By Ken Wolff
In a previous piece I asked why the freeze on Medicare rebates, that has been in effect since November 2012, was not a major issue. I did not expect that it would be dropped in the 2016 budget but I also did not anticipate that it would actually be extended to 30 June 2020. It adds to the continuing assault on Medicare and our health system generally by the LNP.
All the data I have used in this piece can be found on the treasury’s Archive of Budgets website which has all budget papers back to 1996-97.
I have gone back to Wayne Swan’s last budget in 2013/14 when the indexation freeze started. That is necessary because each successive budget does not include, over the forward estimates, previous decisions but just lists the cost or saving created by any new decisions by the government. For a previous decision to disappear it actually has to be changed, as with the repeal of the ‘carbon tax’ and mining tax.
A classic example of the way the budget reports costs and savings is the Abbott/Hockey decision to cut commonwealth funding for state run public hospitals. It was saving $217 million in 2014/15, $261 million in 2015/16, down to $133 million in 2016/17 but then jumping to $1.16 billion in 2017/18 when the funding arrangements were due to change back to a funding model based on the CPI and population growth. In this year’s budget, some funding is being returned to the states but those previous cuts are still built into the budget: so the new funding of $477 million in 2017/18 leaves the commonwealth government $683 million in front. The new proposed payments to the states do increase to $937 million in 2018/19 and $1.4 billion in 2019/20 but it would have been interesting to know what the longer term savings foreseen by treasury in 2014/15 were so as to assess whether the additional payments are still below the projected savings.
Now to start with the Medicare freeze and the associated lifting of the Medicare safety net threshold in Swan’s last budget in 2013/14. Lifting of the threshold was predicted to save the relatively small amount of $106 million over three years. The shift in the indexation date, an effective freeze, was to save $664 million from 2013/14 to 2016/17, saving from $160 million to $178 million each year.
The Hockey 2014 budget extended the freeze to 30 June 2016 (and later to 30 June 2018) and also included freezing indexation of the threshold at which people had to pay the Medicare levy and of the health insurance rebate. That was expected to save $142 million in 2014/15 rising to $621 million in 2017/18, or $1.65 billion in total over that period. Remember that is in addition to the savings Swan announced, so in total about $2.3 billion to 2017/18: that is one reason the saving in 2014/15 is low, as it is an additional saving to Swan’s $106 million (so a total of $248 million), and why it is $621 million in 2017/18 because then it is the full saving as Swan’s projections did not go that far into the future.
In the 2016 Morrison budget another two years was added to the freeze which was expected to save an additional $925 million. Continuation of the freeze on indexation of the levy threshold and health insurance rebate was expected to save another $744 million, bringing the total saving from these various indexation freezes to almost $4 billion between 2013/14 and 2019/20.
And in his first economic statement, the 2015 MYEFO, Morrison also announced that the government would remove the bulk billing incentives for pathology services which was another saving of $639 million through to 2018/19.
Of course the 2014 budget was the one in which Abbott and Hockey proposed the introduction of the co-payment for GPs, pathology services and diagnostic imaging. It was expected to save the government $1.13 billion in 2015/16, $1.15 billion in 2016/17 and $1.2 billion in 2017/18, a total of about $3.5 billion.
The following year that decision was removed from the budget meaning additional expenditure was then required but it is interesting that the additional expenditure in each year is significantly less than the savings previously foreshadowed. The nett result was that the government still saved an additional $484 million in 2015/16, $461 million in 2016/17 and $483 million in 2017/18 (a $1.4 billion saving in total). I assume that part of this difference may include the result of extending the Medicare rebate freeze until 2018 as I have been unable to find any other costing for that change.
The Hockey budgets continually claimed that the savings would be used for other health priorities or paid into the Medical Research Future Fund. Despite that, his own budget figures in 2014 projected only $276 million being paid into the Medical Research Future Fund through to 2017/18. That is only a tiny fraction of the then proposed savings.
Although the GP co-payment did not go ahead, the co-payment under the PBS was also increased in the 2014 budget. It would save $145 million in 2014/15, rising to $489 million in 2017/18, a total of $1.27 billion for that period.
Another Abbott/Hockey cut was the cessation of the National Partnership Agreement on Preventive Health. National Partnership Agreements are, as the name implies, a negotiated agreement between the states and the commonwealth and importantly this one was on preventative health measures. One would have thought that a focus on preventative health would be something that could produce genuine health savings but instead Abbott and Hockey chose to save another $368 million over four years (and would also stop any future payments of about $130 million a year).
There have been many other minor changes creating savings, and some small increases in expenditure, and savings in other related areas. In the recent Morrison budget changes were made to aged care provider funding that would save the health portfolio $1.15 billion by 2019/20.
My simple calculation suggests that the major items I have described have taken something like $8 billion from the commonwealth’s contribution to health funding in the years since 2013 and continuing to 2020: that is the equivalent of 11% of current commonwealth health funding.
What we need to remember is that the costs supported by such funding just don’t disappear. While there may be genuine savings in some areas, the bulk of those costs remain in the health system. All that the commonwealth reduction in funding achieves is a shift in who meets those costs: an increase for the states and individuals.
But that is consistent with the neoliberal approach of the government that ‘price signals’ need to be built into the system so that people don’t over-use services and that they appreciate its dollar value. Of course, the government is also supporting private health with the subsidy for private health fund cover: although its indexation is also frozen, it is costing the government over $6 billion each year, rising to $6.8 billion in 2019/20, or in total $26.4 billion over the forward estimates. Compare that to the cuts made in health funding and ask where the government’s priorities lie.
What do you think?
Where DO the government’s priorities lie?
How long before our healthcare system degenerates to the same extent as the US system if this government continues on its merry way?
This article was originally published on TPS Extra.
