NATIONAL HEALTH FUNDING POOL ADMINISTRATION (SOUTH AUSTRALIA) BILL

Introduction and First Reading

The Hon. J.D. HILL (Kaurna—Minister for Health and Ageing, Minister for Mental Health and Substance Abuse, Minister for the Arts) (15:45): Obtained leave and introduced a bill for an act to give effect to requirements under the National Health Reform Agreement in relation to the establishment and management of accounts, the receipt and payment of funds, and the provision of information; to provide for financial management and reporting in relation to commonwealth/state health funding; and for other purposes. Read a first time.

Second Reading

The Hon. J.D. HILL (Kaurna—Minister for Health and Ageing, Minister for Mental Health and Substance Abuse, Minister for the Arts) (15:46): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

The Bill before the House forms part of a national reform process to improve the transparency and accountability in how our public hospitals are funded and managed. In August 2011 the Council of Australian Governments signed the National Health Reform Agreement committing all Commonwealth, State and Territory Governments to work in partnership to improve the health outcomes for all Australians and to ensure the sustainability of the public health system going forward.

The national reforms will result in changes to the organisation, funding and delivery of our health care system. Under the National Health Reform Agreement the Commonwealth and States and Territories have joint responsibility for funding hospital services. Activity based funding will be used as the primary basis for funding the majority of public hospital services, although some services that are not appropriately funded through this method will continue to be block (or grant) funded.

The National Health Reform Agreement provides for the establishment of four independent national bodies to focus on increased accountability, transparency and performance of the health system:

Independent Hospital Pricing Authority

National Health Funding Authority

National Health Performance Authority

Australian Commission for Safety and Quality in Health Care.

These bodies have been, or are in the process of being, established under the Commonwealth Government's National Health Reform Act 2011. I will briefly outline the role of each of these bodies in the health reform process.

The Independent Hospital Pricing Authority, or IHPA, is responsible for determining the national efficient price for public hospital services for use in activity based funding, and the efficient cost of block funded services and teaching, training and research. IHPA will also determine what public hospital services will be eligible for Commonwealth Government funding contribution and formulate the data requirements and standards relating to public hospital services for States and Territories to achieve national consistency.

The National Health Funding Body will support the Administrator of the National Health Funding Pool to provide activity based funding and block funding to local hospital networks. All Commonwealth Government public hospital funding and the State Government's activity based funding will flow through the National Health Funding Pool to local hospital networks. This funding arrangement is the subject of the Bill before the House and I will outline the role of the Administrator and the National Health Funding Pool in more detail later.

The National Health Performance Authority is responsible for monitoring and publicly reporting on the performance of local hospital networks in addition to public and private hospitals, Medicare Locals and other health bodies. This will allow communities to compare the performance of their health service in a way that is nationally consistent.

The Australian Commission for Safety and Quality in Health Care which is an existing body, has had its powers extended as an independent statutory authority to lead, coordinate and monitor improvements in safety and quality in health care, including nationally agreed clinical standards and standards for safety and quality improvement. The Commission is responsible for publicly reporting on the safety and quality performance of health services against national standards.

All costs associated with the establishment and ongoing operation of these national bodies are the responsibility of the Commonwealth Government.

The organisation and delivery of health care services is through local hospital networks, or local health networks as they are known in South Australia, and Medicare Locals. The South Australian Government established five local health networks that came into operation from 1 July 2011:

Central Adelaide Local Health Network

Northern Adelaide Local Health Network

Southern Adelaide Local Health Network

Country Health SA Local Health Network

Women's and Children's Health Network.

Each of these networks is responsible for managing the delivery of hospital and health services to improve the health of their local communities. These services will be agreed by the State Government through annual Service Agreements. Each network is responsible for the management of their budget.

The Commonwealth Government is responsible for the establishment of five Medicare Locals in South Australia. Four Medicare Locals have already been established in South Australia:

Central Adelaide and Hills Medicare Local

Country North SA Medicare Local

Northern Adelaide Medicare Local

Southern Adelaide—Fleurieu Medicare Local.

I understand that the fifth Medicare Local, Country South SA Medicare Local, will commence on 1 July 2012.

Medicare Locals consist of general practitioner and primary health care organisations working together to coordinate the delivery of services to meet local health care needs. Medicare Locals are responsible for assessing the health care needs of their local communities, identifying gaps in general practitioner and primary health care services and putting strategies in place to address these gaps. Medicare Locals will need to work closely with the local health networks to make sure that the primary health care services complement the public hospital services to meet local health care needs.

These initiatives are about the governance of the public health system in making it more accountable to local communities.

A key part of the health reform process, and the purpose of the Bill before the House, is to ensure the ongoing sustainability of the public hospital system, and that there is complete transparency and accountability in the manner which public hospital funding is allocated.

I will address each of these points in more detail later but from 1 July 2012:

all monies received from the Commonwealth Government for public hospital services will go direct into an account established for each State and Territory to be allocated to each local health network in accordance with their Service Agreement

funding from the Commonwealth and State Governments will increasingly be allocated on an activity basis rather than the current method of special purpose payments. This will better reflect the cost of providing public hospital services

the Commonwealth Government has agreed to provide funding towards the growing costs of the public hospital system.

The move to activity based funding will ensure that public hospitals will be funded for each and every service that they provide, based on a national efficient price determined by the Independent Hospital Pricing Authority. From 1 July 2012, acute inpatient services, emergency department services and eligible non-admitted patient services will be the subject of activity based funding. From 1 July 2013, activity based funding will be extended to include mental health services and those remaining inpatient and non-admitted patient services not previously picked up.

As part of the transition to activity based funding the Commonwealth Government has guaranteed that until 1 July 2014 no State or Territory Government will be worse off. Until this time the Commonwealth Government will continue to provide funding to the amount that would have been otherwise payable through South Australia's special purpose payments for public hospital services.

The Bill before the House provides that there will be complete accountability and transparency on the funding provided by the Commonwealth and State Governments to local health networks and the consequent accounting and reporting of these funds. All Australians will be able to clearly see how much funding is allocated to public hospital services and how this funding is spent. These arrangements will commence on 1 July 2012, subject to this Bill being passed by both Houses of Parliament.

Under the National Health Reform Agreement each State and Territory Government has agreed to pass legislation to give effect to the establishment of a State Pool Account with the Reserve Bank of Australia to receive all Commonwealth Government monies for the public hospital system and all activity based funding from the jurisdiction. These State Pool Accounts will be collectively known as the National Health Funding Pool. All monies from the State Pool Account will flow to a local health network in accordance with their Service Agreement.

The Commonwealth and States and Territories will also pass legislation to establish the position of Administrator who will be responsible for all payments into and out of the National Health Funding Pool. There will be a single person appointed as the Administrator, and this person will administer the State Pool Accounts of the National Health Funding Pool for all jurisdictions. The person appointed as Administrator will be an independent statutory office holder, separate from any Commonwealth and State and Territory department.

Each Health Minister, as part of their membership on the Standing Council on Health, will be entitled to nominate a person to be appointed as the Administrator. The Administrator will be appointed by each Health Minister once agreed by all members of the Standing Council on Health.

The Administrator will perform discrete functions which include:

the calculation and provision of advice to the Commonwealth Treasurer of the amount to be paid by the Commonwealth Government into each State Pool Account

ensuring that payments are made into each State Pool Account

making payments from each State Pool Account in accordance with the directions of the jurisdiction

reporting publicly on the payments made into and from each State Pool Account.

The Administrator may be suspended by the Chair of the Standing Council on Health if requested by at least three jurisdictional Health Ministers or the Commonwealth Health Minister if the Administrator:

is unable to perform the functions of the office satisfactorily because of physical or mental incapacity

has failed to comply with their obligations or duties

has been accused or convicted of an offence that carries a penalty of imprisonment

has or may become bankrupt.

The Administrator may be removed from office if the majority of members of the Standing Council on Health so request.

The Administrator will be entitled to remuneration determined by the Commonwealth Remuneration Tribunal and will be supported by staff and facilities provided by the National Health Funding Body. The remuneration of the Administrator and all costs associated with the operation of the National Health Funding Body will be met by the Commonwealth Government.

In order to ensure consistency in the performance of the Administrator, the Commonwealth and State and Territory Governments have agreed a set of common provisions detailing the financial management and accountability arrangements pertaining to the functions of the Administrator. In order to simplify governance arrangements Commonwealth legislation will apply to the functions of the Administrator rather than individual State and Territory legislation. For example, the relevant Commonwealth legislation will apply to the functions of the Administrator rather than this State's Acts Interpretation Act 1915, Freedom of Information Act 1991, Ombudsman Act 1972, and State Records Act 1997.

The Administrator will make payments out of the State Pool Account in accordance with directions from the responsible Minister for the State. These directions include the amount to be paid and when the amount is to be paid to a local health network.

In addition to the State Pool Account there will be a State Managed Fund which will receive funds from the Commonwealth and State Government for block grants and teaching, training and research. These funds are for those non-patient hospital services or for patient services that are not appropriately funded through activity based funding. These services, including smaller country hospitals, will continue to receive a set contribution ('block funding') rather than funding based on individual services provided. Payments from the State Managed Fund will be made in accordance with directions from the responsible Minister for the State.

It is important to stress that funds held in both the State Pool Account and the State Managed Fund will be under State control and both will be subject to the requirements of this State's Public Finance and Audit Act 1987. Payments from these accounts will be at the direction of the responsible Minister for the State.

The Administrator will provide monthly reports and an annual report on the amounts paid into, and from, both the State Pool Account and the State Managed Fund and the number of public hospital services funded. The South Australian Auditor-General will continue to be responsible for auditing the State Pool Account and the State Managed Fund for this jurisdiction. The Auditor-General is also able to undertake a performance audit of the Administrator to determine whether they are acting effectively, economically, efficiently and are complying with the legislation.

The Bill also provides for the provision of information between a Minister for the State and the Administrator. For example, under the Bill the Health Minister is to provide the Administrator with a copy of the Service Agreement, and any variations, for a local health network. This Service Agreement is to also be made available in such a manner that it is accessible to members of the public. The responsible Minister for the State is also to provide the Administrator with information on the State Managed Fund for incorporation into the monthly and annual reports. The Administrator is to provide a Minister for the State with information for the State that may be requested as well as a copy of the advice provided to the Commonwealth Treasurer on the amounts to be paid by the Commonwealth Government into each State Pool Account.

The National Health Reform Agreement builds on changes the South Australian Government has been putting in place through South Australia's Health Care Plan 2007-2016, to make sure that the public hospital system is more efficient so it can continue to deliver quality services to all in our community.

The National Health Reform Agreement ensures transparency and accountability in the manner in which our public hospital services are funded and the way that the health care system is managed. It also ensures that the Commonwealth Government works in partnership with the State and Territory Governments to make the public hospital system more sustainable.

As Members are aware the cost of health care to South Australia has been growing steadily, as is the case across Australia. This has been exacerbated by a steady decline in the Commonwealth Government's share of funding which has fallen from around 50 per cent to below 40 per cent over the last decade. This decline has been halted with the signing of the National Health Reform Agreement and we now have a commitment from the Commonwealth Government to restore its funding to a reasonable balance with the State's contribution. From 2014-15 the Commonwealth Government will meet up to 45 per cent of the efficient growth in public hospital costs and by 2017-18 will meet up to 50 per cent of efficient growth. So every year, the funding will contribute to the growth of public hospital services and increasing cost of public hospital services.

The funding arrangements outlined in this Bill provide more certainty and more money for South Australia's public hospital system which will lead to a more effective health system that meets the health needs of the South Australian community. South Australia will receive an estimated total of $1.1 billion in growth funding over the period 1 July 2014 to 1 July 2020.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

This clause is formal.

2—Commencement

The measure will be brought into operation by proclamation.

3—Interpretation

This clause sets out the definitions required for the purposes of the legislation. Under this measure, 2 accounts are to be established, namely a State Managed Fund, being a bank account or fund established as a State Managed Fund for the purposes of the National Health Reform Agreement (see clause 17), and a State Pool Account, being the bank account established under Part 3.

In order to provide for consistency across a series of provisions that will form part of the common scheme to be established by the Commonwealth, States and Territories, the interpretation provisions applying under the Health Practitioner Regulation National Law (as enacted as a law of South Australia) will apply in relation to Parts 2 to 5 (inclusive) of this measure and the Acts Interpretation Act 1915 will not apply in relation to those Parts (see subclauses (5) and (6)).

Subclause (7) expressly provides that any incorporated hospital under the Health Care Act 2008 is a local hospital network for the purposes of this measure.

4—Extraterritorial operation of Act

This clause makes express provision for the operation of the legislation in relation to the following:

(a) things situated in or outside the territorial limits of this jurisdiction; and

(b) acts, transactions and matters done, entered into or occurring in or outside the territorial limits of this jurisdiction; and

(c) things, acts, transactions and matters that would, apart from this measure, be governed or otherwise affected by the law of another jurisdiction.

5—Act binds the Crown

This measure will bind the Crown.

Part 2—Administrator of the National Health Funding Pool

6—The office of Administrator

This clause provides for the establishment of the office of Administrator of the National Health Funding Pool for the purposes of the law of the State. It is intended that the same individual will hold the same office under the corresponding law of the Commonwealth and the other States.

7—Appointment of Administrator

This clause sets out a scheme for the appointment of the Administrator under an agreement established by all members of the Standing Council on Health.

8—Suspension of Administrator

It will be possible to suspend the Administrator from office on specified grounds.

9—Removal or resignation of Administrator

An Administrator will be removed from office on the decision of a majority of the members of the Council. The Administrator may resign by notice in writing to the Chair of the Standing Council on Health.

10—Acting Administrator

The Chair of the Standing Council on Health will be able to appoint a person to act as the Administrator during any period when the office is vacant or the holder of the relevant office is suspended or absent from duty.

11—Provision of staff and facilities for Administrator

The National Health Funding Body will provide staff and facilities to assist the Administrator in the performance of his or her functions.

12—Functions of Administrator

This clause sets out the functions of the Administrator, which will include—

(a) to calculate and advise the Treasurer of the Commonwealth of the amounts required to be paid by the Commonwealth into each State Pool Account of the National Health Funding Pool under the National Health Reform Agreement (including advice on any reconciliation of those amounts based on subsequent actual service delivery); and

(b) to monitor State payments into each State Pool Account; and

(c) to make payments from each State Pool Account in accordance with the directions of the State concerned; and

(d) to report publicly on the payments made into and from each State Pool Account.

The Administrator will not be subject to the control or direction of a Commonwealth Minister but the Administrator is required to comply with any direction given by COAG.

Part 3—State Pool Accounts—the National Health Funding Pool

13—Establishment of State Pool Accounts with Reserve Bank

The Chief Executive of the Department will open and maintain a bank account at the Reserve Bank of Australia as the State Pool Account for the State.

14—Payments into State Pool Account

The following will be payable into the State Pool Account:

(a) money paid to the State by the Commonwealth for payment into the State Pool Account under the National Health Reform Agreement; and

(b) money made available by the State for the purposes of funding in the State through the State Pool Account under the National Health Reform Agreement; and

(c) money paid to the State by another State for payment into the State Pool Account under the National Health Reform Agreement; and

(d) interest paid on money deposited in the State Pool Account, unless directed to be paid into another bank account by the responsible Minister for the State.

15—Payments from State Pool Account

There will be payable from the State Pool Account amounts to fund the following in the State under the National Health Reform Agreement:

(a) the services provided by the local hospital networks;

(b) health teaching, training and research provided by local hospital networks or other organisations;

(c) any other matter that under that Agreement is to be funded through the National Health Funding Pool.

Payments from the State Pool Account are to be made by the Administrator strictly in accordance with the directions of the responsible Minister for the State.

16—Distribution of Commonwealth funding

This clause provides that directions given by the responsible Minister for the State for payments from the State Pool Account are to be consistent with the advice provided by the Administrator to the Treasurer of the Commonwealth about the basis on which the Administrator has calculated payments to be made into that Account by the Commonwealth.

Part 4—State Managed Fund

17—Establishment of State Managed Fund

The Chief Executive of the Department will open and maintain with a financial institution a separate account as the State Managed Fund for the State for the purposes of health funding under the National Health Reform Agreement.

18—Payments into State Managed Fund

The following will be payable into the State Managed Fund:

(a) block funding allocated to the State, or paid from the State Pool Account, for the provision of hospital and other health services under the National Health Reform Agreement; and

(b) funding for teaching, training and research related to the provision of health services allocated by the State, or paid from the State Pool Account, under the National Health Reform Agreement; and

(c) interest paid on money deposited into the fund, unless directed to be paid into another bank account by the responsible Minister for the State.

19—Payments from State Managed Fund

Payments from the State Managed Fund will be decided by the responsible Minister for the State.

Payments from the State Managed Fund will be made to—

(a) local hospital networks and other providers of hospital and other health services; and

(b) universities and other providers of teaching, training and research related to the provision of health services.

Part 5—Financial management and reporting

20—Financial management obligations of Administrator

The Administrator will develop and apply financial management policies and procedures with respect to the State Pool Accounts, keep proper records in relation to the administration of the State Pool Accounts, and prepare financial statements in relation to the State Pool Accounts.

21—Monthly reports by Administrator

The Administrator will provide monthly reports to the Commonwealth and each State containing information about payments into and out of each account, the number of public hospital services funded for each local hospital network in accordance with the system of activity based funding, and the number of other public hospital services and functions funded from each account.

22—Annual report by Administrator

The Administrator will prepare an annual report, which will include relevant financial information. The annual report will include audited financial statements in relation to the State Pool Accounts.

23—Administrator to prepare financial statements for State Pool Accounts

The Administrator will prepare the relevant financial statements in respect of each financial year.

24—Audit of financial statements

The financial statements for the State Pool Account of the State will be audited by the Auditor-General.

25—Performance audits

It will be possible for the Auditor-General to conduct a performance audit to determine whether the Administrator is acting effectively, economically, efficiently and in compliance with all relevant laws.

26—States to provide Administrator with information about State Managed Funds

The responsible Minister for the State will provide information required by the Administrator for the preparation of relevant reports and financial statements.

27—Provision of information generally

The Administrator will provide relevant information requested by the responsible Minister for the State. The Administrator will also provide a copy of any advice provided by the Administrator to the Treasurer of the Commonwealth about the basis on which the Administrator has calculated the payments to be made into the State Pool Accounts by the Commonwealth.

Part 6—Miscellaneous

28—Exclusion of legislation of this jurisdiction

29—Application of Commonwealth Acts

These clauses set out a scheme for the application of certain common "oversight" laws to the activities of the Administrator. The relevant enactments will apply as laws of the State.

30—Public finance and audit

The Administrator will not be regarded as a public authority under the Public Finance and Audit Act 1987, other than for the purposes of the performance audit to be conducted under Part 5.

The State Pool Account and the State Managed Fund will be taken to be special deposit accounts under the Public Finance and Audit Act 1987 and will be required to be maintained in accordance with the requirements of the Public Finance and Audit Act 1987.

31—Service agreements

The Minister will establish a Service Agreement with each local hospital network.

32—Provision of information

A Minister acting under this legislation is specifically authorised to provide any information to be provided to the Administrator under the National Health Reform Agreement.

33—Delegation

A Minister will be able to delegate a function of the Minister under the Act.

34—Regulations

The Governor will be able to make regulations for the purposes of the Act.

Schedule 1—Transitional and validation provisions

1—Transitional and validation provisions

This schedule sets out a provision that will assist if all jurisdictions are unable to commence their legislation on the same day.

Debate adjourned on motion of Mr Pederick.