Tony Abbott reflects on his time as federal health minister and says the upcoming health care agreements could achieve most of the benefits of a federal government's  takeover of public hospitals.

At the recent 2020 summit, delegates' frustration with the dog's breakfast of divided responsibilities in health was sidetracked into proposals for a national preventive health agency funded by a tax on junk food and a new health equality commission. Keeping people healthy and giving everyone the best possible health outcomes are worthy goals, but are unlikely to be achieved by creating new bureaucracies. Avoiding discussion of today's actual problems by focusing, instead, on vague aspirations for the distant future seems to be the new government's style. Let's find something that sounds visionary, but that doesn't threaten current power structures or imply blame for current problems. That way, we can all be seen to work together.

It's regrettable that the summit did not, as chairman Michael Good wanted, consider the problems caused by having the federal government part-fund, but state governments wholly run, Australia's public hospital systems. This would have been a meaningful challenge for our best and brightest minds. Instead, as usual, it seems that the politicians and public servants will have to wrestle with this as they renegotiate the Health Care Agreements over the course of this year. Because they deal with the sickest people, public hospitals will always be the heart of health care systems. The next round of Agreements gives the federal government its once-in-five years chance to make a difference to the most difficult and most important aspect of health care delivery.

Scarcely a day passes without a screaming headline about disaster in a public hospital, but even high profile mistakes don't mean that people are routinely badly treated. If the professionals working in them are right, however, patients are well treated despite, rather than because, of the way public hospitals are managed. For instance, a survey of 2860 public hospital doctors and nurses presented to the Garling inquiry in NSW shows that just 17 per cent "trust management" compared with an employee average of 71 per cent. The survey showed that 62 per cent of all medical staff, including 51 per cent of junior doctors, had seriously considered leaving the NSW public hospital system in the last 12 months. 

Even very good health systems (as Australia's undoubtedly are) always have room for improvement. The most effective components of health care delivery still need constant fine-tuning and occasional significant improvements. For instance, the former Howard government tackled growing out-of-pocket costs for treatment outside hospital by introducing a new Medicare safety net. It tackled exploding Pharmaceutical Benefits Scheme costs by introducing mandatory price cuts for patent-expired drugs. It tackled the fastest growing area of private health insurance costs by introducing comparative pricing for prostheses. Other than through the Health Care Agreements, though, which were last renegotiated in August 2003, there's little the federal government can do to improve public hospitals, even though, by general agreement, these are the part of health care delivery most in need of reform.

The constant demand to fix public hospitals is the most frustrating aspect of a federal health minister's job. When it comes to public hospitals, the federal government is in the terrible position of having responsibility but not authority, obligations but not power. Since the advent of Medibank in the mid-1970s, the federal government has provided up to 50 per cent of public hospital funding, even though running them has remained solely the responsibility of the state governments. Some state governments have been better than others at managing their hospitals. Some have been better than others at funding them. Still, ever since the federal government began funding the states to ensure that everyone could be treated for free as a public patient, under pressure, the states have tended to blame the federal government for public hospital problems. Everything would be much better, the states say in response to any serious public concern, if only the federal government would give us more money. For its part, the federal government is understandably reluctant to give more to the states when it has no say over how the money is spent. The result is the "blame game" that the public so dislikes and that Kevin Rudd so hypocritically exploited as opposition leader.

More money is an important part of fixing public hospitals, but not as important as addressing the structural flaws and cultural issues which make every problem worse. No one is really in charge. That is the basic problem with public hospitals. The people making decisions don't have to take responsibility for them. The head office bureaucrats who call the shots rarely have to face the staff and patients that their decisions affect. Public hospital management has become bureaucratised because that's a good way to save money in the short term. It's become politicised because every time a problem hits the media, ministers and their staff need to give the impression of being able to fix it. Invariably, responding to public unrest seems to mean the appointment of more managers and more monitors, rather than the extra clinical staff that hospitals really need. The result is that hospital level administrators can't order a basic ultrasound machine without head office approval. Problem solving is log-jammed in the director-general's or the minister's office and priorities are determined by the latest media campaign.

To the public, all that really matters is well-run hospitals rather than which level of government runs them. It would certainly make organisational sense if one level of government had overall responsibility for health. Still, the states claims that emergency departments are over-stretched because there are not enough federally-funded bulk-billing doctors and that hospital beds are hard to get because there are not enough federally-funded nursing home places are almost entirely misleading. Since 2003, bulk-billing rates have returned to record levels. Since 1996, there has been a near 50 per cent increase in aged care places. The absence of these complaints since November, during the new government's honeymoon, suggests that they were always a political smokescreen.

If one level of government were in charge, it should be easier to ensure that treatment takes place in the best possible context, for instance, to perform simple procedures in Medicare-funded day surgeries rather than state-funded public hospitals. If the federal government were in charge, public hospital services would probably be purchased rather than directly provided because that's the way federal government services are generally delivered. The federal government generally avoids the giant bureaucracies (think public schools and public transport as well as public hospitals) which characterise state-delivered public services. As well, a shift to federal rather than state service delivery could be an opportunity to break the National Health Service mind-set which still bedevils public hospitals and policy thinking about them.

Still, the benefits of such change are easy to overestimate, as a clear majority of my former Cabinet colleagues frequently observed. Talk of saving billions in "waste and duplication" through a federal government takeover is not very plausible without specific concrete examples of tasks that would be redundant. As my former colleagues were aware, the logistics of transferring 750 public hospitals from state to federal ownership, about half a million staff from state to federal employment and the re-assignment of tens of thousands of complex contracts would dwarf the biggest ever Australian corporate take-over. For months, if not years, health officials would be focused on the mechanics of the takeover rather than the business of running hospitals. The problems of taking over just one mid-sized public hospital in Tasmania (admittedly in the teeth of a reluctant state government) turned out to be a signal warning against lightly undertaking change in this area.

I eventually concluded that the best way for the federal government to improve public hospitals, short of actually taking them over, would be to "back seat drive them" through the Health Care Agreements. After cabinet-level discussion, the position that the former government eventually adopted was to try to use the next Health Care Agreements to force the states to run public hospitals better rather than to take them over itself.

Had the Howard government been re-elected, it would have tried to force the states to run public hospitals as it would have run them itself had it been in charge. In essence, it would have required the states to allow public hospitals to operate as more-or-less independent institutions. It would have empowered the public by requiring the states to publish detailed information about the specific performance of hospitals. And it would have boosted public hospital performance by substantially increasing funding but tying it to operating in particular ways.

The former government's plan for public hospitals involved more after-hours GP clinics and more encouragement for GPs to handle the sorts of problems that typically turn up in hospital emergency departments. It involved home visits by practice nurses to help the chronically ill who make up a significant proportion of ED cases. It involved more transition beds for patients who can't go home but who don't really need acute hospital care. It involved more training places for doctors and nurses, including private hospital training. These elements of the former government's plan for public hospitals were substantially announced during or immediately before the election campaign.

The government also announced that, as part of increased funding under the next Health Care Agreements, it would expect the states to create community management boards for larger public hospitals. These boards would appoint the hospital CEO and, together with the CEO, determine how the hospital's budget would be spent. Each board would comprise local people with expertise in business and corporate governance as well as local clinicians and health professionals. A much wider range of decisions would be made at the local hospital level by people in close contact with treating staff and their patients.

The former government decided not to announce its plan for the financial aspects of the Health Care Agreements, largely because it would have fuelled claims that it was trying to "spend its way out of political trouble". For the record, it ought to be known that the former government intended:

• to index current Health Care Agreement spending at the existing rate,
• to add about $600 million a year as half the cost of opening and operating an extra 3500 beds, and
• to add a further $500 million a year towards hospital infrastructure from a beefed-up health version of the Future Fund.

All up, the Howard government expected to spend an extra $17 billion on public hospitals over the life of the 2008-13 Health Care Agreements, including almost $5 billion in new money not provided for in the contingency reserve.

In return for continued funding increases, each state would have been required to provide detailed quarterly reports on the precise number and type of services delivered at each public hospital and to provide detailed quarterly reports on adverse events at each hospital. The states would have been required to provide annual funding allocations for each hospital and regional services plans. This information would have been published.

In return for accessing the extra bed money, each state would have been required to maintain current bed numbers, open a proportionate share of the additional 3500 beds nationwide, and provide detailed quarterly reports on the number and type of beds open at each public hospital. This information would have been published.

In return for access to infrastructure funding, each state would have been required to provide an independent board for each public hospital of more than 50 beds. Infrastructure funding would have been paid to the hospital rather than to the state health department. As well, each state would have been required to allow individual hospitals to retain all income over and above their state government allocation, including donations, research grants and private patient income.

As a result of these changes, hospitals would largely have been run by local CEOs rather than by the state health department and the minister. The health department's role would have been to coordinate and monitor rather than to direct. If a hospital was underperforming, the minister could have changed the board but would not normally have taken a direct role in running the hospital. Over time, these changes should have meant that staff and patients had a greater "stake" in their local hospital and that local management had the capacity to make the most of their particular hospital. They would not entirely have prevented problems - it's impossible to ensure that nothing ever goes wrong in complex institutions dealing with fraught situations - but they should certainly have changed public hospital culture and morale for the better.

It remains to be seen how the new government will approach the Health Care Agreements. The current Agreements have been extended for at least six months, with some extra funding, presumably to allow the Health Reform Commission to make its recommendations. In the meantime, the government's sacking of the community board at the Mersey Hospital in Tasmania, despite a promise not to do so, suggests business as usual with lots of talk about working together but with the state bureaucracies still in charge.

Pre-election, the prime minister talked tough about a federal government takeover of public hospitals if the states did not quickly lift their game. He ought not to be allowed to forget his declaration that the "buck will stop with him". Improving public hospital performance, regardless of which level of government has responsibility, will require a radical devolution of power. This certainly wasn't Kevin Rudd's style when he was the Premier's department head in Brisbane. He might have learned from that experience but I doubt it. Mr Rudd doesn't seem at all like someone who has taken power only to give it away to local managers, clinicians and patients.

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