National Health Reform Agreement

Preliminaries, System Wide Objectives and Roles and Responsibilities

Preliminaries

  1. This Agreement:
    1. sets out the shared intention of the Commonwealth, State and Territory (the States) governments to work in partnership to improve health outcomes for all Australians and ensure the sustainability of the Australian health system;

    2. introduces new financial and governance arrangements for Australian public hospital services and new governance arrangements for primary health care and aged care;

    3. implements National Health Reform as agreed by the Council of Australian Governments (COAG) Heads of Agreement on National Health Reform in February 2011;

    4. builds on and reaffirms the Medicare principles and high-level service delivery principles and objectives for the health system in the National Healthcare Agreement (agreed by COAG in 2008 and amended in July 2011);

    5. supersedes the National Health and Hospitals Network Agreement and the Heads of Agreement on National Health Reform;

    6. recognises that:
      1. the States are the system managers of the public hospital system; and

      2. the Commonwealth has full funding and program responsibility for aged care (except where otherwise agreed) and has lead responsibility for GP and primary health care;
    7. builds on and complements the policy and reform directions and outcomes, progress measures and outputs outlined in the National Healthcare Agreement (NHA). This Agreement should be read in conjunction with the NHA; and

    8. is subject to the Intergovernmental Agreement on Federal Financial Relations (IGA FFR) and should be read in conjunction with that Agreement and subsidiary schedules.

  2. Included at Appendix A is a list of definitions for words and phrases used in this Agreement.

Objectives of this Agreement

  1. The Commonwealth and the States will work in partnership to implement new arrangements for a nationally unified and locally controlled health system which will:
    1. improve patient access to services and public hospital efficiency through the use of activity based funding (ABF) based on a national efficient price (Schedule A);

    2. ensure the sustainability of funding for public hospitals by increasing the Commonwealth’s share of public hospital funding through an increased contribution to the costs of growth (Schedule A);

    3. improve the transparency of public hospital funding through a National Health Funding Pool and a nationally consistent approach to ABF (Schedule A and B);

    4. improve standards of clinical care through the Australian Commission on Safety and Quality in Health Care (ACSQHC) (Schedule B);

    5. improve performance reporting through the establishment of the National Health Performance Authority (NHPA) (Schedule B);

    6. improve accountability through the Performance and Accountability Framework (Schedule C);

    7. improve local accountability and responsiveness to the needs of communities through the establishment of Local Hospital Networks and Medicare Locals (Schedule D);

    8. improve the provision of GP and primary health care services through the development of an integrated primary health care system and the establishment of Medicare Locals (Schedules D and E); and

    9. improve aged care and disability services by clarifying responsibility for client groups (Schedule F).

  2. States will provide health and emergency services through the public hospital system, based on the following Medicare principles:
    1. eligible persons are to be given the choice to receive, free of charge as public patients, health and emergency services of a kind or kinds that are currently, or were historically provided by hospitals;1

    2. access to such services by public patients free of charge is to be on the basis of clinical need and within a clinically appropriate period; and

    3. arrangements are to be in place to ensure equitable access to such services for all eligible persons, regardless of their geographic location.

  3. More specifically, under this Agreement, the States reaffirm their commitment to the following as provided in the NHA:
    1. provide public patients with access to all services provided to private patients in public hospitals;

    2. plan and deliver teaching and training and support research provided through public hospitals;

    3. ensure that eligible persons who have elected to be treated as private patients have done so on the basis of informed financial consent;

    4. provide and fund pharmaceuticals for public and private admitted patients and for public non-admitted patients in public hospitals (except where Pharmaceutical Reform Arrangements are in place); and

    5. maintain a Public Patients Hospital Charter and an independent complaints body and ensure that patients are aware of how to access these provisions.

  4. This Agreement acknowledges the Commonwealth’s lead role in funding and delivering GP and primary health care and aged care, and that the Commonwealth will work in partnership with the States to enable patients to receive the care they need when and where they need it – and in doing so, taking pressure off public hospitals.

Roles and Responsibilities

  1. Under this Agreement the Commonwealth and the States will be jointly responsible for:
    1. funding public hospital services, using ABF where practicable and block funding in other cases;

    2. funding growth in public hospital services and the increasing cost of public hospital services;

    3. establishing and maintaining nationally consistent standards for healthcare and reporting to the community on the performance of health services;

    4. giving effect to the new Commonwealth-State governance arrangements including the establishment of relevant national bodies; and

    5. collecting and providing data to support the objectives of comparability and transparency, and to ensure that data is shared between relevant participants in national health care arrangements to promote better health outcomes.

  2. Under this Agreement, the States will be responsible for:
    1. system management of public hospitals, including:

      1. establishment of the legislative basis and governance arrangements of public hospital services, including the establishment of Local Hospital Networks;

      2. system-wide public hospital service planning and performance;

      3. purchasing of public hospital services and monitoring of delivery of services purchased;

      4. planning, funding and delivering capital;

      5. planning, funding (with the Commonwealth) and delivering teaching, training and research;

      6. managing Local Hospital Network performance; and

      7. state-wide public hospital industrial relations functions, including negotiation of enterprise bargaining agreements and establishment of remuneration and employment terms and conditions to be adopted by Local Hospital Networks;
    2. taking a lead role in managing public health; and

    3. sole management of the relationship with Local Hospital Networks to ensure a single point of accountability in each State for public hospital performance, performance management and planning.

  3. In providing these services States will adhere to the Business Rules and other requirements set out in Schedule G.


  4. Under this Agreement, the Commonwealth will be responsible for:
    1. system management, policy and funding for GP and primary health care services;
    2. establishing Medicare Locals to promote coordinated GP and primary health care service delivery;
    3. working with each State on system-wide policy and state-wide planning for GP and primary health care;
    4. promoting equitable and timely access to GP and primary health care services; and
    5. planning, funding, policy, management and delivery of the national aged care system noting that there will be different arrangements in Western Australia and Victoria under this Agreement (clause F4 refers).

Implementation of the Agreement

  1. This Agreement will be implemented through the following mechanisms:
    1. COAG will provide overall leadership, in consultation with Standing Council on Health and Treasurers;

    2. the Standing Council on Health will take the leadership role in implementation of National Health Reform, including by:
      1. ensuring outstanding implementation and policy matters are on track for resolution, and escalating them to COAG when required; and

      2. considering the progress of implementation of key milestones under this Agreement six months before commencement timeframes, and providing advice to COAG if necessary;
    3. Treasurers will provide advice to COAG on Commonwealth-State financial aspects of the reform agenda, including jurisdictions’ performance against the mechanisms to ensure maintenance of effort through to 2014-15; and

    4. COAG Senior Officials will monitor implementation of this Agreement against the implementation plan at Schedule H and will escalate implementation issues to COAG when required.

  2. The Commonwealth and States will implement public hospital governance and financing arrangements as set out by this Agreement in line with the timeframes identified in this Agreement. In recognition of the implementation by the States of these reforms, the Commonwealth will provide at least an additional $16.4 billion in growth funding between 2014-15 and 2019-20 through meeting 45 per cent of efficient growth between 2014-15 and 2016-17 and 50 per cent of efficient growth from 2017-18 onwards; in the event the additional growth funding is less than $16.4 billion, the Commonwealth will provide the remainder to States as top-up funding.


  3. This Agreement affirms that the following implementation principles should underpin National Health Reform:
    1. governments agree that an effective health system that meets the health needs of the community requires coordination between hospital, GP and primary health care and aged care to minimise service duplication and fragmentation;

    2. Australians should be able to access transparent and nationally comparable performance data and information on hospitals, GPs and primary health care, aged care services and other health services;

    3. governments should continue to support diversity and innovation in the health system as a crucial mechanism to achieve better outcomes;

    4. all Australians should have equitable access to high quality health care, including those living in regional and remote areas; and

    5. governments agree that Australia’s health system should promote social inclusion and reduce disadvantage, especially for Indigenous Australians.

  4. The Commonwealth and States commit to meeting the following critical milestones under this Agreement:
    1. the establishment of national bodies as outlined in Schedule B, including the passing of legislation by the following timeframes:
      1. Commonwealth and State legislation establishing the National Health Funding arrangements no later than 1 April 2012;

      2. Commonwealth legislation establishing the Independent Hospital Pricing Authority (IHPA) no later than 31 December 2011; and

      3. Commonwealth legislation establishing the National Health Performance Authority (NHPA) no later than 31 December 2011;
    2. the commencement of Local Hospital Networks no later than 1 July 2012, as outlined in Schedule D;

    3. the establishment of Medicare Locals no later than 1 July 2012, as outlined in Schedule D;

    4. Commonwealth and each State’s activity based hospital funding being paid into and out of the National Health Funding Pool from 1 July 2012, as outlined in Schedule B;

    5. the implementation of a nationally consistent ABF system for:
      1. admitted acute services, emergency department services and non-admitted patient services (initially using the Tier 2 outpatient clinics list) commencing on 1 July 2012; and

      2. other non-admitted services, mental health and sub-acute services commencing on 1 July 2013; and
    6. the Home and Community Care (HACC) transfer taking effect on 1 July 2012 (with the exception of Victoria and Western Australia).

  5. All States will receive additional Commonwealth funding for public hospitals, relative to the former National Healthcare Specific Purpose Payment (SPP), as a result of this Agreement and:
    1. no State will be worse off in the short or long term, because they will continue to receive at least the amount of funding they would have received under the former National Healthcare SPP and their share of the $3.4 billion in funding available through the National Partnership Agreement on Improving Public Hospital Services (subject to the terms of that Agreement);

    2. the Commonwealth’s ongoing contribution to efficient growth funding from 1 July 2014 into the future will ensure all State governments will be better-off in the long term, relative to existing payment arrangements; and

    3. as an initial commitment, the Commonwealth guarantees that it will provide at least $16.4 billion in additional funding over the 2014-15 to 2019-20 period.

  6. The Commonwealth, States and the national bodies established by this Agreement will comply with applicable privacy legislation and principles during the implementation of this Agreement and will consult with relevant stakeholders during implementation.


  7. The arrangements outlined in this Agreement should be delivered with no net increase in bureaucracy across Commonwealth and State governments as a proportion of the ongoing health workforce.

Review of the Agreement

  1. A review of this Agreement will be commissioned by COAG and undertaken by a panel of reviewers agreed by COAG. The first review will occur in 2015-16, or later if agreed by COAG, and will be set against the objectives in this Agreement outlined in clause 3, including consideration of the following matters:
    1. whether the implementation of the new national governance, financial and other arrangements in this Agreement give effect to the policy intent of this Agreement;

    2. the impact of the new GP and primary health care arrangements outlined in this Agreement on the demand for hospital services;

    3. whether any unintended consequences such as cost-shifting, perverse incentives or other inefficiencies have arisen as a result of the new national governance, financial and other arrangements in this Agreement; and

    4. other matters as agreed by COAG.

Process for Amending the Agreement

  1. Subject to clause 20, this Agreement may be amended at any time in writing with the agreement of all parties and with terms and conditions as agreed by all the parties.


  2. To provide greater certainty and security to the States, the Commonwealth commits to put in place legislation requiring a process to be followed, should the Commonwealth seek to vary this Agreement. The process will involve the Commonwealth taking the following steps:
    1. providing three months notice of the proposed variation to all governments prior to consideration by COAG, unless all governments agree otherwise; and

    2. gaining COAG’s agreement to the variation.

Dispute Resolution

  1. Any party may give notice to other parties of a dispute under this Agreement.


  2. Officials of relevant parties will attempt to resolve any dispute in the first instance. If a dispute cannot be resolved by officials it may be escalated to the relevant Ministers, and if necessary, the relevant COAG Council.

  3. If a dispute cannot be resolved by the relevant Ministers, it may be referred to COAG for consideration.

The Parties have confirmed their commitment to this Agreement as follows:
Signed for and on behalf of the Commonwealth of Australia by
________________________________
The Honourable Julia Gillard MP
Prime Minister of the Commonwealth of Australia
July 2011

Signed for and on behalf of the State of New South Wales by
________________________________
The Honourable Barry O’Farrell MP
Premier of the State of New South Wales
July 2011

Signed for and on behalf of the State of Victoria by
_______________________________
The Honourable Ted Baillieu MP
Premier of the State of Victoria
July 2011

Signed for and on behalf of the State of Queensland by
________________________________
The Honourable Anna Bligh MP
Premier of the State of Queensland
July 2011

Signed for and on behalf of the State of Western Australia by
________________________________
The Honourable Colin Barnett MLA
Premier of the State of Western Australia
July 2011

Signed for and on behalf of the State of South Australia by
________________________________
The Honourable Mike Rann MP
Premier of the State of South Australia
July 2011

Signed for and on behalf of the State of Tasmania by
________________________________
The Honourable Lara Giddings MP
Premier of the State of Tasmania
July 2011

Signed for and on behalf of the Australian Capital Territory by
________________________________
Ms Katy Gallagher MLA
Chief Minister of the Australian Capital Territory
July 2011

Signed for and on behalf of the Northern Territory by
______________________________
The Honourable Paul Henderson MLA
Chief Minister of the Northern Territory of Australia
July 2011


1 This Agreement recognises that clinical practice and technology changes over time and that this will impact on modes of service and methods of delivery. These principles should be considered in conjunction with the definition of public hospital services set out at clauses A10 to A26.

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Page last updated 01 August, 2011