Health Minister, Peter Dutton, yesterday flagged major changes to Medicare in order to reign-in costs. From the AFR:
“I want to start a national conversation about modernising and strengthening Medicare and helping to heal our health system”…
Australia’s health system, currently on an “unsustainable path”, is set to be overhauled as a result of the Commission of Audit, meaning Australians who can afford to do so will have to pay more of their own health costs…
[Dutton] signalled Medicare costs would be his main focus… [and]… health cost blowouts may force the government to introduce co-payments for visits to GPs…
The government has also left open the possibility of legal changes to allow private insurers to pay for GP visits…
Mr Dutton said the government would look to the private sector to provide more services…
Dutton’s focus on Medicare is justified given the 124% rise in Medicare Benefits Scheme (MBS) outlays (from $8.1 billion to $18.6 billion) between 2002-03 and 2012-13, as well as the projected increase in health care spending as Australia’s population ages (see below charts).
Measures like introducing co-payments for visits to GPs are a no brainer. Not everyone should be allowed to visit a bulk billed GP; rather “free” health care should be reserved for those on health care cards and low incomes. Moreover, without some kind of out of pocket expense, GP services are likely to be overused, with scant regard given to the overall cost to taxpayers and the Budget.
That said, the Government’s plan to shift GP costs onto private health insurers is questionable, and would likely lead to an escalation in private health insurance premiums. While such a reform may lower costs to the Budget, overall costs to the economy (and households) could actually rise.
Indeed, the US health system illustrates the perils of moving towards a privatised system. There, health care consumes 18% of GDP, versus 9% in Australia, despite 16% of US households not being covered by any form of health insurance and much worse overall health outcomes.
A recent survey by Bloomberg ranking countries 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, also showed Australia to have the 7th most efficient health care system in the world, ranking above other Anglosphere nations including the UK (14th), Canada (17th) and the United States (46th).
While better price signals are certainly required in order to better ration services, the Government should be very wary about making fundamental changes to the system, including shifting health provision to private operators.
