1                This working paper describes the assessment for Hospital Patient Fees[1] and the results.  The development of the assessment method in the 2004 Review is discussed in Volume 3 of the 2004 Review Working Papers. 

Description of the category

2                The Hospital Patient Fees category assessment recognises the capacity of States to raise revenue from patient fees received from private inpatients and non-inpatients in all public hospitals. 

3                Table 1 shows the average user charges for the last six financial years.  In 2005‑06, the user charges for this category were $41.23 per capita, which represented 6.05 per cent of total user charges revenue and 4.55 per cent of Inpatient average expenses.

Table 1            Hospital Patient Fees, average user charges, 2000‑01 to 2005‑06

Assessment method

Description of the assessment

4                The hospital patient fees assessment for the 2007 Update used one factor — the hospital patient fees factor.  The factor assessed the States' capacity to raise revenue from hospital patient fees.  States with above average numbers of people who were private patients in public hospitals were assessed as having an above average capacity to raise revenue. 

Assessment structure

5                Table 2 summarises the assessment structure for the 2007 Update.

Table 2            Hospital Patient Fees, assessment structure for the 2007 Update, 2005‑06

Component	Component weight	Factor	Basis of calculation
	%
Hospital patient fees	100	Hospital patient fees	Based on separations of private patients in public hospitals cross-classified by age, sex, Indigeneity, income and region, derived from National Hospital Morbidity Data, and 2001 Census of Population and Housing data.

Calculating the category factor

6                Table 3 shows the calculation of the category factor for the 2005‑06 assessment year of the 2007 Update.

Table 3            Hospital Patient Fees, derivation of category factor, 2007 Update, 2005‑06

 

              Component factor rebased so that the average is 1.00000.

7                The category revenue raising capacity was calculated as follows: 

Results for 2005‑06

8                Table 11 at the end of this working paper summarises the results of the assessment.  It shows the average, actual and assessed user charges for each State for all years of the 2007 Update.

9                Table 4 shows actual, average and assessed user charges per capita and revenue raising capacity ratios for 2005‑06.

Table 4            Hospital Patient Fees, assessment results, 2005‑06

(a)             The revenue raising capacity ratio is the ratio of assessed to average category user charges per capita. 

10            Note:    ACT actual expenses may include municipal expenses

11            Figure 1 illustrates the per capita assessed, actual and average user charges for Hospital Patient Fees for 2005‑06.  It shows that the ACT and the Northern Territory have below average capacity to raise hospital patient fees, whilst other States have close to average capacity.

Figure 1          Hospital Patient Fees, user charges revenue per capita, assessed, actual and average, 2005‑06

CONTRIBUTION TO GST REVENUE DISTRIBUTION

12            Table 5 shows the category's contribution to the distribution of GST revenue and Health Care Grants (hereafter described as GST revenue) implied by the 2007 Update. 

Table 5            Hospital Patient Fees, contribution of assessment to GST revenue distribution, 2007 Update

Differences from an equal per capita assessment

13            Compared with an equal per capita (EPC) assessment, the 2007 Update redistributed $12.5 million away from New South Wales, Queensland, South Australia and Tasmania to Victoria, Western Australia, the ACT and the Northern Territory.

14            The hospital patient fees factor assessed the capacity of States to raise revenue from private patients in public hospitals.  The assessment applied national average use rate of private patients using public hospitals, disaggregated by age, sex, region of residence, Indigeneity and socio‑economic status[2], to State population profiles. 

15            Table 6 shows the use rates by these characteristics derived from the 2001‑2002, 2002‑03 and 2003‑04 National Hospital Morbidity Data.  As indicated in Table 6, relative to the national average, people who were non‑Indigenous, low income earners[3], older than 59 years, or living in the remote areas were higher users of public hospitals as private patients.  States with above average numbers of people in these groups were assessed as having an above average capacity to raise revenue from hospital patient fees and consequently below average needs from GST revenue distribution. 

16            Table 7 shows the proportions of people in a State with characteristics associated with use of public hospitals as private patients. 

17            New South Wales, Queensland, South Australia and Tasmania were assessed to have above average capacities to raise revenue from hospital fees.  Both South Australia and Tasmania had relatively high proportions of aged and low income people, leading to a higher capacity to raise revenue.  New South Wales had a relatively high proportion of aged people, while Queensland had relatively high proportions of low income earners and people living in the remote areas, leading to a higher capacity to raise revenue. 

18            Victoria, Western Australia, the ACT and the Northern Territory were assessed to have below average capacities to raise revenue.  Both Western Australia and the Northern Territory had relatively high proportions of Indigenous and young people who were low users of public hospital as private patients, leading to a lower capacity to raise revenue.  For Victoria and the ACT, relatively high proportions of high income people and people living in non‑remote areas (along with a relatively low proportion of older people for the ACT) accounted for their below average capacities to raise revenue. 

Table 6            Use rates of private patients in public hospitals by characteristic, 1999‑2000, 2001‑2001, 2002‑03 and 2003‑04

Characteristic/use rate	1999-2000(a)	2001‑02(b)	2002‑03(b)	2003‑04(b)
	%	%	%	%
Indigeneity
Indigenous	0.2	0.7	0.8	0.9
Non-Indigenous	1.6	2.1	2.1	2.2
Income(c)
High	1.3	1.8	1.8	1.9
Low	2.1	2.6	2.7	2.9
Age in years
0 to 59	1.1	1.5	1.5	1.5
60 or over 60	4.0	4.6	4.7	5.3
Sex
Male	1.4	2.0	2.0	2.2
Female	1.7	2.1	2.1	2.1
Remote
Non-remote	1.6	2.0	2.0	2.2
Remote	1.9	2.7	2.5	2.7
Overall	1.6	2.1	2.1	2.2

 

(a)        Based on the Rural, Remote and Metropolitan Area (RRMA) regional classification. 

(b)        Based on State‑based Accessibility/Remoteness Index of Australia (SARIA) regional classification.  

(c)        The ABS National Health Survey, 2001 defined those with annual income below $31 200 or $21 800 as low income households or individuals respectively. 

 

Source:                    Use of private patients in public hospitals derived from the National Hospital Morbidity Data (AIHW) and population counts from 2001 Census of Population and Housing. 

Table 7            Proportion of population with certain characteristic in a State

	NSW	Vic	Qld	WA	SA	Tas	ACT	NT	Aust
Indigeneity
Indigenous	2.1	0.6	3.6	3.6	1.7	3.8	1.3	29.7	2.4
Non-Indigenous	97.9	99.4	96.4	96.4	98.3	96.2	98.7	70.3	97.6
Income(a)
High	70.6	71.2	67.2	69.7	65.9	61.5	81.0	70.5	69.6
Low	29.4	28.8	32.8	30.3	34.1	38.5	19.0	29.5	30.4
Age in years
0 to 59	82.6	82.7	84.1	84.9	80.9	81.5	88.0	93.6	83.2
60 or over 60	17.4	17.3	15.9	15.1	19.1	18.5	12.0	6.4	16.8
Sex
Male	49.4	49.1	49.5	49.8	49.3	49.0	49.2	51.9	49.4
Female	50.6	50.9	50.5	50.2	50.7	51.0	50.8	48.1	50.6
Remote
Non-remote	98.0	99.7	94.1	92.6	97.2	99.4	100.0	59.6	96.8
Remote	2.0	0.3	5.9	7.4	2.8	0.6	0.0	40.4	3.2

 

(a)        The ABS National Health Survey, 2001 defined those with annual income below $31 200 or $21 800 as low income households or individuals respectively. 

Source:2001 Census of Population and Housing based on SARIA regional classifications. 

Changes since the 2006 Update

Summary of changes

19            The reasons for change for the 2007 Update were the revisions to the average user charges for the category and the replacement of 1999‑2000 private patient separations with 2003‑04 private patient separations.

20            Data from the States was used for the user charges for all years in the 2007 Update.  Previously, the Commission estimated hospital patient fees from a proportion of total hospital user charges.  The State data resulted in lower fee user charges for each year of the assessment, meaning that the GST revenue redistributions decreased for those States with below average assessed revenue raising capacity ratios for this category, as less of the GST revenue was required for equalisation.  There was a redistribution to New South Wales, Queensland, South Australia and Tasmania from Victoria, Western Australia, the ACT and the Northern Territory.

21            The more recent data on private patient separations indicated that, compared to the earlier data, the proportion of patients using public hospital as private patients (and so could be charged hospital fees) increased in New South Wales as well as, to a lesser extent, in Tasmania and the Northern Territory (therefore decreasing their share of the GST revenue).  The proportion of patients using public hospital as private patients decreased in the other States, therefore increasing their share of the GST revenue.

Effect of assessment on the distribution of GST revenue

22            Table 8 shows the distribution of GST revenue resulting from the assessments in the 2006 Update and the 2007 Update.  It also shows the sources of the changes.

23            Changes in the distribution of GST revenue between the 2006 Update and the 2007 Update were brought about because the Commission:

·                used revised financial data in the average user charges and other revised data in factor calculations for the years 2000-01 to 2004-05; and

·                replaced 2000-01 average user charges and factors with those of 2005-06 to move forward the five-year period on which GST revenue distribution was based.  Moving the five-year period forward in this way ensures the assessments reflect recent trends in State priorities on the services provided and recent trends in State demographic, and economic circumstances on the relative costs of those services.

Table 8            Hospital patient fees, effect of assessment on GST revenue distribution, 2006 Update to 2007 Update

 

(a)             Assuming same pool and a constant population. 

(b)           The total redistributed amount shows the change in the amount redistributed among the States between the 2006 Update and the 2007 Update.  It does not necessarily equal the difference in the total redistribution from EPC between the two inquiries.

24            The 2007 Update assessment resulted in a $3.5 million change in the pattern of distribution of the GST between the States and a $3.5m decrease in the amount redistributed, compared to the 2006 Update.  The main reasons for the changes in GST revenue distribution are as follows.

Changes due to revising average user charges for years 2000-01 to 2004‑05

25            Revising average user charges for 2000‑01 to 2004‑05 redistributed $5.3 million.  Data from the States was used for the user charges for all years in the 2007 Update.  Previously, the Commission estimated hospital patient fees from a proportion of total hospital user charges.  These proportions were estimated based on the information provided by the States in 1997‑98.  The State data resulted in lower fee user charges for each year of the assessment, meaning that the GST revenue redistributions decreased for those States with below average assessed revenue raising capacity ratios for this category, as less of the GST pool was required for equalisation.  There was a redistribution to New South Wales, Queensland, South Australia and Tasmania from Victoria, Western Australia, the ACT and the Northern Territory.

26            Table 9 shows the average expenses and user charges for the six financial years of this update and those of the previous update.

27            The downward revision in average user charges was largely due to Victoria's actual user charges being less than the estimates used previously.  New South Wales and South Australia also had actual user charges less than previously estimated, partially offset by higher actual user charges in Queensland.

Table 9            Hospital patient fees, average user charges used in the 2006 and 2007 Updates

            

Changes in State circumstances — replacing 2000-01 with 2005-06 data

28            Table 10 shows the actual user charges and implied revenue raising capacity for 2000-01, the year that drops out of the assessment period, and 2005-06, the year that comes in, for the 2007 Update assessment.

Table 10          Hospital Patient Fees, 2000-01 and 2005-06

29            Changes in the importance of the category.  The category average revenue increased by 36.4 per cent, which was less than the increase in the pool of 43.3 per cent.  The impact of this on the distribution of GST revenue was small, at less than $0.05 million.

30            Changes in the capacity to raise revenue.  Replacing 2000‑01 revenue bases with those for 2005‑06 had the effect of redistributing $2.4 million of GST revenue.

31            The assessed revenue raising capacity ratios for New South Wales, Tasmania and the Northern Territory increased between 2000‑01 and 2005‑06, mostly due to replacing 2000‑01 hospital patient fees factors with those for 2005‑06. 

32            Data on hospital use for 2003‑04 were included in the 2007 Update assessment, replacing hospital use data for 1999‑2000[4].  The hospital use data includes separations for private patients in public hospitals and represents patients who can be charged hospital fees.  The more recent data indicated that, compared to the earlier data, the proportion of patients using public hospital as private patients (and who could be charged hospital fees) increased in New South Wales (therefore decreasing its share of the GST revenue).  Whilst the proportion of people using public hospitals as private patients also increased in Tasmania and the Northern Territory, there was only a marginal effect on their share of the GST revenue.  The proportion of patients using public hospitals as private patients decreased in the other States, therefore increasing their share of the GST revenue.

33            This working paper was prepared by the Expense — Health and Welfare section of the Commonwealth Grants Commission.  If you have any questions about its content please contact Anthony Nichols on (02) 6229 8858 or anthony.nichols@cgc.gov.au.

34             

35                Date: 23/2/07

36             

Table 11          Assessment of expenses, Hospital patient fees

Note:  ACT user charges may include municipal user charges.  Refer to Attachment A of the 2007 Update, Relative Fiscal Capacity of States for how these figures are compiled.