The Australian Medical Association Limited and state AMA entities comply with the Privacy Act 1988. Please refer to the AMA Privacy Policy to understand our commitment to you and information on how we store and protect your data.




Health care not a burden


01 Mar 2010





By Dr Andrew Pesce

AMA President

Since the issue of the third Intergenerational report (IGR3), there have been a number of alarmist commentaries suggesting that Australia will not be able to afford housing, transportation, community services and health care for a projected population of 36 million people (60% higher than the current 22 million) by 2050.

IGR3 is open to the inference that health care looms as a liability and an intolerable burden on future budgets.

The two previous IGR reports (issued in 2002 and 2007) implied a much bigger future burden.  The government of the time tried to use the reports to scare the electorate into accepting unpalatable policies.  It would be unfortunate if IGR3 were used likewise to justify a range of poor decisions on health expenditure in the forthcoming Federal budget or in the broader health reform agenda.

Now is a good time to put some reality checks into the IGR debate.

A key thrust of IGR3 is that increasing participation in the workforce (from higher net immigration) and faster growth in workforce productivity will boost government tax revenue.

The crude nature of the IGR modelling and the assumption-driven outcomes have attracted considerable comment and doubt.  But the high degree of uncertainty about the projections should not obstruct an open and honest debate about how we might deal with prospective pressures on government and household budgets, on resources, and on the environment.

Though the IGR places all its focus on the Federal budget, we all know that the issues run much wider than that.

The first reality check is that, according to the Government's projections, our real incomes are likely to grow about 80% over the period to 2050.  Items such as cars, IT and audiovisual equipment can be expected to continue to become cheaper in real terms, leaving ample capacity to choose new spending priorities.

The second reality check is that some of the things governments now buy with taxpayers' money will also become cheaper in real terms, again allowing for new spending priorities.

The third reality check is that a healthy nation is a productive nation. 

IGR3 somewhat grudgingly acknowledges that health and education improve labour force participation and, hence, productivity.  It does not, however, pick up on the parallel argument that healthy elders can make a very significant contribution to the nation, including by remaining in paid employment for longer, as unpaid carers, unpaid volunteers, mentors and so forth.

Old does not equal useless.  The excessive focus on the paid labour force and on paid work is one of the methodological errors in IGR modelling.

A 60% increase in population over 40 years implies very significant pressures on the natural environment.  IGR3 identifies climate change as a threat to economic sustainability but makes no mention of health effects (eg, increasing incidence of tropical diseases).  As a nation, we will not feel 80% better off if a rise in real incomes is attended by a degraded environment, increasing incidence of new health problems and less access to health care.

Every nation's greatest asset is its people.  A nation that does not invest in its people is wasting the huge potential of its greatest asset.  A nation that does not invest in the health of its people is a failed nation, one that embraces sub-optimal economic and social outcomes.  The health of the economy and the health of the people are, ultimately, inseparable.

In the wake of IGR3, the Government is seeking not only to retain a narrow focus on the budget deficit but also to conduct a narrow debate as to the solutions.

It argues that large deficits are essentially unsustainable and that the solution is not to cut government health spending.  It reduces the options to one only - that of boosting government tax revenue by increasing participation in the workforce and increasing the productivity of the workforce.

The IGR has been used to suggest that health care will be a major problem by talking up the intolerable burden that the elderly and the sick will place on other taxpayers.  Health care is not such a cost burden.  It helps us enjoy more years of quality life.  It is well known to be a ‘superior good', which means that, as real incomes rise, we spend more on it.  That is simply a choice we make.

As a nation, we make many other choices, too.  Collectively, we spend more on pet care than we spend on GPs.  National expenditure on legal gambling rivals that of spending on the public hospitals, while household expenditure on tobacco and alcohol is at much the same level as out-of-pocket spending on health care.

In the future, there will be more choices available to us than the current debate suggests.

We will be able to afford a better quality health system if we want it.  We will be able to fund that through private savings or collectively through revenue increases.  We will be able to rethink spending priorities at the household or government level.  And we will be able to rethink the way that financial resources are applied.  And, certainly, we will be looking towards the challenges of the next 40 years through a wider prism than just the Federal budget.

The proportion of GDP spent on health care is, ultimately, the outcome of a whole range of collective and individual decisions.

That includes, but is not limited to, decisions on how much governments choose to spend on health care as opposed to defence, education, roads, transport, etc.  Decisions about government spending priorities should always be open to debate and mandate from the Australian people.

The share of spending given over to health has not been fixed in the past, nor will it be so in future.  In 1960, we were 10.4 million people and we spent 4.5% of GDP on health care.  Fifty years later, the population is 115% larger and demographic ageing has been very significant.  We are spending about 10% of GDP on health care and the nation is not bankrupt.  Nor, according to the Government's own testimony, are current budget settings unsustainable.  We are still spending at about the OECD average proportion of GDP on health care.

We ought not be trying to scare people.  We should be dealing with the future challenge of funding health care carefully and intelligently.  We have the tools.  We know how to use the scientific evidence to inform patient and provider choices so that health care is safe, cost-effective, produces good health outcomes and remains affordable.

We would be kidding ourselves if we think that spending on health will never rise above 10% of GDP.  But we should not be frightened by that prospect.  It will be the result of choices we make about where we, as a nation, want to spend our money.

The everyday experience of doctors is that patients want to have access to the best available treatment and that they are not satisfied when governments (Commonwealth or State) or private health insurance funds deny them funding to have access to the services, equipment, treatments, pharmaceuticals and medical technology that would help them get well or improve their quality of life.

This is the bottom line in terms of health politics.  This is where it gets personal.  And it is this dimension that doctors have to deal with every day in working through health care options with their patients.

As noted earlier, IGR3 projects an 80% increase in real incomes over 40 years.  There's no good reason that we shouldn't choose - as we assuredly will - to spend a higher proportion of that income on improving our health and longevity.

And if we choose, for reasons of social equity, to pay for our health care mainly via the public purse, this would require a reconsideration of government non-health expenditure and/or revenues.  It is a matter of choice - ultimately a choice that will be made by the people at the ballot box.

Published: 01 Mar 2010