Federalism and Health Care

Health care is a major and challenging policy responsibililty for modern gov­ernments, and even more so when those inherent challenges are exacerbated by the complications of divided jurisdiction in a federal system.

1.1 Reversal ofRoles

The story of health care is the story of Australian federalism more broadly, where a system designed to be decentralized and ‘co-ordinate' has experienced great centralization and developed extensive de facto concurrency (Fenna 2019). Likewise, it reflects the realities of federalism in general, where educa­tion, health and welfare were typically left to the constituent units in original designs. This was because, in an earlier age, these functions were often vehi­cles for expression of local socio-cultural autonomy, their consequences were overwhelmingly local rather than national, and they did not interfere in the development of national economic and strategic union. Among other things, then, what Olson (1969) called ‘the principle of fiscal equivalence' made health and social policy logically a local responsibility.

These realities have been reversed in most federations, including Australia, and, particularly with the mid-century emergence of the redistributive Keynesian welfare state, responsibility for these functions has flowed upward. According to Peterson (1995), this fundamental shift in the functional divi­sion of powers in federal systems leaves constituent units with a strong role to play in underwriting local economic development instead. What this does not acknowledge is the extent to which service delivery in the areas of edu­cation, health and welfare has nonetheless remained a primary responsibility of constituent units, a dominant component of their overall functions, and important ballast for what remains of their autonomous status.

1.2 Common Trends, Different Patterns

A scan of health-care arrangements in federal systems shows three things immediately. First is the general trend over the past century to centralization (Banting and Corbett 2002, p. 30). Second is the great diversity in the way that has happened and in the resulting patterns of divided and shared responsi­bility and program design. Third is that, as with so many policy fields, health care has a range of different components with varying characteristics as far as allocative logic is concerned. These include funding, policy, regulation and service delivery.

With regard to the first two of these observations, the comparison between Australia and Canada is instructive. Both federations experienced a transfor­mative centralization of their health systems in the second half of the 20th century with the introduction of universalistic public health insurance sys­tems. In the Canadian case, this represented a major deviation from the North American patterns prevailing south of the border (Boychuk 2008; Maioni 1998). In Canada the federal government was instrumental in expanding Medicare across the country in the 1960s; in Australia the Commonwealth introduced Medicare in the early 1980s, following a short-lived attempt a decade earlier. However, centralization took two very different forms in the two countries.

In the Australian case, centralization meant a much more qualified univer­salism, since a parallel private system was retained at the same time as a much stronger element of central government involvement. The Commonwealth assumed responsibility for funding part of the system—primary care—while the states were left with responsibility for managing their respective hospital systems, but were substantially dependent on the Commonwealth for neces­sary funding. The result was quite different systems, with the Canadian prov­inces retaining considerably greater autonomy, so much so that the Canadian health system is now one of the most decentralized (Banting and Corbett 2002, p. 14), while the Australian system is more centralized, yet less coherent and more intergovernmentally entangled. In Canada, provincial autonomy has increased in recent years as the federal government has relegated itself to a more passive role (Graefe and Bourns 2009; Marchildon 2018, p. 63). The dif­ferences between these two systems appear to be emblematic of a diversity across not only federal but also unitary systems in how they structure their health-care systems (Palley and Fierlbeck20i5).

1.3 What Use Is Federalism in Health Care?

Duckett (2015) has argued that while there is merit to the idea that federalism provides certain benefits, among them scope for policy experimentation and learning, there is little evidence in the Australian health system of this being the case. Both activity-based funding of hospital treatments and devolved gov­ernance were first introduced in Victoria, but uptake by other states remained patchy for many years, at least until these initiatives were extended nationally under Commonwealth auspices.

In addition, there is the question of whether federalism's benefits are suf­ficient to outweigh its disabilities. Fierlbeck and Palley (2015b; also Haardt 2013a, 2013b) enjoin us not to underestimate those disabilities. In their view, any but the largest jurisdictions are unlikely to have the scale, resources and expertise to manage a health system well.

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