 Arrangements

Cooperative federalism requires intergovernmental architecture for coordination and collaboration on policy setting, funding, regulation and delivery of services. Intergovernmental mechanisms and structures can include conditional grants; compacts and agreements; joint forums and meetings; rules; benchmarks and standards; oversight bodies; and behavioural norms and working relationships (Fenna 2012).

Australian governments collectively spent $124 billion on health care in 2016-17 (aihw 2018). Historically, intergovernmental architecture in Australian health care has involved conditional grant agreements between Commonwealth and state governments andjoint decision making in peak-level meetings of health ministers and coag. The most significant grant agreement is the five- year arrangement for the provision of universal public hospital services. Under this agreement, the Commonwealth contributed $22 billion of the total $53 billion expenditure on public hospitals in 2016-17 (aihw 2018). In addition, the Commonwealth spent $45 billion on the Medical Benefits Scheme for primary care and the Pharmaceutical Benefits Scheme. The significance of the health portfolio and its budget implications usually results in a large number of policy actors being involved in intergovernmental interactions, including the prime minister and state premiers, Commonwealth and state treasurers and ministers for health, and senior bureaucrats from Commonwealth and state agencies.

2.2 Issues

Australian health outcomes rate well against most international measures.

However, like many other countries, the health-care system is under challenge from the pressures of an ageing and growing population; increasing rates of chronic and preventable disease; technological advances that increase healthcare costs; and access and equity issues, in particular for indigenous people. Health care is also consuming an increasing share of Australian government budgets, with health spending almost doubling as a share of tax revenue over the past 30 years—rising from 15.7 per cent in 1989-90 to 24.1 per cent in 201314 (aihw 2016, p. 30) and to 27 per cent in 2017 (aihw 2018, p. 11).

Against these trends and developments, there has been increasing attention directed to the appropriateness of federal arrangements in health care. As Duckett (2015, p. 129) puts it, ‘the peculiar division of responsibilities in the Australian federal system hinders the development and implementation of effective policies to respond to contemporary health issues, including the escalation of health costs'. Successive reviews have confirmed a range of shortcomings in this regard, including:

Program and performance deficiencies. These include unnecessary overlap and duplication; program discontinuities; administrative inefficiencies; distortions in consumer choice; and misallocation of resources (see, for example, hrscha 2006; nca 2014).

Fragmentation of patient care. Federal arrangements are most problematic in the intersections between primary, aged, community and hospital care, where responsibilities are separated between Commonwealth and state governments. With an ageing population and escalating rates of chronic disease, there is a pressing need to increase system flexibility and responsiveness and redesign models of care to improve integration (oecd 2014; Petrich, Ramamurthy, Hendrie and Robinson2oi3).

Cost shifting. There are ingrained practices and incentives within both levels of government to shift costs and responsibilities on to the other, thereby blurring accountability.

This dysfunctional behaviour permeates policy and service-delivery decision making at all levels of the system (hrscha 2006).

Recurring intergovernmental conflict. Relations between the two levels of government are highly contested and tend to be dominated by battles over public hospital funding (Anderson 2012; Ramamurthy 2012a, 2012b; Scotton and Macdonald 1993).

2.3 Intergovernmental Relations

These issues are reflective of weaknesses in the Australian system of intergovernmental relations. There has been inadequate collaboration and integration across the health-care system to bridge the sub-sectors controlled separately by the Commonwealth and state governments. In health care (and more broadly), cooperative federalism in Australia has suffered from a lack of constitutional or legal prescription in intergovernmental architecture. Without formality and consistency in rules, processes and norms, intergovernmental collaboration has been prone to haphazardness, unduly dependent on perennially changing political and economic circumstances and the whim of the Commonwealth (Phillimore and Fenna 2017). This situation is exacerbated by the presence of the very high level of vertical fiscal imbalance; a large diversity of policy stakeholders; and long-standing ideological differences between the two major political parties. Addressing these institutional gaps has been a key focus in the national health reforms implemented since 2011. Lurking in the shadows has been the possibility of a full Commonwealth takeover, which some have advocated as being either an expedient—albeit distinctly un-federal—way to address vertical fiscal imbalance (Eccleston 2008) or the sine qua non of an efficiently organized and coordinated healthcare system (Podger 2010).

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Source: Fenwick Tracy B., Banfield Andrew C. (eds.). Beyond Autonomy: Practical and Theoretical Challenges to 21st Century Federalism. Brill | Nijhoff,2021. — 265 p.. 2021

Australia’s Health-Care System

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