|Implemented in this survey?|
Since 1997, the Australian Government has been running budget surpluses. Initially, surpluses were used to pay off public debt, but since 2006 the government has been debt free. Since then, a number of funds in which to invest future surpluses have been established. The aim of these funds is help meet future government liabilities. In the last year, one such fund has been established in the field of health care. This report details the purpose of this fund.
The previous Government promoted the idea of establishing funds as a vehicle to invest future budget surpluses. In August 2007 it announced the first of such funds in the field of health care. The aim of the Health and Medical Investment Fund is to generate ongoing returns each year that can be used to fund new health care facilities and equipment. The Fund was not intended to replace ordinary expenditure on health services by government.
The fund will support future health infrastructure priorities, including investments in:
The details of how funds can be accessed are not yet clear, although the establishment of previous investment funds provide some guidance on how such a fund is likely to operate. For example, a similar higher education fund seeks expressions of interest (EOI) for potential projects. The EOIs are assessed on the basis of a common set of principles and criteria. In the past, panels have made recommendations for funding to the Minister at arms length.
What is not clear is how state and territory governments will respond to the establishment of the fund. It is possible that state and territory governments (who have historically had considerable financing responsibility in this area) will redirect resources away from areas covered by the Fund.
|Degree of Innovation||traditional||innovative|
|Degree of Controversy||consensual||highly controversial|
|Structural or Systemic Impact||marginal||fundamental|
|Public Visibility||very low||very high|
Whilst the Australian Government is in the fairly unique position of having budgetary surpluses, the idea of creating investment funds for specific purposes can be transferred to other health care systems. Indeed, this is achieved in many other countries through endowment funds and foundations often administered by charitable organisations.
The politics of this policy has been consensual as demonstrated by its survival following a change in government. Still, if implemented correctly, it could represent a signficant new way forward in making more rational and coordinated choices about new health care investments.
Over successive years the previous Australian Government has been able to produce significant budget surpluses. Initially, budget surpluses were derived from prudent economic management. Subsequently, the Government has relied on high tax revenues obtained primarily through strong economic growth and the mining boom.
After paying off public debt in 2005/06, the Government started to look at options for directing future surpluses. In the first instance, it set up the Future Fund; a government investment fund set up to pay future pension liabilities for Australian public servants.
The previous Government announced the establishment of a Health and Medical Investment Fund in the lead up to the 2007 federal election, with an initial investment of AU$2.5 billion and with a view to add proceeds from the sale of Medibank, a publicly owned private health insurance company.
The Health and Medical Investment Fund is a vehicle to invest future surpluses and direct government financing flows in the years to come. The policy should be seen as part of an overall macro-economic policy to protect future generations from higher taxation burdens. In addition, articulating the intended purpose of these funds will make it politically harder for future governments to re-direct finances.
|Implemented in this survey?|
In 2002 the then Treasurer, the Hon. Peter Costello, released the first Intergenerational Report. This report made long term forecasts of government expenditures to identify areas that are likely to excert greater pressures on government finances in future years. The report identified health care as a major growth portfolio.
Since the release of the report, the Government has initiated a number of policy responses to deal with increasing health care costs. Some policies have been implemented to curb expenditures (see for example a previous report on pharmaceutical reforms). In this instance, the government is attempting to transfer the current generation's wealth to future generations through the establishment of investment funds.
This policy fullfilled the macro-economic objectives of the previous government. It transfers wealth from the current generation to future generations to help deal with increasing costs of health care. As such, this policy is as much economic policy as it is health policy.
The policy also suited a political agenda. The announcement came in the months prior to the Federal election, and at the time, the Government was coming under considerable pressure over its reported neglect of public hospitals. In many ways, the Fund was designed to stymie those criticisms. In addition, it also allowed the government to argue that the proceeds from the intended sale of Medibank (a publicly owned private health insurance fund) would be directed to public hospitals. The sale of Medibank had been a political negative for the Government.
The Australian Medical Association was in favour of the fund but argued very early on that the fund should not add red tape. The AMA further argued that it wanted an independent body with intimate knowledge of hospitals and medical practice to assess all future applications to ensure the money is allocated on the basis of genuine health need and not other considerations. Presumably, this means that the AMA does not want economic considerations to determine allocations. Subsequent to the 2008 budget announcement, the AMA also argued that some of the funds should be directed towardscreating new medical training places.
Medicines Australia (an association representing pharmaceutical companies) has been supportive of the initiative as the fund will invest in new research facilities.
|Treasurer||very supportive||strongly opposed|
|Minister for Health||very supportive||strongly opposed|
|Australian Medical Association||very supportive||strongly opposed|
|Private Sector or Industry|
|Pharmaceutical Association||very supportive||strongly opposed|
Legislation for this policy is pending. Following a change in government in November 2007, the Health and Medical Investment fund has been renamed the Health and Hospital Fund.
In its first budget, the new government announced that it would invest AU$10billion into the fund and that future contributions would be made if appropriate.
It also announced that expenditure from the Fund will be subject to consideration through the Budget process each year. This appears to be a change from the previous Government which had indicated that decisions on annual spending from the Fund will be made on advice from a panel of expert advisers led by the Commonwealth Chief Medical Officer following a competitive application process.
Also, whilst the previous Government announced that the capital in the fund will be protected to ensure that ongoing investment returns will be available, the new Government has not made such an undertaking.
|Minister for Health||very strong||none|
|Australian Medical Association||very strong||none|
|Private Sector or Industry|
|Pharmaceutical Association||very strong||none|
Legislation on this proposal is not before parliament at this stage. Thus details on how the fund will operate are not yet clear. The Government has announced that the funds will be allocated through the federal government's budget cycle, due in May of each year.
No plans to monitor or evaluate the impact have been announced. However, it should be possible to monitor the outcomes of the policy as well all aspects of the process.
There is little doubt that numerous public hospitals need urgent updating of key infrastructure. In this regard, the fund is a welcome inititative. The Government argues that it is the biggest single investment in the hospital sector. However, given the nature of the fund, it will not be a single investment (rather a series of projects) spread over a considerable time period. In terms of overall health care funding, Australia spends approximately AU$94 billion a year on health care, of which approximately AU$5.2 billion is spent on capital. Importantly, the Federal Government's direct contribution towards capital expenditure is only $132 million (or 2.5%). Thus, the investment income would, under normal circumstances, represent a signifcant increase in the Federal Government's contribution on capital and infrastucture projects.
There are a number of potential risks associated with the Fund.
|Quality of Health Care Services||marginal||fundamental|
|Level of Equity||system less equitable||system more equitable|
|Cost Efficiency||very low||very high|
It is perhaps too early to tell what the impact of this policy will be. It will depend on a number of unknown factors mainly to do with how funds will be allocated. If done properly and projects are funded on the basis of a clear set of criteria that includes economic considerations, and the risks identified above are minimised, then this initiative could have a positive impact on the Australian health care system. A coordinated approach to large-scale national health care infrastructure is needed to break down some of the existing fiefdoms.
Costello, P. Intergenerational Report, Australian Treasury, Canberra 2002 www.budget.gov.au/2002-03/bp5/html/index.html.
Costello, P. Intergenerational Report, Australian Treasury, Canberra 2007
Costello, P. Preliminary 2006-07 Budget Outcome and Surplus Transfers, Australian Treasury, 2007.
Abbott, T. Media Release (ABB105/07) "Health and Medical Investment Fund" , 21 August 2007
Roxon, N. Budget Media Release - "Investing In A Health System For The Future" 13 May 2008
Chalmers, I. Media Release (Medicines Australia). "New Health and Hospitals Fund Welcomed", 15 May 2008
Capolingua, R. Media Release (AMA). "New Fund Should Buy Medical Equipment and Services, Not Red Tape and Administrators", 21 August 2007.
Kees van Gool