When the federal government brings down its budget on May 14, one of its biggest challenges will be the pressure of an ageing population and related rising demand for health and aged care. But the question is whether this long-term funding challenge will get the focus it deserves.
After all, Kevin Rudd in 2009 announced the “greatest reforms in healthcare since Medicare”, and two years later Julia Gillard said her follow-up deal with the states was one that would “secure the future of health in Australia”.
Despite increased recent discussion of healthcare costs, the public might still be within its rights to conclude that this critical area of public policy had been attended to – reform under way, box ticked.
But nothing could be further from the truth.
The Business Council of Australia has a deep concern that the public has been lulled into a misapprehension – that the nation is now in some way future-proofed, prepared to deal with health-related demographic pressures and inoculated from rising healthcare costs.
A Deloitte Access Economics report commissioned by the BCA projects that health spending as a proportion of total government expenditure will rise from 13 percent in 2009–10 to 21 percent by 2049–50. For the states and territories, the projected increase is from 25 percent to 40 percent. Deloitte also projects aged care costs to rise for the Commonwealth from 15 percent to 25 percent across the same time frame, leaving the proportion of federal government spending devoted to health and aged care sitting at a projected 46 percent in less than four decades hence.
However, what is clear from the report is that the 2011 health reforms are not expected to improve efficiency and effectiveness, nor do we see any major strategy in place or planned to achieve this. This is disturbing. The health needs and expectations of the rapidly ageing Australian population over the next 40 years will be an enormous and growing cost for future state and federal governments, whatever agreement has been made by the incumbents. More health infrastructure will be needed. The future health workforce will need to grow at a rapid pace. Yet governments are still planning to pay for these structural outlays with cyclical revenues that ebb and flow along with the fortunes of Australia’s natural resources and commodities sectors. This arrangement will become unsustainable over time.
But just when big picture thinking is needed, both levels of government are stuck in the weeds, blaming each other for annual funding shortfalls in healthcare.
The twofold challenge
The challenge is twofold. First, it is clear that the major sleeper in both Commonwealth and state budgets is the growing costs of health and ageing. To prepare for this, a priority for the federal Budget must be to shore up the sustainability of Australia’s public finances. This will involve striking the right balance between finding structural savings to underpin fiscal discipline without detracting from programs that enhance the productive capacity of the economy.
The initial step should be for the government to undertake an independent review of the size, scope and efficiency of government. The BCA wants to make sure that every dollar that governments spend on health is spent well. This is not what is happening now. Rapidly growing expenditure has not been matched by rapidly improving health outcomes.
Second, we can no longer avoid once and for all tackling inefficiencies and dysfunction in our Commonwealth-state relations. The health and ageing needs of our population now more than ever requires a better alignment of roles and responsibilities between the Commonwealth and the states and territories.
We must move beyond the cost-shifting and blame-shifting by both levels of government that we see at present and agree that a system more focused on patient outcomes is in everyone’s interest. Rather than seeing elderly people end up in hospitals waiting for aged care places, or people with chronic illness unable to receive assistance to manage their condition in the home and community, care should be able to focus on the specific needs of the patient and how they can be better provided for. The way to do this is to rationalise the key roles in the system that provides us all with our healthcare: funder, purchaser, and provider should be separate and distinct.
A quality health system is one of the hallmarks of enduring prosperity. Healthcare is something that we as a society value very highly. Across the western world, as societies have become more prosperous, they have chosen to spend more on health, and Australia is no different. The community already spends more than $130 billion on its annual health bill.
But it is not just the absolute dollar costs that make this such an imperative. The configuration of our health systems, whose operations remain based on 200-year-old work practices, are ill-formed to deal effectively with the chronic disease and population ageing challenges ahead. What we need is to take a hard look at the structure of the health and aged services labour market and determine how to improve workforce productivity and how to ensure we have right numbers of people and skills in the those people for an effective patient-centred health system. Some of the current administrative changes are not wasted ingredients in future reform, but quality and economics both demand that real reform is injected into the system, and soon.
Rohan Mead chairs the Business Council of Australia’s Healthy Australia Taskforce.
Mead: Government needs to focus on long-term plan for healthcare was published in the Australian Financial Review, Thursday 7 May 2013