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The cost-of-living crisis hits health care

The health cost crunch has just become more savage than it’s been for decades. But it’s been developing for a long time – and governments have ignored the problem.

When you can barely afford to pay the rent, keep the lights on or eat, going to the doctor can become a luxury.

This wasn’t supposed to happen. The Hawke government introduced Medicare in 1984 to embed the core promise of universal health care: that you would be treated according to your need, not how rich you are.

Not any more.

In the last financial year, over 1.2 million people who needed to see a GP did not do so because they couldn’t afford it. That’s double the number for the year before, and there’s a similar picture across the healthcare spectrum.

As this chart shows, the numbers of people avoiding care because of cost fell during the pandemic lockdowns – not because it became cheaper but because everything, including health services, went into a downturn. By 2021-22 the rates had bounced back to where they were and, in the most recent year, rose sharply again.

Seven per cent of the entire adult population avoided going to a GP because of cost. For after-hours GPs it was 4.4% and, for specialists, 10.5%.

Who can afford to stay alive and well?

This is no longer the country of the fair go.

The idea that Australia has a system of universal healthcare is now pure fantasy. More people today are being priced out of the most basic health care than at any time in the past half-century. Are we really prepared to accept the sheer savagery of apportioning illness and early death in this way?

Younger people are affected the most. These are the people who struggle most with living costs. They are the ones juggling the soaring costs of rent, mortgages, food, childcare, schooling and transport. Look at what’s happened to disposable income – that is, the amount left after paying for essentials – between one year and the next:

Health should not be a discretionary item of household expenditure but that is what, for millions of Australians, it has become.

As mental health gets worse, treatment draws further away. According to a recent survey commissioned by the peak organisation Mental Health Australia, “more than one in two Australians say the rising cost of living is having a major impact on their mental health.”

Again, it’s people in younger age groups who are most affected.

Dentistry has never been covered by Medicare. It was a regrettable and damaging omission that no government has seriously addressed ever since. Even before the current cost-of-living crisis, between a third and half of Australians avoided expensive dental care. Current figures aren’t available, but it is highly probable that the situation is worse now than it was six years ago.

Medicare in retreat

Bulk billing has taken a major hit in the past year. Across the whole of Medicare, the number of bulk-billed services fell by over 16% in a single year, and the number in which patient had to pay rose by 18%.

Those percentages are relative, not absolute. The absolute declines are shown below.

Even these figures give an unrealistically optimistic impression. They’re for services, not just for consultations. If your doctor gives you an injection or takes a blood sample, that’s a service too; but they’re likely to be bulk-billed even when the main consultation is not. A comprehensive survey released earlier this year found that only 35% of Australia’s GP clinics still bulk billed.

Tasmania, which has the nation’s oldest, sickest and poorest population, has the second-worst results.

But although the situation has become much worse with the cost-of-living crisis, it has been developing for a very long time. Over the past 15 years, out-of-pocket costs at the GP have risen by 77% and, for specialists, by 135%.

And this is what we have to pay now. Obstetrics is the most expensive of the specialties for which the government provides data, followed by anaesthetists.

Medicare has never been able to control specialist fees. Doctors in private practice can charge whatever they believe the market will stand. Procedural specialists – surgeons and anaesthetists – also benefit from charging more than once for the same patient, at one or more initial consultations and then for the operation. For these doctors, then, the figures in this chart are misleadingly low.

And here’s how these increases, over the past decade and a half, compare with wage increases over the same period.

Severe price inflation has hit most areas of healthcare except, paradoxically, dentistry. But dentists, as we have seen, were already unaffordable for millions of people and remain so.

The PBS in decline

In the last financial year, an estimated 1.9 million people avoided filling a GP’s prescription because they couldn’t afford the PBS copayment. That’s a 36% increase on the year before.

Again, younger people, particularly between 25 and 34, were hardest hit.

In 1944, John Curtin’s wartime government passed the first laws to enact a Pharmaceutical Benefits Scheme to give ordinary Australians access to life-saving drugs like penicillin. The conservative parties and self-interested doctors bitterly fought the measure but finally, after political defeats and High Court challenges, the PBS happened. By the early 1960s, it had assumed the form we’ve had ever since.

But in 1960, the Menzies government imposed the first co-payment of five shillings, (50 cents). Adjusted for inflation, that equates to $8.32 today. By the time the Liberals lost office in 1972, they’d doubled it to $1 ($12.27 today).

From there, the increases continued: some big jumps and a lot of smaller ones.

The Albanese government, to its credit, reduced the copayment for the first time ever. The general amount is now $30 and the concessional amount is $7.50. (Hardly anyone with a full-time job qualifies for a concession.)

Even when we take inflation into account, those earlier co-payment amounts were much less damaging than they later became.

There have been two major attempts to lessen the impact on low-income people: the concessional charge and the safety-net scheme. The Hawke government introduced a concessional rate for pensioners and some others in 1983, when it began its long series of hikes; and there have been various safety net arrangements.

But the safety-net doesn’t kick in until a general patient has racked up $1,563.50 in prescription costs; for concessional patients, it’s $262.80. When that point is reached, they can apply for a special card that will reduce the general copayment to $7.50 and the concessional amount to zero for the rest of that calendar year.

It doesn’t work very well. It requires a level of organisation and administrative literacy that many people don’t possess. Every prescription to be recorded in an approved way, which is often not practical; and the full copayments apply until the safety-net threshold kicks in. It’s of no help to the people who need it most.

Copayments are even more of a problem for people being prescribed several medications. If you’re taking any prescription medication, there’s a good chance you’re taking more than one drug. On average, 3.9 drugs are dispensed for every person.

This is how it pans out across age groups. Even young people are often on multiple medications: 24% of 18-to-24 year olds are being dispensed two to four drugs. For people 65 and over, 59% are taking five or more.

Each prescription incurs a copayment. So someone without a concession card, who is on five drugs, will pay $150 each time they fill their prescriptions; and someone with a concession will pay $37.50.

Someone over 65 is likely to have a concession. But if they’re on (say) eight drugs, they’ll pay $60. And if it’s ten drugs, that’s $100. Every time.

For someone relying on the pension or any other government benefit, that’s a lot of money.

The copayment – and the failure of both the concessional rates and the safety net to ensure equity – show clearly when we look at how various income groups access the PBS. This table shows how various income groups compare with the national average.

Someone in the poorest fifth of the population is 22.6% less likely than the average to be prescribed a single drug and 23% less likely to be prescribed any drugs. But poorer people typically have the worst health, so this can only be explained by a lack of access to health care. In other words, they can’t afford to go to the doctor and they can’t afford to fill even a single prescription.

The two richest quintiles, on the other hand, are less likely to be ill and therefore less likely to need multiple prescriptions: they’re below the average not because of cost but because they’re healthier. But they’re much more likely to be prescribed a single drug – and, unlike those at the bottom of the scale, they can afford those.

The recent reduction in the general copayment – from $42.50 down to $30 – is a step in the right direction, but only a small one. Of the 50 most-prescribed items on the PBS, only eight cost more than $30 – which means that for patients needing those drugs, the PBS is irrelevant.

Two-monthly prescribing, introduced for a limited number of drugs, is also a small step towards affordability. Of the top 50 drugs, it applies to only 14.

Is universal health care forever dead?

Almost half a century of neoliberal economics and small-government cost-cutting, the path back to a fair and efficient health system is long, hard and expensive.

The list of reforms is extensive. Medicare, the PBS and public hospitals have been eroded so far that the health and lives of millions of Australians are in jeopardy. But the Albanese government has been loath to commit to any health reforms that will cost serious money – and almost all do.

The PBS copayment is unnecessary and, as the Grattan Institute has found, could be more than offset by a more rigorous method of setting the prices paid to pharmaceutical companies.

The Medicare rebate must be increased, to wipe out the cuts made by the previous government and to restore bulk-billing. There have been steps to reform, but tiny ones.

Dentistry cannot be ignored forever. Too many Australians have appalling oral health. It costs them, and it costs the community.

Something must be done about specialists fees, particularly those of surgeons and anaesthetists. Some of these people plainly and callously gouge their patients. We cannot afford for these practitioners to go on earning three, four or five million dollars a year. Patients cannot pay this and nor can Medicare.

Some recent judgments by the High Court provide potential opportunities for change. Early judgments, made in the 1940s soon after Labor’s introduction of a pharmaceutical scheme, narrowly restricted the government’s constitutional ability to intervene in medical markets. More recent courts, though, have interpreted the constitution more liberally. The government still can’t control how doctors treat their patients but they are probably able to use the leverage that funding gives them – for instance, by limiting rebates to doctors who bulk-bill.

All this will take a long time, considerable political will and a great deal of money. But these are prices that must be paid. Universal health care is too important to be written off forever.


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