Opinion & Commentary
Recession and reform are in the wind for health care
While it’s hardly polite to mention the R-word, let alone to see the good that might come of a recession, it’s an ill wind that blows no good. In the wake of the global financial crisis, this certainly seems to be true in health reform.
For the first time in a long time, federal and state governments are starting to adjust to the new economic realities. Revenue is no longer just going to roll in to cover spending commitments.
Unless you believe in the growth of government as an end in itself, this will be a good thing. In tougher times, governments are more likely to reassess priorities and to ask the question they always should when making expenditure decisions: ‘Are we getting value for our spend of the taxpayer’s dollars?’ Governments are also less likely to rush into new spending without examining the cost against the benefits. And, hopefully, nagging doubts about the inefficiency of public sector service delivery will be transformed into belief in the benefits of private sector alternatives.
The health debate has already started to tilt in these directions.
To begin with, the federal government’s razor gang finally has the expensive Medicare safety net in its sights. Between 2004 and 2007, the safety net (which pays for 80% of a family’s out-of-pocket expenses beyond a $1060 threshold) enabled obstetricians to increase their fees an extraordinary 269%. The cap on the subsidy the government is considering is long overdue. An estimated 70 cents in every dollar spent on the safety net has paid for hikes in doctor’s fees, and the majority of the money is spent in urban, predominantly wealthy suburbs.
While it is in the mood for ending middle-class welfare, the government should also look at GP Management Plans. Like the safety-net, the original aim was to assist the chronically ill and ensure low-income earners received all beneficial allied healthcare paid for by Medicare. Unfortunately, ‘getting a plan’ from your GP has become the way for the middle-classes to have the taxpayers subsidises their active lifestyles and the cost of their physio treatment.
The government should also have look at the bulk-billing of mental health services under the well-intentioned Better Access program. It will be increasingly hard to justify having Medicare pay for the ‘well but worried’ to see a psychologist.
The winds of change are also starting to blow in aged care. 40% of residential aged care providers are currently making a loss. There is now even less chance the Commonwealth will provide the billions of dollars required to modernise and expand facilities to cope with the ageing of the baby boomers.
Significantly, Catholic Health Australia recently changed its position and called on the federal government to extend the accommodation bond system to ‘high care’ nursing homes. Allowing residents to be charged a bond (a refundable deposit) to offset the cost of their care—a reform a decade delayed—is now even more essential to free up a sector unsustainably dependent on federal government funding.
The greatest challenge for the Rudd government will be delivering on its promise to boost spending on public hospitals and on community health, while at the same time exercising the expenditure rigor now needed.
The big query is whether the Commonwealth will have the money to get reluctant States like NSW to sign up to its foreshadowed national hospital performance reporting system. We won’t know until the COAG meeting at the end of the month. But ‘cooperative federalism’ or not, as budgets head into deficit, performance reporting should be a non-negotiable feature of the health care agreement.
Hopefully the Rudd Government will also hesitate before committing more funding to the $4.6 billion community health sector. This already fails the government’s own standards, as there is no national data to measure the cost effectiveness of community health programs.
The creeping issue with respect to hospitals – which the financial crisis may well propel to the forefront of the health debate – is structural reform of the out-of-date public/private division. Real government spending on public hospitals has increased by 64% over the last decade. We shall see no repeat in the years ahead. Instead, the federal government was already looking for ‘savings’ (by boosting public hospital productivity via incentive payments) and the push to get more services for taxpayer’s money should now intensify.
This will inevitably require more contracting out of publically-funded treatment to private hospitals. Helpfully, the federal health minister has declared herself an ‘agnostic’, or a non-believer in the idea that only public hospitals should treat public patients. The need to economise could well convert others and with a rush.
The potential gains – on top of the ability to take pressure off struggling public hospitals - are considerable. The Department of Veterans’ Affairs purchases hospital care for veterans from both public and private hospital around Australia, and pays significantly less for the same care of the same quality in the private sector, compared to the cost in the public sector.
If reforms can deliver more hospital care for less, then the recession will not be all bad, indeed
Dr Jeremy Sammut is a research fellow at the Centre for Independent Studies.
