The $20 billion medical research slush fund

ScreenHunter_3869 Aug. 21 13.17

By Leith van Onselen

Finance Minister, Mathias Cormann, has given an interview on 2UE radio where the proposed $20 billion Medical Research Fund was discussed (my emphasis):

STUART BOCKING: Joe Hockey keeps telling us it is about safeguarding Medicare. But not a single cent of that extra $7 will find its way back into the Medicare system. Instead $5 from that $7 goes into the Medical Research Fund. Would that not have been something we would have been better off setting down the track when we are back into surplus, we have paid off some of the debt? Would we not be better off using that $5 allotment to pay down that debt now?

MATHIAS CORMANN: This is a very important question. If you bear with me; because it is something that does not appear to be very well understood. So what we are doing is we are pursuing structural reforms in introducing a price signal which will essentially ensure that the allocation of limited resources in health services is more efficient over the medium to long term. Now it will take us about six years to accumulate $20 billion in capital in our Medical Research Fund. Now that $20 billion in capital will actually reduce Government net debt because it is an asset on our balance sheet.

STUART BOCKING: Yes, Yep.

MATHIAS CORMANN: We will not be spending that capital. That $20 billion in capital will be preserved. We will only be investing the net investment returns from that capital in additional medical research. And that will enable us over time to double our investment in medical research, which in turn will help us improve the quality of health care services in Australia and around the world. The efficiency improvements in terms of the level of recurrent expenditure in health in the context of growing demand for health care services will remain in place in perpetuity. Whereas the $20 billion in capital will be accumulated, if our proposals go through, within a six year period, remain on our balance sheet and continue to deliver sustainable cash flow for additional investments into medical research. So it is a way to do both, help us repair our Budget as well as improve quality health care and put health care financing on a more sustainable basis.

The more I look at the rationale behind this Fund, the less I like it.

Back in June, it was revealed that the Fund was a late addition to the Budget, and that health department officials only began working on the policy in April, just weeks before it was announced. Moreover, Australian Chief Scientist, Ian Chubb, was not consulted about the Fund before it was announced.

Health Minister, Peter Dutton, has also ruled-out using money from the Fund fund to commercialise Australian medical breakthroughs, thereby raising question marks about whether it would actually boost the nation’s intellectual property.

What is becoming increasingly clear is that the Government developed the Fund for two main reasons:

  1. To distract the electorate from co-payments on medical services, as well as the cuts to state hospital funding announced in the Budget.
  2. To develop a giant slush fund.

Surely, if the government was truly interested in improving health outcomes, then it would be better to use the funds to keep medical services more affordable and accessible, invest in increased medical services in regional and remote areas, or any number of other worthwhile initiatives, rather than depriving people of actual medical attention?

The whole proposal doesn’t stack up and is a tough sell politically to an electorate that is being asked to pay more for medical services, but will receive few visible benefits in return.

[email protected]

www.twitter.com/leithvo

15 Responses to “ “The $20 billion medical research slush fund”

  1. migtronix says:

    I f#cking told you! Where’s casewithscience now?

  2. UteMan says:

    My theory: it’s a slush fund set up to mollify the international drug companies who want to gut the PBS via the under the table FTA we are “negotiating” with the US at the moment.

    Call it protection money, mafia style.

    • Mining Bogan says:

      You mean the drug companies that sponsor our Tony’s pollie pedal ride?

      • UteMan says:

        It is an interesting sponsorship deal that Abbott has going on that pollie pedal. I’m going to also guess that the whole thing will fail massively because this government can’t even run their scams correctly.

      • migtronix says:

        Hell yes uteman I’ll take that bet

      • surfless says:

        The slow Americanisation of Australia, started in 1901 with the great white fleet, and now in the last ten years accelerated.

  3. Ronin8317 says:

    So the ‘brilliant’ idea behind the $20 billion trust fund is to make the balance sheet look prettier? What’s more, as only the net investment return on the trust fund will be invested for medical research, what would the initial $20 billion be invested in that would ‘preserve the capital’? Australian government bond?

  4. innocent bystander says:

    libs are consistent … ly hopeless.
    cronyism writ large.

  5. ceteris paribus says:

    Always handy for the Libs to have a $20 billion dollar slush fund at the ready for a rainy day. You can’t rely on property developers all the time.

  6. Cornflakes says:

    So they are planning to raise $3 billion or so a year, that works out to be about $150 per capita. Isn’t there supposed to be a cap after ten visits per year?

    Plus they seem to think that raising $3 billion to spend $800 million makes sense.

  7. Jason says:

    This bullshit policy isn’t even original.

    Watch Hollowmen, Season 1, Episode 4 and you’ll see exactly what I mean.

    In the satirical TV series, political staffers concerned about the lack of a budget centrepiece decide at the last minute to create a $150 billion National Perpetual Endowment Fund to meet the nation’s future challenges.

    “The best part of it is, we’ll never have to specify how it will all work,” the character of central policy unit director David “Murph” Murphy, played by Lachy Hulme, says in the Rear Vision episode.

  8. booboo says:

    So, what happens to the co-payment after the 6 years or whenever (probably much later) that the $20bn is raised? Where does the $5 of the $7 co-payment go then?

    I assume the fund stays “locked” at $20bn, invested in low risk investments, at, say, 3% giving $600M / year that will decrease in real terms as the fund size is locked and inflation eats it up.

    Meanwhile, in 6 years I guess that the government of the day will happily eat up the $5 that no longer boosts the fund into their balance sheet.

    It’s all just a rort to boost the government’s balance sheet, with the medical research fund offered of a placebo to the wider public that their copayment is actually being put to good use in the medical sphere.

    On top of that, I would bet that the (decreasing in real terms) ~$600M in “research” funding will be distributed in, shall we say, less than optimal ways…

    And they are claiming these changes as “reforms”. It’s time that people learnt the difference between “reforms” and “changes”.

    • St Jacques says:

      From now on let’s always call this thing for what it really is :

      THE GOVERNMENT’S OWN SLUSH FUND (or piggy bank)

      And yes, we need journos and commentators to ask loudly everytime an announcement is made:
      “Is this a REFORM,
      or just another CHANGE for your convenience?

  9. drsmithy says:

    “So what we are doing is we are pursuing structural reforms in introducing a price signal which will essentially ensure that the allocation of limited resources in health services is more efficient over the medium to long term.”

    I am still waiting for someone – anyone – to provide even the slightest shred of evidence that health services are being misused on any meaningful scale – and especially by people such a “price signal” would actually affect.