Issue number:
Date Issued:
11 Dec 2003
Issued to:
Public hospitals
To provide advice about the new 2003-2008 Australian Health Care Agreement and the requirement for public hospitals to comply with the Medicare Principles.


Public hospitals are required to comply with the Medicare Principles and related sections of the 2003-2008 AHCA. This covers issues including: compliance with national standards on patient election processes, not billing against the Medicare Benefits Schedule for services provided to public patients, and ensuring that public patients have access to the same clinical services as private patients.

The Australian Government Minister for Health can impose significant financial penalties on Victoria if public hospitals breach the AHCA. Public hospitals must ensure that all relevant staff understand and comply with the Medicare Principles.

1. Overview of 2003-2008 AHCA

In August 2003 the Victorian Government signed the 2003-2008 Australian Health Care Agreement (AHCA). Key features of the Agreement are:

  • The Australian Government will provide funding of $10.1 billion over 5 years if Victoria meets various compliance requirements.
  • There are three broad sets of compliance requirements:
    • Adherence to the Medicare Principles;
    • Victorian state funding to at least match the rate of growth in Australian Government funding under the AHCA; and
    • Meeting new and expanded performance reporting requirements.
  • Pharmaceutical reform implemented under the previous Agreement will continue to be rolled out, providing access to the PBS for patients on discharge and for outpatients, together with access to chemotherapy for outpatients and day admitted patients.
  • A new Pathways Home Program has been established to provide one-off funding to support the transition from hospital to home.

The 2003-2008 AHCA differs from its predecessor as follows:

  • The Agreement does not contain a requirement for Victoria to meet a target rate of public patients treated.
  • The Australian Government funding provided to Victoria is not linked to the level of private health insurance.

View the 2003-2008 AHCA.

2. Implications of the Medicare Principles for Victorian Public Hospitals

Victorian public hospitals must comply with Medicare Principles, and related sections of the 2003-2008 AHCA, to ensure that Victoria is not financially penalized. Attachment 1 provides detailed information on the principles.

Attachment 1 - Medicare Principles - Requirements in the 2003-2008 AHCA (Word File 83KB)

The strategic directions and policy outcomes for public hospitals will continue to be outlined annually in the Policy and Funding Guidelines. The 2003-2004 Guidelines have highlighted the importance of continuing the Hospital Demand Management (HDM) Strategy and strengthening the focus on financial sustainability. Under the HDM Strategy public hospitals will continue to focus on creating capacity to meet demand for emergency and elective surgery services through funding growth, substitution, practice improvement and innovation, and new models of care that prevent hospital admission. Under the financial sustainability strategy, there are incentives for public hospitals to increase private patient revenue. It is essential that the implementation of these strategic directions occurs within the framework of the AHCA.

Public hospitals must ensure that all relevant staff understand and comply with the Medicare Principles. This includes ensuring that any complaints relating to potential breaches of the Medicare Principles are managed at senior levels. Public hospitals should consult with the Department of Human Services before taking action that might constitute a breach of the Medicare Principles or the Australian Health Care Agreement.

Shane Solomon
Executive Director
Metropolitan Health & Aged Care Services