Time for tough decisions on health

As Victorians now know, the state has a world-class health system.

We know because we are told daily by Premier Steve Bracks that it is so.  The State Government is flooding the media with ads telling us it has fixed the system and made it world class.  In large part, the ads are correct except for one big issue -- costs.

The Bracks Government has pumped billions into the public hospital system.  Since it was elected in 1999, public hospital budgets have increased by about $3.5 billion, or nearly 70 per cent.  This has included over 5000 additional nurses, a substantial increase in their wages and a reduction in their workload, and thousands of additional doctors, medical professionals and health administrators.

Indeed, Victoria's public hospitals now have the highest staffing levels of any state system.  The Government has also spent heavily on new beds and facilities without closing existing ones.  As a result, it has increased the total capacity of the system.

The spending program has achieved its stated aims.  It has made key stakeholders, particularly nurses, very content.  After a disconcerting delay, it has resulted in sharp, across-the-board reductions in waiting lists.  Indeed, as a result of the expansion program, waiting lists have been cut from among the highest to the lowest in the country.

The extra funding has increased throughput in the system not only by expanding capacity, but by greater use of same-day procedures.

Politically, the program has also worked.  Surveys show punters hate hospital waiting lists, trust nurses and are pleased with the changes.

The problem is costs.  Health expenditure per person in Victoria is now the highest in the country (except for Northern Territory) and hospital cost per person, which in the 1990s was below the rest of Australia, is now 15 per cent above the average of the other states.  In short, Victoria's world-class health system has been built on piles of money allocated without much focus on efficiency.

Thanks to its $1.7 billion inheritance and the huge revenue windfall from the GST and the property boom, the Bracks Government has been able to afford this rate of spending to date.

However, it will struggle to do so in the future.  State revenue will not continue to grow at the rates experienced over the past five years and the inheritance has been spent.  The challenge going forward is to build on the recent injection of resources and drive greater value for money.  This will include rationalisation of hospitals, greater contracting-out of services, injecting competition into the system and making greater use of non-hospital facilities.

Mr Bracks is aware of this need.  Indeed, to his credit, he has made reform of health a central plank of his New Wave reform agenda.

However, spending money on health is easy and driving efficiency is tough.  But the latter needs to be done if we are to have a sustainable, world-class health system.

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