Well, as you can see, I’m with Sussan Ley and Steve Hambleton and Antonio, our friendly local GP. We’ve just been discussing this great initiative with him and one of his patients in his clinic. Now, chronic illness can have a devastating effect on a person’s quality of life. Thirty-five per cent of Australians or around seven million people have a chronic condition. One in five have two or more chronic illnesses such as diabetes, cardiac disease, cancer. That places a lot of pressure on the health system. Around 10 per cent of patients account for around 40 per cent of our Medicare expenditure, 48 per cent of potentially avoidable hospital admissions are for chronic illness. Often patients struggle with managing their illness and with accessing the care they need easily. They often spend more time in hospital than they should and they often don’t have a regular doctor to see. So we have to address that.
Now we’ve set up an advisory group chaired by Steve Hambleton who is here today to help guide the reforms which will improve people’s lives and take pressure off the system. We are releasing the report and the Government's response to the report. This is a very significant reform to primary healthcare. It is one of the most significant reforms in the history of our healthcare system. It puts patients with chronic illness right at the centre of their care. It's about better care for Australians with the aim of keeping them well, to be at home and out of hospital. It's about improving patients life who have chronic illnesses, improving their quality of life.
I'll ask Sussan Ley, the Health Minister, to say some more about this very significant reform.
Thank you Prime Minister. Thank you Dr Antonio for having us here at Yarralumla surgery.
The patient we just met said something that I think captures what we're doing. He said "every day that I'm not in hospital is a good day." And when we know that almost half of the presentations to our emergency departments are avoidable, because they're for chronic and complex conditions that should be better treated out of hospital, we know that this reform is absolutely on the right track. So, led by doctors with submissions by clinicians, consumers, patients and everyone who works day-to-day in the health system and from whom we should always, as Members of Parliament, get our best advice, Steve has put together a first-class report which, as the Prime Minister said, will be released today.
In the future, patients, about 20 per cent with the most chronic and complex conditions, will enrol at a medical home. I'm sure most of your local GPs will choose to be one of those medical homes and that place will coordinate all of your care, whether it be a specialist nursing care, aged care as you move into the aged care system, psychology, if it's mental health, dietician and so on, and follow you up, most importantly, empower, empower you to take an interest in what happens to you so that you don't leave the doctor's surgery thinking ‘I've got all these things I'm supposed to do but they seem complicated’. I'm really, really excited, Steve, that we are moving into a new era. Medicare will stay exactly the same. We're certainly building a better chronic care system on Medicare and none of this is – this is all about encouragement, enablement and it's really very much about the future of primary care in Australia.
So Steve I might ask you to say a few words.
Dr Steve Hambleton:
Well thank you very much ladies and gentlemen, and it was absolutely a privilege to actually look at a new system of care for Australia in chronic disease management, at that acute care/primary care interface. We looked at models of care that existed in Australia and we looked at models of care overseas to look at what were the features of those good models and could we bring them here. That's really what’s in the substance of the report.
So the Health Care Home concept that puts the patient at the centre of that Health Care Home is one of the most important things. Empowering and engaging that patient to be part of their care, helping them with the decisions that they have to make to keep themselves healthy - a very important part. We want to make sure that the Health Care Home can provide that patient with that support in a longitudinal manner.
We know that our current funding model is actually episodic and fee for service, so that move to blended payments changes the way we think about our patients and can lead to that more longitudinal support. It should be good for patients, it should be good for practices. It's going to be underpinned by better communication with the patient, with hospitals and better use of information technology. But in addition, it allows us to have non-real time, non-face care built into the system, something we don't do a lot of in this country. But we know who the patient is, the doctor knows who the patient is, the patient knows who their doctor is and other members of the healthcare system will know that as well. Somebody takes responsibility for the patient on a longitudinal basis. And that's the model of care we want to underpin. And it's something that we're going to roll out progressively, work with the profession. It's a model of care that the College of GPs has very strongly supported, the AMA has strongly supported. So we need to get this right for this country and that's why we're going to have a progressive roll out starting in July next year.
So it's a very exciting time. I think that we should be able to bend the cost curve. If we do better in primary healthcare we should be able to keep people out of that expensive part of the healthcare system, that acute sector. We heard from the Minister a moment ago, we had something like an admission to hospital every two minutes for a patient who has got a chronic disease. We should be able to improve on that. For diabetes it's about every 2.5 hours. If we can keep those people out of hospital, we can make care better for them, we can make it more efficient and we can get better outcomes.
Now in general practice, we have one size fits all at the moment. In the future, we're going to risk stratify so we get more focus on those who need more and we can look after them in a better of way. The model of care, I think, is well accepted. We need to roll this out in Australia in an orderly fashion and this is why we're having this proof on concept starting in July next year.
Minister, will the states lose health funding as a result of this announcement? There are suggestions $70 million a year over four years will be taken from state health budgets?
No. This is a very significant reform and improvement to healthcare but Sussan, do you want to say more about that?
No, that's not the case. This is something we've been working on with Steve Hambleton and his advisory group for a long time. So it comes to fruition today. We will be asking the states to partner with us in managing chronic and complex care and that's a discussion that will obviously happen tomorrow. But this stands alone as the Commonwealth investing in primary care and looking after patients better.
But your draft heads of agreement does say that $70 million would be retained from 2017-18 per year from public health services to fund these reforms?
These reforms stand alone. And Steve talked a little bit about the remuneration model. So at the moment, we have practice incentive payments. I think there's about at least seven that go into every GP practice. There are chronic disease management plans, they tend to be clunky and one template fits all, and there are other revenues that come into a GP practice that are separate from the Medicare that funds the actual patient consultation. It's those patients, it's those payments that will be wrapped up and form the new remuneration model for this primary Health Care Home. In addition, we're adding $22 million to build the system over the next 12 months.
Prime Minister, can I ask you about the income tax reforms. As I understand it you need all the states and territories to agree to this. So, how do you convince premiers to sign up to a deal where they get no extra money but have to cop all the political pain for raising it?
Well, thank you. At the last COAG in December, we agreed – the states and territories and the Federal Government – we all agreed that we would come back with proposals for tax reform, including State tax reform, there are some extremely inefficient taxes at the State level, as you know. And I noticed in the ACT, that's being addressed. They're making changes here. And also we’ve said we would come back with proposals for revenue sharing, for tax revenue sharing. And so what we are proposing here is canvassing with the states, is the opportunity for them to have a share of income tax in replacement for an equivalent amount of grants.
So it would be a wash from the Federal Government's point of view, we gave them a few per cent, say two per cent, I'm using that for illustrative purposes, you understand. That would represent about $14 billion a year or thereabouts. And so, we would then cancel grants to that amount. But what that would mean is they would then have that $14 billion, they would have freedom to allocate it and use it as they wished. They would be able to manage their own priorities. They'd have real responsibility. They'd have much greater fiscal autonomy.
Now, the real thing we've got to recognise is that what is wrong with the Federation, with our federal system, is this problem that the states do not raise enough of the money that they spend. Every report that's been done into the Federation over many years has recommended that this should be addressed. It's not a secret. That is the problem. And the problem is that if you don't have responsibility for raising the money you spend, then you are not going to spend it as wisely as you would if you had to raise it. Spending other people's money, it's human nature, you're rarely going to be as careful about it as you should be.
So this really is an issue that we've put on the table in accordance with the agreement from last December, and it's something that we should discuss and whether states and territories want to take real responsibility for raising more of the money they spend and having more financial freedom or autonomy.
If I can just take you to that study of human nature, Paul Keating didn’t say never get between the Premier’s and a pile of responsibility. So you’re offering them no more money but more responsibility. What makes you think that the Premiers would accept that deal?
Well, it depends. You know it’s a very good question, Chris. This is really a test for the states and the territories. Do they believe that they have the ability to do what the Federal Government does and what Governments should do, and what Parliaments should do, which is to raise more of the money? I mean ideally you’d raise all of the money that you spend, so that you are completely accountable to your electors, to your taxpayers.
What we’ve seen over many years, we’ve seen it the course of the last year. Again, we’ve had the states saying we need more money so, Federal Government raise the GST, we need more money, Federal Government, raise the Medicare levy. We need more money, Federal Government we need more money, raise income tax and give us some of that. The bottom line really should be that as far as we can, and there are areas of clearly where we are joined at the hip – excuse the pun – and health, primary and acute care, is a good example of that. The Federal Government, state governments will be working together collaboratively on healthcare forever given the nature of, the linkages between primary and acute care.
But in other areas where the states are receiving these dozens and dozens of grants, some of which cost almost as much to administer as the money that is paid. One Chief Minister told me that in respect of his jurisdiction the cost of the public servants monitoring how the Commonwealth money was being spent and then reporting faithfully to the Commonwealth bureaucrats cost almost as much as the amount of the grant. So there is enormous duplication. So if the states are going to spend money more effectively and get a better outcome for their taxpayers, then you would have greater autonomy with the states. Now, what are we in politics for, what are we in Government for? We’re in Government to take responsibility, to seize the opportunities, to govern well, to be accountable to our electors, to be accountable for the money we spend and if we need more money to go to them and say we need to raise taxes, we need to do this, or we need to cut expenditure somewhere else. So having more autonomy would make state governments and territory governments, better governments. It would mean they would spend money better and more wisely and it addresses an issue, a floor in the Federation which again has been identified for time out of mind. You know, the Commission of Audit, the Henry Review, you go back and back. This has been the fundamental problem and it’s only getting worse.
So the only thing we have in ample supply I regret to say is finger pointing and blame. Now we can choose to bring that to an end or at least to mitigate it with a sensible approach to reform consistent with the decision last December. I think it’s important. I think it’s very valuable and I think it’s a process we should undertake.
What about the test for you, Prime Minister? There are already premiers rejecting this outright. Is it something you're willing to take and fight for at a federal election?
This is a reform which could only be effected with the support of the states. I mean it's a collaborative exercise. Now if the states were to say we don't want to have any responsibility, any more responsibility for raising money, we're not responsible enough to do that. We don't trust ourselves to raise more money. If they were to say that, I don't think they will, by the way, but if they were, that, in itself, is a very, very significant political admission.
How would it work for a smaller state, say South Australia? An ageing population, increased healthcare needs and a shrinking taxpayer base, would this work per capita?
Well, the way - well, again, this is a process of agreement, but let's say you did work on the basis that you gave each state a percentage of the personal income tax that was raised in their state, and if a state was nonetheless fell behind in terms of because of an ageing tax base and so forth, then there are mechanisms within the federal system to compensate for that just as there are now. I mean it's fundamental that no state would be disadvantaged by this. But what it would do, it would give every State Government and every State Parliament a really vested interest in the economic growth of their state.
So again, what is our economic plan? Our economic plan is to ensure that we can seize the opportunities of the 21st century. That we can, by being more innovative, more competitive and more efficient, that we can ensure that our children and grandchildren have great jobs that we can continue to successfully transition from an economy that's been pumped up by a mining construction boom to one that is more diverse and takes advantage of the big open markets in our region. All of that requires governments to be more innovative and more effective. Now, if you believe in governments being more effective, then decisions and responsibilities should be much closer the people whom they're serving.
Some mechanisms already in place to ensure there's not that disadvantage?
The Commonwealth Grants Commission.
So what exactly would apply in this model?
The mechanism and the Grants Commission ensures that states are able to deliver comparable services across the country and that is - that's how the grants - this is why you get controversies over the allocation over the GST. I'm not suggesting the grants system is a particularly straightforward one, it's always controversial. But we do have a commitment to comparable levels of service but equally states are able to raise their own revenue. States can choose to raise more or less revenues now. They have different rates of land tax, different rates of payroll tax, different rates of stamp duty, different fines for speeding. There is that variation and there's nothing wrong with competitive federalism. There's nothing wrong with states choosing to do - one State doing things in a different way and it may be a very successful experiment. Everyone might learn and then emulate it, or they might say gosh, that didn't work, we'll do something else.
If the states don't accept this tax plan, what would your alternative plan for school funding be from 2017?
I expect we will be discussing that over the next year or so, the future of the school funding plan. But I believe it is bound up in this discussion of more fundamental revenue sharing reform, and, you know, we all agreed, if you look at the COAG communique from December 2015, you will see that we agreed this was something that we were going to come back to and discuss and so honouring that commitment, that is exactly what we are doing. Now, I'm not going to hypothesise or speculate about what the state's reaction will be, I have the advantage of having spoken to all of the premiers and all of chief ministers, some of them about this for a considerable time and so I think you will - we'll see a range of responses. Obviously a bit of politics will come into that and sometimes the public remarks are not entirely consistent with the private conversations.
How will you respond to the question this will be double taxation in the long run, some states will lift their taxes?
Well, let me say, Chris, if that were the case, that would not be double taxation. The states - local government, state government, Federal Government all raise tax to fund expenditure. So it's not double taxation. What you would have, if at some point in the future you had that, I think that would be very unlikely to develop and it may be that it's agreed - well I would expect if there were to be an income tax sharing arrangement of the kind that we've discussed, that there would be a lengthy period where it would be agreed that there would be no changes. But consistent with fiscal autonomy and states having financial freedom, yes, theoretically you could have some changes in the future. But a state government and state parliament would have to defend that. That would not be additional - that would not be double taxation, it would simply mean that one tax rate in another state was somewhat different than another - but that applies now in a whole range of areas.
It's not a question of double taxation, it's a question of whether you want to allow states to actually take greater responsibility for raising the money they spend and so this is a question of responsibility. Our state parliaments - do state parliaments have the ability, the responsibility to be accountable to their voters for the money they spend and the way they raise it? I believe they do. But obviously this is a discussion we have to have. The problem with the blame game, the finger pointing, we are all sick of it. I think everyone agrees with that. So what's the solution? The only solution is to give the states greater financial autonomy.
If you don't do that, then the blame game and the finger pointing will just continue. So this is the first time in many, many years that a Federal Government has said we are prepared to vacate a portion of the income tax schedule, if you like, and make that available to the states, make that - give them the fastest access to some of the fastest growing tax. So that's the big change. Now, if the states decide they're not up to that, if they don't want to take responsibility, if they want to continue coming to Canberra and complaining and then I think Australians will say well, you had the opportunity, you had the opportunity to step up and be responsible and you knocked it back and that will affect the judgement Australians have of the states that do that.
Now I believe we can have a stronger Federation and one in which taxpayers dollars will be better spent. Because I just conclude with this fundamental point. If you are, as a government, responsible for raising the money you spend, you will spend that money more effectively because if you do not spend it well, then you would have to go back to your voters and say let me raise some more money from you. But no-one likes doing that. No politician likes doing that.
So what that means is you will spend your money, your taxpayers' money better. So this is not, this is not an arcane or, you know, legalistic issue, this is about better government, better services, greater responsibility, stronger democracy.
Thank you so much.