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‘Super-Style’ Health Funding Will Save Unsustainable Medicare
More private financing of healthcare is needed to control the runaway cost of Medicare in an ageing Australia.
An 80% real increase in Australian government health expenditure since 2000 shows how unaffordable Medicare will become in coming decades, warns a new TARGET30 report from The Centre for Independent Studies.
The private health reforms introduced by the Howard government in the late-1990s have failed to alter the balance between public and private health funding, finds Dr Jeremy Sammut in Saving Medicare But NOT As We Know It.
“Non-government health expenditure increased from 2.7% of GDP in 2000–01 to 2.9% in 2010–11,” says Dr Sammut.
“This was far outstripped by the 0.8% increase in government health expenditure, which was mainly responsible for increasing total national health spending from 8.2% of GDP to 9.3% (or $130 billion).”
“These trends are a sign of the long-term challenges facing Medicare. Conservative estimates suggest government health spending will top 10% of GDP by mid-century, and the Intergenerational Reports show that the ageing-driven cost of Medicare will lead to unfair tax hikes on younger generations, higher public debt and deficits, or cuts to government health and other services.”
“We can’t be complacent about unsustainable health spending exhausting government’s ability to tax and spend—this will have real implications for Australians of all ages denied access to health care that governments won’t be able to fund.”
To avert the looming health and ageing crisis, Medicare must be cut down to size, argues Dr Sammut.
“We should build a more efficient and better targeted health system by downsizing the health bureaucracy and privatising select public hospitals to improve productivity. We should also re-introduce the Hawke government’s short-lived Medicare co-payments and means test Medicare consistent with the PHI rebate means test.”
“But given the magnitude of the fiscal challenges ahead, we must do more to shift health costs off government budgets.”
“Generations X and Y should pre-fund future health costs over time by reconfiguring Medicare spending into two new streams of funding for superannuation-style Health Savings Accounts and high-deductible private health insurance vouchers.”
“The existing Medicare scheme should be transformed into an age-limited program for the current generation of retirees or near-retirees that can be abolished when the self-funded system matures.”
Dr Jeremy Sammut is a Research Fellow at The Centre for Independent Studies.
He is available for comment.
Read the TARGET30 report, Saving Medicare but Not As We Know It.
Read the 4 page TARGET30 Snapshots of Saving Medicare but Not As We Know It
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