The question of how much to pay for “closing the gap” in Aboriginal health ought to be debated more on ethical lines than on economic lines but the two inevitably intersect. While the federal government and COAG have come to the party to some extent, to date their promises of money remain limited.
Of course, the issue here is not just about how much but about how. On the former it looks like all too little. On the latter the extent of mainstreaming that the government is indulging in is worrying. Also concerning is the seeming lack of understanding of the importance of the social determinants of Aboriginal health — witness the threats to the homelands movement where there is now good evidence that health is better than in more centralised communities.
I have previously argued that as a nation we should be prepared to pay an amount up to $340 billion to close the gap. This figure is derived by multiplying by 17 (the gap in life years) the number of Aboriginal people (400,000) and in turn multiplying that by the implied value of a year of life (about $50,000) as set by the decisions of the Pharmaceutical Benefits Advisory Committee (PBAC). It seemed a large figure at the time but in calculating it I did not build in the savings that might accrue, so in net terms maybe it is not so enormous.
There are economic savings to be obtained in closing the gap. A recent report from US researchers shows the way. A Johns Hopkins University-based study estimated “how much of a financial burden racial disparities are putting on [the US] health care system and society at large”. They calculated “the direct costs associated with the provision of care to a sicker and more disadvantaged population, as well as the indirect costs of health inequities such as lost productivity, lost wages, absenteeism, family leave and premature death”.
They found that “more than 30% of direct medical costs faced by African Americans, Hispanics, and Asian Americans were excess costs due to health inequities — more than $230 billion over a four-year period. And when you add the indirect costs of these inequities over the same period, the tab comes to $1.24 trillion”.
What is the cost of inequities in Aboriginal health in Australia?
There are so many differences that it is difficult to say but in the US the figure in health care costs alone amounts to nearly $800 for every American citizen or more than $3000 if all costs are taken into account. The proportion of the US population who fall into the category examined by these researchers — African Americans, Hispanics, and Asian Americans — is higher than the proportion of our population who are indigenous but the gap in life expectancy here is greater.
Maybe, just maybe, we might be better off financially if we did close the gap. I doubt it but we need to find out at least what the net cost is likely to be. This kind of thinking does not appeal to me ethically but it is relevant. We need a good solid study in Australia to examine the issue. How about the NHMRC funding that?
Despite the fact that the economy is picking up, the government still seems to need a push to get them to accept the responsibility that follows from the Prime Minister’s apology last year. Showing that it ain’t all costs in closing the gap might spur the government on to provide the means to do so.
OK, there is no moral argument here but nonetheless one that might appeal to government.
Lots of good questions in this piece. Readers may be interested to look at some economic modelling Reconciliation Australia commissioned last year from Access Economics around closing the gap. It concluded there is a “clear economic justification for government action to reduce Indigenous disadvantage”, based on a reduction in the burden of disease and an improvement in the ability of Indigenous Australians to contribute to and share economic prosperity. More details are on our website at reconciliation.org.au
“… On the latter the extent of mainstreaming that the government is indulging in is worrying…..”
As someone (non-indigenous) living on a “Prescribed Area” under the NTER (Northern Territory Emergency Response) that sentence resonated the most with me.
As for “Closing the Gap”, when it became a political catch-cry some local residents thought it referred to The Gap in Alice Springs or The Gap Hotel even!!!
My take on “the Gap” is that it is a shibboleth… an ethnocentrically defined gap.
I don’t know how you measure such as “social cohesion” etc. but I suspect that the “gap” measured on such criteria would come up with surprising results, that would go some way to debunking the recent politically driven stimatization of remote Aboriginal Australia.
Hey Mooney
From a purely finiancial point of view it would be much better if they died sooner, the country saves 17 years worth of paid benefits.
It would also save us a quite a bit if some of the sick and older white buggers could drop off the perch a little earlier as well.
I’m not advocating any of this but the logic behind your article is rubbish.
You are stupid even for an economist.
It reminds me of a story about a group of scientists in the 1980s who were frustrated that all their environmental arguments for Western Australia switching from coal-fired electricity to natural gas were falling on deaf ears. So they co-opted an economist who wrote a beautiful paper demonstrating how this switch would save millions of dollars every year (besides having a positive impact on the environment). Everyone agreed it was a wonderful idea. But it still wasn’t implemented – because the coal miners whose jobs would have been at risk all lived in a marginal electorate and neither political party was willing to risk electoral defeat over a policy that would save both money and the environment.
I’m a Yank so I can provide an objective opinion, which is that economically, your idea is TOTALLY INSANE. Let’s leave aside the issue of whether or not it would actually cost $50K a person a year to improve Aboriginal health, which seems wildly overstated to me. Why should 21 million non-Aboriginal Australians pay anything, let alone over $16,000 each ($340 billion divided by 21 million) to “close the gap”? Economically and ethically, the rest of Australia owes the Aborigines NOTHING. The only people responsible for the health of the Aborigines are the Aborigines themselves, and if the Aborigines want the benefits of living longer, then they should pay the costs, not everyone else in the country. They are adults, right, responsible for their own behavior and capable of independent thought? If not, then I assume your plan includes adult supervision for all 400,000 Aborigines, to ensure they eat and exercise properly, and avoid smoking and excessive alcohol. But I’m guessing that approach is ruled out as “racist”.
Ironically, to the extent that the “gap” results from Aboriginal genetics and cultural behavior, you could wind up throwing $340bn at the problem and still not reduce the gap. (Again, I assume changing their behavior is off the table, being racist and all that.) And if you do close the “gap”, what do you get for your $340bn? 6,800,000 person-years of Aborigines sitting on the couch watching TV in an alcoholic stupor. Hooray for central planning! Seems like a total waste of $340bn to me, but hey, it’s your money. God knows we in the States have thrown a lot more money at futile efforts to change the immutable behaviors of various minority groups.
You want to spend more than Australia’s entire annual Federal budget, and if you achieve your intended effect, which cannot be guaranteed, you will only benefit less than 2% of the population. An idea as stupidly energetic and far-reaching in scope as this could only have come from academia, the place where common sense goes to die.