The Kevin Rudd plan to reform the health system and, if necessary, take over the hospitals has many sound policy features.

The extra funding for intermediate care to meet the needs of people between hospital and residential aged care is particularly welcome.

But looking into the policy document a little further there are some caveats.

First, $2 billion sounds impressive. However, that’s over four years – $500 million per annum does not go a long way in health these days. After all that will fund only 10 Mersey hospitals!

Moreover, $1 billion of the $2 billion will come from savings resulting from reduced duplication between the levels of government. Fair enough, but even the most ardent advocates of reducing duplication cannot specify exactly how those savings will be achieved in reality, and all estimate they will take many years to be realised.

Then there is the plan itself. The states, within 100 days of Labor forming government, would agree to a process for the Commonwealth to set performance standards for them to reach in running the hospitals. Given the speed with which the Council of Australian Governments (COAG) moves, that is an ambitious timetable.

Some of the $2 billion will be to help the States come up to scratch. Sensibly, the criteria against which the $2 billion will be spent are mainly intended to keep people out of hospitals. It’s therefore not all that clear how useful the additional money will be for the States as they are primarily involved in running the public hospitals – not the primary care sector, which is where all the action must occur to keep people out of hospitals.

Finally, there is the fall back plan if the States fail to meet the mark – a Commonwealth takeover. The ALP policy document refers to a referendum as the vehicle for achieving this.

Given that the proposed takeover also involves clawing back the current Commonwealth funding for the hospitals, it is almost certain that the States will oppose the change. Australian voters have been notoriously cautious in referendums, and agreeing to a Commonwealth takeover of public hospitals in the face of state premiers’ opposition might not be the outcome.

So then we would be in a real pickle: a dysfunctional health system but with the obvious solution not possible.

Until 2004 Robert Wells was a senior official in the Commonwealth Department of Health and Ageing.