Criticism of Comrnonwealth involvement in the funding of hospitals through the cost sharing arrangements has linked the arrangements with the increasing absorption of resources, over the 1970s, by the health sector, in which hospitals are major users of resources. Introduction of the cost sharing arrangements in 1975 coincided with a period of rapidly increasing hospital expenditures.
This thesis aims to analyse the effects of the cost sharing arrangements, within the limits imposed by data availability, to discover the ways through which increased expenditures could have been generated, and to provide some indication of the importance of these factors in the escalation of hospital expenditures. Proposed alternatives will be examined for their likely impact on hospital expenditure. Intergovernmental grants and their attached conditions can distort the allocation of resources by altering the relative prices facing recipient governments and individuals. Whether or not distortions result depends on the reason for the grant. Different types of grants are most appropriate for different purposes.
The conclusions reached are that the cost sharing arrangements were responsible for some distortion in choice decisions and m resource allocation and that the most appropriate type of grant for the problem to be solved is a general revenue grant. However political and ideological considerations are often allowed to override concern for economic efficiency, so that the type and design of grant to provide is often determined by other goals than the efficient allocation of resources.