Wednesday, October 22, 2014
As you recall, Health Minister Peter Dutton got an early start this year, warning that health spending was growing "unsustainably". (Blame it all on Gough Whitlam, whose supposedly too-expensive Medibank Malcolm Fraser dismantled, only to have Bob Hawke restore it as Medicare.)
The report of the Commission of Audit soon confirmed that health was prominent among the various classes of government spending growing - and projected to continue growing - "unsustainably".
Something would have to be done.
In the budget, we found out what the something was. A new "co-payment" of $7 a pop on visits to the GP and on each test the GP orders. The general co-payment on prescriptions to rise by $5 to $42.70 each.
And the previous government's funding agreement with the states to be torn up, with grants for public hospitals to rise only in line with inflation and population growth.
Sorry, but it was all growing "unsustainably".
So how unsustainable was growth in 2012-13? Total spending on health goods and services was $147 billion, up a frightening 1.5 per cent on the previous year, after allowing for inflation.
This was the lowest growth since the institute's records began in the mid-1980s, and less than a third of the average annual growth in the past decade.
Allow for growth in the population, and average annual health spending of $6430 per person was actually down a touch in real terms.
It gets better (or worse if you've been one of the panic merchants).
That $147 billion is the combined spending on health by the federal government, state governments, private health funds and other insurers, plus you and me in direct, out-of-pocket payments on co-payments and such like.
So, total spending may not have grown much, but the federal government's share of the tab rose faster than the rest, right? Err ... no. The opposite, actually.
The feds' health spending in 2012-13 actually fell by 2.4 per cent in real terms. The states' spending rose by 1.5 per cent, but that left the combined government spend falling by 0.9 per cent.
So it was actually the private sector (including you and me) that accounted for more than all of the overall increase in spending. This is a big problem for the government?
By my reckoning, out-of-pocket payments by individuals rose by 6.9 per cent in real terms. The pollies seem to have been doing a good job of shunting health costs off onto us even before the latest onslaught.
So, all very embarrassing for the three-word-slogan brigade. Or would have been had the government's spin doctors not had the media off chasing foreign will-o-the-wisps at the time. Easily diverted, the media.
But let's be reasonable about this. One year of surprisingly weak growth in total health spending - and falling federal spending - doesn't prove there isn't longer-term problem.
Government health spending has grown pretty strongly in previous years, and the latest year's moderation may be the product of one-off factors rather than the start of a new moderate trend.
Actually, the real fall in federal spending seems to be largely the product of savings measures taken by the previous government, particularly its tightening of rules for the private health insurance rebate - which the Coalition fought so hard to stop happening.
Even so, when you look at the trend of spending in recent years revealed by the institute's figures, it does suggest that health spending may not grow as strongly in coming years as we've long been told to expect.
The spectre of ever more rapid growth in public spending on healthcare - to the point where health spending comes to dominate the federal budget - is one the federal Treasury has been warning of in each of its three "intergenerational reports" since 2002.
The state treasury versions of this exercise portray health spending positively overrunning state budgets, crowding out all other spending.
Federal Treasury has explained its dramatic projections in terms of the ageing of the population, developments in medical technology that invariably are much more expensive than the technology they replace, and the public's insatiable demand for immediate access to whatever advances medical science has come up with.
But Treasury's figures are essentially mechanical projections of past growth trends over the coming 40 years, meaning just a small reduction in the assumed annual rate of growth can make a big difference.
The institute's latest figures show the federal government's real spending on health grew at an annual rate of 4.8 per cent over the five years to 2007-08, but by just 4.1 per cent over the five years to 2012-13.
Perhaps more significantly, they show that whereas the prices of health goods and services rose faster than the prices of all domestic goods and services by 0.7 per cent a year during the first five-year period, during the second period they rose by 0.2 per cent a year more slowly than other prices.
In other words, the long-feared problem of "excess health inflation" seems to be going away.
It will be interesting to see Treasury's latest prognostications in next year's intergenerational report.