Kevin Rudd is proposing steps to integrate the health system in radical changes, of a scale which transcends Australia's last big health revamp, Medicare, in 1984.

Not only is he proposing to radically change Australia's heavy dependency on hospitals, he is also planning to establish a new "independent umpire" at arms lengths from government, to set "efficient national prices" of health services to be paid for by federal and state governments.

The Rudd Government is seeking to REDUCE not increase use of public hospitals, thus easing the strain, by putting in place a more efficient, integrated arrangement which, it is hoped, will spur people to be treated by less expensive primary health, (ie outside hospital) services.

He is hoping to assuage the hostility of some states, particularly Victoria, to change by promising dollops more money for both hospital and primary care.

Rudd is promising to double the Commonwealth's contribution to efficient hospital services by promising to pay 60 per cent of the efficient running cost --- up from the 40 per cent level recommended by his own National Health and Hospitals Reform Commission.

Canberra would also pay 100 per cent of the efficient price of primary health care services as part of a package he says will "permanently reverse" the decline in Commonwealth funding of public hospitals.

The federal Government will also directly fund "local hospital networks" (sounding familiar to the current Victorian arrangements) to "break down the barriers" in the system and deliver better integrated care.

These go much further than what was expected.

The National Health and Hospitals Reform Commission, which delivered its report to the Government nine months ago, called for a shift towards a "one health system" to end the blame and cost-shifting inherent today. The commission urged the Federal Government to take over 100 per cent of the efficient cost of hospital outpatient services and pay 40 per cent of the efficient cost of every public patient admission to a public hospital, with that percentage figure to be increased incrementally to 100 per cent.