Health minister, Peter Dutton, has reportedly flagged that the Coalition will look to cut “waste” in the health system, where costs have risen at a rate well above inflation:
Figures to be published by the Productivity Commission on Thursday show that between 2002-03 and 2011-12, federal government spending on health grew at an average of 4.9 per cent a year, while state government spending grew at 6.8 per cent a year, and non-government spending – by individuals and insurers – grew by 5 per cent a year. Health spending per head by all governments rose 37 per cent over the period in real terms, from $4474 to $6230. Adjusting for inflation, non-government health spending per person rose from $1259 to $1802 over the same period.
Mr Dutton said the figures demonstrated the challenge the government faced in placing the health system on a stable financial footing. ”It is the reason we have to cut waste in health and invest in areas that provide the greatest benefits to patients.”
Earlier this month, Mr Dutton flagged an overhaul of Medicare, warning spiralling costs would make the system ”unmanageable” without change.
”In the end, we want to strengthen Medicare and we want to strengthen our health system, but we can’t do that if we leave change to the 11th hour,” he said.
Like it or not, rising health costs are inevitable given Australia’s ageing population and ongoing advancements in medical technology. As noted earlier in the week by Ross Gittins:
It’s hardly surprising that as we become more prosperous, we’re prepared to devote a higher share of our income to staving off death and ensuring those extra years are as free from pain and disability as possible.
Can you think of a higher priority? And the good news is that medical science is forever coming up with better pills and prosthetics, as well as better and less invasive surgery. The bad news is that the new stuff is invariably a lot more expensive than the technology it replaces. And as surgeons get better at doing particular operations, they’re able to perform them on a wider range of patients, particularly the elderly…
If healthcare was something we bought in the marketplace like most things we buy, that would be the end of the story. We’d go on spending a growing proportion of our increasing real incomes on healthcare and there isn’t an economist or politician in the country who’d see a problem...
Contrary to the politicians’ framing of the issue, the growing cost of healthcare is sustainable for the simple reason the electorate’s demands leave them with no choice but to sustain it. What’s unsustainable is the politicians’ pretence that taxes won’t have to rise.
Some perspective on health care costs is also warranted.
While Australians are paying on average $6,230 per person on health, this is actually at the lower end of global comparisons. A survey released last year by Bloomberg ranked Australia’s health system as the 7th most efficient in the world based on three criteria: life expectancy; relative per capita cost of health care (percentage of GDP per capita); and the absolute per capita cost of health care (expenditures covering preventive and curative services, family planning, nutrition and emergency aid). The survey only included countries with populations of at least five million, life expectancy of at least 70 years and GDP per capita of at least $5,000 (see below).
As shown above, Australia scored best in the Anglosphere, ranking ahead of the UK (14th), Canada (17th) and the United States (46th); although rankings for New Zealand or Ireland are not shown due to their small size.
So although minor reforms could be made to improve the efficiency and sustainability of the health system, Australia is already operating near world’s best practice when it comes to health.
It is also curious that the Coalition has raised concern over “waste” and rising health costs when, at the same time, it is looking to sign Australia up to Trans-Pacific Partnership (TPP) free trade agreement (FTA), which threatens to further extend pharmaceutical patents and push-up the cost of generic medicines, as well as reducing rights for the government to regulate medicine prices.
As noted last year by Peter Martin, the Australia-US FTA, signed by the Howard Government in the mid-2000s, extended the life of pharmaceutical patents, costing the taxpayer billions of dollars in the process:
Australia’s enthusiastic approach to extending the life of pharmaceutical patents has cost the economy “billions of dollars” an independent review has found.
Originally 14 years, then 16 years and now the 20 years enshrined in the US Australia Free Trade Agreement, the review finds the extensions to the standard life of drug patents have been made “without careful regard to whether this was in our own economic interest”.
Justified at the time a measures to “encourage the development of the pharmaceutical products industry in Australia” the review finds instead they’ve suppressed the development of a generic drugs industry and cost the government $200 million per year by slowing the entry of cheap generic drugs into the pharmaceutical benefits scheme.
Generic manufacturers have missed out on an estimated $2 billion over eight years.
The report says 70 per cent of drug patents expire later in Australia than in other countries…
The review wants trade negotiations such as those over the proposed Trans Pacific Partnership to be much more focused on the costs and benefits to Australia of extending intellectual property.
“So far we’ve seen no evidence suggesting the Australian government has shown any vigor in pursuing any of these issues or an agenda for a patent rights regime that would more fully advantage Australia,” Dr Gruen said.
If the Coalition truly wants to improve the efficiency and sustainability of Australia’s health system, surely dumping the TPP is a good start.
