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Budget emergency? Not on these numbers

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National spending on health is growing at a record slow pace as governments nationwide tighten budgets and push more of the cost of health care onto families and individuals.

In a result that dramatically undermines Federal Government claims of a health budget out of control, the Australian Institute of Health and Welfare (AIHW) has reported total health expenditure grew by just 1.5 per cent in real terms in 2012-13 to $147 billion – a little less than 9.7 per cent of gross national product – dragged lower by a 2.4 per cent slump in Commonwealth Government spending.

Federal Health Minister Peter Dutton has blamed what he claims is unsustainable growth in health spending to justify massive cuts to funding, including slashing $5 from Medicare rebates and wiping billions from future public hospital budgets.

But AMA President Associate Professor Brian Owler said the AIHW analysis showed that the pressure on the Commonwealth Budget from health was easing even before the Coalition entered office, and claims of out of control spending were baseless.

“The Abbott Government has justified its extreme health Budget measures on the basis that health spending is out of control. Clearly it is not,” A/Professor Owler said.

The AMA President said Government health spending was failing to keep pace with the growth in demand. On average, $6430 was spent on health per person in 2012-13 – a $17 drop in constant price terms in 12 months.

“These numbers clearly demonstrate that there are simply no grounds for taking even more money out of health,” A/Professor Owler said, calling on the Government to scrap its plans for a $5 Medicare rebate cut for GP, pathology and diagnostic imaging services.

“Australia has one of the best-performing and most cost-effective health systems in the world, and the Government is putting that at risk with its ill-considered and unjustified Budget cuts.”

The AIHW report Health expenditure Australia 2012-13 shows not only is spending on health (including by government) slowing, but households are shouldering an increasing share of the nation’s health bill.

Institute Chief Executive Officer David Kalisch said the 1.5 per cent increase in total health expenditure in 2012-13 was “the lowest growth the AIHW has recorded since it began the [data] series in the mid-1980s”, and was three times lower than the average annual growth rate of 5.1 per cent.

Significantly, the AIHW found only modest growth in spending on GP services, which has been targeted by the Federal Government in its proposed $5 Medicare rebate cut.

For the first time, the Institute has reported separately on non-referred medical services, showing that spending in this area of care grew by just 6.1 per cent in 2012-13, following 4.4 per cent growth the previous year.

To put this increase in context, there are more people seeking treatment (the nation’s population is growing an average 1.5 per cent a year), the number of GP services they require is increasing by almost 1 per cent a year and there are more doctors (the GP workforce has expended by 3.5 per cent since 2007-08).

The record slow growth in total health spending was underpinned by the biggest drop in government spending on health in a decade – a 1.6 percentage point plunge in 2012-13.

The result shows that the Commonwealth’s health bill was coming down even before the Abbott Government took office, meaning the cuts it has made or plans to implement come from an already shrinking plate.

The previous Labor Government’s price disclosure reforms to the Pharmaceutical Benefits Scheme delivered significant savings, but the slowdown in Commonwealth spending was also due to funding cuts to public health, dental and e-health programs.

The Federal Government’s claims regarding unsustainable growth in health spending are centred on the crucial measure of health expenditure as a proportion of tax revenues.

Before the global financial crisis, both were growing roughly in step. But when the crisis hit, health spending continued to growth while the Commonwealth’s tax take plummeted. As a result, the health-tax ratio surged as high as 29 per cent in 2009-10.

But Institute figures show it has fallen back steadily since then, and dropped to 25 per cent in 2012-13.

Even with a strong 7.2 per cent increase in non-government health spending, the amount expended on health per capita actually shrank by $17 in 2012-13 to $6430 – a 0.3 per cent drop after inflation.

Australia’s overall health spending remains close to the average among developed nations. As a proportion of GDP, in 2012 it was at 9.4 per cent, 0.2 of a percentage point above the OECD average and similar to that in the UK and Norway, and far below 16.9 per cent in the United States.

The trend toward greater reliance on individuals to fund the cost of their health care has been underlined by the AIHW report.

It found that in the 10 years to 2012-13, the Commonwealth’s share of health funding slid from 43.6 to 41.4 per cent, with some of the slack picked up by the states and territories, whose share grew from 24.3 to 26.9 per cent.

But the burden on individuals also grew strongly, up from 16.6 to 17.8 per cent over the same period, while the health funds continued to cover around 8 per cent.

Adrian Rollins