Science broadcaster Karl Kruszelnicki has expressed “deep regret” over his role in promoting the Federal Government’s Intergenerational Report, citing its inadequate attention to climate change.

However, this photo taken just a few days ago in a shopping centre in Mackay in regional Queensland shows that he is still being used to promote the report.

Meanwhile, a senior health policy analyst, who writes for Croakey under the pen name “William Foggin”, suggests below that the report is also lacking in its consideration of significant health issues.

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“William Foggin” writes:

Now the initial fuss about the latest Intergenerational Report has died down a little, I thought I should try and draw out a few issues from its treatment of health.

Most importantly, of all the expenditure areas modelled in the IGR (health, aged care, income support, education, NDIS, public sector superannuation and defence), it is the one where unforeseen technological change can have a massive impact on costs.

We don’t have to look far for an example. Back in 1991, the National Health Strategy led by Jenny Macklin analysed all the available evidence and concluded that over the next ten years the number of acute hospital beds would have to increase by about 20% to 6 per thousand population.

By 2001 the number of beds had fallen, not risen, and it is now down to under 4 per thousand population. While there are arguments it could be a little higher to address capacity issues and waiting lists, nobody is seriously arguing for an increase of 50%,

What had changed between 1991 and 2001? Laparoscopic and endoscopic procedures boomed, replacing open surgery and its associated extended recovery times in hospital for patients.

And what drove the boom? The 1986 “development of a video computer chip that allowed the magnification and projection of images onto television screens” (http://www.ncbi.nlm.nih.gov/pubmed/9449087) – the implications of which were only just starting to become apparent in 1991.

(In passing, it is interesting to note that the IGR (page 61) identifies “keyhole surgery” as a factor driving up demand for services due to reduced patient discomfort.)

Nobody knows what impact technology will have over the next forty years.

Treasury essentially has a bob each way:  “some treatments that come on to the market are expensive, pushing up health expenditure… [but] new ways of treating a condition can also be more efficient, leading to lower prices” (page 61).

Nowhere is the reduced burden of disease and improved quality of life resulting from new treatments factored in to the report.

Second, the IGR appears to use fixed cost ratios for MBS, PBS and hospital utilisation over the next forty years.  That is to say, it assumes that a 70-75 year old who costs 2¼ times the average for MBS now will continue to cost 2¼ times the average – and as the proportion of the population in that age bracket increases costs will increase even faster.

This ignores the tendency for people to live healthier lives post-retirement as well as longer lives, and will result in an overstatement of costs from demographic change.

Third, the IGR highlights the impact of the decisions in the 2014 Budget, particularly the decision to walk away from the National Health Reform Agreement.  From 2017-18 it assumes that public hospital expenditure by the Commonwealth will be indexed by raw population growth and CPI for a decade.

Given the assumptions about growth in other programs, the changes to hospital indexation is presumably the major factor leading to Commonwealth health expenditure as a share of GDP actually falling from its current level of 4.2% to 3.9% in 2024‑25 (page 100), and only climbing back to 4.0% in 2034-35.

In other words, the government’s policy will result its health spending declining as a share of GDP for the next two decades, largely at the expense of states and territories.

Finally, it is worth noting the difference between the “currently legislated” and “proposed policy” end points for Commonwealth health spending as a share of GDP in forty years’ time.

“Currently legislated” presumably includes the freeze on MBS indexation and changes to public hospital indexation (neither of which need legislation), but excludes changes to the MBS safety net and to PBS co-payments and safety net.

On this basis Commonwealth health spending as a share of GDP in 2054-55 will be 5.7%, or $260 billion in today’s dollars (page 60).

“Proposed policy” means implementing all the measures that have yet to pass the Senate, and on this basis Commonwealth health spending as a share of GDP in 2054-55 will be 5.5%, or $255 billion in today’s dollars.

Will the Senate agree that reducing Commonwealth expenditure on health by 0.2% of GDP in forty years’ time is worth the pain of the changes to the PBS, including a $5 increase in general co-payments and a 40% increase in the general safety net threshold over the next four years?

• “William Foggin” is the pen name of a senior health policy analyst. More articles are here.

 

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