Prime Minister Tony Abbott has ruled out means-testing for public schools but other key recommendations for funding reform are still under consideration.
The states would lose up to $18 billion a year in Commonwealth support for public hospitals and be left to fund and operate the system by themselves, under one option prepared by the Prime Minister’s department as part of the Federation reform process.
The leaked proposal brings into play the prospect of the states having to raise the GST or find another funding source by accepting that the “ongoing financial durability of this option is likely to be challenged” unless the states could fid the money by cutting back on hospital admissions and addressing shortfalls in primary care.
“Durability will also be challenged if the states and territories do not have access to adequate revenue,” it says.
The option is one of five presented by the Department of Prime Minister and Cabinet in a green paper on reforming the Federation by seeking more efficient ways to run the public hospital and public schools systems.
It’s leaking follows the disclosure on Monday of the options to change the funding of schools, including mean-testing public schools so wealthier parents had to pay more.
Labor accused the government of contemplating a “school tax”, prompting Tony Abbott to unequivocally rule it out.
“Not today, not tomorrow, not ever,” he told Parliament.
“If the states and territories want to charge wealthy parents fees for public schools, that is a matter for them.”
NSW and Western Australia quickly scotched the option with WA calling it stupid.
Mr Abbott did, however, compliment South Australian Labor Premier Jay Weatherill who, The Australian Financial Review revealed on Monday, wants to extend the GST to financial services as he seeks to reshape the GST debate ahead of next month’s federal and state leaders retreat to discuss hospital and school funding.
“Obviously, there is a federation reform white paper process taking place now,” Mr Abbot said.
“We are perfectly happy to see a broad debate about the future of reform in this country, but I do have to say that the actual running of public schools is entirely a matter for the states and territories.”
The leaked green paper on health says the five options stemmed from consultations with stakeholders and the states and territories.
The states provide about 54 per cent of public hospital funding totalling $34.7 billion in 2012-13. The Commonwealth contributes 37 per cent, which will soon level off at about $18 billion a year, while the remainder comes from individuals, health insurers, workers compensation and motor vehicle insurers.
THE OPTIONS AVAILABLE
Option one, which mirrors the recommendation in the government’s commission of audit, would give the states and
The recommendation is likely to be controversial given that in the 2014 budget the Abbott government withdrew $80 billion in funding for schools and public hospitals over the next decade. This was designed to force the states to consider new revenue options such as an increased GST or a GST with a broader base.
The second option is for the commonwealth to establish a benefit scheme similar to the Medicare Benefits Schedule for all hospital treatments, regardless of whether they were performed in a public or private hospital. The states would cover the gap between the benefit and the actual cost for public patients to ensure the were still treated free.
“This would be the public hospital equivalent of bulk-billing in general practice,” it says.
The third option would see the Commonwealth and states jointly responsible for funding individualised care packages for patients with or at risk of developing chronic or complex conditions. “Funding would be provided for all services received by the patients, including GP visits, specialist appointments, hospital care, and care from allied health professionals,” the paper says.
Option four would see the establishment of regional agencies which would purchase health services for people in their catchments. The Commonwealth and the states would put their funding into a pool from which payments would be made to purchasing agencies. This is similar to a reform model flagged by Kevin Rudd when he was prime minister.
The fifth option would see the Commonwealth become the singe government funder of health services. It would withdraw all funding from the states and disburse all health money itself. A purchasing agency would commission a range of services from public and private providers based on individual community requirements.
The paper’s authors’ stress that the order in which the options appear does not indicate any preference.
It says option one, under which the states would have full operational and funding responsibility for public hospitals “delivers clear lines of accountability”.
“Australians would know who to hold to account for the provision of better hospital services,” it says.
“This would improve incentives for increasing the efficiency of public hospitals.”