Economic Context
The COVID-19 pandemic remains a critical reminder of the importance of health investment as the best spend a government can make for its people, and its economy.
With a significant increase in national deficits, it is reasonable to expect that the ability of the Government to fund significant new health expenditure will be constrained, and the dubious temptation may be to cease new spending, and instead search for savings by cutting services or delaying necessary innovation. But now is not the time to reduce spending on healthcare. A healthy society is a critical component of a healthier economy.
As Australia continues to suppress COVID-19, the health system will need to be ready to deal with dual challenges: low-level infections and outbreaks, as well as ‘pent-up’ demand for non-pandemic healthcare compounding routine activity. There are significant unrealised consequences of delayed care and worsening health conditions.
There are fundamental changes needed to accommodate ongoing disease identification, testing, infection control and suppression in our health system. The patient flow through health systems needs to be reconsidered, with appropriate resources, funding and infrastructure provided to accommodate the restrictions and demands required for a COVID-19 existence. This will require an expansion of our health system to respond to increased demand, recognising however that many Australians have been financially impacted by the pandemic.
Prior to the pandemic, Australia’s health spending was 9.3 per cent of GDP — less than many similar countries, and close to half of the USA with its managed care model. It’s clear our health funding provides a strong return on investment. The opportunity now exists to invest further into the reforms shown to be efficient and effective, such as integrated General Practice, telehealth and e-prescribing. It is important to recognise that the health sector is also a major employer, and therefore investment in health has an additional benefit in increasing economic activity and employment.
We also need to fix the historical underinvestment in health. Average Weekly Earnings increased by 4 per cent per year from 1995 to 2020, and practice costs for General Practice for example, rise by the same amount, with health inflation also 4 per cent16.
Medicare rebates only increased by 1.2 to 2.5 per cent between 1995 and 2012, before the recent Medicare freeze prevented indexation completely, furthering the erosion of rebate values into the future17. This impacts practice viability and affordability for patients and will only be more severe in harsh economic climates.
16 Australian Bureau of Statistics (2021). Average Weekly Earnings, Australia. Table 3: Average Weekly Earnings, Australia (dollars) - original. Retrieved 19/05/2021 from: https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/average-weekly-earnings-australia/latest-release; Australian Bureau of Statistics (2021). Consumer Price Index, Australia. Table 7: CPI: Group, Sub-group and Expenditure Class, Weighted Average of Eight Capital Cities. Retrieved 19/05/2021 from: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release
17 Australian Medical Association. AMA Fees Gaps Poster 2020. Retrieved 22/01/2021 from: https://feeslist.ama.com.au/resources-ama-gaps-poster; Harrison, C., Bayram, C., Miller, G.C. & Britt, H.C. (2015). The cost of freezing general practice. Medical Journal of Australia 202(6), 313-316. Doi: 10.5694/mja15.00182
18 Australian Indigenous Doctors’ Association (2017). Report on the findings of the 2016 AIDA member survey on bullying, racism and lateral violence in the workplace. Retrieved 23/11/2020 from: https://www.aida.org.au/wp-content/uploads/2017/08/Report-on-AIDA-Member-Survey_Final.pdf