THE states will be asked to surrender a slice of their GST revenue so it can be given directly to a new national health network that will fund hospitals directly.
The Prime Minister, Kevin Rudd, will today announce the new funding arrangements which will involve the Commonwealth bypassing the states as he launches the government's long-awaited health reform agenda.
It is expected to come with an all-or-nothing offer.
Unless the states agree at a meeting in a month to the funding mechanism for public hospitals, they will not be offered other elements of the health reform package which will include expanded and uniform federal funding for GPs and allied health services such as physiotherapy.
Instead, Mr Rudd will take the whole package to the next election to seek a mandate for its implementation.
As well as specific Commonwealth funding, the states use a proportion of the GST revenue to fund health services.
The Sydney Morning Herald understands the Commonwealth will seek to strip them of this proportion of GST so it could be handed to a new National Health and Hospital Network which will distribute the money on a regional basis.
To encourage the states to surrender the revenue, the Commonwealth will argue that the growth in GST is failing to keep up with the increases in health costs and eventually the states would not be able to fund health.
Mr Rudd will promise that the Commonwealth will increase its own contribution to make up for the increasing shortfall.
The Commonwealth would also be expected to keep for itself the specific health funding it gives to the states, which was worth $64.4 billion over five years.
An example of a National Health and Hospital Network member could include hospitals, elective surgery centres, rehabilitation and community care services in a given region.
The funding mechanism would require a restructuring of the GST formula which was agreed by the states and the Commonwealth in 1999. It guaranteed the states received all the GST revenue and any change would require the agreement of the states.
While the NSW government was open-minded about a takeover, Victoria, which has a relatively good hospital system, was hostile. The Premier, John Brumby, said there was no need for a takeover, just more money.
Mr Rudd said yesterday: "We will put a reform proposal to the states and territories. And we would hope that they would accept it. If they do not accept it, then of course we stand by our position of then going to the people to seek a mandate for taking over the full funding responsibility of the system.''
Today's announcement will centre on hospitals. But the package also includes refining and expanding the funding mechanisms for non-hospital services. For example, GPs are funded by the Commonwealth through Medicare while podiatrists and physiotherapists are funded with state-based programs. The reforms aim to bring these services under a single umbrella, similar to the public hospitals.
The president of the Australian Medical Association, Andrew Pesce, said he would need to see the detail but he welcomed the idea of a single funding body.
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