Time to consider the dollar in healthcare delivery

Ignorance explains much of it and misinformation the rest. The real cost of health is hidden - cynics might say conveniently - from taxpayers because most services are "free" and the 1.5 per cent Medicare levy appears to be small change. An "ageing population", the trite explanation usually put forward, not only is wrong, but soothingly suggests the users rather than the system itself are the problem.

The proliferation of older people, both absolutely and relatively, explains less than one quarter of the growth in health spending in the decade to 2012, according to the Grattan Institute.

"Increases in health spending are driven primarily not by an ageing population but by more people of all ages seeing doctors more often, having more tests and operations, and taking more prescription drugs," its analysts point out.

Commonwealth government spending on health has risen by 30 per cent to $64 billion since the last year of the Howard government, about three times as quickly as consumer prices and population.

For cash-strapped state governments, who run public hospitals, health costs threaten to absorb almost all their revenues, ultimately squeezing out spending on new roads, rail and schools. In NSW, health spending - 27 per cent of the state budget now, up from 19 per cent in 1995 - is projected to grow 6.2 per cent a year until 2050, contributing 38 per cent to the growth in costs to that year, more than any other area, even if the effects of ageing are stripped out.

Some government subsidy to health services is desirable for reasons of efficiency and equity. But massive savings can be made with very negligible impact on health outcomes or equity.

The best place to start is to curb unnecessary visits to the GP, as the Australian Centre for Health Research is proposing, revealed in today's The Australian.

The cost to taxpayers of the 115.5 million visits to the GPs last year - more than 80 per cent of which were "bulk-billed" or "free" - was $4.9bn, 6 per cent higher than the year before. A modest co-payment of $6 for every visit would save taxpayers $750 million across four years without undermining Australians' health, it calculates.

Indeed, the renowned RAND Corporation confirmed common sense with a comprehensive study over 20 years that showed co-payments have practically no impact on health outcomes but reduce usage significantly.

Alas, even a measure as reasonable and modest as this will probably be attacked, including by the Labor Party, whose grip on economic reality has rapidly weakened. Younger Australians, inured to the big-spending Labor Party under Kevin Rudd and Julia Gillard, might be surprised to learn that the Hawke Labor government introduced co-payments for GP visits in 1991. Unfortunately, Paul Keating used the change to undermine Bob Hawke's waning popularity and, in an act of rank populism, abolished them.

"Free" doctors visits are now a sacred cow. Far from making the system more sustainable, the new Prime Minister Tony Abbott boasted, as health minister in the supposedly economically liberal Howard government, about lifting bulk-billing rates to their highest level ever.

To paraphrase Herb Stein, Richard Nixon's adviser, if something is unsustainable, like Australia's spending on health, it will stop. But cessation can occur in one of two ways: massively increased taxation, which would be a disaster, or more efficient spending.

For all the talk of inquiries, no area is more deserving of one than Australia's health system. It is not only government payments that require critical review but the supply of medical services. Doctors and governments artificially restrict the number of hospital doctors and particular surgeons.

For example, the various colleges of specialists deliberately cap their numbers - often using the excuse of keeping standards high - to keep their incomes sky high at enormous financial cost to the general public, both financially and in terms of delayed treatments.

They also try to prevent well-trained foreign doctors from local practice. "You can have trained as a psychiatrist in the United Kingdom and be fully qualified as a specialist, but the local college will charge you a small fortune to re-train in Australia," says Jeremy Sammut, a research fellow specialising in health at the Centre for Independent Studies.

The federal government should also rescind the agreements that stop state governments charging for services at public hospitals. The NSW audit commission showed that about 20 per cent of presentations at emergency wards could be dealt with by a GP but because such consultations are "free" - despite the enormous cost to taxpayers and the harried emergency ward doctors with better things to do - they are an attractive alternative.

Reform is not politically impossible

Another rich country, The Netherlands, comprehensively reformed its health system in 2006 to itemise clearly the cost of public health for taxpayers, but maintained a generous public safety net.

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