News Alert: MUCHE's analysis of this year's Federal Health Budget

Dr Henry Cutler, Director for the Macquaire University Centre for the Health Economy, provides an overview of the 2017-18 federal health budget. 

Australia has one of the healthiest populations in the world, ranking sixth among OECD countries when comparing life expectancy. A male born today can expect to live until their 82 years old, while a female can expect to live until they are 84 years old.

Our long life expectancy is a combination of lifestyle, behaviours and health and social care systems. In 2013 the Commonwealth Fund ranked the Australian health care system fourth against 11 developed countries, behind the UK, Switzerland and Sweden in that order. We were ranked 2nd for quality behind the UK.

Our worst health care ranking was access to services due to high costs. Australians pay more for their health care than most other developed countries, and only the US had a greater proportion of patients with excessive out of pocket costs.

Health care funding has always been a battle ground, usually fought between the Australian government and state and territory governments, the Australian government and health care service providers, and both sides of politics. That is because Australians are passionate about affordable, good quality health care, and believe access to public health care is part of the ‘fair go’ Australian story. Ideology also gets involved.

One of the fiercest health care battles began immediately after the 2016-17 Budget, which had been brought forward to accommodate an election call on 8 May 2016. That budget had implicitly asked consumers to pay more for their health care by pausing index arrangements for Medicare Benefits Schedule items and the private health insurance rebate.

The Labour party launched its election campaign strategy, with a flanking manoeuver concentrated on health care. Dubbed the Medi-Scare campaign, it managed to convince a substantial proportion of the electorate that a coalition government would privatise health care if re-elected. Not only had the coalition government extended a pause in index arrangements within the Budget, it had also sought to privatise the Medicare payments system.[1]

According to Sun Tzu ‘the supreme art of war is to subdue the enemy without fighting’. The Labor government may have won the battle in 2016, but this Budget and the 2016 Mid Year Economic and Fiscal Outlook budget has firmed up the flank, making it more difficult for the Labor government to criticise current health care policy on the basis of reduced access to publically funded health care.

Overall, the health portfolio will experience a 2.0 per cent increase in expenditure, which is relatively small considering expenditure increased by 6.7 per cent in 2016-17. However, the Australian Government has invested in the Medicare payments system (rather than selling if off), and has started to remove the pause in indexation arrangements for MBS items, starting with GP bulk billing consultations. This will cost the Australian Government around $1.0 billion over the forward estimates.

It will also spend around $1.2 billion on new and amended listings to the Pharmaceutical Benefits Scheme (PBS), providing greater access to drugs. This will be paid for through drug price reductions, saving the Australian Government around $1.8 billion between 2016-17 and 2021-22.

The Australian Government has also established the Medicare Guarantee Fund, which will receive $33.8 million in 2017-18 and provide funding to cover MBS and PBS expenditure. It is uncertain why such a fund is needed given MBS and PBS expenditure is currently funded by consolidated revenue, but may just help the coalition argue they have established a ‘more sustainable’ publically funded health care system.

Some sectors have avoided any major changes, including public hospitals, private health insurance and aged care. Private health insurance and aged care sectors are expected to undergo large reforms in the coming years, as a result of current reviews. The Budget has put its ‘money where its mouth is’ when it comes to mental health care, although the sector will be expecting more once the Fifth National Mental Health Plan is completed.

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