$2b black hole in SA health funding by 2030, says Ernst & Young report

AN Ernst & Young study has found hospitals in South Australia will be left with a $2 billion hole in their budgets because of a federal government funding decision.

South Australians will have to make up the shortfall in higher taxes and private health insurance, the Ernst & Young report found.

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HOSPITALS in South Australia will be left with a $2 billion hole in their budgets because of a federal government funding decision, a study has found.

The State Government commissioned experts Ernst & Young to study the impact of a 2014-15 federal Budget decision to slash hospital funding across the country.

It found by 2030 demand and an ageing population will mean SA hospitals would need $7 billion each year, but when government and private funding is added up, would only have $5 billion.

South Australians will have to make up the shortfall in higher taxes and private health insurance, the report found.

The report concluded: “Underlying growth in public hospital expenditure in SA is well in excess of the funding indexation proposed by the Commonwealth. Non-government sector (households through direct payments and private health insurance) and the State Government are left to pick up the burden in the absence of any change.’’

The AMA of SA has expressed concerns about the State Government study, despite that fact that a partial backflip on the federal Budget changes in 2014 provided short-term relief until 2020.

The Ernst & Young report found that based on the 2014-15 budget position, the growth in Commonwealth Specific Purpose Payments for public hospitals to South Australia of 3.4 per cent each year, while a total funding growth of 4.7 per cent would be needed to keep up with demand.

In response, a Federal Health Department spokeswoman argued the 2014-15 Federal Budget policy on which the report was based was no longer relevant because funding had been restored until 2020, but the AMA disagreed.

“The Council of Australian Governments agreement between the Commonwealth and the states and territories on April 1 last year retains activity based funding,’’ the spokeswoman said.

“Over the period 1 July 2017 to 30 June 2020, the Commonwealth will continue to fund 45 per cent of the efficient growth of hospital services, subject to a cap in overall growth of 6.5 per cent per annum.”

“Funding arrangements beyond 2019-20 are subject to further consideration by COAG.”

But AMA South Australia president Dr Janice Fletcher said the 2016 changes were not enough and fears created by the 2014-15 budget were still real, despite short-term relief being granted last year up to 2020.

“The AMA remains concerned that restricting public hospital funding growth to CPI indexation and population growth would be inadequate in both the short and long term,’’ she said.

“An agreement between the states and Federal Government earlier this year providing a still inadequate public hospital funding down payment to appease desperate states and territories ahead of the Federal election.

“This additional funding goes nowhere near meeting the long-term needs of the nation’s public hospitals, however, and it falls dismally short of replacing the funding removed from the States in the 2014 Federal Budget.

“It also leaves us with big questions about what the future holds after this current agreement runs out in 2020.”

The Advertiser obtained the previously secret Ernst & Young report after applying under a State Government proactive information release policy.

There is no health funding agreement between the states and Federal Government beyond 2020.

Premier Jay Weatherill said all states would suffer unless the Federal Government changed its strategy.

“When the Federal Liberal Government tore up its agreement to fund SA’s hospitals in 2014, we knew it could lead to disastrous consequences in the long term,’’ he said.

“If the Prime Minister does not return to the table and negotiate a new deal for funding our health system, hospitals around the nation will close. That is a fact.

“We are already taking on the significant challenge of modernising our health care system in order to deliver better and more efficient treatment.

“This is an issue being faced by all states and territories, not just in South Australia, and will remain on the COAG agenda until we strike a deal.’’

Dr Fletcher said SA’s current “transforming health” reforms were being forced on the system to meet federal cuts.

“But proper reform takes time and investment. Instead it is happening in a climate of fear, uncertainty, and budget constraint. We are getting reforms shaped to fit the cuts — not the ideal way to drive system improvement,’’ she said.

“South Australia is one of the poorest, most disadvantaged states, with rising rates of obesity and unemployment, all linked to poorer health outcomes.

“We must have a commitment to develop a long term funding agreement with the states/territories for the period beyond 2020. But what that new agreement will deliver remains to be seen. And what we have seen so far gives us little faith.”