Australia’s health system weighed down by bureaucrats

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By Leith van Onselen

The Australian’s Adam Creighton has penned an insightful piece today on the high number of bureaucrats involved in Australia’s health system, which is growing much faster than employment growth:

Australia’s health bureaucracy is growing faster than national employment and now rivals the country’s 17,300-strong army and airforce reserves, with one administrator for every 3.4 hospital beds nationally…

The number of public hospital beds per bureaucrat — which The Australian estimated from annual reports of various state health departments — varied from 6.8 in Western Australia, which had 813 “clerical-based ­occupations” in mid-2015, to three in Queensland, which employed 3951 “managerial and clerical” staff.

Meanwhile, the federal Health Department, which costs about $850 million a year to run, employed almost 3600 staff in June, an increase of more than 3.8 per cent from the previous year, or more than double the rate of ­national employment growth.

The federal department administers Medicare and the Pharmaceutical Benefits Schedule, but does not run any hospitals…

While one would expect employment in health to rise as the population ages and we become more wealthy (thus demanding more superior goods like health), the health bureaucracy should not necessarily increase in lockstep.

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Unlike actual treatment staff like doctors and nurses, the bureaucracy should exhibit ‘economies of scale’ in which it does not take twice the number of administrators to manage twice the Budget. So it is disconcerting to read that the health bureaucracy has been rising so quickly, and indicates significant waste in public expenditure.

Another issue underpinning the health bureaucracy is the fact that Australia’s federal system shares responsibility for health among the state and federal governments. This has led to health bureaucracies being present across each state and federally, very likely resulting in significant amounts of duplication, not to mention cost-shifting.

While most Australians would prefer more spending on public health – the latest Per Capita survey suggests 64% would pay more tax for better health and aged care services – they would like to see it channeled into front-line services like nurses, hospital beds and the like, not into feathering back-office bureaucrat’s nests.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.