Page 3956 - Week 12 - Tuesday, 29 November 2022
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I recognise that this is actually quite complicated and it takes a while to get your head around. The National Health Reform Agreement sets out that the commonwealth government will pay 45 per cent of efficient growth in activity annually, with a 6.5 per cent cap for public hospital services. That means up to a 6.5 per cent cap on the activity growth for each nationally weighted activity unit, NWAU. Of new activity, the commonwealth will pay 45 per cent of the national efficient price for that activity, and the state or territory will pay the remainder.
To be clear, this does not mean that the commonwealth funds 45 per cent of our hospital funding. It means that 45 per cent of new activity is funded at the nationally agreed efficient price each year by the commonwealth. This comes on top of the existing base funding, which is the funding that was provided by the commonwealth in the previous year. The aim, over time, is to move towards the commonwealth funding a greater proportion of hospital activity, to get closer to that 45 per cent of all activity. I absolutely recognise that this is not a simple system to understand. Many claim to understand the funding arrangements, while very few actually do. Indeed it is commonly assumed that the 45 per cent figure relates to total hospital funding.
Although Ms Castley’s figures are incorrect, her observation that commonwealth funding is growing more quickly than ACT annual growth is correct. This is not some kind of hidden secret; this is actually the deliberate design of the National Health Reform Agreement. All states and territories and the commonwealth agreed to a funding arrangement that would slowly close the gap in hospital funding over time between the commonwealth’s current share and an ambition of getting closer to a 45 per cent share. To achieve this, the commonwealth funding must grow at a quicker rate, and the funding arrangements mean that it has to.
Before commencement of the National Health Reform Agreement arrangements in 2013, the commonwealth contributed approximately 28 per cent of the ACT’s public hospital funding. With the commonwealth contributing 45 per cent to new activity each year, it has slowly increased its share over time. In 2019-20 the share had increased to 33 per cent. There is a long way down the road to go to approach that 45 per cent of funding.
In 2019-20—but we could choose this financial year as well—the territory contribution to ACT public hospitals will represent 67 per cent of total recurrent hospital funding. I should say state and territory, actually, because New South Wales does contribute some of that.
Ms Castley, as reported on the ABC this morning, stated that the ACT needed to increase our funding to meet the rate of inflation and costs of the system. This is another part of her argument. In fact the health inflation rate, as reported last week in the Australian Institute of Health and Welfare Health expenditure 2020-21- report, was less than 1.9 per cent between 2010-11 and 2020-21. That inflation rate was less than two per cent between the period 2015-16 and 2020-21, not the 4.3 per cent that Ms Castley indicates, although I can understand where she might have got that figure, in terms of looking at demand growth plus cost inflation and the way that hospital funding is growing. But it does not reflect health inflation in the way that she has presented it.
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