This month marks the 30th anniversary of the introduction of Medicare and a timely opportunity for all Australians to consider the importance of this iconic program. Recently mooted proposals such as co-payments and private health insurance to cover gaps for doctors' services have given rise to concerns about the future of Medicare. In the absence of clear policy directions from the Coalition government, short-term budget imperatives seem to be the prime drivers for decisions that could have long-term repercussions.
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The government's mantra is that Medicare costs are out of control and not sustainable. Annual spending on Medicare has grown 120 per cent in the past decade, faster than growth in the total health budget of 104 per cent and Pharmaceutical Benefits Schedule spending, which rose 79 per cent over the same period.
This concern for healthcare expenditures apparently does not extend to the rising cost of private health insurance which has been around 5.4 per cent annually - well above CPI - and this year, with ministerial approval, will rise by an average of 6.2 per cent. Every such rise also means that taxpayers foot a growing bill for the private health insurance rebate, which will cost $5.4 billion this financial year. At the same time, out-of-pocket costs for patients have almost doubled over the decade.
The Parliamentary Library estimates that since its inception in 1984, Medicare has paid $235 billion in benefits for more than five billion health services. In that time, the population has grown from 15.5million to 23 million, the median age has increased by seven years, average full-time earnings have increased from $18,990 to $73,980, and new medications and technology have extended life expectancy from 75.8 to 82.1 years - and added significantly to healthcare costs.
A recent Productivity Commission report shows while spending on GP services grew from $6.2 billion in 2006-07 to $7.4 billion in 2012-13, GP spending per person increased little, from $301.60 in 2006-07 to $304.40 in 2011-12.
The worrisome issue is that this static spending likely reflects the increasing numbers of Australians who defer seeing a doctor because of cost and the failure of many people with mental illness to get the treatment they need.
The levels of healthcare spending are highly germane to Treasury's projections of future budget deficits. But they are hardly out of control, even if GDP growth has slowed. The options for action have been presented simplistically as ration or reform but the reality is that we must do more to make the healthcare system work smarter.
There are two key areas for action: giving greater support to prevention and managing chronic illnesses effectively in the community, and addressing current waste and inefficiencies.
In the first instance, delivering good health will drive increases in workforce participation and productivity, simultaneously boosting the economy and easing pressures on the healthcare system. The loss to the workforce of people suffering from chronic illness and their carers has been estimated at 537,000 full-time and 47,000 part-time person years; the costs run into many billions of dollars. Doing prevention, early intervention and chronic disease management well may mean spending even more in Medicare, but the savings will show elsewhere in the healthcare system and the economy generally.
There are large offsets to be gained by reducing waste and inefficiency which could account for as much as 30 per cent of healthcare expenditure. The causes are adverse events, unnecessary duplication of tests, inability of patients to comply with treatment and medication regimens, and failure to ensure that best practice is followed.
It is estimated that patients receive appropriate care or best practice less than 60 per cent of the time, and adverse events result in approximately 4550 unnecessary deaths a year and add a cost of around $2 billion annually to the healthcare budget.
There are 5700 items on the Medicare Benefits Schedule but only 3 per cent of these have been formally evaluated for evidence of their efficacy and cost-effectiveness. Recently Australian researchers flagged 150 Medicare services as potentially unsafe, ineffective or otherwise inappropriately applied. On the other hand a groundbreaking study funded by the National Health and Medical Research Council has evaluated the cost-effectiveness of 150 preventive health interventions, identifying where more and less should be done to achieve a healthier community and a health system that delivers better value.
While adding new Medicare services is easy, the process of disinvestment (the withdrawal of resources from health care practices, procedures, technologies, and pharmaceuticals that are deemed to deliver no or low health gain for their cost, and are thus not efficient health resource allocations) is not work for budget slashers in a hurry but rather for those who wield a budget scalpel with surgical precision.
There is also a raft of approaches to healthcare reform and sustainability included in the report of the National Health and Hospital Reform Commission. To date, despite their expert provenance, these have barely been considered.
Finally, based on the relationship between government health expenditures and GDP, the Medicare levy should be at least 2.5 per cent by now. Raising it by 1 per cent would generate a further $7 billion each year. There are likely many people who would be happy to pay that or more for well-funded health services - if only the government would engage them in the discussion.
Dr Lesley Russell is a Research Associate at the Menzies Centre for Health Policy at the University of Sydney.
