While everyone, politicians included, wants to move on from the pandemic, COVID clearly has other plans for us. And it has other plans for government spending.
The virus has ushered in a remarkable change in health funding. In 2019-20, the Commonwealth’s total health and aged care budget, as estimated in May 2019, was to be $73 billion. Funding for state and territory hospitals, handed out under national agreements, was planned to be about $22.5 billion.
The best-laid plans, etc. Spending in 2019-20 ended up at $77 billion for the Commonwealth and hospital funding at $25 billion. And that was only until June 2020, early in the pandemic. Much worse was to come in 2021: health funding was supposed to be just under $90 billion and hospitals $25.6 billion. They ended up, according to the April budget papers this year, at $98.5 billion and $29.6 billion.
In the current year, 2022-23, the Morrison government budgeted for things to improve a little: hospital funding would fall to $28 billion (despite inflation) and health portfolio funding would increase a tiny fraction to $98.9 billion — still about $20 billion more than estimated for this year back in 2019.
Safe to say that optimism won’t be borne out after the Albanese government gave the states an extra three-quarters of a billion dollars to help deal with the COVID surge.
We’ve come a long way from 2016, when the Commonwealth spent just $56 billion and handed $17 billion to the states for hospitals. Not all of it is COVID. Aged care funding has increased — though almost entirely for home care; the big expenses required to fix residential care are yet to come. But the pandemic’s fiscal impacts will be felt for years. The optimistic appraisal of the 2022 budget was that health funding would only gently rise above $100 billion a year over the forward estimates. Hospitals funding will be $32.6 billion on current estimates in 2026.
Even without factoring in the costs of fixing residential aged care (which costs more than $22 billion), health spending has been ratcheted up significantly by the pandemic, and further growth will be off a higher base. Unlike income measures such as JobKeeper, there’s little that’s temporary about the overall increased level of health spending, even if the government is moving to cut back on some pandemic-related spending like telehealth.
From a fiscal point of view, the other problem is that health spending increases come in the billions; it takes a lot of substantial cuts elsewhere to make up for a $20 billion increase. Ending waste and cutting pork-barrelling won’t get there.
Add in fixing aged care and the NDIS, where changes also come in the tens of billions, and you rapidly run out of other programs to cut to provide offsets.
This also partly explains why our health workforce is under so much pressure: years of extra spending have already soaked up considerable spare capacity in the workforce; there’s a finite number of additional doctors, nurses and allied health professionals who can be drawn into an expanded health system, even before you have to cover for the impact of COVID and flu. Beyond a certain point, state hospital systems are just bidding against each other to try to lift staff numbers, especially if our immigration system is unable to rapidly process temporary visas for foreign workers.
This is the future we knew was coming: a much greater need for health services, and a workforce too small to staff them properly. But the pandemic brought it several years early, and it’s unclear how we can go back even to 2019.
The other problem is how to pay for it all — extra health funding, aged care funding, NDIS, nuclear submarines, the lot.
The Coalition’s solution to a smaller spending problem — it hadn’t costed higher aged care wages, or fixing the NDIS, or what the subs would require — was simply to run it all up on the credit card. It budgeted for a permanent budget deficit between now and 2033, with spending of around 27% of GDP and receipts never reaching 26%. That would leave net debt north of 26% of GDP in the mid-2030s — the sort of figure that would have had armed mobs of economic commentators storming Parliament House if Labor had announced it.
The alternative is tax increases — and not just some token changes to multinational company tax revenue. It makes Labor’s obstinate refusal to fix the petroleum resource rent tax (PRRT) regime — costing us tens of billions of revenue over the forward estimates — look even more pig-headed.
The October budget (budget mark II) is the first test of how Labor will address the challenge. It can’t come soon enough — in a post-pandemic world, tax reform is increasingly urgent.
This country needs to have a long hard look at what it is (and isn’t) prepared to fund in the future. PBS costs can be dramatically reduced if some of the OTT drugs are NOT funded – spending hundreds of thousands on drugs for one or two people is not sustainable. Asking taxpayers to fund IVF is also OTT: if people choose to delay having kids until they are in their 30s or 40s and have been on the pill for decades, let them pay for their own! Prosthetic surgery for patients in their 80s or 90s? Nope! Keeping hopeless, helpless cases alive may make great TV news fodder but it is stupid public policy. Subsidising vanity surgeries, ditto. Making dying people linger in a hospice when they just want out? Cruel AND expensive. Not making everone contribute something towards a doctor’s visit: stupid and wasteful. Let the bludgers whinge, but make them pay anyway. Making Woodside and other NW Shelf gas miners pay a fair share of tax: a no-brainer. Stopping well-pensioned ex-pollies from access to the public teat in QANGOs? A few million savings right there! But until we have a real discussion about what is worth funding and what is wasteful and/or immoral, the deficits will, like Topsy, just grow and grow.
Co-payments for GP visits end up costing more, because they discourage people seeking early (and relatively cheap) primary health care and lead to more (relatively expensive) hospital care. Health care does not obey the rules of the market – unless you are prepared to callously let the poor die, as they do in the US.
It would be a brave politician who suggested that the public health system not pay the costs of bad choices & life style ailments – smoking, drinking, junk food, sloth etc.
Personal responsibility is anathema.
‘Personal responsibility’ gets a hell of a lot more play than collective responsibility.
Were it to exist, would ‘collective responsibility’ negate personal autonomy?
If not, why not?
Albo’s certainly drawn the short straw . . .
what should happen is what society we want. What level of health, education and aged care spending is required to meet these needs. Then what level of taxation is fair and reasonable. The difference between the two is the level of public deficit that is necessary. That this cannot be done by the currency issuing government is a fallacy.
But what will the dinosaurs at The Australian say.
It is obvious that 2 things need to happen: raise taxes on resources companies, including a permanent windfall profits tax and an effective resources rent tax & grow our way out of this mess on the back of decarbonisation opportunities with the government playing and active and guiding role, not ‘picking winners’.
Unfortunately, Labor’s rhetoric is still anchored in pre-pandemic neoliberal nonsense – markets, efficiency etc. Leave that nonsense for the coalition to bleat in the electoral wilderness and get on with bold, innovative policy. We were promised an end to BAU. Let’s see it happen.
The expanding universe of health funding is merely throwing money at health willy nilly with no auditing.
On population basis Australia must be the nuttiest country in the world – nearly every teenager in Sydney is either in never ending useless talk therapy or on some tablet . Mental Health budget is scandalous but NDIS is the biggest scam based upon the the premise – that the incompetent in life [for whatever reason] are completely competent to spend money given to them. Some have sufficient funds thrown at them which equates to the salaries of middle and upper management decision makers. Anyone labelled health worker can order a variety medical tests paid for by Medicare. Everyone can get free allied health treatment at least 5 paid for by Medicare. All these uncontrolled freebies do add up –
People are migrating to Australia with sick children or relatives because they can get better health treatment here than in their home country. The never ending largesse of our health system never ceases to amaze – all of it unregulated once a decision to spend on new ‘initiatives’ or increased funding decisions are made by the politicians.
It is a free for all – I am trying to think of a scam [oops essential health outcomes ] -by making an application to have a support person and mental health program for in grown toe nail sufferers. I am sure given enough air time and TV photo op
and Crikey being supportive we will achieve funding, Starting at a modest $15 million in the first year, then a study will show how successful it has been so it cam be increased to about $300 million -definitely do’t want it to achieve $billion status -someone might look at it.
Bye- send you a card from the Maldives [with the support person].