Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009-2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FEDERAL FINANCIAL RELATIONS AMENDMENT (NATIONAL HEALTH AND HOSPITALS
NETWORK) BILL 2010
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 National Health and Hospitals Network payments 7
Chapter 2 National Health and Hospitals Network Fund and payment
arrangements 19
Do not remove section break.
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|CGC |Commonwealth Grants |
| |Commission |
|COAG |Council of Australian |
| |Governments |
|Dedicated GST |Section 6A |
|revenue for a State | |
|Dedicated GST |Section 15D |
|revenue payments | |
|FFR Act |Refers to the Federal |
| |Financial Relations Act 2009 |
|GST |Goods and Services Tax |
|NHHN Agreement |Refers to the National Health|
| |and Hospitals Network |
| |Agreement (section 4) |
|NHHN Fund |Refers to the National Health|
| |and Hospitals Network Fund |
| |(section 4) |
|National Health and |Section 4 |
|Hospitals Network | |
|matter | |
|HACC |Home and Community Care |
| |program |
|Intergovernmental |Refers to the |
|Agreement |Intergovernmental Agreement |
| |on Federal Financial |
| |Relations (section 4) |
|Joint |Section 4 |
|intergovernmental | |
|funding authority | |
|Local hospital |Section 4 |
|network | |
|Non-participating |Section 4 |
|NHHN State | |
|Participating NHHN |Section 4 |
|State | |
|Premier |Section 4 |
|Primary health care |Section 4 |
|equivalent | |
|outpatient service | |
|Special payment |Section 15E |
|SPP |Specific Purpose Payment |
|Abbreviation |Definition |
|States |Refers to the States, the |
| |Australian Capital Territory |
| |and the Northern Territory of|
| |Australia |
|State adjustment |Section 15G |
|amount | |
|Top-up payment |Section 15H |
General outline and financial impact
Changes to the federal financial relations framework
This Bill implements changes to federal financial arrangements. It
gives effect to reforms to the financing of health and hospital
services set out in the National Health and Hospitals Network
(NHHN) Agreement, endorsed by the States, with the exception of
Western Australia, on 20 April 2010.
The NHHN Agreement includes significant reforms to the financing of
the health and hospital system that require modifications to the
current framework for federal financial relations set out in the
Federal Financial Relations Act 2009 (FFR Act) and the current
Intergovernmental Agreement on Federal Financial Relations
(Intergovernmental Agreement).
Specifically, the NHHN Agreement changes the treatment of GST
general revenue assistance payments and the National Healthcare
SPP. It also creates new arrangements that allow the Commonwealth
to meet its financial commitments under the NHHN Agreement by
making additional Top-up payments.
Under the NHHN Agreement, the Commonwealth becomes the majority
funder of the Australian public hospital system by funding:
. 60 per cent of the national efficient price of every
public hospital service provided to public patients;
. 60 per cent of recurrent expenditure on research and
training functions funded by States undertaken in public
hospitals;
. 60 per cent of block funding paid against a COAG-agreed
funding model, including for agreed functions and services
and community service obligations required to support
small regional and rural public hospitals;
. 60 per cent of capital expenditure, on a 'user cost of
capital' basis where possible; and
. over time, up to 100 per cent of the efficient price of
'primary health care equivalent' outpatient services
provided to public patients.
The Commonwealth is also taking full policy and funding
responsibility for general practitioner (GP), primary health care
and aged care. This includes transferring funding and policy
responsibility for aged care Home and Community Care (HACC)
services and related programs from States participating in the NHHN
Agreement to the Commonwealth (other than in Victoria).
The extent of expenditure covered under the Commonwealth's new
funding commitments will be finalised with participating States as
part of the implementation of the NHHN reforms. This is not
covered in the amendments to the FFR Act.
The NHHN Agreement sets up a framework for the Commonwealth to fund
its increased responsibilities through a combination of:
. retention and dedication of an agreed amount of total GST
revenue to health and hospital services;
. funding as currently provided by the National Healthcare
Specific Purpose Payment (National Healthcare SPP); and
. providing additional Top-up payments, from 2014-15, to
reflect the Commonwealth's greater responsibility for
financing health and hospital expenditure growth under the
NHHN Agreement.
Under the NHHN Agreement, this funding is to be paid through a new
National Health and Hospitals Network Fund (NHHN Fund).
The framework also makes provision for funding currently provided
by the National Healthcare SPP to be adjusted to reflect changes to
funding responsibilities for different programs under the NHHN
Agreement. This includes transferring HACC and related programs
from participating NHHN States (except for Victoria) to the
Commonwealth.
To provide certainty and security to the States, the framework also
imposes additional conditions that the Minister must comply with
when making funding decisions that relate to the NHHN Agreement.
States that have not endorsed the NHHN Agreement are not affected
by these new funding arrangements; they will continue to receive
untied GST payments, for use for any purpose, and the Healthcare
SPP.
[pic]Chapter 1 outlines amendments to provide for the Commonwealth
to make NHHN payments to the States. This requires the following
key changes:
. amendments to the way the Commonwealth makes GST payments
to States participating in the NHHN Agreement in order to
ensure an amount of each State's GST entitlement is
dedicated to health care;
. amendments that replace the current National Healthcare
SPP with a Special payment (for States participating in
the NHHN Agreement) or an equivalent Healthcare SPP (for
States not participating in the NHHN Agreement); and
. the new arrangements for additional Top-up payments, from
2014-15, to be paid by the Commonwealth to States
participating in the NHHN Agreement. These payments
reflect the Commonwealth's greater responsibility for
financing health and hospital expenditure growth under the
NHHN Agreement.
Chapter 2 outlines amendments that implement the funding
arrangements outlined in the NHHN Agreement, including: specifying
payment conditions; creating a new NHHN Fund to facilitate these
payments; and imposing conditions on the Minister when making
decisions relating to the NHHN Agreement.
Date of effect: The new arrangements apply to payments made on or
after 1 July 2011.
Proposal announced: On 20 April 2010, the Council of Australian
Governments, with the exception of Western Australia, endorsed the
NHHN Agreement.
Financial impact: Under the NHHN Agreement, between 2014-15 and
2019-20, the Commonwealth committed to provide no less than
$15.6 billion in additional Top-up funding, over and above the
funding sourced from the National Healthcare SPP and the fixed
dedicated share of GST, in order to meet its new health care
funding responsibilities. The Bill provides flexibility for the
$15.6 billion to be varied downwards, but only in the event that
not all States participate in the NHHN Agreement over this period.
The maximum amount of Top-up payments for a financial year is
linked to the annual Appropriation Acts.
As part of the funding package, the funding to replace the current
National Healthcare SPP will be adjusted to enable a budget neutral
transfer of HACC and related programs from States participating in
the NHHN Agreement to the Commonwealth (other than in Victoria).
The 2010-11 Budget estimated this would equate to a total funding
decrease of $38.1 million in 2011-12, $61.7 million in 2012-13 and
$77 million in 2013-14. This estimate included Western Australia
which was not a participating NHHN State on 20 April 2010. There
will be a corresponding increase in Commonwealth expenses,
resulting in no net impact on the Commonwealth budget over the
forward estimates.
Compliance cost impact: Nil
Do not remove section break.
Outline of chapter
1. The amendments set up a framework for the Commonwealth to fund its
increased responsibilities under the NHHN Agreement by:
. Varying the way the Commonwealth makes GST payments for
States participating in the NHHN Agreement in order to
ensure a certain amount of each State's GST entitlement is
dedicated to matters relating to the NHHN Agreement.
. Replacing the National Healthcare Specific Purpose Payment
(SPP) for States participating in the NHHN Agreement with
a Special payment. These changes ensure that funding for
the new Special payment is equivalent to the old National
Healthcare SPP.
. Providing for additional Top-up payments, from 2014-15,
from the Commonwealth for States participating in the NHHN
Agreement, to reflect the Commonwealth's greater
responsibility for financing health and hospital
expenditure growth under the NHHN Agreement.
2. The amendments retain the current framework for federal financial
relations for States not participating in the NHHN Agreement.
Context of amendments
3. The NHHN Agreement includes significant reforms to the way
financial assistance is paid for States participating in the NHHN
Agreement. This includes changing the treatment of GST general
revenue assistance payments and the National Healthcare SPP, and
creating new arrangements that allow the Commonwealth to meet its
financial commitments under the NHHN Agreement by making additional
Top-up payments.
Summary of new law
Dedicated and other GST revenue
4. The Commonwealth makes GST revenue assistance payments to the
States equivalent to the revenue received from the GST.
5. Each State's entitlement to GST payments is determined using a
formula to ensure GST revenue is distributed in accordance with the
principle of horizontal fiscal equalisation.
6. For States participating in the NHHN Agreement, the amendments vary
the purposes for which GST payments may be used, with two
categories:
. dedicated GST revenue payments for health and hospital
services; and
. untied GST revenue payments for use for any purpose.
7. The amendments ensure GST payments for States not participating in
the NHHN Agreement remain untied general revenue assistance, paid
by the Commonwealth to State Treasuries, for use for any purpose.
Special and Specific Purpose Payments
8. The Commonwealth provides ongoing financial contributions to the
States to support service delivery in respect of health care (the
National Healthcare SPP).
9. For States participating in the NHHN Agreement, the amendments will
repeal the National Healthcare SPP and replace it with a new
Special payment.
10. The amendments ensure a Healthcare SPP will continue to be paid for
States not participating in the NHHN Agreement.
Additional Top-up payments to meet the Commonwealth's financial commitments
11. For States participating in the NHHN Agreement, the amendments
enable the Commonwealth to make Top-up payments to reflect its
greater responsibility for financing health and hospital
expenditure growth under the NHHN Agreement.
. Under the NHHN Agreement, the Commonwealth has guaranteed
that Top-up payments will be no less than $15.6 billion
between 2014-15 and 2019-20. This funding commitment was
made on the basis that all States endorsed the NHHN
Agreement. In the event that not all States endorse the
NHHN Agreement over this period, the total funding of
$15.6 billion may be reduced to reflect this.
. In the event that the Commonwealth's responsibility for
financing growth in health and hospital expenditure is
less than $15.6 billion, the Commonwealth will still
provide $15.6 billion in Top-up payments. This is to
ensure that the Commonwealth's guarantee on total Top-up
payments between 2014-15 and 2019-20 is met.
12. States not participating in the NHHN Agreement will not receive Top-
up payments.
NHHN Fund
13. Dedicated GST revenue, Special and Top-up payments will be paid to
a State or joint intergovernmental funding authority for a State
though a new NHHN Fund, created to facilitate the new funding
arrangements under the NHHN Agreement. Details of the NHHN Fund
are in Chapter 2.
Comparison of key features of new law and current law
|New law |Current law |
|States participating in |GST revenue is paid by |
|the NHHN Agreement are |the Commonwealth as |
|paid GST revenue by the |general purpose financial|
|Commonwealth as either: |assistance to be used by |
|dedicated GST revenue |the States for any |
|payments for health and |purpose. |
|hospital services - paid |Ongoing National |
|through the NHHN Fund; or|Healthcare SPPs are paid |
| |to the States. |
|untied GST revenue | |
|payments for use for any | |
|purpose - paid by the | |
|Commonwealth to the | |
|relevant State. | |
|They are also paid | |
|ongoing Special payments | |
|to replace the current | |
|National Healthcare SPPs | |
|and Top-up payments to | |
|reflect the | |
|Commonwealth's greater | |
|funding responsibility | |
|under the NHHN Agreement.| |
| | |
|States not participating | |
|in the NHHN Agreement are| |
|paid GST revenue by the | |
|Commonwealth as general | |
|revenue assistance to be | |
|used by that State for | |
|any purpose. They also | |
|continue to be paid | |
|ongoing Healthcare SPPs, | |
|but do not qualify for | |
|Top-up payments. | |
Detailed explanation of new law
Preliminary
14. The amendments expand the object of the FFR Act to provide ongoing
financial assistance for States participating in the NHHN Agreement
in the form of NHHN payments. [subsection 3(ba)]
. This funding includes dedicated GST revenue payments,
Special payments and Top-up payments. [sections 15D, 15E
and 15H]
. The amendments retain the objective of the FFR Act for
States not participating in the NHHN Agreement including
the provision of untied GST payments and Healthcare SPPs.
15. Under the amendments, States participating in the NHHN Agreement
will be determined at the start of the financial year. [section 4]
Dedicated and other GST revenue
Certainty about future funding arrangements
16. To provide the States with certainty and security about future
funding arrangements relating to the GST, the NHHN Agreement
requires the Commonwealth to exercise its best endeavours to put in
place legislation to prevent it from making any further changes to:
. the provision of GST revenue to States as untied general
revenue assistance; and
. the amount of GST to be dedicated to health care.
17. The amendments ensure that the Parliament acknowledges the
intention that the Commonwealth will not seek to change provisions
in the FFR Act dealing with untied GST revenue grants and dedicated
GST revenue payments. [section 4A]
Untied GST revenue grants
18. The Commonwealth will continue to provide payments to the States
equivalent to the revenue received from the GST.
19. From 1 July 2011, the GST payments for States participating in the
NHHN in a financial year will be: [section 5]
. the State's share of untied GST revenue payments for use
for any purpose;
reduced by
. dedicated GST revenue payments for matters relating to the
NHHN Agreement.
20. GST payments for States not participating in the NHHN Agreement in
a financial year will remain available for use for any purpose.
[section 5]
Dedicated GST revenue payments
21. From 1 July 2011, the amount of dedicated GST revenue to be paid
for each State participating in the NHHN Agreement in a financial
year will be determined by the Minister and be paid through a new
NHHN Fund. [section 6A]
. The Minister will make these determinations based on
recommendations of the Commonwealth Grants Commission
(CGC).
22. For each participating NHHN State in each financial year, the
Minister will also determine the amount of a State's dedicated GST
revenue to be paid through the NHHN Fund to each State and the
amount to be paid through the NHHN Fund to a joint
intergovernmental funding authority for the State. [subsections
15D(1) and 15D(2)]
Special and Specific Purpose payments
Current Healthcare SPP
23. The amendments will replace the current arrangements enabling the
Commonwealth to make an ongoing financial contribution to support
State service delivery in respect of healthcare - the National
Healthcare SPP. [section 10]
Funding for Special payments
24. From 1 July 2011, the amendments provide for the Commonwealth to
make ongoing financial contributions with either a:
. Special payment (for States participating in the NHHN
Agreement); or
. Healthcare SPP (for States not participating in the NHHN
Agreement).
25. The amendments ensure total funding for these new payments will be
equivalent to the financial assistance States would have received
under the existing National Healthcare SPP arrangements in 2011-12,
and will be indexed annually by a growth factor determined by the
Minister for later financial years. [subsections 15F(1) and
15F(2)]
. The Minister will determine the indexation arrangements by
legislative instrument that will be registered on the
Federal Register of Legislative Instruments. [subsection
15F(2)]
. The Intergovernmental Agreement provides that the National
Healthcare SPP will be indexed by a growth factor that
will be the product of: a health specific cost index;
growth in population estimates weighted for hospital
utilisation; and a technology factor.
26. The Minister will determine by legislative instrument the share of
payments that will be paid: [subsection 15F(3)]:
. for States participating in the NHHN Agreement (as Special
payments); and
. for States not participating in the NHHN Agreement (as
Healthcare SPPs);
- The Minister's determination will be made on the same
basis as the current National Healthcare SPP.
27. Under the NHHN Agreement, funding responsibilities for different
programs will also change. As a result, the amendments allow the
Minister to adjust total funding for Special payments (for States
participating in the NHHN Agreement) that would have been received
under the existing National Healthcare SPP so that they reflect
these changes in funding responsibilities. [section 15G]
. The Minister will make these adjustments (either up or
down) for each State for a financial year. These
adjustments will be known as a State adjustment amount.
[section 15G]
. To provide the States with certainty and security about
Special payments, section 21A requires the Minister to
consider the NHHN Agreement when making determinations
about NHHN funding arrangements. Section 21B sets out the
procedure the Minister must follow if making
determinations that are inconsistent with the NHHN
Agreement. [sections 21A and 21B]
1. State adjustment amounts
Under the NHHN Agreement the Commonwealth agreed to take
full funding and policy responsibility for HACC and related
programs from States participating in the NHHN Agreement.
Victoria did not endorse this aspect of the NHHN Agreement.
The Minister may adjust each State's Special payment to
achieve a budget neutral transfer of funding for HACC and
related programs to the Commonwealth. As Victoria did not
endorse this aspect of the agreement, and will continue to
fund HACC and related programs, Victoria's Special payment
will not be adjusted in relation to this transfer.
Special payments for participating NHHN States
28. From 1 July 2011, the National Healthcare SPPs will be replaced
with Special payments for each State participating in the NHHN
Agreement and will be paid through a new NHHN Fund. [subsections
15E(1) and 15E(2) and section 15B]
29. The Minister will determine the amounts of the Special payment to
be paid through the NHHN Fund to each State and the amounts to be
paid through the NHHN Fund to a joint intergovernmental funding
authority for each State for a financial year. [subsections 15E(1)
and 15E(2)]
30. To provide clarity, section 15E allows the Minister to make
multiple determinations and grants. [subsections 15E(1) and
15E(2)]
31. The base funding for the Special payments in a financial year will
be the component of total funding for Special payments and
Healthcare SPPs payable under subsection 15F(3) attributed to
participating NHHN States (the participating NHHN States
component). [subsections 15E(4) and 15F(3)]
. If all States are participating NHHN States, the base
funding is the total funding payable under subsection
15F(3). [subsection 15E(4) and section 15G]
32. The total base funding for participating NHHN States can be
increased or decreased by the Minister for a financial year based
on the total of the adjustments made for each State (State
adjustment amounts). [subsection 15E(4) and section 15G]
Specific purpose payments for healthcare for non-participating NHHN
States
33. For States not participating in the NHHN Agreement, the amendments
replace the National Healthcare SPP with an equivalent Healthcare
SPP from 1 July 2011. [section 10A]
34. The base funding for the new Healthcare SPP payment will be the
component of total funding for Special payments and Healthcare SPPs
payable under subsection 15F(3) attributed to non-participating
NHHN States (the non-participating NHHN States component).
[subsections 10A(3) and 15F(3)]
. If all States are participating NHHN States, there will be
no Healthcare SPP under section 10A.
35. A non-participating State's share of the Healthcare SPP in a
financial year will be determined by the Minister. [subsections
10A(4) and 15F(3)]
. The Minister's determination will be made on the same
basis as the current National Healthcare SPP.
36. The amendments treat the new Healthcare SPP for non-participating
States in the same manner as the current National Healthcare SPP
meaning that:
. the Minister's determinations under subsection 10A(4) will
be legislative instruments, thereby disallowable; and
[subsection 10A(4)]
. the conditions for the new Healthcare SPP will continue
within their current scope. That is, they must be spent
on healthcare, but non-participating States will have full
budget flexibility to allocate funds within the healthcare
sector as they see fit to achieve any mutually agreed
objectives for that sector. [subsection 10A(5)]
Top-up payments
37. From 1 July 2014, the Commonwealth will provide a new type of
financial assistance, known as Top-up payments, for States
participating in the NHHN Agreement to reflect its greater
responsibility for financing health and hospital expenditure growth
under these arrangements. [section 15H]
38. The additional Top-up payment reflects that hospital costs have
been growing at close to 10 per cent per annum and are expected to
grow at around 8 per cent per annum over the medium term. This
means that hospital costs are expected to outpace growth in GST of
around 6 per cent per annum, over the medium term, as well as
growth in the existing National Healthcare SPP.
39. For each participating NHHN State in each financial year, the
Minister will determine the amounts of the Top-up payments to be
paid through the NHHN Fund to each State, and the amounts to be
paid through the NHHN Fund to a joint intergovernmental funding
authority for each State. [subsections 15H(1), 15H(2) and 15H(3)]
40. The amendments give effect to the Commonwealth guarantee that Top-
up payments during the period 2014-15 to 2019-20 will be at least
$15.6 billion if all States participate in the NHHN Agreement.
[subsection 15H(4)]
41. In the event that not all States participate in the NHHN Agreement
over this period, the amendments provide flexibility for the
Minister to reduce the total funding of $15.6 billion to reflect
this. [subsections 15H(4), 15H(5) and 15H(6)]
42. In the event that the Commonwealth's responsibility for financing
growth in health costs is less than $15.6 billion over this period
(or a lower amount if not all States endorse the NHHN Agreement),
the Commonwealth will still provide $15.6 billion in Top-up
payments. This is to ensure that the Commonwealth's guarantee to
participating States of total Top-up payments of $15.6 billion
between 2014-15 and 2019-20 is met.
Payment conditions
43. The Minister will determine payment conditions for dedicated GST
revenue, Special and Top-up payments. These are outlined in
Chapter 2.
Legislative instruments
44. The Minister's determinations about:
. dedicated GST revenue for a State made under
subsection 6A(2) and dedicated GST revenue payment amounts
made under subsections 15D(1) and 15D(2);
. Special payments (made under subsections 15E(1) and
15E(2)) and State adjustment amounts (made under
section 15G); and
. Top-up payments (made under subsections 15H(1), 15H(2) and
15H(5)).
will be legislative instruments, but they will not be
disallowable. [subsections 6A(4), 15D(9), 15E(9), 15G(3)
and 15H(13)]
45. The Minister's determinations will not be disallowable on the basis
that the determination facilitates the operation of an
intergovernmental body or scheme involving the Commonwealth and a
State and is made for the purposes of the body or scheme.
46. The Minister's discretion in making these determinations is limited
by section 21A requiring the Minister to consider the NHHN
Agreement and the Intergovernmental Agreement. Section 21A is
discussed further in Chapter 2. [section 21A]
47. In addition, section 21B prevents the Minister from making
determinations inconsistent with the NHHN Agreement that would
result in a substantial financial detriment to one or more States
unless a proper process is followed. [section 21B]
. As part of this process, the determination must be tabled
and approved by each House of the Parliament.
. Section 21B is discussed further in Chapter 2.
48. To provide clarity, the Minister's determinations under section 15F
about the indexation of Special payments and the share of payments
that will be paid for States participating in the NHHN Agreement
(as Special payments) and for States not participating in the NHHN
Agreement (as Healthcare SPPs) will be legislative instruments.
They will be disallowable.
Dedicated GST revenue
49. In addition to section 21A and section 21B, the exemption from
disallowance for the determinations under subsection 6A(2) reflects
that the Minister will make them based on recommendations of the
CGC and the determinations will not affect the total amount of GST
revenue appropriated by the Commonwealth, only the distribution of
GST between participating NHHN States.
Special payments
50. In addition to section 21A and section 21B, the exemption from
disallowance for the determinations made under section 15G reflects
that the Minister will make them based on actual funding transfers.
The determinations made under section 15E will not be disallowable
because they do not affect the total amount of Special payments
appropriated by the Commonwealth, only the distribution of that
funding between participating NHHN States.
Top-up payments
51. In addition to section 21A and section 21B, the exemption from
disallowance for Top-up payments reflects that the maximum amount
of Top-up payments for a financial year is linked to the annual
Appropriation Acts, which are subject to Parliamentary scrutiny.
[subsections 15H(7) and 15H(8)]
. Subsection 15H(7) provides for the annual Appropriation
Acts to declare that a specified amount is the general
drawing rights limit in relation to a particular financial
year.
. The general drawing rights limit will operate by
restricting the total amount that may be covered by
drawing rights under the Financial Management and
Accountability Act 1997, and hence, the amount of Top-up
payments that can be paid out from the NHHN Fund in a
financial year to States and joint intergovernmental
funding authorities for States.
Application and transitional provisions
52. These amendments apply from 1 July 2011. Arrangements for Top-up
payments will apply from 2014-15.
Consequential amendments
53. Nil.
Do not remove section break.
Outline of chapter
54. The amendments modify the current framework to implement the
funding arrangements outlined in the NHHN Agreement, including:
creating a new National Health and Hospitals Network Fund (NHHN
Fund) to receive payments; specifying conditions on payments
through the NHHN Fund; and imposing conditions on the Minister when
making decisions relating to the NHHN Agreement.
Context of amendments
55. The NHHN Agreement includes payment arrangements that provide the
Commonwealth and participating States with certainty about the
changes to the financial assistance framework under the FFR Act.
They also ensure the framework is consistent with the NHHN
Agreement.
Summary of new law
56. A new NHHN Fund will receive dedicated GST revenue, Special and Top-
up payments for the purpose of making payments to the States and
joint intergovernmental funding authorities.
57. Dedicated GST revenue, Special and Top-up payments will be subject
to payment conditions.
58. To provide greater certainty and security to States, the Minister
is subject to additional conditions when making determinations
under the FFR Act that relate to the NHHN Agreement.
Comparison of key features of new law and current law
|New law |Current law |
|Dedicated GST revenue, |GST revenue payments and |
|Special and Top-up |National Healthcare SPPs |
|payments are paid through|are paid to State |
|the NHHN Fund for |Treasuries. |
|participating NHHN States|The Minister must |
|and paid to States or |consider the |
|joint intergovernmental |Intergovernmental |
|funding authorities for |Agreement and, if |
|States. |applicable, other written|
|Untied GST revenue |agreements between the |
|payments and Healthcare |Commonwealth and the |
|SPPs paid to |State when making |
|non-participating NHHN |determinations. |
|States continue to the | |
|paid to State Treasuries.| |
| | |
|The Minister must | |
|consider the NHHN | |
|Agreement when making | |
|determinations that | |
|relate to the Agreement | |
|and comply with a set | |
|procedure for making | |
|determinations that are | |
|inconsistent with the | |
|NHHN Agreement and would | |
|result in substantial | |
|financial detriment to | |
|one or more participating| |
|States. | |
|The Minister must | |
|continue to consider the | |
|Intergovernmental | |
|Agreement and, if | |
|applicable, other written| |
|agreements between the | |
|Commonwealth and the | |
|States when making | |
|determinations that do | |
|not relate to the NHHN | |
|Agreement. | |
Detailed explanation of new law
Establishment of the NHHN Fund
59. The NHHN Agreement requires the Commonwealth's funding contribution
to be paid into a NHHN Fund.
60. To facilitate the payment of dedicated GST revenue, Special and Top-
up payments under the FFR Act the amendments establish the NHHN
Fund and specify that it will be a Special Account for the purposes
of section 21 of the Financial Management and Accountability Act
1997. [section 15A]
. A Special Account is an appropriation mechanism that sets
aside an amount within the Consolidated Revenue Fund to be
expended for specific purposes. Any amounts credited to
the NHHN Fund are quarantined from the rest of the
Consolidated Revenue Fund and can only be debited from the
NHHN Fund for the purposes specified.
61. The purpose of the NHHN Fund will be providing:
. dedicated GST revenue payments; [section 15D]
. Special payments; and [section 15E]
. Top-up payments [section 15H]
to States and joint intergovernmental funding authorities
for States participating in the NHHN Agreement. [section
15C]
62. The amendments do not require untied GST (for all States) or
Healthcare SPPs (for States not participating in the NHHN
Agreement) to be paid into the NHHN Fund.
63. The Minister can pay amounts to the NHHN Fund by written
determination, which can specify when payments will be paid into
the fund. [section 15B]
Payment conditions
64. The Minister will determine in writing payment conditions for
dedicated GST revenue payments (under section 15D), Special
payments (under section 15E) and Top-up payments (under section
15H) paid through the NHHN Fund. [sections 15D, 15E and 15H]
65. These must include the standard condition that the State or joint
intergovernmental funding authority for the State spends the
payment on one or more specified NHHN matters. [subsections
15D(6), 15E(6) and 15H(10)]
66. Alternatively, the Minister may determine that the payment is to
cover a State or joint intergovernmental funding authority for the
State for particular costs in relation to capital expenditure for
public hospitals or primary health care facilities where that
expenditure has already been incurred. [subsections 15D(7), 15E(7)
and 15H(11) and section 4]
. The focus of these amendments is on capital expenditure
for public hospitals.
. The reference to primary health care facilities provides
flexibility in the event that such an approach is required
as part of the implementation of the NHHN reforms in
consultation with participating States.
67. If the Minister determines a payment must be spent on one or more
NHHN matters, it must be spent on those matters:
[subsections 15D(6), 15E(6) and 15H(10) and section 4]:
. the provision of public hospital services to public
patients;
. training in public hospitals;
. research in public hospitals;
. general practitioner medical services;
. primary health care services;
. primary health care equivalent outpatient services; or
. a matter that relates to health care and is specified in
the regulations.
68. Costs in relation to capital expenditure for public hospitals or
primary health care facilities where the expenditure has already
been incurred include depreciation and borrowing costs or other
costs as specified in the regulations. [subsections 15D(7), 15E(7)
and 15H(11) and section 4]
69. Particular amounts already spent on capital for public hospitals or
primary health care facilities may be reimbursed by the
Commonwealth to a different entity than the one that incurred the
cost.
Indirect spending of payments
70. To ensure that joint intergovernmental funding authorities are able
to effectively manage the payments they receive while satisfying
the payment conditions, they are able to forward all or part of the
payments to local hospital networks, provided they are still spent
on NHHN matters. [section 15J]
. If local hospital networks forward all or part of the
payments to one or more bodies corporate, the joint
intergovernmental funding authority will still satisfy the
payment conditions, provided the bodies corporate spend
the payment on those matters.
. These conditions only affect the ability of a State or
joint intergovernmental funding authority for the State to
receive and forward payments under the FFR Act. They do
not concern other payment conditions that may be agreed
between joint intergovernmental funding authorities, local
hospital networks or bodies corporate.
71. To provide clarity, if payments are made through the NHHN Fund to a
joint intergovernmental funding authority for a State they will not
be considered to be public money for the purpose of the Financial
Management and Accountability Act 1997. If the funding authority
forwards the money to a local hospital network it will also not be
considered to be public money. [section 15K]
. The Financial Management and Accountability Act 1997 sets
out the financial management, accountability and audit
obligations of agencies that are financially part of the
Commonwealth. In particular, the Act requires agencies to
manage public resources efficiently, effectively and
ethically. It also requires that proper accounts and
records be maintained for the receipt and expenditure of
public money.
72. State legislation establishing joint intergovernmental funding
authorities will deal with financial accountability issues,
including reporting requirements and auditing arrangements. In
addition, the Commonwealth can impose additional requirements
through making regulations for the purposes of defining a joint
intergovernmental funding authority. [section 4]
. The regulations can require that the State law that
establishes the authority must include certain provisions
relating to governance, financial management and
accountability, auditing and reporting obligations.
. Alternatively, the Commonwealth can attach these
conditions to any payments to the joint intergovernmental
funding authority that are made through the NHHN Fund.
[subsections 15D(5), 15E(5) and 15H(9)]
Legislative instruments
73. The Minister's determinations about paying amounts to the NHHN Fund
under section 15B will be legislative instruments, but they will
not be disallowable. [subsection 15B(2)]
74. The Minister's determinations will not be disallowable on the basis
that the determinations facilitate the operation of an
intergovernmental body or scheme involving the Commonwealth and a
State, and are made for the purposes of the body or scheme.
75. The Minister's determinations about payment conditions under
subsections 15D(5), 15D(7), 15E(5), 15E(7), 15H(9) and 15H(11) are
not legislative instruments. This is because they are
administrative rather than legislative in nature. [subsections
15D(10), 15E(10) and 15H(14)]
Payment arrangements
76. The amendments extend the payments arrangements for financial
assistance that currently operate under the FFR Act to NHHN
payments under Part 3A of the Act.
77. The Minister will have the authority to determine in writing the
frequency and amount of NHHN payments to States or joint
intergovernmental funding authorities for States during a financial
year. [subsections 19(1), 19(1A) and 19(1B)]
. This continues the payment arrangements under the current
FFR Act.
78. The Minister will also be able to make advance payments of portions
of NHHN payments that the State will be entitled to under Part 3A
for a financial year. This includes payments to a joint
intergovernmental funding authority for the State. [subsections
17(2) and 17(3)]
. The extension of section 17 to NHHN payments enables the
Minister to make payments for the States based on the
latest available estimates prior to determining the final
amount to be paid. The final amount may typically be
determined in the year following the year that advances of
payments are made.
79. To provide clarity, the amendments to section 17 (advance of
payments) and section 19 (frequency and amount of NHHN payments)
allow a different Minister to be responsible for:
. the payment of NHHN payments under Part 3A; and
. the payment of other amounts under the remainder of the
FFR Act.
80. This can be done by way of Administrative Arrangement Orders.
81. The amendments also ensure that the Minister responsible for
payments under Part 3A can delegate their powers under section 17
and section 19. [subsection 23(3)]
82. The under or overpayment of grants under section 18 of the FFR Act
is also extended to include dedicated GST revenue, Special or Top-
up payments to a State or to a joint intergovernmental funding
authority for the State. This ensures that an adjustment amount
(which may be positive or negative) to account for any difference
between the estimated and actual outcome for dedicated GST revenue,
Special or Top-up payments is to be deducted from any amount that
the State or joint intergovernmental funding authority for the
State is entitled to receive by way of financial assistance in the
following financial year. [section 18]
83. The amendments also extend the current requirements to repay
financial assistance under section 20 of the FFR Act if a condition
of payment is not satisfied.
. This ensures that if a State or joint intergovernmental
funding authority for the State is required to spend
dedicated GST revenue, Special or Top-up payments in
accordance with certain conditions, the Minister can
determine that the State or joint intergovernmental
funding authority should repay an amount to the
Commonwealth, if the required conditions are not
fulfilled. [subsection 20(6)]
84. The amendments also clarify that if the Minister has determined a
joint intergovernmental funding authority must repay financial
assistance because a condition of payment is not satisfied, the
Minister may deduct this amount from any future financial
assistance that the joint intergovernmental funding authority is
entitled to receive. [subsection 20(9)]
Minister to have regard to the NHHN Agreement
85. To provide greater certainty and security to States participating
in the NHHN Agreement, the Minister must consider the NHHN
Agreement as well as the Intergovernmental Agreement when making a
determination about dedicated GST revenue for a State under section
6A or NHHN payments under Part 3A. [section 21A]
. If the determination relates to financial assistance for a
particular State or the joint intergovernmental funding
authority for a particular State, the Minister must also
consider any other written agreement between the
Commonwealth and that State. [subsection 21A(e)]
Procedure for making determinations that are inconsistent with the NHHN
Agreement
86. To provide the States with certainty and security about future
funding arrangements, the NHHN Agreement requires the Commonwealth
to exercise its best endeavours to put in place legislation that
sets out a specific process, should the Commonwealth seek to vary
the NHHN Agreement in a way that involves substantial financial
detriment to States.
87. To provide this additional assurance to the States, a proposed
determination must be approved by participating States through COAG
and by each House of Parliament if: [section 21B]
. it relates to dedicated GST revenue under section 6A or
NHHN payments under Part 3A;
. would be inconsistent with the NHHN Agreement; and
. would cause substantial financial detriment to one or more
States participating in the NHHN Agreement.
88. Before participating States can approve the proposed determination
at COAG they must: have received a copy at least three months
before the approval; or have received a copy and waived the three
month notice requirement. [subsection 21B(2)]
89. The procedure in section 21B is a sign of good faith on behalf of
the Commonwealth to the States in regard to the NHHN Agreement. As
a result, it is intended there be a high threshold in relation to
what is substantial financial detriment to one or more States. It
is intended that this threshold would only be met in exceptional
circumstances.
Application and transitional provisions
90. These amendments apply from 1 July 2011. Arrangements for Top-up
payments will apply from 2014-15.
Consequential amendments
91. Nil.
Do not remove section break.