Is there something in the US Constitution that prevents joint partnerships between the Feds and States? Australia runs our government owned and operated health system in the following way - designed to maximise efficiency and NOT take advantage of a government 'blank cheque' that the more right-wing friends here might worry about.
While states are responsible for running hospitals, the federal government shares responsibility for paying for them. The federal government also has the primary responsibility for keeping people out of hospital – through the primary care system, which includes general practice...
... (some irrelevant history)...
...Hospitals are paid for each procedure
Since 2011, the federal contribution to public hospitals has been based on the number and type of patients treated. This is known as
activity-based funding.
All states and territories measure hospital activity by case “type”, weighted to reflect the complexity of a hospital’s activity. A lung transplant, for example, has a higher value than resolving an ingrown toenail.
The idea of measuring hospital activity and even using this as a basis for funding is not new. What was new in 2011 was using activity-based funding to determine the federal contribution.
Since 2011, the federal government pays 45% of the growth in the cost of delivering hospital services each year. This means the federal government’s annual increase in contribution can reflect both additional costs and activity.
State and territory governments are responsible for the remaining costs.
Since 2017-18, the growth in federal government expenditure has been limited to 6.5% each year. So even if a hospital performs many more procedures than the previous year, the federal government caps its annual expenditure growth at 6.5% more than the previous year.
Funding also encourages efficiency
Activity is one component of hospital funding, the other is the price paid for each unit of activity. The basis for this is the “nationally efficient price”.
The
Independent Hospital Pricing Authority determines this price, based on its analysis of actual costs and assessment of unavoidable and legitimate variations in costs. For example, the 2022-23 efficient price for a hip replacement was deemed to be A$19,798.
This means the price is the same across Australia. Adjustments are made for patients from rural and remote areas, and for Indigenous patients. Sicker patients or those with multiple underlying conditions will fall into a different case type, with a higher price.
This provides a benchmark for comparing hospital efficiency as well as the level of funding the hospital will receive.
The goal is to treat more patients but keep costs constrained
The hospital funding system is designed to address efficiency by providing incentives to increase output, while constraining the growth in costs.
Since 2011, we’ve seen a
substantial reduction in the rate of increase in costs, with an overall growth rate of 2.1%.
Annual growth in costs (per national weighted activity unit):
While states are responsible for running hospitals, the federal government shares responsibility for paying for them. But it’s an uneasy relationship.
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