For political parties, health can be a poison pill

As we creep closer to the State election, Associate Director Michael Cairnduff dissects the activities of the major parties in WA .

All three major parties in WA have been active of late – the Liberals sorted out their internal squabble and let Premier Colin Barnett get back to doing what he does best, remaining steadfast in his direction for the State; the Nationals changed jockeys and launched a new revenue policy which has predictably created a war with the State’s two major iron ore producers; and the Labor leadership team has been busy trying to capitalise on their buoyancy in the polls by driving divisive wedges into key policy areas, as they seek to differentiate what a potential State Labor Government might look like.

One such area is health. WA’s public health system represents the single largest cost centre of annual spending in the WA Government budget (it’s called recurrent spending). The annual recurrent figures are of mind-blowing proportions. The striking thing is the way the recurrent annual health budget has a habit of growing each year.

In the 2015/16 State Budget, recurrent expenses for health were recorded at $8.17 billion while the budget estimate for 2016/17 budget put that figure at $8.56 billion. Let me do the math for you – that is a not-insignificant jump of $395 million or 4.8% in a single year.

By comparison, back in 2008 the Carpenter Government allocated $4.5 billion for recurrent health expenses in FY09. That’s a 90% increase in expenditure in just eight years.

And coming back to today’s budget, for comparative purposes, recurrent expenses for education were $4.76 billion in FY16 and were projected to grow by just $81 million or 1.7% in FY17 to be $4.84 billion.

If we think of this in terms of the entire pie of WA Government recurrent expenses, which is predicted to be $29.59 billion in FY17, health represents 29% of all projected expenses (up from 28% in FY16).

And these figures are before you even consider the additional money spent to build new hospitals and other health infrastructure. WA Health has been through a massive infrastructure investment program over the past decade (think Fiona Stanley Hospital, Perth Children’s Hospital, Midland Health Campus, upgrades to Joondalup Health Campus and many other hospitals throughout the suburbs and regional WA). In FY17, a relatively modest $526 million was set aside for heath infrastructure, which represents 9% of the total spend, down from the dizzying heights of recent years. The FY17 figure is dwarfed by spending on transport and utilities.

So, enough with the numbers, but you get the picture – health is an essential and increasingly expensive area of service delivery, where innovative policy settings and associated investment really do have the potential to make a significant impact. However, looking at it from the other angle, if you view innovation as potentially introducing risk in service delivery, you could end up with catastrophic outcomes for patients and expensive distractions for the health system as a whole.

The two main men in the State Labor leadership when it comes to health, Opposition Leader Mark McGowan and Shadow Minister for Health Roger Cook, had clearly spent some time in a shadow cabinet lock-up practicing their lines on innovative health policy when they took the floor at a community health forum in Perth’s far northern suburbs earlier this week.

For those of you who haven’t heard the lines I will give you the general theme, they all include the catch word “medi-hotels”. This concept has been embraced in Queensland and Victoria already and in basic terms are accommodation facilities, usually in the immediate vicinity of a Tertiary Hospital, where patients, who do not require hospital admission before or after a hospital procedure can stay and receive low level care without occupying an in-demand hospital bed.

The concept has merit and is an innovative way to reduce some pressure on existing hospital beds, but detail was a bit light on how it would be administered and whether or not we are talking about building new facilities or adapting existing – which would be the logical path forward in this scribe’s view. I can’t help thinking of all the new apartments buildings throughout Perth and the likely oversupply in the market over at least the next five years. Could blocks of these apartments be used as medi-hotels, for example?

It is no coincidence the Labor duo were out engaging the community on health policies in the seat of Joondalup – not only does the Joondalup CBD and surrounding high density dwellings appear to fit well with the medi-hotels concept in conjunction with the Joondalup Health Campus, but it is also one of the seats Labor needs to win to take Government. The seat is currently held by active first term Liberal MLA Jan Norberger by a margin of 10.4% and is being contested by a credible Labor staffer and local campaigner in Emily Hamilton.

There is still a lot to be said about focussing on traditional investment in health assets to cater for growth in service requirements. In this regard, the Barnett Government has undertaken some significant projects in FY17, including committing $150 million for the ongoing redevelopment and expansion of regional hospitals and medical facilities; and $92 million to finalise construction of the $1.2 million Perth Children’s Hospital. Although that last one in particular has been the source of a string of bad publicity scenarios for the Premier, once delivered I suspect it will be like the Perth Arena – all the drama will soon be forgotten and the community of Western Australia will unanimously consider it a worthwhile exercise.

Michael Cairnduff is an expert investor and stakeholder relations adviser, who has extensive experience in the mining and resources sector and in managing government and community engagement. Contact Michael.