The National Health and Hospitals Reform Commission report is a policy response to a political issue — and not too bad a response at that.

The political issue is not the one that the media finds most interesting — Kevin Rudd’s promise to call a referendum if the states don’t fall into line on health, or even the Opposition’s attempts to claim Rudd has broken his promise (give up guys — after 18 months, Rudd is perceived, as much as any politician can be, as keeping his promises, in the same way Howard was perceived as breaking them).

The political issue is that our health systems — plural — are perceived as broken when in fact they’re not. Australia — as Rudd acknowledged yesterday — obtains pretty good health outcomes from its healthcare system despite ploughing less as a proportion of GDP into health than most OECD countries.

Part of that is because of extraneous factors — we’re a peaceful country with few guns, well-enforced road rules, an educated popualtion and a climate that’s normally not too hostile. There’d be something wrong if we weren’t one of the world’s healthier peoples.

The media, however, enthusiastically promote the idea that if you have to wait in an emergency department for treatment, or because there are queues for elective surgery, or adverse events in hospitals, that’s evidence of fundamental dysfunction. Urban Australians seem to have bought into this idea, unwilling to accept that, in the absence of a pricing mechanism, queuing is the market’s way of rationing goods and services, or that, no matter how good the system, mistakes will always happen.

Kevin Rudd happily endorsed this approach when he promised to fix health before the election. As with fuel prices and groceries, doing it is proving much harder than saying it.

There are plenty in the health sector who are also happy to play along. The health sector is chockers with groups, companies and academics who either want to protect their stake in the current system or change the current system so they can get a bigger stake. There are few disinterested views on offer from health professionals.

Despite all that, there is some very good work in the report.

There are some glaring problems in our health system: if you’re indigenous, or live in rural or regional Australia, or have mental health issues, you’re comparatively poorly served and that’s reflected in health outcomes for those groups. To its credit, the Commission has tackled these problems as the first of its three priorities, urging greater resources and better coordination of services in those areas.

It also recognises that basic dental care has become a problem for lower-income Australians, although whether a tax hike to extend Medicare to a $3.6b a year “Denticare” program is the best way to address it might be an issue voters will want to think about.

It would be a pity if, in going to high-visibility “coalface” health industry sites like Royal North Shore Hospital, the Prime Minister mistook the whingeing of mostly well-off urban Australians and the media that serves them for the real priority of improving health outcomes for Australians in indigenous communities, and country towns, and those with mental illness. That’s where precious extra resources should be directed, not at reducing waiting times in urban emergency wards or cutting queues for non-urgent surgery, and MPs from all parties who represent rural and remote areas should be making that point loud and clear in the coming months.

The report then addresses both emerging challenges and the changes necessary for long-term sustainability. In those sections, the report frequently offers only current healthcare fashions. More funding for prevention. The wonders of e-health — something that has been promised for years and never materialised; the astonishing bureaucratic wrangling and industry resistance on electronic health records that has gone on for years suggests the report’s timeframe of 2012 for a personal electronic health record is rather optimistic. Greater use of ICT and broadband. More coordinated primary care, with greater continuity of care. All of these are well-established approaches, mirroring existing documents like the National Service Improvement Frameworks for chronic disease developed much earlier in the decade.

Where the report is stronger, though, is in arguing the case for more efficient funding and more unified funding. It recommends activity-based funding for hospitals, Commonwealth responsibility for out-patient services, and different Medicare funding models than the standard consultation-based approach, as well as consideration of, in essence, a contestable version of Medicare, “Medicare Select”. But the move to a single funder is the key point, one recognised by former Health Secretary Andrew Podger today in the AFR, where he notes that, whatever Rudd might say, the issue is not the competence or otherwise of State governments managing health. It is “the structural impediments of multiple government funders”.

Podger’s point is critical because, in the absence of a magic pudding, the cost of health care reform — on top of the burgeoning cost of the sector as the population ages and advanced treatments proliferate — have to come from somewhere. Yesterday Rudd lamely offered Budget changes to the Medicare safety net and the haircut he had given the private health insurance rebate as evidence there were significant savings to be obtained that could fund big reform. And while it’s true that the appalling rort of the private health insurance rebate should be ended forthwith, the inefficiencies that accrue from having multiple funders, often funding the treatment of the same patient with the same condition through multiple stages of their treatment, are the biggest potential gain.

Rudd repeatedly says that he — like all Australians — “just wants it fixed”. But what precisely Rudd — and the rest of us — want fixed is less clear. The issue of whether “faceless bureaucrats in Canberra” or “incompetent State Governments” run healthcare is less important than the need to address the health funding equivalent of the old rail break-of-gauge that splits healthcare into multiple and sometimes conflicting fiefdoms.