Patients could cop the brunt of a $57 billion hospital funding shortfall that lies behind the miraculous budget turnaround projected by Joe Hockey in the Intergenerational Report.
The yawning funding gap, that threatens to blow out state budgets as well as hospital waiting lists, will be central to the Abbott government's looming white paper on federalism, which NSW Premier Mike Baird insists must be used to resolve the problem.
The Abbott government is booking savings of $57 billion over 10 years as a result of dismantling the hospital funding system put in place by Labor, and from 2017 moving to a new system in which states receive block grants that are adjusted for population growth and inflation as measured by the consumer price index.
The Victorian government says it stands to lose around $13 billion over the next 10 years, but Victorian Treasurer Tim Pallas said this week he would not push for an increase in the GST to fund the shortfall.
Mr Baird says health funding is the "biggest challenge" facing NSW, with the state set to lose $2 billion over the next four years, and the upcoming white paper on federalism would have to resolve the problem.
"The states do not have the capacity to meet those health costs on their own," Mr Baird said last month.
Former federal health department head Stephen Duckett, who helped develop the funding system which the Abbott government is dismantling, said the changes were "a lazy set of savings".
"It just shifts the problem from the Commonwealth to the states and risks states shifting it back to them like a game of ping pong," said Dr Duckett, who is health program director at the Grattan Institute.
He said states had four options to address the shortfall.
"They can try and improve efficiency … and that should be the first response. The second response might be to cost-shift back onto the Commonwealth. What might used to be provided as hospital outpatients might be closed and private clinics established which would bill Medicare. A third strategy is try to encourage patients to use their private insurance for their hospital stay. A fourth option is to reduce services …or to rationalise services between hospitals."
Australian Medical Association president Brian Owler said
it was inevitable the changes would impact on frontline services.
"People will have to wait longer in the emergency department. People will struggle to get access to an appropriate bed or will have to travel a lot further to get to a hospital," he said.
The Intergenerational Report says under Labor's settings, federal government health spending would have reached 7.1 per cent of GDP in 40 years' time. Instead, as a result of the Coalition's changes, federal health spending will be constrained to 5.5 per cent of GDP.
A spokeswoman for Mr Hockey said Labor had left the Coalition "an unsustainable budget ... including an unfunded public hospitals agreement".
Asked on Friday how he expected the states to fund the multibillion-dollar funding shortfall, Mr Hockey said it was a matter for the states.
Health Minister Sussan Ley said she was "committed to working with state and territory governments to deliver a more efficient hospital system," including through the federation white paper process.
"Unsustainable health spending will cause Australians more harm than good in the long run. These decisions are never easy or popular, but doing nothing is not an option and we are a government taking action," Ms Ley said.
With Su-Lin Tan
