Ideas@TheCentre
Health savings a super idea
The Target 30 campaign is not just about reducing government spending. It is also about promoting better and more sustainable ways to deliver high-quality health services for all Australians.
The escalating cost of Medicare is set to place unsustainable financial pressure on state and federal government budgets by the middle of the twenty-first century.
If saddling future generations with unfeasibly high tax rates is to be avoided, governments will be forced to cut health funding and this will inevitably impact on the availability of health services.
There are many practical things that policymakers should do now to prevent onerous tax-hikes or patients having to endure even longer waits for hospital treatment.
Copayments for Medicare-funded services (as proposed by the Hawke Government in 1990) should be introduced, and eligibility for Medicare entitlements should be means-tested (same as for the private health insurance rebate).
Federal and state health bureaucracies should be down-sized, and financial and managerial responsibility for public hospitals should be devolved to the local level.
Public hospitals should also be selectively privatised, creating a more competitive environment and encouraging all hospitals to improve their productivity.
These policies would help create a more cost-effective health system. But to lay the foundations of a truly sustainable health system we need to fundamentally change how health care is financed in this country.
Medicare is a Pay-As-You-Go system. Every tax-dollar collected for health purposes each year is spent in the same year, and nothing is saved and invested for the future. This is why there are huge unfunded liabilities going forward for the health costs of Australia’s rapidly ageing population.
Imagine if instead of Canberra doling out money to pay for our GP visits and prescriptions each year (an arrangement that encourages over-use and waste), we each had an annual tax-credit or transfer payment deposited into our personal Health Savings Accounts (HSA), which we would draw upon to pay for medical expenses.
Because we would be spending our own money, we would become far more cost-conscious consumers of health services (up to30% more cost-conscious according to the famous Rand experiments). As HSA balances grew (tax-free), more and more health care would be self-funded instead of relying on government to foot the bill.
This isn’t as radical as it sounds. HSA’s are very similar to the compulsory superannuation system, which has successfully lowered the cost of the Old Age Pension in coming decades.
It’s time for us to apply to health the same principles of self-reliance and personal responsibility. Saving-As-We-Go to self-fund our own health care will reduce the burdens that Medicare will otherwise impose on future generations.
Dr Jeremy Sammut is a Research Fellow at The Centre for Independent Studies. He is the author of a forthcoming Target 30 publication, Saving Medicare - But Not As We Know It.
