The Guardian March 15, 2000

What direction on public health funding?

by Rohan Gowland

The new funding package announced on 8 March by the NSW Labor Government 
contains many positive improvements to the running of public hospitals. 
However, questions remain over the political motivation for the changes  
some of which could be the beginning of a Victorian-style case-mix system, 
or worse, US-style managed care.

On the positive side is an extra $2 billion for public hospitals over the 
next three years. NSW hospitals are desperately under-funded and the extra 
money is urgently needed.

Of this extra $2b. funding, $45m. is to eliminate the outstanding debt of 
rural area health services. This is a move to be welcomed, but there may be 
strings attached, such as tougher demands to cut services to prevent future 
debt creation and thereby, avoid long-term funding increases.

One of the changes welcomed by doctors and nurses is the three-year 
recurrent health budget. Allocating funding for a three-year period instead 
of for one year at a time means that hospitals have more stability and are 
able to plan and monitor their funding.

Other changes would allow more involvement of doctors in the running of 
hospitals and better use of nurses in areas such as the patient discharge 

The funding was announced as a "package" and the good points could be 
sweeteners to cover a pro-privatisation agenda. 

The package has been announced as "one-off" which means that the struggle 
for hospital funding will resume again after this period.

The Government's package was tied to the release of a report on health 
funding by the NSW Health Council, which made a number of business-oriented 

The Council recommended having contracts between area health services and 
private hospitals to care for public patients (fitting the grand plan of 
private hospitals replacing what were, and should remain, publicly-provided 

They also recommended the use of what has been dubbed "episode funding" 
which divides funding up into set amounts for each different hospital 
procedure. Episode funding means hospitals could receive funding for a 
certain number  and no more  of each type of operation. If they 
performed too many of one type, they would be pressured to cut back on 
other types of procedures to stay within their overall budget.

The extension of this model is the US-style "managed care" where decisions 
on what treatment is given to a patient is driven less by what the patient 
actually needs than by the level of insurance the patient has taken out. If 
the patient has enough private insurance cover, then a more expensive 
procedure can be chosen by the hospital, otherwise the hospital would say 
"we haven't the budget for that".

It is the government's responsibility to remedy a problem that has been 
created by years of neglect by successive governments.

The solution is more generous funding and the preservation of the public 
hospital and health system. 

The Government's package needs to be looked at critically, given the 
current trend towards privatisation of hospitals by stealth. 

The NSW Health Minister, Craig Knowles, is known to be a supporter of 
involving the private sector in the provision of public services.

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