Misdiagnosis of the system

Commissioner Geoff Davies’ report on Queensland’s health system criticised Queensland’s method of funding public hospitals, implying it was a major contributor to the system’s problems.

Surprisingly, the commissioner apparently accepted critiques by health officials who may be part of those problems. This is unfortunate as it provided a one-sided perspective and contributed to analytical errors.

Most important, the report asserted that “the plight of public hospitals was worsened by a philosophy of economic rationalism rather than of patient care and safety”. As an economic rationalist I can safely say that the two are not alternatives.

Economic rationalists expect funds allocated for health (or other) services to be used efficiently and with proper attention to safety and care. Their difference of view rests on the belief that the best way of ensuring this is to have most health services delivered (as distinct from funded) by competing private sector agencies.

The idea that patient care comes second reflects a misunderstanding of how state budget allocations are determined. Echoing official submissions, Davies criticises a process that starts with last year’s total budget allocation and then increases it in line with a range of criteria, including numbers of elective patients to be treated.

He then accepts assertions by health officials that the outcome means giving primacy to keeping within the financial allocations and patient treatment targets, with patient care coming second.

But two important facts are missing from this picture.

First, the government (not the treasury or some outside devil) determines the budget allocations for Queensland public hospitals and it must accept responsibility for them.

Premier Beattie’s persistent claim for more federal health grants conveniently overlooks that his government in 2003 signed agreements providing increases in such grants averaging nearly 4 per cent per annum in real terms. Also, other states already say Queensland receives more than its fair share of federal funding.

Second, the public hospital systems of every other state face similar budgetary decision-making processes, with health departments responsible for living within their budget allocations and meeting performance targets. The Queensland health minister and health department knew its allocation and, if the targeted quantity of services could not have been delivered safely and with care, the minister should have sought additional funding or a reduction in the targets. Lower targets for treating electives, increased waiting lists or additional contracting out could have reduced systemic pressures.

Accordingly, Davies should have reported on whether claims by Queensland health officials that their allocations and targets provided unsafe and or uncaring bases were conveyed to the minister and, if so, what his (and the government’s response) was.

Regrettably, it appears he did not directly address the responsibility of the government for mal-performance within the health system.

This is surprising given, first, his conclusion that Queensland’s recurrent expenditure per head was about 20 per cent below the national average in 2003-04 and his portrayal of this as “under-funding”.

And, second, his suggestion that Queensland may need to spend more per head than other states because of various factors, including having the fastest growth in the over 65 age group (which make greater use of hospital services).

Unfortunately, this analysis was again one-sided.

It overlooked that among the states Queensland has the highest proportion of private hospital separations (nearly half of all hospital separations) and that this “saves” much public hospital expenditure.

For example, if in 2003-04 Queensland had had the same proportion of public hospital separations as in the other states combined, it would have put another 150,000 odd patients through public hospitals and incurred $113 per head (about $440 million) more spending.

This budget-saving role of private hospitals has been neglected in the debate on how Queensland’s health system could be improved.

Further, while Queensland has an increasing proportion of medically expensive over 65 year olds, it has the second lowest proportion in that age group. Moreover, with Queensland’s average wages about six per cent below the national average, its public hospitals have significantly lower labour costs.

Finally, the Queensland Government’s policy of running the state with taxes lower than the national average (over $900 million lower in 2003-04) implies that individual Queenslanders are expected to fund more services out of their own pockets.

In short, the Davies Report seriously overstated the extent of Queensland’s lower per head spending on public hospitals and overlooked the state’s high private hospital separations and the implications thereof; failed to adequately assess the roles and responsibilities of both the government and health officials in regard to public hospitals’ budgetary allocations and performance requirements; and too readily accepted critiques by self-interested officials.