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Hospital cuts will hurt all

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Households face a big jump in health costs and waiting times for treatment will blow out as a result of the Commonwealth’s cuts to public hospital funding.

A report on the impact of the Federal Government’s decision to slash public hospital spending by $57 billion from mid-2017 has found that households, state governments and private insurers will be forced to foot a growing share of the nation’s health bill, while public hospitals will have to increasingly ration their services, forcing many patients to seek treatment in the private system or face lengthy delays.

The analysis was undertaken by consultancy Ernst & Young at the behest of the South Australian Government, and focused on the effects of the slowdown in Commonwealth funding on the South Australian health system.

It found that spending on the state’s public hospitals was increasing at an average 6.7 per cent year, driven by the demands of an expanding but older and sicker population, as well as fixed costs like staff wages and improvements in technology.

But the Commonwealth’s revised funding formula, under which its expenditure will be indexed to population growth and inflation, means its contribution will grow at just 3.4 per cent a year.

If the State Government sustains its current rate of funding growth of 4.9 per cent a year, and the contribution from households and health funds continues to increase by 8.1 per cent a year, the Ernst & Young report warned this would leave a funding hole of 2 per cent a year.

It said this would force changes in the way public hospitals operate, with knock-on effects for the rest of the health system.

To cope with increasing financial constraints, hospitals will increasingly defer less critical or complex cases like tooth extractions and knee procedures, with an increasing proportion of their resources devoted to more complicated cases such as liver and heart transplants.

As a result, Ernst & Young estimated the number of separations handled would drop so that by 2019-20 more than 56,000 patients a year would be left untreated, reaching 107,000 a year by 2024-25.

Patients with less complex or serious ailments would face a choice of an increasingly long wait for treatment or, for those who could afford it, seeking care in the private system.

The report’s authors estimated that about one in five of those waiting for public hospital treatment would instead opt for the private sector, driving increased demand for private health insurance and adding 0.5 per cent a year to premiums.

This in turn would discourage younger, healthier people from taking out or maintaining private health cover, adding further upward pressure to premiums and increasing the cost for the Commonwealth of its private health insurance rebate scheme.

South Australian Premier Jay Weatherill said it was “an unavoidable fact” that the Commonwealth’s cuts would be felt hardest by the most vulnerable.

“But this is not just a South Australian problem,” he said. “This is something that affects every State in Australia. The states and territories simply cannot afford to bear the brunt of these cuts.”

See also: Hospital handout ‘dismally short’ of need

Adrian Rollins