Who pays for health?

The Lamp examines the different health funding priorities of the Coalition and Labor.

States slam federal government over health funding

The federal government is diddling the public hospital system of about $1.1 billion annually, according to a damning report released by the state and territory health ministers.

The study – Caring for our Health – says the costs of health are rising much faster than inflation and the burden is being shifted by the Howard government on to the states and individuals.

The report also says that many older people are waiting in acute hospital beds for places in aged care facilities because of a shortage of federal government-funded aged care places.

And despite the federal government providing some incentives to GPs, the proportion of bulk-billed GP visits is well below the level of a decade ago.

Canberra shifts health cost burden on to individuals

Ten years ago Australians spent the equivalent of $9 billion out of their own pockets on health care. That figure has jumped to $15 billion.

A patient’s out-of-pocket cost to see a GP rose by 60% from $9.40 in 1997-1998 to $15.82 in 2005-2006.

A visit to see a specialist jumped from $17.99 in 1996-1997 to $32.88 in 2005-2006.

Australians are now paying about $1,000 a year on average to fill scripts subsidised under the Pharmaceuticals Benefits Scheme.
Even for concession card holders there has been an increase, from $2.60 in 1994-1995 to the current $4.90.

The Commonwealth contributes less to public hospitals each year

The report says the federal government has gradually reduced its share of the funding of public hospitals and the states and territories are being left to pick up the shortfall.

In 2000, the Howard government contributed 50% of the cost of maintaining and running public hospitals. By 2005, that share had dropped to 45%.

If this trend continues, then in 20 years’ time the federal government’s share of public hospital costs will have declined to about 25% and the states and territories share will have climbed to 75%. According to the report, this would affect the states’ ability to look after other essential services such as schools, police, public transport and roads.

In dollar terms, this creates a shortfall of $1.1 billion a year, an amount that would fund an extra 350,000 admissions in our public hospitals.

Private health insurance subsidised by $3 billion a year
The report accuses the federal government of double standards in its treatment of private and public health funding.

In 1999, the government introduced a 30% rebate on premiums to health insurance funds. It also penalised those earning more than $50,000 through the taxation system if they did not join a fund. The government’s rebate scheme costed about $3 billion in 2006-2007.

These changes were meant to shift some of the burden away from the overstretched public hospitals to the private sector. In fact, while the government has increased its spending on the rebate by 58% between 2000-2001 and 2005-2006, the number of people in private health insurance funds increased by only 1.5%.

Health insurance premiums have increased at roughly twice the rate of inflation. These increases have been sanctioned by federal health minister Tony Abbott.

The state health ministers argue the federal government justifies these higher premium increases by saying prices in health care rise faster than prices in other areas yet the federal government does not apply the same reasoning to its share of the costs of public hospitals.

Bulk billing down, cost of seeing a GP up, EDs at breaking point

In 1996-1997 more than 80% of visits to a GP were bulk billed. Fewer than 20% of people visiting a doctor had to pay anything out of their own pocket. The figure of 80% dropped alarmingly to 68% in the seven years to 2003-2004 as federal government payments to GPs failed to keep pace with inflation. The Howard government then introduced measures that increased bulk billing but it is still below the level of a decade ago.

The out-of-pocket costs of visiting a GP have risen due to the relative shortage of GPs and the decline in the federal government’s schedule fee, which has led to doctors’ incomes dropping. This has made many GPs reluctant to bulk bill.

NSW Health Minister Reba Meagher says this adds to the pressure on public hospitals.

‘There are not enough GPs. That means people are more inclined to use hospital emergency rooms to get the care they need,’ she said.
In NSW, the number of people attending emergency departments rose by 73,000 in the nine months to April 2007. This follows an increase of 80,746 patients turning up at EDs from 2005 to 2006 (NSW Health figures).

Health costs are tough
Karen Collins, an EN at Auburn Hospital, is a sole earner with two young kids, Sara-Jayne (7) and Daniel (5). She said the cost of health care can be tough on the family budget.

‘It can be pricey and I’m the only one earning. I pay $60 for my child to see a speech pathologist. Seeing a health specialist can be even dearer. If I go to a paediatrician it can cost $200 to $300 a time,’ she said.

Karen said that without private insurance, waiting lists can be the bane of her life.

‘I’m not in a health care fund so I’m on a waiting list all the time. I might have to wait 12 months for teeth to be done or 16 months to see a specialist.’

Karen has noticed that medical expenses have been rising.

‘There’s not much I can do. I can’t afford a health care fund for my family. The price is out of my range.’

Key facts about health funding 

  • The federal government spends about $42 billion a year on health care.
  • The federal government’s contribution to maintaining and running public hospitals dropped from 50% in 2000 to 45% in 2005, creating a shortfall of $1.1 billion a year.
  • If it paid the extra $1.1 billion a year, public hospitals could manage an extra 350,000 admissions a year.
  • The government’s private insurance rebate scheme cost taxpayers $3 billion in 2006-2007.
  • People are spending over 5% a year more on health care.