Cash will not
fix health ills

Courier Mail
7th October 2005

Can Queensland's health crisis be solved with more money? Des Moore and Julie Novak say there is no case for tax increases.

The Forster review of Queensland Health's systems ranges widely across policy issues relevant to improving the delivery of health services, including many that would require decisions by both federal and state governments.

But the immediate question is whether a major increase in state spending on health can be justified in the mini-budget on October 25.

Our analysis of the review raises serious questions about the proposed large spending increase and, hence, the need for increases in state taxes as foreshadowed by Premier Peter Beattie.

The basis for the proposed additional spending of $1.5 billion is that total Queensland expenditure on health in 2003-04 was about $200 per head, or 14 per cent lower than the average for the states.

However, this lower level of spending added up to no more than $780 million in 2003-04 and could not now be higher than $900 million.

Moreover, it relates to total spending on health services, whereas the obvious policy question is whether additional spending is needed to lift public hospital services to the states' average.

What commentators seemingly overlook is that the review identifies why Queensland's health expenditure is lower than in other states. The reasons include Queensland's wage levels being 6-7 per cent below the states' average and that Queensland's public hospitals are 11 per cent more efficient than the national average when measured on a weighted separation basis.

Remarkably (but correctly), the report says it would be wrong to conclude that an additional $200 per person is justified for health services. For many services, Queensland Health provides a similar level of activity but with a lower level of expenditure. In short, any need for additional spending cannot be based on straight comparisons of per head figures. Indeed, given that Queensland's hospitals are 11 per cent more efficient, the 14 per cent lower spending on a per capita basis virtually ceases to be of any major significance.

The review nevertheless argues that public patient hospital separations should be increased to the national average by financing an extra 37,500 weighted separations. This, we are told, would require increased expenditure of $197 million in 2005-06 plus a further $209 million for 1000 more nurses and 1780 more allied health staff.

However, no substantive justification is provided for a policy that would push public patient hospital separations to the states' average. Astonishingly, the review overlooks the main reason for those separations being below average: that Queensland has a higher proportion of separations by private hospitals (47 per cent) than any other state.

Implementation of the policy would simply reduce those separations and put more pressure on an already over-loaded public hospital system.

Missing from the review are proposals for reducing that overload by increasing the private hospitals' role. Indeed, when the review considers possible future pressures on the public hospital system, it again seems to overlook the potential contribution of the private hospitals.

Thus, while assessing that Queensland may need to add 170 beds a year out to 2021, its estimate of additional expenditure of $45 million a year makes no allowance for the capacity of private hospitals to provide additional beds, as it has been doing in recent years.

And, in discussing how much more the community might be prepared to pay for health care, no serious examination is made of private hospitals' roles, such as by contracting out certain operations and other functions. Forster should have started with the Commonwealth Grants Commission's assessment that Queensland's spending on public hospitals was $680 million, or about 22 per cent, less than the states' average in 2003-04.

He should then have taken account of the greater efficiency of the Queensland hospital system, as well as the Premier's Australian Financial Review letter, published on August 30, pointing out that Queensland has increased health spending by more than 20 per cent since 2003-04.

That would then surely have led to the conclusion that Queensland's public hospitals are already functioning at or close to average state levels.

Finally - and most importantly - his conclusion that the culture of Queensland Health severely inhibits its capacity to deliver the best possible standard should have indicated that, rather than additional expenditure, the major requirement is to change the structure of the public health system.

Yet, even before he could have received any substantive analysis of the review, Beattie seemingly committed the Government to substantial additional expenditure. This is not responsible government: Cabinet should first have considered a Treasury analysis of the review.

But, if this jumping of the gun means increased hospital spending, it should mainly be financed by reducing the above-average state spending of $500 million on general public services (where there is large spending on business regulation). The large budget surplus ($934 million) could also be drawn on. There is no case for tax increases.

Des Moore is director of the Institute for Private Enterprise.
Julie Novak is a senior policy adviser to Commerce Queensland.