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The budget that forgot health.

Every element of Australia’s health system is in trouble. But you’d never know it from looking at this year’s budget.

“Labor governments,” said Jim Chalmers in his budget speech, “make Medicare stronger.”

Once, that was true. It was true of Curtin, Chifley, Whitlam, Hawke and Keating. But nothing in this budget, or in anything the Albanese government has done so far, indicates that it is true any longer.

The health measures in the 2024-25 budget leave the nation’s crumbling health system to decline even further. The few positives – delaying PBS indexation increases, expanding some GP clinics, a mental health call line – are minor. But the core responsibilities that this government continues to ignore are massive.

The PBS

In his budget speech, Mr Chalmers said the annual increase in the PBS co-payment would be temporarily frozen for general patients for a year, and for concessional patients for five years. For many years, the co-payment was indexed annually to the cost of inflation. But not indexing has become fairly normal, and makes relatively little difference to the government’s bottom line.

Inflation rose by 3.6% for the 12 months to March; it may be less by the end of the financial year. An increase of 3.6% to the general co-payment of $31.60 would be $1.14 and, for the concessional co-payment of $7.70 would be 28 cents.

The co-payment is a major barrier to people seeking health care. According to the Australian Bureau of Statistics surveys, around 1.1 million Australians did not fill a GP’s prescription in 2022-23 because they couldn’t afford it. And the co-payment isn’t going down, it’s just not going up. But $1.14 and 28 cents won’t make much difference.

A lot more could be done to alleviate the impact of this co-payment. The cost to government of the PBS is barely increasing in nominal terms and is going down in real (inflation-adjusted) terms.

“We’re also investing $3.4 billion to add life changing and life saving medicines to the PBS,” said the Treasurer. But listing new drugs on the PBS has almost nothing to do with government policy. The National Health Act gives that responsibility to the Pharmaceutical Benefits Advisory Committee, which makes the key decisions. All the government can do is refuse to list a recommended drug. And that would be politically fraught.

Including this in the budget speech indicates how little of substance the government has to say about health.

Clinics 

“In this budget,” said the Treasurer, “we are allocating $227 million for a further 29 Medicare Urgent Care Clinics, taking pressure off emergency departments and making it easier for Australians to access free healthcare.”

The urgent care clinics program involves expanding existing general practices to include out-of-hours services, with access to nurses and allied health professionals. Just how many new bulk-billed consultations this involves is therefore uncertain.

These clinics are welcome, but hardly transformational. According to the AMA, there are around 6,500 general practices in Australia; the extra 29 urgent-care clinics promised in the budget will make little difference to the ability of Australian patients to find treatment.

Nor is it enough to make a substantial difference to the workload of public hospital emergency departments. Non-emergency ED presentations are usually dealt with quickly and do not involve major workload problems.

Medicare

Constant repetition of the slogan “Strengthening Medicare” cannot alter the fact that Medicare has become substantially weaker under the Albanese government. The most recent figures from the Australian Institute of Health and Welfare show how serious the decline has been in the capacity of Medicare to pay doctors’ fees. Between the election in May 2022 and March 2024, the proportion of GP fees covered by Medicare fell from 89.8% to 83.8%.

This had the predictable and dangerous effect of fewer people needing to go to a GP being able to afford increasing out-of-pocket costs. This supercharged two other issues keeping people away from needed treatment: cost-of-living and workforce shortage.

Between the election in May 2022 and March this year, GP attendances fell by 26%.

The cost of Medicare is a serious challenge but one which must be met. Even without major new investments, costs are estimated to go on rising faster than inflation.

But failing to spend is a false economy. If the government doesn’t pay, individual patients will have to – if they can.

Mental health

The budget has little of substance to say about this critical area. There is a list of small, cheap measures that will make little overall difference to the sector.

The lead mental health measure is a promise to set up an online and telephone counselling service. How this will fit in with existing services, such as Lifeline and Beyond Blue, is uncertain. The headline number in budget papers say it will cost $588.5 million – but that’s over eight years for a program that hasn’t been designed yet.

There’s the usual list of tiny measures, largely extensions to existing programs, that add up to not much.

This country has an immensely serious problem in mental health. According to the ABS National Study of Mental Health, 3.4 million people experienced an anxiety-related disorder (which includes post-traumatic stress disorder) in the previous 12 months. Another 1.5 million experienced depressive disorders, including bipolar. For substance use disorders, the figure was 650,000.

Of all mental disorders, over 1.1 million were classified as severe.

In a 12-month period, 342,000 self-harmed. The AIHW reports that in 2022 alone, 3249 people died from suicide. That’s nine per day.

Australia has a mental health crisis. But, judging from the three budgets this Labor government has now delivered, they don’t seem to think so.

Health workforce

There are shortages in most areas of the health sector and most of them are serious. We don’t have anywhere near enough GPs, nurses, psychiatrists, psychologists or allied health professionals. But the budget contains only one significant measure directed at the problem.

Over the next three years, the government says it will spend $90 million – just $30 million a year – to make it easier for overseas-trained doctors to register in Australia. This has been an ongoing sore for decades, and any attempt to address these onerous barriers is welcome.

But there are some issues here. First among them is why we haven’t been training enough doctors ourselves and, particularly, why general practice hasn’t been made more attractive and supportable. The GP workforce is ageing and retiring. Workload is increasing, training requirements are the same as for any other specialty but remuneration is a fraction of what those other doctors can command.

It's hardly a surprise, then, that medical students shun general practice as never before. This budget will make that shortfall worse, not better.

What about all the other workforce shortages? We need those people too.

And should we rely so heavily on doctors from other, often poor, nations to prop up the health system in a rich country that can’t be bothered to train its own?

Hospitals

Public hospitals are almost completely ignored. The main element in this budget is a promise to spend $14.8 million a year on measures to get people out of expensive acute hospital care into other settings that are cheaper and more clinically appropriate. The big problem is that those other settings generally have not been built, and the federal government won’t fund hospital infrastructure.

When the last Labor government introduced the current hospital funding system 14 years ago, it promised to fund 45% of the day-to-day cost of treating each patient. This was to increase to 50%.

But the incoming Liberal government abandoned that increase. And those three Labor budgets since the last election haven’t given it a mention. All states have lobbied hard, but with no apparent effect, for this urgently-needed injection of money.

And in the future?

It could, of course, be that the government is keeping its fiscal ammunition for later, when it would be less likely to spur inflation and could form an important part of an election pitch. But, whenever the money is allocated, it will have to come from somewhere. But where?

Australia has long had a structural budget deficit, which means that in an average year, expenses are bigger than revenue. In short, we don’t pay enough tax.

Instead, taxes are being cut. The rejigged stage three tax cuts are fairer than the coalition’s version but will still cost the budget around $20 billion a year. There are many other options for increasing tax revenue – mineral royalties, the 50% capital gains discount, negative gearing, ending tax-avoidance rorts in the corporate sector,  and so on – but this risk-averse government is unlikely to take this path quickly and certainly not before an election.

So if there’s a new budget before next year’s election, what are the chances of money being found to do the important but expensive things the country needs?

Every budget under-estimates the revenue side of the forward estimates. It helps to produce pleasant surprises at budget times rather than unpleasant ones.

The most obvious example in this one is the estimate of the iron ore price, which has been the main reason for Mr Chalmers’s successive surpluses. In the budget papers, the Treasury has factored in an iron ore price of $US60 per tonne. But the price has been remarkably resilient, showing no sign of sinking anything like that far. Right now, the key benchmark price is just over $100US/tonne. Because each $US10 on the iron ore price brings an extra $A500 million in tax revenue. So the gap between the estimate and the reality means the government is already reaping an windfall of $2 billion a year.

Other important commodities are also doing well: copper, gold, gas, metallurgical coal, wheat and rice.

Every budget, including this one, has two particularly murky line-items: the contingency reserve and “decisions taken but not yet announced”.

The contingency reserve is a catch-all category. It not only includes “insurance” money in case costs rise too far – the usual meaning of contingency – but also a plethora of theoretical funding for various programs, some of which may not happen.

“Decisions taken but not yet announced” could mean anything. It could, perhaps, include money for the health system that the government wants to surprise us with later.

But there’s room in here for something that looks suspiciously like a war chest. The not-yet-announced category amounts to almost $6.7 billion over the forward estimates; the broader contingency reserve is a whopping $60.7 billion.

So there’s some possibility for improvement, but only a possibility. Don’t get your hopes up.

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