Breaking the Commonwealth/State Impasse in Health: a coalition of the willing

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A Joint Commonwealth/State Health Commission

(Joint Health Commission)

A State handover of health services to the Commonwealth, as suggested by Tony Abbott, would be the best way to overcome the waste and buck-passing between the Commonwealth and State governments. Another option would be a joint national Commonwealth/State health commission. Both approaches would require the agreement of the Commonwealth and all of the States.

But if these were not achievable because of ideology or political opportunism, which seems to be the case, a practical and feasible alternative would be to establish a Joint Commonwealth/State Health Commission (Joint Health Commission) in any State where the Commonwealth and a State government can agree – a coalition of the willing.

It is envisaged that the joint commission, with shared Commonwealth/State governance would be responsible for funding, planning and integrating all health services in that State. Consistent with an agreed plan, the Commission would then buy health services from existing providers – Commonwealth, State, local, NGO and private.

A political agreement between the Commonwealth and any State is essential. If this political agreement is achieved, we would see a more cohesive and integrated health service, delivered much more efficiently. Once the benefit was clear in one State, hopefully other States would follow.

This proposal would have strong public support. Either the Commonwealth government or any State government could initiate the breaking of the impasse.


The Commonwealth Government provides 46% of national health funding and the State Governments 23%. Another 31% of funding is from non-government sources (mainly individual users of health services).

In both the NSW and SA health reviews that I chaired, a view was widely expressed that ‘it’s all very well for State governments to review their health systems, but a major problem is the inefficiency, fragmentation, gaps, cost and blame shifting which results from the different roles of the Commonwealth and State governments in health’. This view was expressed, not only by those working in the health system, but also by the community generally. It was also frequently expressed by the media. The problem of divided responsibilities is well understood. The public doesn’t really give a hoot who plans and delivers health services. The public’s real concern is that the services are provided efficiently and equitably.

A solution requires a political agreement between the Commonwealth government and at least one State (or territory). The political issue cannot be avoided and attempts to get around this issue are likely to be unsuccessful, time-consuming and cumbersome. A bureaucratic or organisational response to a political problem will be unsatisfactory. The issue must be addressed politically. If there is political agreement, governance, financial, administrative and other issues could be successfully managed.

Political will is paramount. If there is not this will, we will continue to be fobbed off with excuses about, for example, dilution of ministerial responsibility. If there is political will, governance problems can be resolved as we have found now in respect of the Murray-Darling Basin.

Such an approach would not produce a unified national health system, but six (excluding the territories for the moment) joint health systems which are State-based. Nonetheless, this would be superior to the present division and fragmentation. The six State-based joint commissions may also better reflect the different history and needs of respective States. One size doesn’t necessarily fit all.

A Joint Health Commission in any State where the Commonwealth and the State could agree, would have the following characteristics.

1. Coverage of Joint Health Commission

The wider the coverage the better to ensure real and comprehensive resource allocation and integration of services across the full continuum of care. The following programs should be included as the planning responsibility of the Joint Health Commission.

  • State Health (including Health Care Agreement)
  • High level residential aged care
  • Department of Veterans’ Affairs (DVA)
  • Home and Community Care (HACC)
  • Commonwealth Regional Health Services in rural and remote areas.
  • Medical Benefits Scheme (MBS)
  • Pharmaceutical Benefit Scheme (PBS)
  • Aboriginal Health
  • Local Government health
  • NGOs (eg nursing services)
  • Public health

State Health, HACC, etc. would tender for the provision of services to the Joint Health Commission. Similarly, local government and NGOs would tender, although allocations to them would probably need to be made through the State Health department.

Private hospitals could probably be excluded from this coverage, as they depend on private contributions rather than direct government funding – except for occasional seed money. But provision should be made for private hospitals, along with local government and NGOs, to tender for supply of services to a Joint Health Commission, (see 3 below). The private delivery of health services should be encouraged where it is consistent with the statewide plan and is delivered efficiently.

Importantly, existing providers would continue to operate and provide services, and where appropriate, ministers – both Commonwealth and State – would continue to be responsible for their own services. But those services would be purchased by the Joint Health Commission as part of a statewide plan, which I refer to under ‘functions’ below.

Assuming that the Commonwealth stays within its own programs, e.g. MBS and PBS, there is still the cost of fragmentation around the legacy of an input-based program structure. Pooling (as described in the next sections) achieves its benefits only if budget holders can choose the best therapies. The Commonwealth should set broad priorities by recipient (youth, indigenous, etc.) or by condition (mental illness, obesity, etc.), but should not be concerned with the means (drugs, medical, etc.).

2. Pooled Funding of Joint Health Commission

The Joint Health Commission would receive a negotiated pooled allocation of funds from the Commonwealth and State governments, which reflected the coverage of programs for which it would be responsible (see 1 above), with appropriate population growth and cost indexation add-ons.

Whilst confidence in the funding formula is developed, it might be useful to consider shadow funding in the first 3 years and move to actual pooling of funds thereafter.

3. Functions of Joint Health Commission

a) Shared Resource Allocation through the purchase of various services from providers – Commonwealth, State and local government, and NGOs as part of a joint strategic plan.

  • In this case, shared resource allocation can be achieved through the establishment of a minimum set of Commonwealth and State programs, e.g. primary care services; aboriginal health services; home and community care services; hospital services and aged care services.
  • Funding would be allocated with agreed short and long term integrated outcomes, rather than program outcomes, with specified standards and levels of performance.

b) Shared Performance Management

Oversee continuous improvement of the health system, monitor progress and establish reform targets and timelines:

  • Development of standard measurement
  • Benchmarking
  • Patient-centred best practices

The development of the National Health Performance Framework provides an excellent opportunity for the establishment of a system that can meet the needs of consumers, community and health services. The National Health Performance Framework provides a three-tiered approach that examines health status and outcomes, determinants of health, and health system performance.

The performance framework should facilitate the mapping of progress for the population of a State, region or service. It could also be used to examine progress in tackling a particular health problem (e.g. aboriginal health), and to take a wider look at the interface between health and other government departments, the private sector and non-government organisations.

4. Joint Health Commission Governance

The following features could be included, and would ensure full Commonwealth and State government input into the statewide plan:

  • Membership of the board should be high level to enable strategic decision-making on broad and longer-term issues.
  • Maximum transparency and disclosure of the Joint Commission’s work and final recommendations in order to neutralise special pleading and vested interests and to ensure public understanding and support.
  • The board of directors must have clear ‘governance’ responsibility and not a junior role. They should reflect the broad interests of the whole community and not be seen as representative of the Commonwealth or State or ‘insider interests’ that so dominate health systems in Australia.
  • Independent chair appointed by the two Ministers from a short list provided by the respective Commonwealth and State Health CEOs. It might be useful to have the chair from another State.
  • Apart from the chair, no jurisdiction to have more than 50% representation.
  • Representation could include other Commonwealth and State jurisdictions (eg Education) and people having knowledge of the private sector.
  • The board would appoint the CEO who would be responsible to the board and not the two jurisdictions.
  • The board would approve the strategic plan and budget.
  • A constitution may be useful to provide more user-friendly objects, role, function and operating procedures, including engaging the private sector.
  • Subsidiarity should be an important principle for governors in developing the statewide plan. Management and service delivery should be driven down to the lowest and most local level possible, consistent with state and nation-wide standards.
  • Board should have a small secretariat, but rely on Joint Health Commission for planning etc. It must avoid a new level of bureaucracy.
  • Board costs would be shared by Commonwealth and State.
  • Commonwealth and State ministers would be responsible for negotiating high-level policy principles, including overall funding on the advice of the board. This would help reduce the risk of the board dividing on Commonwealth/State lines. Ministers must reach broad agreement if the Joint Health Commission is to work.
  • The board should be responsible to Commonwealth and State ministers, with one financial report to both. If there is not agreement between the two ministers, there would be a public dispute resolution procedure which would encourage cooperation and dialogue between the two ministers. This would encourage public trust in the integrity of the process. I would expect that this would produce an agreement in almost all cases. If resolution is not possible, the Commonwealth minister would prevail, given the need for a stronger national role and that the Commonwealth Government provides double the health funds of the states – 46% compared with 23%.

These governance arrangements could be reviewed in 5 or 7 years in the way the proposed enhanced Murray-Darling Basin Commission will be reviewed.

5. Getting Ministers to stand back

  • There would be considerable public advantage in encouraging health ministers to stand back from a great deal of day to day health operations. Micro-management in health by ministers and their offices has led to gun-shy executives, confused management and ministers reluctant to make essential policy decisions because they allow themselves to be drawn into every health brushfire, usually promoted by the media. They become preoccupied with the urgent rather than the important. There are serious long-term consequences as a result.
  • In Ontario, in 1996, the provincial government set up a Health Services Restructuring Commission to not only advise on restructure in health but to implement the restructuring. Ministers recognised that they were too subject to pressure by vested interests in the health sector and that a more arms length and independent commission could achieve outcomes that ministers couldn’t. Ministers had shown that they were unwilling or unable to address necessary closure or rationalisation of hospitals and clinical services. The commission made significant progress and after a period handed back its powers to ministers. A key in the commission’s success was public education so that the public could better understand and accept the necessary changes.
  • In Australia an explicit distancing of ministers from day to day health issues would be a major step in the direction of evidence-based policy and practice. As well as assisting in improved health administration, it would also make the political life of health ministers, particularly state health ministers, much easier. Caught in the daily media loop, most are very politically vulnerable.
  • More checks and balances on ministers would also be very valuable in redressing the increasing domination by ministers of parliament and the public service.
  • The Health Insurance Commission and the Pharmaceutical Benefits Advisory Committee are independent statutory bodies. They work effectively and efficiently in the public interest. They do not detract from ministerial responsibility; in fact the commission structure re-empowers ministers to advocate for the public’s wellbeing. The Prime Minister has now accepted the proposals of the Premiers of South Australia, Queensland and New South Wales that a panel of independent experts should manage the Murray-Darling. This explicitly concedes that there is value in ministers standing back in order to counter the vested interests who make good administration of the Murray-Darling basin very difficult. This is consistent with what we have proposed – that an expert joint commission report to Commonwealth and State governments on a state-wide health plan, which would be adopted if both ministers agreed or by the Commonwealth minister if there was disagreement and the dispute resolution process was not successful.
  • Instead of engaging in a technical and largely pointless discussion about ministerial responsibility, the community would be much better served if health ministers addressed all government areas that have a major impact on health. These areas include education, employment, labour relations and trade (drugs). The health of the community is probably more affected by what happens outside the health portfolio than within the health portfolio. It is most obviously true in indigenous health. So often ministers see themselves as responsible for health services rather than health.


A Joint Health Commission established upon agreement of any State with the Commonwealth would be a substantial improvement on the present arrangements. It requires a political decision. The public is tired of the blame shifting and fragmentation in health and would respond to a sea change such as this. If John Howard or Kevin Rudd offered to establish such a joint health commission in any State that agreed, they would achieve what both of them are seeking in health – a better health system, a favourable community response, and differentiation in health policy. A truly committed Commonwealth government could even use its financial leverage to make such an offer more attractive to the states.

A Joint Health Commission in any one State could begin to address the ‘big ticket’ problems in health delivery – the Commonwealth/State fragmentation, an eroding primary health care system, an antiquated workforce structure and obvious system failures in safety and quality.

Of course, the fragmentation in health is not just caused by Commonwealth-State fragmentation. The two big Commonwealth programs – MBS and PBS – are not integrated.

All these big-ticket issues are lost sight of in the argy-bargy of Commonwealth/State blame and cost shifting.

Not only would a Joint Health Commission in one State be a substantial improvement, it would also be very symbolic, demonstrating that governments can address hard political issues in a cooperative way.

We must stop merely asking for more money or tweaking the dollars, when the real problems are structural. A lot of health spending is counter-productive – throwing money at problems to get them out of the media or for short-term political gain, rather than solving systemic problems. Any increase in health dollars must be accompanied by system change. A Joint Health Commission starting in one State is a sound way to begin breaking the impasse.

The key is political will by ministers. If there is the political will, the governance problems can be resolved.

There is no reason that the principles proposed above in health could not be applied in other fields such as education.

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