Does Rudd Have The Guts For Health Reform?


All of a sudden, things are starting to get interesting in federal politics. 

After a lacklustre start to the year that was dominated by the insulation scandal, Kevin Rudd and his senior ministers have made two big policy announcements: the national curriculum for schools and an ambitious health reform agenda.

To Julia Gillard’s evident satisfaction, the curriculum was well received by basically everyone except the teachers’ union. Even the Opposition could only manage a carping and shallow response, with education spokesman Christopher Pyne mounting an astonishingly superficial attack on the history curriculum’s "political correctness" on the grounds that it mentioned Indigenous history 118 times but left out the Magna Carta altogether. (Legal scholars will be surprised the Coalition is so enamoured of the Magna Carta, given the Howard government’s terror laws effectively removed many of the rights to legal due process first enshrined in the compact eight centuries ago.)

But no sooner had Julia Gillard presented the new national curriculum than the Rudd Government had moved on to a second big announcement, this time on healthcare. Handing down the Government’s proposed policy, the Prime Minister flagged reforms to the health system that were bigger in scope than the universal, publicly funded health system — called Medicare — introduced by the Hawke government in 1983. Medicare offers a lesson for reforming governments: strongly opposed at the time by a Liberal Party committed to private healthcare, it has gone on to become perhaps Labor’s most popular ever policy.

With the announcement of the health reforms, Prime Minister Kevin Rudd has signalled that Labor intends to make the issue a key part of its 2010 election platform. The Government is proposing to take over primary healthcare, placing hospital management under the charge of local health "networks" and redirecting one third of the states’ GST revenue to health expenditure. The plan is complex, difficult, and sure to be opposed by the states and many powerful interests in the health system. It’s also exactly the kind of sweeping reform that many in the conservative media have derided the Prime Minister for being unable to deliver.

There’s no doubt that Australia needs significant health reform. As the Government’s many consultations on the issue (not to mention the extensive policy literature) have made clear: the rising cost of healthcare will eventually bankrupt state governments. It’s not just that Australians are ageing, it’s also that preventable but debilitating lifestyle diseases like Type 2 diabetes are exploding, driven by the increasingly unhealthy nature of our lifestyles. In addition, the micro-economics of health are simply very different to many other industries: consumers have almost no information or purchasing power, and those who need healthcare most are often in no position to pay for it.

On the other side of the supply and demand curve, health providers are often highly empowered professionals with little incentive to cut costs; indeed, many get paid according to how much healthcare they provide. Factors like this account for the rapid increase in the cost of healthcare which is currently out-stripping inflation.

The Government’s plan aims to address these issues, chiefly by becoming the major funder of healthcare in the country. The idea is to give the Feds ownership of the health system, providing an overwhelming incentive to rein in spiralling health costs while keeping the states involved.

Under the plan, the Federal Government will raise its share of all-government funding for hospitals to 60 per cent, and take over funding for GPs and primary healthcare programs completely. In addition, the Government will establish new "Local Hospitals Networks" comprising between one and four hospitals in a geographically contiguous area. These networks are supposed to have the autonomy to deliver the kinds of health services required in their community which the Government claims will "drive accountability and performance" although no-one is quite sure how. The real cost controls will come through a new "independent umpire" that will mandate the "efficient price" for various services and procedures across the various hospital networks. It’s a system that has worked well with the Pharmaceutical Benefits Scheme, where the government has used its purchasing muscle to hold down the costs of drug prescriptions. (In comparison, the powerful US pharmaceutical lobby means drugs costs are many times higher there.)

Health policy experts such as Ian McAuley have cautiously welcomed Rudd’s plan while pointing out that there are many loose ends that are yet to be tied up: notably private hospitals and health insurance, both of which Labor has left out of its reform plans. Safeguarding the private health insurance rebate was actually one of Labor’s election promises in 2007 which shows you just how afraid of the private health lobby the ALP is. Notice how the Prime Minister has been happy to attack state health bureaucrats but has scrupulously avoided mentioning private hospitals or health insurance.

There is a broader issue here, which is whether this Government has the guts to push through a major policy reform such as this one. So far in this term, the Rudd Government’s record on standing up to entrenched special interests has been dismal, rolling over repeatedly to industry lobby groups on issues from emissions permits to parallel book importation. Now, with healthcare, the Government will have to win over powerful lobby groups with real support in the community, such as the Pharmacy Guild and the AMA, or risk having to fight against them as well as the states in the run-up to the election.

We’re about to see Kevin Rudd’s true colours as a policy reformer. Given how badly his Government bungled its emissions trading strategy, pushing ahead on health reform looks brave, even foolhardy. On the other hand, if he can take a broadly supported health reform package to the election, he is likely to be rewarded for it by voters. Stranger things have happened — John Howard won an election after promising to introduce a "great big new tax on everything": the GST.

Meanwhile, apparently without consulting his own party-room, Tony Abbott has announced a big policy of his own: a $2.7 billion paid maternity leave program funded by a new tax on medium and large business. Working couples wanting to start families, and the Greens, were impressed. The business lobby, however, is furious.

Abbott’s gamble is a win for Australia’s parents, who will finally see parental leave become a reality after the election, no matter who wins. It also signals a new willingness for Abbott to attack Labor on its home ground of social policy but it leaves Abbott open to charges of hypocrisy: after campaigning hard against the emissions trading scheme, he is now proposing his own big, new tax. It’s a calculated risk. Labor has attacked him for fiscal irresponsibility, but in doing so has been forced to admit that the Government’s scheme is far less generous than the Coalition’s. Abbott could be reined in by his own party room, aghast at the profligacy of the policy. Then again, if Abbott continues attempting to outflank Labor to the left on social policy, the stage will be set for an intriguing election campaign.


Ben Eltham is New Matilda's National Affairs Correspondent.