National Health Reform Agreement – how health is funded by the Federal and State governments

Posted on May 12, 2023

By Clare Mullen, Executive Director

The National Health Reform Agreement (NHRA) is an agreement between the Commonwealth government and the state government on a range of health issues.

The Federal Government has commissioned an independent review of this Agreement as it is the mid-way point of the Agreement’s term. The review team is due to report in August 2023.

I had the chance to speak with the Review team when they were in Perth this week.

Below are some of the points we plan to include in Health Consumers’ Council’s submission which we will submit by the end of June 2023. If you have further points you’d like to see included in that response, please email them to Jasmina Brankovich, HCC’s Systemic Advocacy and Policy Lead, jasmina.brankovich@hconc.org.au

  • A key focus of the Agreement relates to how hospitals are funded – this is called Activity Based Funding (ABF) and it means that hospitals are funded based on the volume of services they provide (rather than receiving a block of funding as was the case previously). From our discussions with people across health, it seems this has led to some activities which would benefit consumers being understood by hospitals as not to be included – i.e. activities which might lead to services being provided in primary care/community care settings rather than in a hospital setting
  • Funding based on fee for service inevitably leads to health services need to drive activity – when less activity in the hospital, and more in primary care would be best for the consumer
    • We note that NSW Health opted to initiate collaborative commissioning, using state funds to commission primary care services so as to reduce demand on hospital services – we’re not aware that this has been replicated in other states yet, including WA
  • The role of “system manager” as it’s currently recognised – i.e. only of public hospitals – limits the value of a system manager role.
    • Given that managing hospitals relies heavily on the provision and functioning of primary/community care services – often commissioned and/or funded by the Commonwealth, there may be an advantage in exploring the role of “system manager” being expanded to all publicly funded health services in the state – including those in primary care.
    • Consumer input into commissioning and funding decisions should be mandated for all publicly funded health services – both at a hospital and primary care level. This may require investment in building the capacity and structures to support informed consumer input to these decisions.
  • In response to the goals of the NHRA:
    • deliver safe, high-quality care in the right place at the right time
      • there is significant opportunity to improve funding flows across hospital/primary and community services – all too often consumer reps hear, that’s a function of “the other part of the system”.
    • prioritise prevention, and help people manage their health across their lifetime
      • there is little evidence that this goal is being achieved through any of the activities in the current agreement
    • drive best-practice and performance using data and research
      • this is difficult for consumers to comment on given the limited transparency of data about best practice and performance that is in the public domain
    • improve efficiency and ensure financial sustainability
      • the geographic and demographic characteristics of WA mean that “efficiency” and “financial sustainability” comparisons with other states is unlikely to be an effective way of measuring success for the WA community
      • We advocate for a recognition of the inherent “inefficiencies” in a health system that is delivering care across a vast geographic area, with very limited Federally-funded primary care provision in the regions – a national efficient price is unlikely to be sufficient to deliver safe high quality care in many parts of WA

With regards to the 6 reforms outlined in Schedule C of the NHRA:

  • empowering people through health literacy – person-centred health information and support will empower people to manage their own health well and engage effectively with health services
    • from our position in the system, there is very limited evidence of any activity happening in this area
    • we would like to see a stronger role for community-led initiatives – including bi-cultural workers – to shift the dial on health literacy
  • prevention and wellbeing – to reduce the burden of long-term chronic conditions and improve people’s quality of life
    • we note the publication of both state and national strategies relating to preventive health and obesity prevention, but see limited evidence of any investment in the implementation of these strategies at any level
    • we believe grassroots investment in building and maintain social capital is critical to this priority
  • paying for value and outcomes – enabling new and flexible ways for governments to pay for health services
    • we believe there’s an opportunity for more consumer involvement in discussions to determine the framework for paying for value and outcomes
  • joint planning and funding at a local level – improving the way health services are planned and delivered at the local level
    • in WA, we have limited evidence of this happening in practice. We acknowledge the benefit of having the three WA Primary Health Networks (PHNs) managed by the same organisation – the WA Primary Health Alliance.
    • We note the fact that in WA, the geographical areas covered by our PHNs don’t match the geographical areas covered by WA’s Health Service Providers and the challenge this creates for joint funding and planning
      • (In the metro area we have Perth North PHN and Perth South PHN, but South Metro, North Metro and East Metro Health Services)
  • enhanced health data – integrating data to support better health outcomes and save lives
    • we would advocate for more local involvement and upskilling of WA consumers to inform the collection, publication and use of health data for the WA community
  • nationally cohesive health technology assessment – improving health technology decisions will deliver safe, effective and affordable care
    • we are looking into this to inform our response.

We will also be considering our position on how Patient Reported Outcome Measures (PROMS) and Patient Reported Experience Measures (PREMS) could be used to inform how funding flows to different parts of the health system in future.

Overall, we will be calling for more local involvement and control of public funds that are allocated for the benefit of the WA community. For example, regional commissioning groups that agree funding priorities, planned outcomes, and performance measurement frameworks – to include multiple and diverse consumer and carer leaders working alongside local health system staff and policy makers who are well-placed to make decisions affecting the WA community.