Patient co-payments, cuts to hospital funding and preventative health
During the committee's inquiry one issue has dominated the evidence:
concern over the $7 co-payment. This chapter will examine the concerns raised
about the proposed $7 co-payment.
As discussed in chapter 2, from July 2015, the government will introduce
a $7 co-payment on all bulk-billed GP consultations, out‑of‑hospital
pathology and diagnostic imaging services. The government also plans to
increase the current Pharmaceutical Benefits Scheme (PBS) co‑payment by
an extra $5 for each PBS prescription for non-concession card holders from July
2015. Concession card holders will pay an extra 80 cents.
The committee notes that this policy area has recently been the subject
of a Senate Community Affairs References Committee inquiry and report into out‑of‑pocket
That report, Out-of-pocket costs in Australian healthcare, was tabled on
22 August 2014 and provides a useful summary of the information known
about the proposed co-payment post the 2014-15 Budget. As there has been
minimal new information released by the government about the PBS and $7
co-payments since the May Budget, the committee reproduces parts of the
background information from that report below.
At the time of writing the government continues to assert that from 1
July 2015, bulk-billed patients will be required to pay $7 per visit toward the
cost of GP consultations, and out-of-hospital pathology and imaging services.
Under the proposed changes, $5 will be invested in the Medical Research Future
Fund and $2 will be paid directly to the doctor or service provider. Medicare
rebates for items attracting a patient contribution will be reduced by $5.
The government has indicated that doctors will be paid a 'low gap
incentive payment' to encourage them to charge concession card holders and
children under 16 no more than a $7 "contribution" for their first 10
visits, and to bulk-bill these patients (after 10 initial visits) and not
charge them for subsequent visits.
Currently, the incentive payment for bulk-billing concession patients is
$6 for metropolitan areas and $9.10 for regional areas and Tasmania. GPs do not
receive an incentive payment when bulk-billing patients without a concession
In the Budget, the government also announced that from 1 January 2015,
general patients will pay an extra $5.00 towards the cost of each PBS
prescription. Patients with a concession card will pay an extra $0.80 towards
the cost of each PBS prescription.
Following the tabling of the 'out-of-pocket' report, there has been
continued critical commentary on both types of co-payment proposals. During the
same period there has been no new information from the government about the
policy itself. The committee observes that across its broad remit of health
portfolio matters, a key concern of witnesses has been the serious and harmful
effects of this policy, particularly the $7 co-payment.
Three key themes emerged from the evidence presented to the committee
regarding the government's policy development process:
the $7 co-payments were based on an assertion by the government
of an unsustainable healthcare system—in particular that expenditure on the MBS
was not sustainable;
the $7 co‑payments proposal was not based on credible
the government did not consult stakeholders during the policy
Both before and after the May 2014 Budget the government has claimed
that Australia's healthcare system is unsustainable. For instance the Health
Minister, the Hon Peter Dutton MP, stated at the February 2014 CEDA Conference that
the health budget was 'tracking on an unsustainable path with no prospect of
meeting the needs of the health of our nation in the 21st century.'
Post-Budget, in September 2014, the Health Minister told Lateline:
We're determined to make sure that Medicare is sustainable
into the 21st Century. We've got an ageing population, huge costs
coming down the line. The fact that we spend $20 billion today on Medicare, but
only raise about $10 billion from the Medicare levy and the gap grows and grows
each year. It's absolutely necessary that we introduce sensible reforms...
This notion of unsustainability has repeatedly been cited as the
rationale for the government's $7 co-payment policy intervention. However, the
evidence provided to the committee does not support the government's
assertions. For example the AMA's submission states that:
The Government is justifying the health budget measures on
the basis that Australia’s health spending is unsustainable. It is not.
Health is 16.13% of the total 2014-15 Commonwealth Budget, down
from 18.09% in 2006-07.
- Health was 8.9% of Australia’s GDP in 2010, stable when compared
with 8.2% in 2001, and lower than the OECD average of 9.3%.
The Government fails to acknowledge that Australia’s nominal
GDP continues to grow at rates that are above OECD averages. Australia can
afford the health system it currently has.
The College of Medicine and Dentistry, James Cook University pointed out
that general practice is not driving force in any increase in MBS expenditure:
There is concern about a rise in health care costs driven by
an increase in Medicare spending. Further analysis suggests that most of the
increase in spending has come from an increase in specialist and hospital
spending and from areas such as pharmaceuticals and medical imaging (ie. New,
improved and more spending per person). Productivity commission figures
indicate that in 2012-13 Australian Government expenditure on general practice
was $286 per person, but in the same period government spending on public
hospitals was $1792 per person. General practice is not the cost driver in the
Medicare Benefit Scheme (MBS).
The Australian Medical Association Victoria supported the view that
health expenditure is not unsustainable:
Whichever set of numbers you want to look at, we can look at
the percentage of the Commonwealth budget, in terms of health. We have said
that it was 18 per cent and it is down to 16 per cent. On that measure alone it
is not unsustainable. If we look at general practice, in this whole co-payment
argument general practice has been hit over the head with a very big stick as
being to blame for the problem, but nothing could be further from the truth. In
fact, general practice is the solution to the problem, not the problem.
Associate Professor Sarah Larkins who is the Director of Research and
Postgraduate Education at the College of Medicine and Dentistry, James Cook
University cited Productivity Commission analysis to demonstrate that primary
care is not driving healthcare expenditure:
'Productivity Commission figures suggested in 2012 and 2013
that Australian government expenditure on general practice is around $304.10
per person but in the same period government spending on public hospitals was
$1,792 per person thus general practice spending is 15.5 per cent of the total
government spending. General practice is not the cost driver in the [Medicare
While acknowledging that healthcare expenditure is rising gradually over
time, Dr Stephen Duckett, Director of the Health Program at the Grattan
Institute, explained that Australia's healthcare system is not unsustainable
and that increased investment in healthcare is often a deliberate choice made
by wealthy countries:
Australia...is one of the better performing health systems in
the world. In terms of health expenditure, for example, we are below the comparable
OECD average in terms of share of GDP and cost per capita. That is not to say
that we should not be doing something. I am not one who thinks the health
system is unsustainable. We have seen an increase in its share of gross
domestic product over time; in fact, it is projected to increase [from
approximately 9 per cent] to a bit over 12 per cent of GDP over the next 20 or
so years. That does not mean it is unsustainable. What it does mean is that we
have to think about what it is that we are going to trade off, what it is that
we are going to give up, and whether that is what we want. Basically all
wealthy countries spend more on health care as they get wealthier; it is a
choice that society makes, that we want to invest in health care.
Finally on this point the committee notes that, contrary to the Health
Minister's argument about unsustainable health funding, the Australian
Institute of Health and Welfare (AIHW) report Health expenditure Australia
2012-13 states that health funding in that year had in fact decreased:
Expenditure on health in Australia was estimated to be $147.4
billion in 2012–13, 1.5% higher than in 2011–12 and the lowest growth since the
mid 1980’s. In 2012–13, governments provided $100.8 billion (or 68.3%) of total
health expenditure. Government funding of health expenditure fell in real terms
for the first time in the decade by 0.9%, largely a result of a decline in
Australian Government funding of 2.4%. State and territory government funding
was also relatively low, growing just 1.4% in real terms in 2012–13. In
contrast, growth in non-government funding was relatively strong at 7.2%.
The committee considers that the government’s argument that the MBS is
unsustainable is not supported by the witness testimony or submissions. The
AIHW report also reveals the fallacy of the government's claims.
$7 co-payment not supported by
During the Senate Community Affairs References Committee's out-of-pocket
expenses inquiry, the Department of Health explained that it produced
'estimates', not 'modelling' for the government of two academic papers, the
RAND study and the Keel and Hillberg paper. The latter paper is a meta-analysis
of a 'range of co-payments which have been introduced in a variety of countries
around the world and what their effects have been'. The department did
recognise that each health system is unique, and that the Australian system is
quite unique, as are some of the issues it faces,
which calls into question the application of the papers' findings to an
Australian policy context. Further, the Department also admitted that '[it] did
not make estimates about impacts [of $7 co-payments] on emergency departments.'
The committee is surprised at the Department's use of papers analysing
overseas jurisdictions as evidence of modelling having been undertaken for the
introduction of the $7 co-payments. Given the uniqueness of the Australian
health system, it is surprising that overseas models are being used, especially
given the Department's own admission that it had not undertaken modelling of
the compounding effects of the $7 co-payment on emergency departments. The
impacts on NSW and South Australia's emergency departments are detailed below.
and not evidence-based
The committee heard evidence that the government's proposed $7 co‑payment
and the increased PBS co-payment were not based on credible evidence. The
policy originates from Mr Terry Barnes, a former policy adviser to the Hon Tony
Abbott MP when the Prime Minister was Health Minister and later Opposition
Leader. It was picked up by the government's National Commission of Audit and
subsequently adopted by the government in the 2014-15 Budget. It was described
by its author as 'sending a price signal to people, there's no doubt about
that... the level of co-payment we're suggesting is equivalent to a hamburger
and fries or a schooner of beer, it's not a great deal.'
However the AMA, amongst others, has criticised the policy as both
ideologically driven and not based on credible evidence:
The AMA is concerned that the Government’s Budget measures
therefore appear to ignore systemic opportunities to address health care
spending. They appear to be driven by ideology rather than based on evidence
and have not been developed within a vision and framework of systemic reform.
This view was supported by submitters such as the Queensland Nurses'
Union, which stated:
This federal budget marks the beginning of a wide-ranging
agenda to change Australia’s health system through economic policy based on
neo-liberal principles of small government and large private interests. An
outdated ideology that finds its origins in the 1980s moves to dismantle the
mixed economy and reduce the role of government informs the audit commission’s
reports and thus underpins the 2014 federal budget.
The committee was consistently told that the government had either
failed to, or deliberately avoided consulting on the $7 co-payments prior to
their announcement in the 2014-15 Budget. The following organisations/sectoral
interests confirmed that the government had not consulted with them prior to
Australian Medical Association Tasmania
Royal Australian College of General Practitioners
Royal Australasian College of Physicians
The Hon. Jay Weatherill, Premier, South Australian Government
The Grattan Institute
Australasian College of Emergency Medicine
Australian Diagnostic Imaging Association
Residential aged care
Ambulance Employees Australia of Victoria
Australian Nursing and Midwifery Federation (SA Branch)
Aboriginal Health Council of South Australia
Health Consumers Alliance of South Australia
Minimal modelling of impact on disadvantaged
and young Australians
The committee is particularly concerned at the lack of data or modelling
from the Department of Health relating to the numbers of eligible concession
card holders and under 16 year olds who would not be liable to pay the $7
co-payment after 10 visits. The complicated system of visit caps and patient
co-payments has demonstrated that the Department of Health either has no data
to clearly explain the proportion of the Australian population that would pay
the $7 co-payment for the first 10 visits or is refusing to release it.
In Senate Estimates hearings, the Department of Health was asked to
quantify the total number of concession card holders who will meet the cap:
There were 7.8 million people who had a concession card at
any time during the 2012-13 financial year who had at least one Medicare
service in that year. Of these people, 3.1 million (40 per cent) had more than
10 in‑scope services (that is, out-of-hospital services for which the
patient contribution measure applies). Some of these services are not currently
The committee is disappointed that the Department was unable to provide
detailed modelling of the expected numbers of patients who would be required to
pay the $7 co-payment following its introduction.
Given that this was to be a government of no nasty surprises,
it is of great concern that a policy of the scale and impact of that proposed
in the $7 co‑payment was done without consultation with consumers of the
healthcare sector and was not revealed to the Australian public prior to the
Witnesses' concerns about the negative impacts of the $7 co-payments and
the increased PBS co-payment were a regular feature of the evidence put before
the committee. They can be divided into the following five areas:
- Undermining universality – the diminution of the principle on
which universal healthcare and Medicare is based.
- Inequity – concern that the patient co-payments will be
detrimental to the health and life opportunities of the most vulnerable
sections of the Australian community.
- Economic – cost shifting to the states via increased emergency
department visits and public hospital admissions as well as cost shifting to
the Australian community through payment of the patient co-payments. Concerns
were also raised about the potential for the patient co-payments to lead to
higher system‑wide healthcare costs as a result of increased reliance on
highly expensive hospital treatment over more cost-effective primary care.
- Health prevention and management – that the patient co-payments
will delay or prevent people seeking primary healthcare from GPs, pathology and
imaging specialists, and by filling prescriptions and thus fail to treat
preventable illnesses or make early interventions. Concerns were also raised
that the patient co-payment would impose additional cost burden on patients
managing chronic disease, leading to worse health outcomes.
- Administration – how the $7 co-payment will operate in practice;
what services will attract the co-payment; how can it be collected; additional
costs for administration and collection of the co-payment on GPs and other
- Links to the Medical Research Future Fund – widespread support
for increased investment in medical research but not via the proposed $7 co‑payment.
The risk posed by the government's proposed patient co-payments to
Australia's system of universal healthcare was a grave concern to many
submitters. The St Vincent de Paul Society explained to the committee the
government's obligation to provide universal healthcare:
...there is an internationally recognised right to health.
Moreover, Australia has ratified international human rights treaties which
include sustaining this right. The provision of universal healthcare therefore
plays an important component of our government’s legal, moral, and social
responsibility to its citizens. The Medicare system has been providing this
universal healthcare for decades, which has gone a long way in preventing major
health disparity in our communities. This has been particularly important for
those who are socioeconomically disadvantaged or marginalised, and who cannot
afford alternative (private) health services.
The Public Healthcare Association of Australia raised similar concerns:
Universal access to primary health care based on need and not
on the ability to pay is a fundamental human right. Providing access to primary
health care is an essential role of Government and not a cost that can be
shifted onto those in the community who least can afford to pay.
Closely linked to the question of universality of healthcare coverage is
the inequity in access to healthcare for disadvantaged sections of our society.
An official from the South Australian Department of Health and Ageing
effectively summarised the concerns expressed by many witnesses about the
disproportionate impact the $7 co-payment will have on Australia's most
South Australia is significantly concerned about the
disproportionate detrimental impact the co-payments will make on the most
vulnerable people in the community, particularly Aboriginal and Torres Strait
Islanders, older people, those with low socioeconomic status and those with
chronic conditions needing primary management in order to avoid hospital. It is
concerning that these at-risk patients may see the co-payment, in particular,
as a prohibitive barrier and be discouraged from seeing their doctor or filling
their prescriptions. In turn, these conditions could worsen or place increasing
pressure on our hospitals but also impact on quality of life and health
The Dieticians Association of Australia (DAA) provided a starting point
for the categories of vulnerable communities that will have their access to
healthcare diminished by the $7 co-payment:
DAA is concerned that additional costs will further
disadvantage vulnerable groups in the community. People experiencing
socioeconomic difficulties, Indigenous Australians, people living with mental
illness, people with disability, and rural and remote residents shoulder a
greater chronic disease burden. Yet they have poorer access to comprehensive
healthcare through Medicare with a limit of five face-to-face allied health
visits under MBS Chronic Disease items per year.
Similarly, ACOSS provided this overview of the types of groups that will
experience further access issues because of the proposed $7 co‑payments:
We are also concerned that proposals may further disadvantage
groups in the community that already are not sharing in the good health
experienced by most Australians. Particular groups in the community including
Aboriginal and Torres Strait Islander communities, those with chronic
illnesses, and people with disabilities and mental health issues need to be
supported to access the services they need, rather than facing additional
barriers to access.
Benetas, as a large provider of aged care services supporting over four
thousand older people requiring aged care, noted there were significant issues
with the imposition of a $7 co-payment on the ability of older Australians to
obtain advice and treatment for medical conditions. Benetas's submission noted:
Older people consistently identify access to affordable and
quality health care services as an area of concern. Chronic disease and poorer
health status preferentially affects those on the lowest incomes and those that
live in areas of concentrated disadvantage.
Benetas argued that older people with multiple chronic medical conditions
should be encouraged to seek primary medical care, as early treatment and
management would reduce admissions for acute hospital care.
This would result in significant savings to the Commonwealth, and corroborates
evidence from multiple witnesses that demonstrates that preventative health
programs are effective in reducing both hospital admissions and costs.
Organisations representing young people also raised objections to the
introduction of the $7 co-payment, suggesting that the government's cost cutting
agenda would further disadvantage young people, who already experience
significant cost barriers to obtaining medical care:
YACSA [Youth Affairs Council of South Australia] strongly
opposes the government's transparent cost-cutting agenda as set out in the 2014
budget. The changes proposed by the Federal Government including the Medicare
and PBS medications co-payments, if undertaken in the current and proposed
income and social service support environment, has the potential to increase
disadvantage and negative health impacts amongst already vulnerable young
The National Aboriginal Community Controlled Health Organisation
(NACCHO) also argued for more investment in preventative treatments, arguing
benefits to Aboriginal and Torres Strait Islander people would be significantly
enhanced through the provision of comprehensive primary health care. Its
submission also strongly opposed the imposition of additional cost barriers to
accessing medical services, arguing:
...the form of a GP co-payment and a rise in the cost of
accessing PBS medicines...would discourage Aboriginal and Torres Strait
Islander patients seeking preventative health care and proactively managing
NACCHO noted that Aboriginal and Torres Strait Islander people already
delay GP treatment for preventable illness. This trend was expected to worsen
if the government proceeded with a $7 co-payment:
On average 12 per cent of Aboriginal Australians defer GP
visits for more than a year because of costs. This is more than twice the rate
of the general population. Aboriginal Australians also represent a
disproportionately high number of ‘potentially avoidable GP-type presentations’
to hospital outpatient centres, particular in major cities and inner regional
centres. Additional costs to accessing healthcare [a $7 co-payment] would
result in further delays to seeking care, resulting in greater health risks to
The Aboriginal Health Council of South Australia supported the arguments
made by NACCHO. Mr Shane Mohor, Acting Chief Executive Officer of the
Aboriginal Health Council of South Australia told the committee that the
$7 co‑payment would have severe flow on effects across the whole
When we look at the current health status of our community we
are at the lowest end of the margin and by not accessing GPs and by not seeking
preventative health care, you are going to increase the rates of illnesses and
morbidity and mortality rates will increase. So there are significant flow-on
effects...The impact that this will have on the youth right across Australia,
whether you are Aboriginal or not, is an unforeseen example of not a measured
response to a budget cut which could see youth crime increase to pay for a GP
visit. It will potentially have non-adherence to medication or prescribed
medication based on the cost...We already have elderly who are noncompliant with
medications because they forgo their medications to provide food and clothing
to their grandchildren, as opposed to going to a GP for their own medical problems.
The Aboriginal Health Council of Western Australia argued strongly for
the government not to implement the $7 co-payment:
For a government who has repeatedly made verbal expressions
of commitment to improving the health and living standards of Australia’s
Aboriginal people, such budget changes not only fail to reflect these expressed
commitments, but will lead to catastrophic outcomes for Australia’s first
people. AHCWA urges the federal government to recognise its obligations under
internationally recognised human rights conventions, to which it is signatory,
and to work closely with Aboriginal communities and service providers,
particularly ACCHS, to close the unforgiving gap between the health outcomes of
Aboriginal and other Australians.
While noting that access to health services is a human right, St Vincent
de Paul Society submitted that research into social determinants of health has
concluded that health outcomes are often closely intertwined with
Its submission noted:
Increasing the cost of healthcare must also be seen against
the background of other financial pressures on the most disadvantages. Housing
affordability is decreasing, income support payments from the government are
decreasing (either directly or due to lack of indexation), the cost of
education is increasing, and utility prices are increasing far above inflation.
Adding further barriers to healthcare will not just add to, but will compound,
these issues. The costs will be severely detrimental to the wellbeing of those
who are already doing it tough.
The Australian Federation of AIDS Organisations (AFAO) argued that
Australians living with HIV/AIDS would also be disadvantaged by the introduction
of cost barriers to medical care services. AFAO's submission argued that the $7 co‑payment
would undermine years of work undertaken by previous Federal and State Governments
in formulating a comprehensive and effective response to blood borne viruses in
The introduction of any new mandatory healthcare co-payments
and the increase of any current healthcare co-payments would undermine
prevention efforts by imposing perceived or real cost barriers to testing for
HIV (and for other BBVs and STI tests). Initiatives to address barriers to accessing
testing services and thereby enhance HIV testing rates and frequency have been
carefully framed over the last few years, under the Sixth HIV Strategy and
enhanced under the new Strategy [2014-17], with Commonwealth resources
committed to the rollout of rapid HIV testing services in community settings
for gay men and other men who have sex with men. Essential to marketing these
services is that they are free of charge; any perception that the introduction
of mandatory co-payments would mean that all BBV and STI tests would incur a
co-payment would necessarily undermine these efforts.
For Australia's most vulnerable groups, there are already numerous
barriers to accessing healthcare. The committee consistently heard evidence
that the $7 co‑payment and the increased PBS co-payment would add an
additional damaging cost barrier and act as a disincentive for people to seek
medical assistance and to access medicines under the PBS. For instance Mr
Bonner, the Director of Operations and Strategy, Australian Nursing and Midwifery
Federation (SA Branch), argued that Australia was already behind other
countries in terms of healthcare costs impacting on disadvantaged groups:
The Commonwealth Fund study [How the Performance of the
U.S. Health Care System Compares Internationally] showed that Australia was
the third worst of the 11 countries in the study. [Australia] ranked only
really behind the US and the Netherlands in relation to prescription costs
impacting on low-income people. So this idea that we need to put more costs
into the system to disincentivise people from unnecessarily taking drugs or
turning up at GP services is just clearly a nonsense because we are already up
there amongst the most highly hit for co-payments, whether you are talking
about scripts, GPs or other tests...
It is frightening when you think that one in six people of
below-average income is skipping, already, some or all of their prescription
medications. If you are getting that level of noncompliance now, what would
that look like if you increased by another $7 the level of the price of each of
The perspective from Victoria's frontline of hospital care, the
Ambulance Employees Australia (Victoria), was that disadvantaged groups would
be the first to be negatively affected by the $7 co-payment and this would
result in a reliance on hospital care rather than less costly primary care:
So much of paramedics' work is [generated] because patients
feel they do not have any other alternative. It could be that they perhaps do
not understand the system. People of limited English may not understand the
health system and what is available to them. They do not understand about
preventive care and things like that. As I said, we need to see people being
comfortable and having GPs and other health providers more accessible to
people, particularly in low socioeconomic areas. There needs to be a way of
bringing people into the system, trusting the system and building up that
trust. To me, the co-payment just puts another barrier in front of that.
Negative economic impacts
The government has stated its intention in introducing the $7 co‑payments
is to create a 'price signal' to reduce the number of visits to GPs and for
out-of-hospital pathology and diagnostic imaging services.
The Department of Health informed the committee that it anticipates a one per
cent reduction (equivalent to approximately 1 million fewer visits) in the
number of GP attendances in the first 12 months of the $7 co‑payments.
The committee is aware of anecdotal evidence indicating an immediate decline in
GP visits following the Budget announcement due to patients' misunderstanding
that the $7 co‑payment was already in force.
Price signals inappropriate for primary
Experts in health economics have argued that price signals are
inappropriate and ineffective in the context of primary care:
Price signals work by encouraging consumers to think about
whatever it is they are about to buy, and whether it’s worth the cost. They
assume some consumer knowledge of the product, and its value. We rely on prices
right through the economy to temper consumption.
But this economic common device is inappropriate for primary
care because health care is not a commodity or luxury service; it is an
essential service that can create much greater downstream costs if not used at
the right time.
Evidence from Australia and other countries shows that
low-income groups are much more likely to rely on general practitioners than
visit more expensive specialists. But it is this less expensive and more
accessible (and accessed) service that’s being targeted by the government’s
The chairman of the National Commission of Audit, the
treasurer and the health minister have all claimed that Australians go to the
doctor too often. They suggest the introduction of a price signal for health in
the form of co-payments will only reduce trivial visits.
...Co-payments cannot operate as an effective price signal if
people can’t judge the quality of what they’re buying. They will simply stop
going if they cannot afford to pay.
The need for price signals in primary health care has been much
criticised since the $7 co-payment was announced in the 2014-15 Budget. Ms
Carter from the Victorian Medicare Action Group (VMAG) was one witness who
discussed the irrationality of a price signal on access to primary health:
In terms of price indicators, it is very clear from the
patterns of access to GPs that co-payments are not effective in either
deterring overuse of GP services or encouraging use of necessary health
services by the people who most need them. I note that the report of the Senate
committee [inquiring into out‑of‑pocket expenses] suggests that at
least six percent of the population are already deferring access to general
practice because of the costs involved in accessing health care—that may not be
co-payments for the GP service but other costs—and that the most marginalised,
Indigenous people, are 12 percent more likely not to access general practice
costs and in fact to defer them up to a year, according to the data in the
[out-of-pocket expenses] report. It is a very crude instrument for dealing with
the subtle nuances—and the not-so-subtle nuances, I guess—of our health system,
and it is not very creative.
Cost-shifting to the states
Other witnesses argued that an unintended consequence of the $7 co‑payment
would be to shift the cost of treatment from primary health to hospitals and so
from the federal government to the states. This position was not declared prior
to the federal election of 2013. Professor Dabars, CEO of the Australian
Nursing and Midwifery Federation (SA Branch) explained that the $7 patient co-payment
would cause people to defer primary health care with the result that treatable
conditions would eventually require hospital care:
...the introduction of co-payments for a range of health
services—GP visits, pathology tests, radiology services—and the increases in
pharmaceutical payments will, in our submission, likely lead to those people
most in need of attending those services either avoiding them or delaying
seeking care due to costs. In addition to the personal and unintended social
and economic impacts that co-payments will have, they will add to the cost of
our healthcare system over time. People avoiding visiting the GP and whose
health conditions worsen will ultimately attend the hospital emergency
department acutely unwell. People taking multiple medications for chronic
health conditions and who become partially or wholly noncompliant with those
directions again will become more unwell and require additional services. Those
costs will impact the most vulnerable in our community: those on benefits or
pensions, the lower paid and especially those with families, but also, research
suggests, disproportionately on Indigenous people, on women, on the elderly and
on those with chronic diseases such as asthma or mental health conditions.
I noticed you were talking earlier about studies that are
available. There was a study undertaken by the Commonwealth Fund, reported in
June 2014, [How the Performance of the U.S. Health Care System Compares
Internationally] that in below average income households 14 per cent of
people had not seen a doctor for a medical problem in the previous year, and in
above average households the result was five per cent. Fourteen per cent of
below average income households had avoided or skipped medications, while the
figure for above average income people was eight per cent.
In a similar vein, Professor Mike Daube, Curtin University, Perth, and
former head of the WA Health Department, stated:
I also note that I have concerns about the proposed
co-payment scheme. Others with more expertise in that area will have spoken
with you and will have made submissions. From my perspective, I have to say,
firstly, I simply do not understand the rationale for it and, secondly, I have
no doubt whatever that it will increase the burdens on the states and
territories, everything from increased pressures on [Emergency Departments] to
the flow-on there—why would you not go to an [Emergency Department] if you do
not have to pay for it, you just have to wait a while?
Several state governments have estimated the increased pressure on
emergency departments and hospital admissions resulting from the $7 co‑payments.
For example a preliminary study conducted by the NSW Health Department shows an
expected increase of 500 000 people visiting the state's emergency departments
if a $7 co-payment was enforced.
This represents a 27 per cent increase from 2.6 million presentations to NSW
emergency departments in 2012-13 to approximately 3.1 million per annum
once the $7 co-payment is introduced. The committee notes that emergency
department admissions can cost up to ten times that of a typical GP visit.
Similarly concerning figures were provided to the committee by officials
from the South Australian Department of Health and Ageing:
Mr Archer: We are anticipating another 290,000 presentations
in our emergency [departments due to the introduction of the co-payment].
Senator CAMERON: So 290,000 in South Australia, 500,000 in
New South Wales. New South Wales have estimated that this is a significant cost
burden on hospitals. Is that the same here?
Mr Archer: Absolutely, we have estimated that the cost will
be $80 million.
Finally on the issue of cost-shifting to the states, the government has
indicated that it will allow state emergency departments to introduce a similar
co-payment to prevent or reduce the flow of patients.
However the committee understands that many state governments have rejected
this option outright.
Cost-shifting to patients
In addition to the cost-shift to the states, the AMA clearly outlined
the very significant costs being shifted by the government from the 2014-15
Budget to individual patients:
Through [the government's proposed] structural changes to
Medicare and the PBS, the Government is shifting $8.4 billion of health care
costs onto patients over the next four years.
Assuming that the $5 rebate cut is offset by the $7
co-payment, the $2 difference imposes a further cost on patients of around $1.4
Dr Stephen Duckett, Director of the Health Program at the Grattan
Institute explained to the committee the risks associated with burdening
patients with additional healthcare costs, which in his view was a return to
the healthcare model that pre-dated Medicare:
Certainly, we do not want a system which shifts more costs
onto consumers. We do not want a system which introduces financial barriers to
access so that people have to find money to see a GP, for example. We do not
want systems of that kind. Certainly, I do not think Australians want that...
We had a huge debate in Australia in the sixties and
seventies about what sort of health system we wanted. Did we want a system
where people who needed to get access to general practitioners or hospitals had
to find money to do so? One of my first jobs in the health system was taking
people to court to force them to pay their hospital bills... I was working in a
public hospital—the Prince Henry Hospital and Prince of Wales Hospital in
Sydney. This was before Medicare. I may look like I am only 35, but this was a
long time ago!...
This was a debate that was resolved in Australia in the
seventies and eighties. It is highly undesirable to have a system where people
cannot afford to go to hospital or cannot afford to go to the GP...
There is word—I do not know whether it exists any more—which
is 'garnishee', where we actually took almost all of their wages to pay their
unpaid public hospital debts.
Increase system-wide healthcare
Dr Stephen Duckett has detailed the false economy of the government's
$7 patient co-payment proposal:
In addition to problems of fairness, the $7 policy is
probably bad economics as well. The government's modelling however has been
pretty crude: all that's been announced so far is that there will be about 1
per cent fewer visits, that's a drop of about a million visits.
But it's which visits are reduced that is crucial – if they
are the wrong ones, health costs could go up instead of down. A GP visit costs
government, as a conservative estimate, about $100, taking into account
possible pathology tests or x-rays. If a person doesn't go to a GP and their
condition deteriorates, they may end up in a hospital emergency department
(which costs at least three times as much as a GP visit), being admitted to
hospital (50 times the cost) or both.
If patients make the wrong judgment call about whether to see
a GP just once in every 50 times about whether they should see a GP, and they
end up in hospital, then any system savings have vanished. Other costs, such as
additional days off work because of worsening conditions or hospital admissions
make the economics look even sicker. On top of that, some modelling suggests
that waiting times in hospital emergency departments will blow out because of
increased demand shifted from GPs.
Many other witnesses shared Dr Duckett's concerns, arguing that the
impact of the $7 co-payments will lead to an overall increase in system-wide
A compelling example of this was provided by Mr Vahid Saberi, the CEO of
Northern NSW Medicare Local:
We did a quick calculation in terms of access to general
practice. If a person goes and visits their GP once a week for a whole year, it
costs $1,872 for that whole-year, every-week access. If they go to hospital
once at the average rate, which is our average rate of 3½ to four days, that
costs $6,200. So, you can see the difference. Everything we do is to avoid
having people go to hospital, because that is where the high costs are, and to provide
all the care that we can outside the hospital.
Drawing on research from the United States, health policy analyst Mr
Martyn Goddard confirmed that the proposed $7 co-payment would increase overall
healthcare expenses and not raise any additional Commonwealth revenue:
...it does not take very many people who need to [see a GP] and
do not go and who then get sick and then have to go to hospital and have a
whole complicated range of things done. As soon as you go into a hospital, the
costs are hugely expensive. It does not take very many of those people to
massively outweigh the people who drop in [to the GP] for a chat. We have got
some data now on that from pretty well designed studies, some in this country
but mostly in North America. The study of US medicare with people over 65,
which was published in the New England Journal, found that for every dollar
saved through the payment of a $7 co-payment itself or through reduced demand
could be directly traced to an increase of $3.35 in patient costs...
One of the things that occurred to me is that if the figure
is more than about two-and-a-bit times bigger, which I suspect it might be,
then because the Commonwealth funds 43 per cent or thereabouts of public
hospital costs the cost to the federal budget of hospital costs is probably
going to outweigh what it earns or saves through co-payments.
Health prevention and management
As a barrier to accessing healthcare, the $7 co-payment is also a
deterrent to people who may be seeking preventative healthcare. This is
apparent from the evidence of Mr Stephen Burgess, Innovation, Policy and
Research Officer of the aged care service provider Benetas, Victoria, who
explained that in deciding whether to seek medical advice, people may consider
cost above whether the condition requires treatment or prevention:
The other problem with cost disincentives and barriers to
people which are designed, purportedly, to reduce inappropriate use of Medicare
funded services by GPs is that the appropriateness or otherwise of a medical
consultation is something that can only be made in retrospect, by the doctor,
after the consultation... laypeople use a very different rubric for decision
making to seek health care, particularly in settings of urgency or emergency
cases, and they are not driven by the clinical urgency of the program but
rather their emotional reaction to the symptoms that are presenting at the
time, whether or not they are in fact life threatening. In fact, there is quite
poor correlation between life-threatening symptoms and people recognising how
serious they are. Given that laypeople, by necessity, are not experts in health,
putting a financial barrier to them accessing people who are is very
It is clear from evidence presented to the committee that the multiple
GP visits, pathology and imaging services required for the management of a
chronic disease will soon cause significant cost for users of the healthcare
system. Ms Carter, VMAG provided a succinct and personal example of this
My dad needs podiatry every six weeks for a severe hammer toe
that impedes him in wearing shoes. But he did not get [his treatment] for a
while and developed an ulcer on one of his toes. The GP told him it could
result in him losing the toe without proper attention. And that would undermine
his mobility, probably put him in a wheelchair faster than the direction he
might be heading in...and cost the community far more than a regular podiatry
visit every six weeks.
Through community health services, those sorts of services,
even for self-funded retirees, can be accessed relatively cheaply. But, for
people who are on fixed and low incomes, even the cost of accessing those
services through community health services can be significant when you add up
all of the co‑payments that people are confronted with, particularly as
they age or if they have a chronic condition earlier in their lives.
Mr Hill, Ambulance Employees Australia (Victoria) argued that the
consequence of rising costs for those managing a chronic illness would be a
lapse in treatment and increased hospital admissions:
There are a lot of people in the community who may have, say,
a back injury, chronic pain, and they are out of work because of that injury.
So they are not on a lot of money and they cannot afford to be seeing their
doctor every week. Whether they go to the doctor or not depends on how much
money they have in their pocket. This is just a further disincentive to keep in
touch with the doctor, to keep on track with whatever medical condition it is
they are dealing with. Mental health is a good example where people regularly
need to see their doctors and their counsellors. Sometimes they have a GP, a
psychiatrist, a psychologist, counsellors, the works. When they are not
adhering to their medical schedule, that is when they fall into a bit of a pit
and paramedics get called out when they are at the point of real despair.
The committee also heard evidence relating to the practical
implementation of collecting the co-payment. The evidence of Mr Burgess,
Benetas, Melbourne, was particularly concerning as it highlights the
complexities and cost implications of administration which will be needed to
collect the $7 co-payment:
Specifically to your question on the realities of making [the
administration of the co-payment] work: for every client who has a scheduled GP
coming that day—not to mention unscheduled GP visits from locums or for an
acute problem—they will need $7 in cash sitting on the bedside table which then
gets handed over to the GP, who must then write a cash receipt for it so it can
be recorded in the client record and acquitted under their monthly account
under client directed care. Each client is issued a monthly statement which
must be accounted for to the cent. Alternatively, the $7 will need to be taken
out of that client's essential pool of care funds and remitted to the GP, whose
clinic then has to account for it and send a receipt back for it so it can be
accounted for. The practicalities of doing that are very difficult.
The overhead and staff costs are going to vastly exceed the
cash amount involved, and it is a perverse incentive because the relationship
is actually between the client and the general practitioner. Residential aged
care is housing. All of a sudden you have the provider of the housing and the
daily support services mediating the relationship with the GP. 'Will I call the
GP for client X, who does not appear to be quite as well as usual? Their
cognitive impairment seems a bit worse. Some of their behaviours are a little
bit more extreme than normal, but they do not appear actually unwell. If I make
the call then the client will be bearing the financial cost. If I do not make
the call then the client bears the health risk of not receiving the medical
care that they might need'—not to mention the administrative burden that sits
there. It may well be that there are tensions between the provider of the
residential aged-care facility and, for example, family members who might get
the monthly statements and wonder where all this money has gone. 'Why did you
ring the doctor for my mother when the doctor turned up and said there was
The committee heard about administrative and cost burden the $7 co‑payment
will have on the thousands of GP practices across Australia. Dr Carlson who
operates a general practice on the South Coast of NSW explained of the
unexpected impacts of the $7 co-payments to small private GP practices:
...there is not a hope in Hades of developing by July next year
the software that can cope with it [the GP co-payment]—for us to have real-time
information and to know, 'They have just been for an X-ray. Was that their 10th
visit or not?' There is an impact upon general practice and pathology and
radiology practices in terms of managing the collection of that small amount.
What do we do? Put an extra secretary on? Except we are not able to afford it
because we are giving up $16 out of $45 per consultation.
The committee also heard evidence from the South Australian Department
of Health and Ageing about the practical administrative burden of collecting a
$7 co‑payment. Although the response was given in the context of a
state-based emergency department co-payment, which the Federal Government has
promoted but the South Australian Government has firmly rejected, and although
the South Australian official was cautious in his response, it shows that the significant
cost burden that could potentially flow from the $7 co-payments:
...we have not looked specifically at what the cost of
administering it would be, because at this point in time we do not know how we
would administer it or what we would do. The comments [that the cost of
administering a $7 co-payment would be significantly more than $7] were based
on the normal cost of collection for our current debtors, if you like—what that
normally costs to process. It is significant. I think it is of the order of $30
per transaction, from memory. That is purely through our shared services
The administrative burden resulting from the $7 co-payment would also be
felt by organisations providing Indigenous health services. The Aboriginal Health
Council of South Australia told the committee that Aboriginal Australians,
being amongst the lowest income section of the Australian population, would
struggle to pay the $7 co-payment. In order to incentivise their community to
use health services and seek early treatment, groups would have to take the
co-payment cost on themselves. Ms Amanda Mitchell, Health Development
Coordinator, Aboriginal Health Council of South Australia, told the committee
that the issue had been raised at a roundtable with Assistant Minister for
Health, Senator the Hon Fiona Nash:
This issue was brought up on that teleconference with
Minister Nash and some of the CEOs of the others state affiliates mentioned
some of these flow-on effects to on-the-ground services. A question was asked,
'Can't the Aboriginal people who work pay the $7 and the unemployed not pay?'
That would mean the services would have to do means testing, they would have to
have cash on premises. Just because an Aboriginal person works does not mean
they can pay this all the time. A lot of the time we are supporting other
family members, extended family. There are costs that everyone has for
themselves. There was quite a bit of concern about this question when it was
raised. One of the CEOs said if we do not charge the $7 it could be $350,000
per year that we would have to find out of our own money to make sure that
Aboriginal people come to our service. There are extra costs that are involved
in seeing patients.
Links to the Medical Research
In the 2014-15 Budget the government announced plans to establish a
$20 billion Medical Research Future Fund (MRFF).
The government has directly linked the MRFF to the $7 co-payments, with $5 of
every $7 going to the MRFF.
Witnesses to the inquiry were highly critical of the government's
decision to link these two proposals. Witnesses generally expressed strong
support for increased public investment in medical research, but not at the
expense of burdening the most vulnerable in our community with a $7 co-payment.
Professor Mike Daube, Curtin University, and former head of the Western
Australian health department expressed the sentiment of many witnesses:
...of course I strongly support medical research but I cannot
see any reason to tie medical research into the co-payment process. We should
be funding more medical research from other sources and there are ready-made
sources. Examples would be the $14 billion or so that we get from alcohol and
A similar concern was expressed by the VMAG spokesperson:
I certainly agree that there are very mixed messages about
precisely what the government's motivation is [in implementing the co-payments].
Ostensibly, it was to fund this medical research fund—on the backs of the
people who need the health system most. That seems extremely bizarre,
particularly given that they will not benefit from this medical research fund,
given that it is estimated that it will take quite a while to actually build up
a significant corpus in it.
The committee is deeply concerned by the substantial body of evidence it
has received regarding the negative effects of the government's proposed $7 co‑payments
and increased PBS co-payment. More than 100 submitters and countless witnesses have
expressed consistent and overwhelming opposition to the proposed $7 co‑payments.
Grave concerns were expressed about the government's plan which was
described as fundamentally undermining the principle of universal primary
healthcare. In the committee's view, the government's $7 co-payment is a
significant regressive step.
Perhaps the strongest objection to the government's $7 co-payment is the
disproportionate impact it will have on the most vulnerable sections of the
Australian community. The list of vulnerable groups ranges from the elderly to
the poor, from Indigenous Australians to those in rural and remote areas, from
those with chronic conditions to those with mental illnesses. These Australians
will bear the brunt of the financial costs associated with the government's $7
co-payment but also will suffer worse health outcomes as a direct result.
Several significant and perverse economic outcomes were also raised as a
highly problematic aspect of the government's $7 co-payment. Firstly, the tax
was described by economic health experts as ineffective in the area of primary
care. It cannot possibly target the GP visits, pathology and imaging services
and prescription medicines that the government has described as
"unnecessary" without also increasing preventable illnesses through
the deferral of necessary healthcare. Secondly, it poses a substantial
cost-shift from the Commonwealth Budget to state emergency departments and
individual patients. In doing so it would lead to even greater pressures on
already overstretched emergency departments as well as higher system-wide
healthcare costs due to a greater reliance on more expensive hospital treatments.
For patients with complex chronic health conditions such as diabetes and
obesity, the government's $7 co-payment will result in people delaying much
needed primary care treatments. This will ultimately lead to patients needing
attention for acute conditions, greater cost imposts on both the patient and
the health system, and worse health outcomes for the patient and the system.
Finally, the $7 co-payment will create additional cost and
administrative burdens and red tape for healthcare providers across Australia.
This appears to be inconsistent with the government's mantra about reducing red
Collectively, these concerns demonstrate the sheer size and scale of the
impact of the government's proposed $7 co-payment.
Accordingly, the committee makes the following recommendation.
The committee recommends that the government should immediately abandon
its plan to implement the $7 co-payments.
The committee is deeply concerned by the substantial body of evidence it
has received regarding the negative effects of the government's proposed
patient co‑payments. More than 100 submitters and countless witnesses
have expressed consistent and overwhelming opposition to the proposed $7
Cuts to hospital funding
Many organisations and individuals have expressed frustration and
disappointment at the government's announcement in the 2014-15 Budget that
$50 billion would be cut from the public hospital system over ten years.
Similarly, all state premiers and territory chief ministers reacted negatively
to this announcement.
Witnesses and submitters to this inquiry, including the South Australian
Premier and the South Australian Department of Health and Ageing, the Royal
College of Physicians and the Australasian College of Emergency Medicine, all
relayed their strong opposition to the cuts. Many submitters and witnesses
argued that the cuts would place an already overstretched public hospital
system under unnecessary additional pressure.
The Premier of South Australia, the Hon Jay Weatherill detailed the
severity of cuts in funding and services to his state. While acknowledging a
total reduction of $80 billion in health and education funding, the
I want to direct my remarks today to essentially the federal
budget and the changes in the budget which affect all states and territories, [which
is] in the order of $80 billion in cuts to our state health and education
systems over the next 10 years. South Australia's share of that is $5.5 billion
over the next 10 years. Most of that is in health... It is $4.6 billion over
the next 10 years in health. In the next four years alone, the health cuts
amount to $655 million.
Premier Weatherill explained that the federal government had reneged
upon the previously signed health expenditure agreements between the
Commonwealth and South Australian governments. These agreements, equating to
funding cuts of $655 million over four years included the:
National Health Reform Agreement;
National Partnership Agreement on Improving Public Hospital
National Partnership Agreement on Financial Assistance for Long
Stay Older Patients;
Health National Partnership reward payments;
National Partnership Agreement on Preventive Health; and
National Partnership Agreement on Indigenous Early Childhood
Finally, Premier Weatherill described the frustration felt by premiers
and chief ministers, who in Council of Australian Government (COAG) meetings
with the Prime Minister in early May, less than two weeks before the budget,
were not told of the $80 billion in cuts to state and territory governments for
health and education services.
In related evidence from the South Australian Department of Health and
Ageing, the committee learned of the additional pressure that the announced
cuts will place on public hospitals in South Australia. Mr Archer, Deputy Chief
Executive Officer of the department explained that of the total $5.248 billion
in the South Australian health budget, $1.5 billion is sourced from the federal
government. As the federal government is a significant financial partner in the
health of Australians, it was particularly difficult for the department to plan
over the short term, due to the severity of the cuts:
The federal health budget reductions will mean that South Australia
will receive approximately $444 million less over the next four years for
public hospital services when compared to what was published in the 2013-14
Mid-Year Economic and Fiscal Outlook. This grows to a loss of $4.6 billion
over the next 10 years. These reductions relate to the cessation of funding
guarantees under the National Health Reform Agreement, not increasing
contributions to 50 per cent of the efficient public health service expenditure
and new indexation arrangements from 2017-18 to a composite CPI and population
The AMA Victoria argued that the cuts would be detrimental to the
Victorian health system. The AMA Victoria's analysis revealed that cancellation
of the health reform agreements would result in cuts of about $676 million over
the next three years.The
AMA Victoria's President, Dr Bartone told the committee of likely outcome to
the Victorian public hospital system if funding uncertainty continued in the
short and medium term:
Simply there is a lot of ambiguity and uncertainty going
forward. The decisions around health care need to be planned well in advance.
We cannot have a system of changing or moving the chess pieces. Hospitals need
to forward plan their budgets more than the current financial year. Putting the
horse before the cart is only going to result in programs getting lost,
elective surgery waiting lists falling apart and operating theatres being
brought to a halt because suddenly they are running out of money.
The AMA Victoria also gave evidence that, the federal government did not
consult stakeholders or service providers prior to the removal of $50 billion
from the health system, stating that there was 'zero' consultation prior to the
announcement in May. Dr Bartone expressed frustration at having being 'stonewalled'
by the government following the release of the National Commission of Audit
Dr Bartone: There were a lot of murmurings and gestures.
There was a lot of corridor discussion of what was going to happen. I heard
this and I heard that, but there was no formal meeting to say what was being
proposed. Our previous federal president did try to meet on many occasions to
get a better understanding of what was going to be released but was stonewalled
in terms of clarity about where the government was heading. We did put on
record, as soon as the Commission of Audit came out with its findings, that we
were opposed to even its more adventurous, shall we say, targets. We clearly
put that out there at the time. We were expecting some bad news but not what we
CHAIR: They are important numbers—zero for consultation and
$50 billion for cuts over 10 years. It is a dangerous mix—is it not?
Dr Bartone: Absolutely.
The Australasian College of Emergency Medicine argued that continued
cuts to health funding and services could result in an exodus of medical
professionals overseas due to the compounding effect of additional pressures
public hospitals are experiencing:
I am saying with the budget cuts and the increasing
requirement to do more with less, the impost on people's working conditions,
the requirement to actually do things that are outside your ability to do—which
is what is happening in the UK. I am looking at what has happened overseas and
hoping that we do not go down that pathway.
The Grattan Institute submitted that the government's decision to cease
activity based funding and return to block funding would create incentives for
the states to cost-shift back to the Commonwealth:
I think the shift away from the shared activity based funding
was a retrograde step. It had a number of attributes which you have mentioned,
one of which is transparency. Importantly, from my perspective was the
alignment of incentives. If the Commonwealth government were at risk of
spending additional money because of hospital activity increases then it was in
the Commonwealth's interest to actually improve primary care services to reduce
demand on hospitals...
[Shared activity based funding] gave the Commonwealth skin in
the game to try to reduce public hospital expenditure. Interestingly, the
budget has increase the incentives on the states to cost shift to the
Commonwealth. It is the most amazingly perverse policy you could possibly
imagine in that regard. It now says that there is no reward to the states for
doing additional activity, so they can say, 'We will label this additional
activity as Commonwealth activity,' and cost shift it.
The AMA was also critical of the moves by the federal government to move
away from activity based funding, arguing that block funding adjusted for
population growth and CPI would result in more inefficiencies in the public
Activity based funding provides transparency in terms of the
activities that are funded. It provides a mechanism to deal with inefficiencies
in the public hospital system by enabling comparison of costs and the activities
and services produced. [Activity Based Funding] classification of activities,
together with the transparent application of standard costs, enables better
assessment of performance and informed consideration of issues like unwarranted
The committee is greatly troubled by the evidence relating to the
government's cuts of $50 billion to hospitals across Australia which
demonstrates the detrimental effects of these cuts on public hospital systems
already under pressure.
The committee is concerned by the government's decision to renege on
hospital funding agreements, the abandonment of activity based funding and the
return to block funding for public hospitals. The committee strongly supports
activity based funding as it incentivises system-wide efficiency improvements
and minimises the cost-shifting associated with block funding.
The committee notes the evidence of the negative implications of the
changed hospital funding indexation arrangements that will see
public hospitals funded on the basis of population growth and CPI;
cuts to the National Health Reform Agreements and associated
National Partnership Agreements; and
lack of commitment to Activity Based Funding.
The evidence points to a significant loss of health services in
Australia’s public hospitals if these changes proceed.
On the basis of the evidence to the committee, the government should
restate its commitment to Activity Based Funding and associated reforms.
Abolition of the Australian National Preventative Health Agency
The committee heard that investment in health promotion is both highly
cost effective and relatively cheap. It has been estimated that for every
dollar spent on health promotion and prevention five dollars in healthcare
expenditure alone is saved.
The Victorian Health Promotion Foundation observed that despite the
cost effectiveness of health prevention, Australia invests just two per cent of
all health expenditure in health promotion and disease prevention programs—low
by international standards.
The committee heard persuasive evidence from numerous submitters that
the government's decision to abolish of the Australian National Preventative
Health Agency (ANPHA) was a critical mistake that would result in significantly
higher health expenditure over the long term. Many witnesses and submitters
argued that the abolition of the ANPHA was a regressive step that ignored
significant research that demonstrates the enormous financial, social and
health benefits of preventative health programs.
For instance the AMA Victoria argued that as chronic disease is the
driving force in healthcare funding in Australia, further cuts to health
prevention programs would have a profoundly negative effect on both health and
financial outcomes for Australians:
In Australia, chronic disease is the dominant driver of
health care spending. It accounts for half of all hospital costs. Further cuts
to prevention and health promotion will only compound the problem. The best way
to treat chronic diseases is to prevent people developing them in the first
VMAG was also strongly critical of the abolition of the ANPHA. It argued
that it would result in Australia's health system mirroring the two-tier system
in the United States, and consequentially see less use of preventative health
measures. VMAG argued:
So we support a strong shift in emphasis to evidence-informed
prevention and health promotion strategies. Again, things like the abolition of
the Australian National Preventive Health Agency, we think, send the wrong
The Australian Nursing and Midwifery Federation South Australia (ANMFSA)
argued that the Commonwealth, through the abolition of the ANPHA and the
National Partnership Agreement on Preventative Health was effectively walking
away from its role in primary and preventative health care:
Under the reform agreement, the Commonwealth was to assume a
greater role for the funding of primary health services. That is a wider role
than the historic federal role in the funding of primary medical services. It
took the Commonwealth into a greater responsibility for funding of community
based health care, particularly into the areas of multidisciplinary healthcare
delivery for disease prevention and for health promotion.
The ANMFSA argued that the cuts by the Commonwealth government to
preventative health programs are both short-sighted and counterintuitive. It
submitted that any short-term "saving" would result in a significant
increase in demand in the long-term.
The AMA also shared the view that the cancellation of the National
Partnership Agreement on Preventative Health would result in significantly
higher costs to the health system.
The legislation to abolish ANPHA was defeated in the Senate on
25 November 2014.
Despite this, by 2 July 2014 the government had completed the transfer of
staff, files and functions from ANPHA to the Department of Health.
The 2014-15 Budget removed ANPHA's future funding, claiming this as a
The committee is not satisfied that the abolition of ANPHA will result
in any significant budgetary savings. The government has proposed that ANPHA's
functions will be integrated into the Department of Health so the cost of
running ANPHA's programs will still be a Commonwealth responsibility.
The committee is however persuaded by the evidence that the work of
ANPHA is crucial to reducing illness in the medium and long term, and would
provide significantly greater health and financial outcomes for both patients
and governments. The committee notes the extensive evidence that demonstrates
the positive outcomes of investments in preventative health.
The committee considers the defeat of the bill to abolish ANPHA sends a
clear signal to the government of the lack of support for this measure. The
committee urges the government to reconsider its proposal to abolish ANPHA.
The committee recommends that, based on the evidence before it, and the
demonstrated benefits arising from the work of the Australian National
Preventive Health Agency (ANPHA) and the National Partnership Agreement on
Preventive Health, the government should drop its plans to abolish ANPHA and
reinstate the National Partnership Agreement on Preventative Health.
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