COAG Health Agreement

The Council of Australian Governments (COAG) met in Canberra on 19-20 April 2010 to negotiate an historic agreement to reform health and hospitals funding arrangements between the Commonwealth, State and Territory Governments.

Background
On 3 March 2010, the Government proposed significant structural reforms to hospital funding arrangements following detailed consideration of the report of the National Health & Hospitals Reform Commission, which concluded that without significant long-term reform, State and Territory budgets would be consumed by rising health costs.
”COAG has to do more than simply come up with a plan for [more] money. It has to come up with a plan for reform because the blank-cheque theory of health and hospitals doesn’t work.’[1]‘
In recent weeks, Prime Minister Kevin Rudd and Minister for Health Nicola Roxon, met State and Territory leaders to negotiate prior to the scheduled COAG meeting.
The agreement
On 20 April 2010, an agreement was reached between the Commonwealth Government, and all State and Territory Governments with the exception of Western Australia.
Essentially, the Federal Government will establish a single, national network of hospitals which will be funded by the Commonwealth but run locally.
The Federal Government will takeover 60 per cent of funding responsibility for public hospitals by taking back one third of GST revenue and investing it directly in health programs and hospitals rather than the current arrangement of paying this revenue to State and Territory Governments.
The funds will be pooled into a ‘National Hospitals Fund’, and the Commonwealth Government will allocate money to a payment authority in each State/Territory. The State/Territory Governments will also pay their remaining share of funding (40 per cent) to these same payment authorities, which will then deliver the funds to the local hospital networks directly. Performance benchmarks and indicators will ensure that hospitals are remunerated for the services they deliver (activity-based funding).
From 1 July 2010, ‘Transition Period’ payments will commence to deliver the following:
  • 1300 new sub-acute hospital beds.
  • 2500 beds for those in aged care.
  • 6000 new doctors.
  • Reducing emergency waiting times to no longer than four hours.
  • Delivering elective surgery on time in 95 per cent of cases.
  • Providing mental health services to an extra 20,000 young people.
  • Commonwealth takeover of full funding responsibility for primary and aged care.
 As a result of petitioning by state and territory leaders, the Commonwealth made additional offers of assistance to reach an agreement. These include:
  • $1.2 billion for NSW in the first four years of the agreement, with the guarantee of $4.9 billion guaranteed funding for growth in health costs after 2014, a total of $6.1 billion in the next 10 years.
  • $4 billion for Queensland to deliver more emergency rooms, elective surgery, new hospital beds, mental health services and aged care.
  • An additional $150 million annually to 2020 for the ACT.
  • $890 million over three years for Victoria.
WA is not part of the agreement as it stands. WA Premier Colin Barnett indicated that the WA Government supported the improved health services and targets proposed in the agreement. Premier Barnett indicated that the only area of disagreement was whether the 30 per cent of GST funding to be allocated to the plan would be paid via the Western Australian Government or directly by the Commonwealth to the new National Hospitals Fund.
Negotiations between the Commonwealth and WA Government will continue in the coming weeks. Both the Prime Minister and the WA Premier stated they were confident a final agreement would be reached prior to 1 July 2010.
The Prime Minister indicated that on the basis of the progress made to date  there would not be a need for a referendum.
Further detail about the COAG meeting is available in the Communiqué at http://www.coag.gov.au/coag_meeting_outcomes/2010-04-19/docs/Communique_20_April_2010.pdf.
The National Health and Hospitals Network Agremeent is available in full at http://www.coag.gov.au/coag_meeting_outcomes/2010-04-19/docs/NHHN_Agreement.pdf.