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Tasmania’s hospitals are among the most costly in Australia. That means fewer patients can be treated for the same amount of money.

But the load of unmet patient demand has been fuelled even more by successive state governments ripping hundreds of millions of dollars ‒ money Canberra gives them to fund hospitals and other health services ‒ out of our public hospitals and clinics.

Until now, the extent of the sleight-of-hand performed year after year by the Treasury has not been identified. But a new analysis shows how this year, public hospitals stand to lose $84 million and other state health services ‒ community clinics, outpatient services, prevention programs, home care ‒ will lose another $85 million. That’s $169 million all up.

(Download, read below)

This is how it works. It’s complicated, so bear with me.

Every year the Commonwealth Grants Commission ‒ the people who dole out GST money to the states ‒ assess which states need more money than others in order to provide the same levels of services to their populations.

It’s called Horizontal Fiscal Equalisation and it means all Australians, whether they live in a poor state or a rich one, should have access to the same level of state government services ‒ hospitals, schools, police, roads ‒ as everyone.

Tasmania is a poor state. The state government is able to raise only about one-third of its budget from its own taxes and charges within Tasmania. The rest comes from Canberra.

The Grants Commission calculates how much extra GST money the state will need to bring its money-raising capacity up to the national average. This year, we will get an extra $595 million to compensate. This is enough for the Tasmanian government to spend the national average amount per head on all its areas of service.

If that was all we needed, the Grants Commission could stop there. But it’s not.

In many areas, Tasmania needs more than the national average to be spent on services ‒ particularly in health. Tasmanians tend to be sicker, older and poorer than other Australians, so have a greater need for public hospitals and other types of health care.

So, having compensated us for our revenue shortfall, the Commission then compensates us on the expenditure side. Because we need to spend more.

That’s why, this year, we will get an extra $169 million for health. This money is taken from other states and given to us because our health system needs it. But the health system doesn’t get it.

The proof of this is that if the Tasmanian government was spending that money on health and hospitals, their per-capita funding would be well above the national average ‒ as it ought to be because of our special needs. In the other beneficiary jurisdictions, the Northern Territory and South Australia, that is what happens.

But not in Tasmania. Our state-controlled health system actually gets less than the national average.

This money is paid by the Grants Commission into the state Treasury, where it is put into consolidated revenue. But rather than being allocated to health, it is used to prop up the government’s general budgetary position.

The failure to pass that money onto our hospitals, clinics and disease prevention programs has had a devastating effect. The money siphoned off from the health system is perhaps the most reliable measure we have of unmet demand ‒ of people who need care but cannot get it. And their numbers have been building, year after year, for a very long time. Even if the new state government moved to remedy the situation, we might be able to keep up with new demand as it arose, but that great well of unmet demand would remain. That extra GST money would not be enough for us to catch up.

A further look at the data reveals how the process of starving the health system of money is distorting the system and making it even more expensive.

Some of that GST money was intended to go to prevention programs. Sacrificing prevention work, most of which is highly cost-effective, means more people will get sick and need expensive care. It is economic madness.

As my attached study (download below) shows, Tasmania’s demographics produce a disproportionately high death rate. We have 2.3% of the nation’s population and 3% of its deaths. That amounts to about 1,000 more deaths a year than would be the case if Australia’s death rate was distributed evenly across the country ‒ and that 1,000 accounts for almost a quarter of all Tasmanian deaths.

Each person costs, on average, around $30,000 in inpatient hospital costs in the last two years of life. So those ‘extra’ deaths cost our hospitals about $30 million a year for inpatient costs alone.

Through the Grants Commission, Tasmania is compensated by the other states for dealing with the deaths that occur here rather than there. The government’s failure to pass on that money is a big part of the squeeze on hospitals.

But terminally ill people needing hospital care must be dealt with. And they are.

As a result, other patients ‒ whose treatment is deemed to be less urgent ‒ have to wait. For years, sometimes. One of the reasons why people have to wait so long in pain and distress to see a specialist or for an operation is that the terminally ill must be cared for.

This raises two questions. The first, obviously, is funding.

The second is whether we are offering terminally ill people the right set of care and treatment options. Few people want to die in an acute hospital ward: they would much rather be at home in their own surroundings, with those they love. But there are too few options available for proper home care, overseen adequately by doctors and nurses ‒ or for the nursing homes which handle the elderly dying all the time.

In many cases, these options are not only more clinically and humanely appropriate. They are also vastly cheaper.

That GST money being denied to health care has been built into the general state budget for so long that it will take years to free it for its original purpose. Even if the new government wanted to do so, that money would leave a huge hole in the budget that would have to be filled somehow ‒ partly by politically unpopular cuts. And, where we can, we must increase revenue.

But it will have to happen. We can’t go on as we are.



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• Garry Stannus, in Comments: Tasmanian Times got a plug on ABC radio ‘Mornings’ just a few minutes before the Mon (Aug4) 9:00am morning news.  Martyn Goddard was explaining his “Deaths, Costs and GST” report [Link to it here within Martyn’s article] and finished by telling listeners that they could ‘read all about it’ on ”tasmaniantimes - that’s one word” (he said) - “dot com”!