February 17, 2004
Listening to Radio National this morning I was suprised at how the political topics of conversation had changed. It's health, education and work/family with terrorism, defence and the national security state now hovering in the background.
Health policy is going to become a key election issue. It's a strategy by the Howard Government to cut the ground from under the ALP; to claw back the traditional advantage of the ALP on this issue.
Now sitting behind the froth and bubble of the election sound bites is the Federal Treasury's Intergenerational Report (2002), which estimates a doubling of federal money on health over the next 40 years due to the aging of the population and new technology. That effect of the process of aging on health means big pressures continuing to build up on public funding of health care. That means health costs will have to be maintained once the election is out of the way.
My interpretation of the Intergenerational Report is that it is is going to be used to drive policy after the election. It begins to lay the groundwork for the 4th term policy agenda, and that goundwork has been carefully prepared in the name of fiscal sustainability. This is the prognosis: slower economic growth over the next four decades, lower productivity are forecasted; spending is projected to exceed revenue after 2014 largely because of health and ageing; and that means higher taxes or reductions in government spending.
It's an overload thesis. Sound management is required. So we have to cut health spending on Medicare and PBS (in small steps) over the next decade.
This raises the corollary issue of the public funding of private hospitals through private health insurance (rebate and lifetime cover). Why this mechanism? Should we not question this way of funding in the name of economic efficiency?
It seems to be an axiom of politics that a public subsidy ($2-$3.3 billion) of private health insurance must be maintained in order to sustain the private health system. Without the 30 per cent rebate and lifetime health cover private health insurance would fall to very low levels. The private health insurance industry would collapse, and federal government budgets would come under enormous pressure. So private health insurance shifts the burden of health service delivery from the public to the private sector.
It's the fear argument. Ignore the fear rhetoric and one can see that there are other ways to fund private hospitals. It is no longer the case that reducing subsidies for private health insurance is doing away with the private health system. That is the line of the private health insurance industry.
The private health insurance industry is a high cost financial intermediary protecting its corporate welfare.
Why not fund the private health hospitals directly--say through a bed subsidy? Why not cut out the private health insurance industry? Take its snout out of the public trough, and force it to stand on its own feet and embrace the discipline of the market.
The problem is not Medicare. It is the private health insurance industry. Subsidizing the insurance industry is a high cost way to fund the services provided by private hospitals. It sucks up a lot of the public subsidy to run itself.
The article on health policy, 'A healthy use of public funds', by Ian Harper and Chris Murphy in today's Australian Financial Review (subscription required, 17 02 04, p. 55) defends the public rebate of private health insurance. It amounts to a defense of corporate welfare for the public health insurance industry, under the guise of limiting the looming blowout in government health costs.
Defending the corporate snout in the trough is a rather strange line of argument for hard nosed neo-liberals who love the free market. Isn't the market meant to be about the survival of the fittest?
Maybe these hard nosed neo-liberals have gone all weak in the knees. Or maybe these economists don't know that much about health.
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Why fund private hospitals at all? The funding of private hospitals (and education) is a joke and makes you wonder what the point of a Liberal government is.