By Jennifer Thompson
Changes to the Medicare and pharmaceutical benefits schemes and other changes to health funding introduced in the Coalition's August 20 budget have been promoted as a start to the process of restraining government expenditure on health care. Cloaked in the contradictory descriptions of reducing "middle class welfare" and looking after"middle" Australia, the changes augur ill for the long term fairness and effectiveness of the national health system.
Included in the budget are measures to:
- shift higher and middle income earners from Medicare to the private health system. This would be done by charging single earners with taxable income above $50,000 ($100,000 for couples and families) a higher rate of Medicare levy — the stick — and giving single earners with a taxable income of less than $35,000 ($70,000 for couples and families) a reduced private insurance premium or tax rebate — the carrot;
- reduce hospital funding grants to the states by $73.5 million in 1996-97;
- freeze the Medicare fee schedule for a year at the October 31 level and reduce or abolish Medicare rebates for some services;
- abolish the Commonwealth dental program, which was introduced in 1993-94 to provide dental services to Health Care Card and Commonwealth Seniors Card holders;
- cap pathology expenditure and freeze diagnostic imaging prices and open up to more private service providers;
- increase pharmaceutical charges for concession patients and general patients, to $3.20 and $20 respectively;
- remove capital grants to nursing homes and allow the charging of an entry deposit to nursing homes, and means-test residential care subsidies, moves that may force many older people to sell their homes and leave others without nursing home care;
- transfer responsibility for the delivery of public health programs to the states.
National savings
Driving the government's agenda is the need to increase "national savings". The "national savings" catch phrase is really just a way of describing the further redistribution of wealth from workers to an investment pool for the use of big business.
According to Budget Statement 2, the "trend decline in recent years has been a sharper trend decline in household saving, offset partly by an increase in corporate saving", which the budget's authors admit "may reflect movements in the distribution of national income between wages and profits". The trick is to convince households to save their money for a rainy day, when government welfare like age or unemployment pensions won't be around.
Particular targets are universal welfare payments — termed "middle class welfare" — and payments to those least able to fight back. The effects of the budget measures and the broad polemic against "middle class welfare" are both practical and ideological. In addition to delivering more business to the private health system and reducing the public sector competition for overseas borrowing, the longer term intention is to induce "behaviour change".
The National Commission of Audit report, presented to the government in June, outlines most clearly the changed relationship between Australians and governments that the Coalition hopes to achieve. It aims to convince people that governments aren't about providing social services and welfare, and that individual families and people should purchase these services on the market. Government's role, they argue, is to create the optimal climate for business, by minimising inflation, interest rates, wages and "restrictive" labour conditions.
In practical terms, this means convincing middle and upper income Australians to fund their own social needs, and running down the welfare system for poor Australians.
Two-tier system
Medicare and pharmaceutical benefits are major targets. The Coalition would dearly love to introduce a Medicare co-payment, originally conceived by Labor and advocated in the National Commission of Audit report. Pro-business media commentators have been disappointed by the Coalition's unwillingness to take this step, politically explosive because of the wide public support for Medicare and bulk billing, which would be undermined by a co-payment.
The main target of a co-payment is pensioners, who are the largest users of medical services. The Institute of Public Affairs, which last year urged budget cuts of $15 to $16 billion over two years, calculated then that a $5 co-payment with the introduction of a "safety net" would save the government over $1 billion per year.
Much of the savings would occur by discouraging pensioners from making "unnecessary" visits to the doctor. The Doctors' Reform Society points out that the financial "deterrent" to seeking medical services will particularly affect early intervention.
The DRS says the estimated 15% drop in Medicare usage would also result in doctors providing more health screening and regular check-ups to maintain their incomes — services that would be provided only to wealthier people paying more $5 co-payments. Any drops in the Medicare fee schedule — like the Coalition's 12-month freeze on fees and reduction or removal of some rebates — are likely to have the same effect, shifting medical services from poorer to wealthier Australians.
The government's efforts to stem the flow from the private health system will create a two-tier health system. The government estimates that the private health insurance rebate and higher Medicare levy will result in a 1.5% increase in private health fund membership, currently around 33% — down from 68% in 1982 despite the Labor government's attempts to turn the tide. The squeeze on the public health system caused by increased demand and inadequate funding, which will be worsened by budget cuts to hospital grants, is reflected in blow-outs in hospital waiting lists and closures of beds, wards and hospitals.
As this situation worsens, the two queues — a long one for Medicare and a shorter, more expensive one for private patients — will lead people who can afford it to the private health system. The public system can then be degraded further.
Efficiency?
The effort to force people into private funds is justified with the claim that the private sector is more efficient. The budget authors say, "... high levels of government spending ... can be wasteful and create disincentives for private sector involvement which may reduce potential economic growth".
The facts are otherwise. The Tax Office and Medicare take only 5% of the health "premiums" they handle, while the private funds take about 14%. As private health insurance funds have proliferated — there are now 88 — premiums have increased at a much faster rate than inflation. A report released in March 1995 by the Australian Tax Research Foundation pointed to the annual family payments of one typical fund that rose 104% in real terms between 1986 and 1993.
The Financial Review has pointed out the danger of the money-hungry private health funds absorbing the rebate for private health insurance by simply increasing their premiums.
According to the Doctors' Reform Society, the cost of the largely private US health care system is 14.5% of GDP and increasing, while the Australian system costs 8.4% of GDP and is stable.
The alternative to user pays for services like health care and education is free services funded by a tax system which ensures that all people pay according to their ability to do so. If the government was really concerned about the upper and middle classes paying for services, it would simply increase taxes on these groups rather than introducing fees and means testing. The Medicare levy should be abolished and Medicare paid for out of general income taxes, which should be scaled more progressively.
Most of all, we need health care to be accountable to the community. This goal will become less achievable with the privatisation of health care and the erosion of the public system. n