Wednesday, July 6, 2016

Who really wins from Mediscare

The success of Labor's "Mediscare" in this election is worrying - but not for the reason you may imagine. Its greatest effect may be to fatten the incomes of medical specialists and corporate medical suppliers.

Scare campaigns are often effective politically, but they can impose a high price on the country's good government.

Tony Abbott's highly successful scare about depredations of the carbon tax at the last election has left us bereft of an effective and relatively low-cost means of reducing our greenhouse gas emissions at a time when climate change is worsening and we've been obliged by international pressure to agree to a tighter target.

Bill Shorten's claim that the Coalition is bent on privatising Medicare could leave us with politicians of all colours lacking the courage to do anything to restrain the rapid growth in federal and state spending on healthcare by insisting on greater efficiency and more realistic charges for medical services.

The people who work in the House with the Flag on Top take just a few days after an election to reach agreement on why the winners won and the losers lost.

Right or wrong, this conventional wisdom sticks in the minds of pollies on both sides for many years.

Should the politicians conclude that the wrath of voters will descend on any government caught making any change that could, by any stretch, be described as privatising Medicare, the people making excessive incomes out of healthcare will be laughing and the rest of us will be paying.

Labor's Mediscare was more subtle than Abbott's crude claims that the carbon tax would wipe out Whyalla and lift the price of a lamb roast to $100.

Its distortion and exaggeration was based on the meaning attached that emotive word "privatisation". We know from repeated polling that voters overwhelmingly disapprove of all privatisation.

The righteous indignation with which ministers condemned Labor's claim as "extraordinarily dishonest", an "absolute lie" and "some of the most systematic, well-funded lies ever peddled" rest on a narrow interpretation of the word.

Privatisation means taking a profitable government-owned business and selling it off to private interests. Since Medicare isn't a profitable business, the claim is absurd.

Labor, however, was using the word more broadly to mean any change that involves reducing the role of government and increasing the participation of private businesses.

Its pretext for making its claim was the Turnbull government's intention to save a little money by shifting the processing of Medicare's many bank transfers from its giant cheque-writing agency, the Department of Human Services, to a private provider.

We wouldn't even have noticed this back-office switch, but Malcolm Turnbull felt obliged to swear the proposal would be abandoned.

But the effectiveness of this scare - and the vehemence of the Coalition's denials - rests on its large element of truth.

Labor was relying on voters remembering Abbott's broken promise to leave Medicare untouched with his first budget's plan to impose a $7 co-payment on pathology tests and GP visits.

The outcry forced him to abandon that plan. In subsequent budgets, however, the government has sought to achieve savings by ending the extra bulk-billing incentives paid to providers of pathology tests and by continuing from 2014 until 2020 the freeze on increases on the schedule fees doctors receive under bulk-billing.

Here the doctors' union has been doing Labor's work by scaring their patients with claims this would force them to abandon bulk-billing and charge big co-payments.

This is untrue in the case of path tests (where the schedule fee far exceeds the costs incurred by the two big public companies that bulk-process three-quarters of our tests) and greatly exaggerated in the case of the continuing freeze on schedule fees.

But what does the public take the word Medicare to mean? I think we're mainly referring to bulk-billing and the federal grants for state government public hospitals, which are conditional on hospital services being free of direct charge.

The public loves bulk-billing because it provides the illusion of something for nothing. But the Coalition has decades of hostility to bulk-billing. The $7 co-payment was an attempt to break it down immediately and the continuing freeze on schedule fees will break it down slowly.

This was the element of truth in Mediscare. What's more, the Coalition still plans to press on with most of Abbott's cuts in grants for public hospitals of $57 billion over 10 years.

The public's attachment to bulk-billing may be irrational, but health economists have two rational reasons for wanting it to survive.

First, it adds to the overall efficiency of the healthcare system by reducing the amount doctors need to spend on billing and collecting money. This is why doctors' initial opposition to bulk-billing turned to support.

Second, because its continuation is so valuable to doctors, bulk-billing gives the government of the day the ability to limit the annual increase in GPs' and pathologists' fees - provided it doesn't push the doctors too far.

Ever-rising healthcare costs are the biggest single threat to combined federal and state budgets. There is scope for the removal of inefficiencies that do more to line medical pockets than benefit patients.

In every case, doctors will resist the removal of those inefficiencies by telling their patients it's an attack on Medicare, not the doctors' wallets. That's why the success of Mediscare is a worry.