There are two elements in the Government’s health reform plan that make it worth pursuing, and neither have anything to do with which levels of government funds what.

One is the switch to performance-based funding, rather than handout-style block grants, which will establish some link between hospital activity and patient services, and the funding they receive.  The other is the rollout of uniform performance reporting.

Both have been flagged previously in COAG agreements over the past two years, but now they would form the core of a new funding system.

Performance information is, contrary to what teachers and principals might say, always good, and it yields cumulative benefits for consumers and the economy over the long-term. Uniform reporting will enable comparisons between hospitals. Patients, particularly in regional areas, have less choice about the hospitals they use than parents tend to for schools, so don’t expect a MyHospital.gov.au to drive a consumer health revolution as patients pick and choose where they go.

There’ll be an element of that, but performance information will more importantly allow poor-performing hospitals to be identified and addressed by funders, their managers, and regulators.

On the effectiveness of Local Hospital Networks, which apparently will be no bigger than groups of five hospitals, it depends on who you ask.  Some observers say they’re too small and won’t be able to achieve economies of scale or negotiate with large-scale providers. Tony Abbott, to the extent that he still holds any opinions he held last week, presumably thinks they’re too big, although he seems to be the only advocate for boards for every hospital in the country.

But for anyone who suggests the reform plan is a power grab by Rudd and centralisation gone mad (both of those attack lines are probably coming soon to a Coalition press release near you), the outsourcing of responsibility to these small-scale management bodies comes with quite the opposite political problem.

When Abbott launched his book last year, I asked him specifically about his hospital board proposal and suggested that the moment such a board was found to have grievously mismanaged a hospital, or featured in some scandal, Opposition politicians and the media would demand that Governments step in and take back control. To his credit, he admitted that was a substantial risk and that ultimately you couldn’t legislate for such bodies to always act sensibly.

Well, now Kevin Rudd is proposing to take exactly that risk, because while Local Hospital Network CEOs would be in the firing line for everything that went wrong in a hospital in their network, it’s silly to think that would prevent politicians and the media from demanding intervention by Governments when things go wrong — and they will inevitably go wrong.

Another criticism of the plan — which within 24 hours had become incessant from the states — is that it doesn’t involve additional funding. Well, why should it?  They’ve already been handed tens of billions in additional funding.  The states, like the health industry, never met a problem that couldn’t be solved with lots more money.  They’re behaving in typical fashion — demanding Commonwealth handouts as the price for support of reform — barely 18 months since they got huge handouts from Rudd for hospitals.

That’s why it’s to be hoped that the Prime Minister’s threat of a referendum is part of the policy component of the reform plan, as well as a key element in the political component.  On Kevin Rudd’s COAG record so far, he tends to hand out a lot of money, and not secure very good results from the states for his spending.  Hopefully, armed with the threat of going to the people, he can drive reform without wasting more money on the states whose poor management is the primary problem being addressed here.