Budget comment

Health spending up despite an austere budget

Professor Jim Butler, Director, Australian Centre for Economic Research on Health
Australian National University

The macroeconomic parameters for this year’s Commonwealth budget have led to modest growth in government spending. Total expenditure is estimated to grow by only 3.4% in current prices in 2010-11 compared with the last financial year. In real terms, after adjusting for the expected increase in the Consumer Price Index, the increase is a meagre 0.5%. 

But health spending is a different story with a projected increase of 7.8% in current prices. Further, this is not a once-off aberration but rather reflects a long-term, demand-driven increase in government spending on health. 

Of immediate interest are the new initiatives to be funded with this increased spending. In addition to the recent hospital funding reforms that have received much attention, the National Primary Health Care Strategy will be boosted with: 

• The establishment of Medicare Locals across Australia to identify service gaps in local areas and improve care coordination ($290.5m over 4 years)
• Investments in a national after-hours service to provide telephone support and, if necessary, access to after-hours GP services ($126.3m over 4 years)
• Funding for GP-based coordinated care for patients with diabetes ($449.2m over 4 years)
• Infrastructure funding for a further 23 new GP Super Clinics and for upgrades to about 425 existing primary care facilities ($355.2m over 3 years)
• Funding to establish the national component of an Individual Electronic Health Record system

Fee-for-service continues as the main payment mechanism for out-of-hospital medical services, and there do not appear to be any provisions for nurses or other allied health professionals to be given direct access to MBS rebates or to rights of PBS prescribing. 

From an economic perspective, the limitation on access to MBS rebates and PBS prescribing by nurses is worth retaining in the short term at least, until more is known about the extent to which services provided by nurses in independent clinics are substitutes for, or additional to, GP services. The new Walk-in Clinic in the ACT will hopefully cast some light on this issue.

One aspect that may prove to be controversial is the commitment of further infrastructure subsidies to GP Super Clinics, given the delays in establishing these clinics so far and the debatable economic rationale for the program. Expanded GP clinics offering horizontally and vertically integrated services are being developed in the private sector outside the GP Super Clinics program and independently of it. The case for infrastructure funding being provided to a limited number of these types of business organisations therefore warrants close scrutiny.

The development of Medicare Locals is also part of the evolution of primary health care. These organisations will embrace the responsibilities of the former Divisions of General Practice but will also provide the new after-hours support services and will continue a push for greater emphasis on prevention. There may be a risk of a GP backlash against these organisations, but probably not to any greater extent than the backlash against Divisions of General Practice when introduced some years ago. The Locals do offer the prospect of bringing a greater population health perspective to health service provision in an area, for example, by providing data to GPs on the incidence of risk factors for cardiovascular disease in their patient catchment areas.

Overall though, the primary health care initiatives are non-controversial and not unexpected, and will continue to evolve and grow as health expenditure continues to rise in the foreseeable future. The evolutionary, targeted approach runs less risk of jeopardising the substantial health gains at modest cost that Australian has managed to achieve in recent years than a more revolutionary approach. It is a cautious but defensible way forward.