Health sector misses out on major investment in budget proposal

By Mark Harrison - April 5, 2019

A challenged health sector was optimistic that the budget announcement would contain significant immediate investment and proactive solutions. With a $7.1B surplus expected next year and a range of issues to address – community and sector participants struggling to meet the volume challenges of an aging population, support for mental health remedies, NDIS roll out and implementation, and declining private insurance cover – there seemed to be some scope for further improvement for the health sector.

However, there were no structural changes in the health sector announced in the proposed budget, and no significant increases in investment. The Health portfolio accounts for $81.7B, or 16% of the budgeted Federal spend each year. Alas, the budget papers project a 1.4% increase in spending in 2019-20 and an average of 2% real growth in spend over the coming four years. It appears the proposed budget offers limited opportunities for improvement in the sector.

The health budgetary winners

Aged care

Aged care emerged as one of the winners in this budget. Australia is expected to have over 1.1m citizens over 85 years old by 2042. This is twice the current population for this age group. The challenge of supporting an aging population must be resolved for current seniors, and a scaleable model developed to cope with the increasing demand.

Home care package service providers will be pleased with the confirmation of the release of 10,000 more packages. However, there was no timeframe attached nor any visibility of plans to deal with the remaining 100,000 (estimated) seniors awaiting a package. Residential age care providers are to receive $320m as a single year additional subsidy to support existing places, suggesting there is a need to address the model for funding levels to ensure quality of care is improved beyond this funded 12 month period.

These two allocations may be viewed as a defensive and pre-emptive strike in advance of any problems that may be unveiled by the Royal Commission into Aged Care. Realistically, if these budgetary changes were all that was required to improve the care of seniors in our communities, there would be no need for a Royal Commission.

Medicare

GPs will be pleased with the removal of the Medicare indexation freeze for services, but this will not offset the cost increases borne by practices since the freeze was implemented. There may be opportunity to grow the revenue of practices through access/supporting patients into new preventative care and treatment programs. As expected there is an increase in overall Medicare spend forecast.

Mental illness

A reported one in five Australians experience an episode of mental illness each year. The growing challenge of dealing with mental health issues has been recognised, and there is a plan to establish 30 new Headspace sites for those under 25 years, and eight walk-in mental health centres across the nation.

Health infrastructure

The government’s plan to offset a slowing economy by pouring $100B into infrastructure, will in part have a positive impact on the health sector. A small portion of this spend will go towards upgrades of regional hospitals, a children’s cancer centre in Sydney, and a brain and spinal ward for Adelaide. There is also funding to the states for their hospital network. 

Disability

The National Disability Insurance Scheme (NDIS), with a direct funding model through the Medicare levy, an impending Royal Commission into treatment of the disabled and recently loudly voiced views of under-funding should not need such alternatives, but the rollout challenges remain, and the business case for many operators remains questionable under current operating structures. There is scope for allocation of additional monies to ensure the scheme is effective and sustainable.

Overall reflections for health

In an economy with a declining production base, still reliant on mining and agriculture, the opportunity to invest in education, training, and technology to build globally competitive business for health research, pharmaceuticals, and robotics, would be visionary and potentially lead the development of a smart Australia.

The health sector also requires a significant increase in qualified people to work in the sector. Training, quality of work, and remuneration models must be reviewed to relieve the labour market pressures and resulting quality of care challenges. Investment in technology such as robotics and AI tools to support people will also be needed.

With no structural changes announced, and no significant increases in investment for health, the opportunities for improvement in the budget allocation for health may still come, either through a change in government or by the current government seeking further electoral sweeteners.

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