Opinion & Commentary
Hospital ‘crisis’ signals health challenges ahead
Pre-election promises to ‘fix’ the public hospital system count for little when politicians lack the courage to implement good policy.
The so-called hospital ‘crisis’ signals the long-term challenges facing the health system.
Crisis is the wrong word. The problems in hospitals have not emerged suddenly, but reflect five increasingly pressing problems. The pressure these challenges are placing on the health system will intensify in coming decades.
The first problem is population ageing. Because death rates have fallen and life expectancy has increased, the fundamental issue is that larger numbers of elderly people suffering complex conditions are presenting for treatment. As the number of people aged over 65 triples over the next forty years, the elderly cohort of the population will double in size to 25%.
The second problem is caused by advances in medical technology. Public hospitals are increasingly difficult and expensive institutions to run due to the technological sophistication of modern hospital care. The medical revolution that is underway will give doctors more and more ways to intervene with more and more patients. A range of high tech, high cost procedures and therapies is in development and this will deliver new treatments to alleviate chronic disease. But this is going to be increasingly expensive.
Research by the Productivity Commission suggests that ageing (the first problem) will compound the impact of the medical revolution (the second problem). The evidence is that because illness increases with age, elderly people will demand an increasing amount of expensive healthcare to improve and prolong their lives.
The third problem is increasing levels of obesity and chronic disease. In 2005-6, the number one reason for admission to public hospital was renal dialysis - the recurring treatment for patients with end-stage kidney disease. Kidney disease is commonly caused by type-2 diabetes, a chronic condition the rising incidence of which is linked - like cancer and heart disease – to rising levels of obesity.
The fourth problem confronting the health system is sustainability.
P.A.Y.E. taxpayer funded health systems like Medicare were easier to sustain when governments provided health care to a much younger and healthier population.
The federal government’s Intergenerational Report predicts that Commonwealth health expenditure will rise from 3.8 % to 7.3% of GDP by the mid-2040s and be responsible for the emergence of a 3.5% ‘fiscal gap’ between government spending and revenue. But due to the rising ‘quality’ and cost of healthcare thanks to technological change, pressure on health spending could be greater than anticipated and create even bigger budgetary problems.
The question is whether in a globalised economy the proportionately smaller number of taxpayers of tomorrow will be able to bear the increased cost of Medicare. Governments will either have to slow the take up of new technology and strictly ration access to new treatments, or else future generations will have to pay considerably higher taxes to provide healthcare to the elderly.
Intergenerational fairness is the fifth problem.
Since foundation of the welfare state, an implied social contract has obliged each generation to care for the elderly through the pension and health systems. When few people lived long enough to enjoy extended retirements on the pension, and when medical care was relatively cheap and basic, the cost imposed on each generation was light.
Demographic and technological change is rewriting the contract. While the baby boomer generation is retiring on tax-free superannuation and negative-geared property, younger taxpayers are expected to supply ageing ‘boomers’ with healthcare of a far superior quality and quantity.
As Professor Nick Bosanquet of the UK think tank Reform has argued, it simply is unfair to ask ‘the iPod generation: insecure, pressured, over-taxed and debt-ridden - to fund more services for well-off baby boomers.’
In other words, the intergenerational politics of health are going to be ugly.
They already are. Over 2000 public hospital beds are ‘blocked’ by elderly patients unable to be placed in nursing homes due to the shortage of ‘high-care’ places. The 2004 Hogan Review recommended extending the accommodation bond system in place for ‘low-care’ facilities to ‘high-care’ facilities to give aged-care providers the capital required to create new places. Bonds are financed by the sale of family homes, and are returned to the resident’s estate upon death, minus an administration charge.
The state of public hospitals is clearly a key election issue. But neither the federal government nor opposition have committed to the extension of the bond system because they fear the backlash from ‘outraged’ baby boomers forced to surrender temporary control of their inheritance.
Real political leadership is required to address the health challenges of the 21st century.
Dr Jeremy Sammut is a research fellow in the Social Foundations Programme at the Centre for Independent Studies.
