Federal Health Budget 2018

Federal Health Budget 2018

The MUCHE Health Report 2018


Executive Summary

For the average Australian taking an interest in their health, this year’s Budget announcements would have you jumping for joy. After all, the Hon Greg Hunt MP has declared Australians will see record investment in health care.

Take a closer look and the real story emerges. Estimated Health portfolio expenditure for 2018-19 has only increased by 2.1 per cent, compared to last year’s actual Health portfolio expenditure increase of 5.1 per cent. Accounting for health inflation, real Health portfolio expenditure will grow by 1 per cent less than population growth over the forward estimates, which means less money will be spent on a per capita basis.

The Australian Government needs to invest more to improve the wellbeing of Australians. Service gaps are growing in health, ageing and disability care, while improved quality remains stubborn. As the ever increasing march of ageing, health technology costs, and chronic disease continues unabated, Australians will either face worse health outcomes, or be asked to pay more for their health care if the Australian Government does not respond.

The centrepiece of the Australian Government’s aged care announcement is 14,000 additional high level home care packages over four years costing $1.6 billion. But none of this is new money, and is being paid for by a 26,700 reduction in projected residential aged care places.

Given the Australian Government struggles to keep up with aged care costs, it must ask consumers to pay more for their care. That would firm up sector sustainability, and help aged care providers better meet consumer preferences.

But increasing co-contributions will not be enough. The Australian Government must also invest more in home care packages and residential aged care places. The additional high level home care packages falls way short of the 82,237 consumers currently awaiting an approved high level package. There is also a projected 94,200 gap in residential aged care places by 2025.

Investment in transparent residential aged care quality indicators must also happen as a matter of urgency. That would stimulate quality competition within the market. Removing supply restrictions must also be undertaken to allow consumers to choose better quality facilities.

The Australian Government will remove the 0.5 per cent rise in the Medicare levy hypothecated to the National Disability Insurance Scheme (NDIS) in last year’s Budget. This is nothing more than a political move by the Coalition Party to firm up their defence against an Australian Labor Party attack in the lead up to the election.

This removal dramatically increases funding uncertainty for Australians with a disability. Now NDIS funding is once again reliant on the good fortunes of Australia’s economy (which is cyclical), and if the Australian Government falls into a revenue hole (which it will), the disability sector will be exposed to bigger funding cuts than would have otherwise occurred.

The Australian Government should have used the levy to expand the NDIS, in particular mental health services for those with severe psychosocial disability. Around 166,000 people with severe psychosocial disability will not be eligible for the NDIS. Those currently covered by the NDIS receive fewer services, and report lower satisfaction, compared to pre-NDIS.

While the Australian Government will provide more than $30 billion in increased funding to public hospitals, and $130.2 billion in total over five years from 2020-21, this primarily reflects population growth and health inflation.

Council of Australian Governments (COAG) Heads of Agreement on public hospital funding and health reform does outline several reforms to be pursued by States. This includes paying for value and outcomes within public hospitals.

Incentivising better hospital outcomes using financial means is complex, and international experience suggests often not successful, and at great expense. That doesn’t mean States shouldn’t try.

The Heads of Agreement has missed a major opportunity to improve quality and value within public hospitals. The Productivity Commission recommended in 2017 that the Australian Government work with States to increase choice for referred patients, and develop guidelines (with professional bodies) on how to support patient choice.

Our own research suggests Australians value choice, and are willing to travel and wait longer for a better quality public hospital. Empirical research from the UK suggests increased public hospital choice can improve hospital quality, and patient health outcomes.

This year the Budget was silent on private health insurance. That may be the eye of the storm. Pressure on prices will continue into the future, and hospital cover membership has decreased from 47.3 per cent in June 2015 to 46.0 per cent in June 2017.

Recent calls for a Productivity Commission review into private health insurance seem justified to ensure the sector remains valuable to consumers, and fiscally sustainable.

The private health insurance rebate must be reviewed. It is projected to cost the Australian Government $6.9 billion by 2012-22, and represents an inefficient way to fund hospital care. Research suggests a marginal decrease in the rebate would provide net savings to the Australian Government, even if it pays for any increased public hospital visits.

Overall, the Budget for health and human services is sedate. No real winners and no real losers. The courage to make real change to improve the wellbeing of Australians has been deferred for a future Government.

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