Nurses and midwives wrote anonymously to Health Minister Meegan Fitzharris last year alleging that mothers’ and babies’ lives were being put at risk by chronic overcrowding in the maternity unit. The minister commissioned a review into workplace culture in public health after rejecting calls by the Australian Medical Association for a full board of inquiry and an investigation into the adequacy of resources.

The question of adequacy of resources is, of course, fundamental. A close look at the ACT budget shows that funding is going backwards by about 1 per cent a year after taking into account population growth, an ageing population and changes in health technology. That’s without taking into account growth in wages and other costs.

In the four years from 2012-13 to 2016-17 the shortfall was $67 million in hospital funding. In 2016-17, an extra $37 million should have gone into hospitals just to keep up with demand, not including increases in wages and other costs. Once wages and costs are included, the shortfall for that year alone is, conservatively, $120 million.

Unit costs of hospital activity as measured by cost per weighted separation, which takes into account the complexity of each episode, have historically been higher in the ACT than the national average - as much as 33 per cent higher. This is clearly not a function only of technical inefficiency or overservicing. The clinicians practise within a national and professional context and there is no suggestion that there is any deviation from national norms and standards. The main factors contributing to the higher-than-average unit cost are the diseconomies of scale and the cross-border patient flows from NSW.

The hospital system in the ACT is relatively small. In 2016-17, there were 54,893 overnight separations in the ACT’s public hospitals, compared with 1.04 million in NSW. Specialties with relatively smaller throughput need to be maintained, and the overheads and fixed costs are distributed over a smaller level of activity.

The ACT government has, with justification, argued over time in its submissions to the Commonwealth Grants Commission that cross-border patients contribute significantly to the higher-than-average cost.

Like any system, there is scope for improving efficiency. However, health-system improvements generally require long lead times, investment and, most importantly, close engagement with clinicians. The review into workplace culture has reported that there has been a noticeable level of disengagement of clinicians in the ACT due to disenchantment with management and the administration of the health system. While unfortunately not surprising, this finding identifies a major hurdle to change in the short-to-medium term.

The hospital system in Australia is critically dependent on growth funds. Coverage and access are genuinely universal, making it a fair system that is the envy of the world. Three main factors drive the inexorable growth in costs and numbers of patients - population increase, ageing of the population, and advances in health technologies.

The annual increase in funding also takes into account inflation and increases in wages and the cost of equipment and consumables.

Failure to provide adequate annual growth funds can have major consequences. Noting that patients cannot be turned away, constraints on growth result in longer wait times in emergency and for surgery. Frontline clinicians do their best with the number of rostered staff and available beds by attending to the most urgent, while the rest are prioritised. Another consequence, less realised, is the frontline clinicians become stressed and fatigued, and the system as a whole becomes prone to tension and conflict.

We have pointed out the inadequacy of growth funding in successive ACT budgets. Data from the Australian Bureau of Statistics, supplied by the ACT government, reveals severe constraint since 2012-13. From 2007-08 to 2011-12, nominal health spending grew by an average of 10.3 per cent a year. By comparison, from 2012-13 to 2016-17, this was slashed to just 4.1 per cent.

Population growth from 2007-08 to 2011-12 averaged 1.9 per cent. In the second period, 2012-13 to 2016-17, it averaged 1.8 per cent. The increase in separations per head of population due to ageing and technology changes was 2.7 per cent in the first period, and 3.2 per cent in the second.

The appropriate growth for price increases can be debated. Budget provision could be at health inflation, or weighted average of changes in the consumer price index and wage price index, or some other escalator. These factors combined indicate a required or desirable annual growth rate of 9.9 per cent for the first period, 2007-08 to 2011-12, and 9 per cent for the second, 2012-13 to 2016-17.

But any debate about appropriateness of the price escalator is irrelevant, as funding in the second period was inadequate to even meet population and utilisation growths - that is, the overall growth in demand. The system was in negative territory just meeting increased demand, with no capacity to cover the increasing costs of inputs.

In reality, prices for inputs such as wages and medicine did increase and were met. The system clearly had to resort to rationing, however, resulting in longer waits. In total, about 1700 patients waited longer than clinically recommended for their surgery.

In the emergency department, for urgent cases in 2017-18, the ACT had the lowest rate of Aboriginal and Torres Strait Islander patients being treated within national benchmarks, at 34 per cent against a national average of 66 per cent. Other Canberrans fared slightly better, at 37 per cent in this category, but still the lowest in the country. It is not suggested that the system or clinicians actively discriminated. In general, rationing in systems can lead to distributional inequities unless special care is taken to ensure that the access of marginalised and disadvantaged groups is not limited.

The government’s plans for improving the performance of the health system are unlikely to be effective. Notably, the decision to separate the policy- and service-delivery arms mirrors the health structure of the Carnell government in the mid 1990s under the “purchaser-provider model”. This was abandoned and the system reintegrated by the incoming Labor government because of the widespread acceptance of the fact the system was deemed to have failed. It is difficult to see how a return to a failed structure of the past is the way to the future.