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Federal budget 2014: health experts react

The Abbott government has announced a A$20 billion medical research “future fund”, to help discover what Treasurer Joe Hockey calls the “cures of the future”, paid for with money generated as a result…

The budget has introduced a $7 co-payment for visits to the general practitioners. Dave Hunt/AAP

The Abbott government has announced a A$20 billion medical research “future fund”, to help discover what Treasurer Joe Hockey calls the “cures of the future”, paid for with money generated as a result of major changes to health policy.

The fund, expected to be “biggest medical research endowment fund in the world” within six years, will be capital protected, with net interest earnings used to fund medical research. Distributions to medical research are expected to be around $1 billion by 2022-23, effectively doubling the government’s direct medical research funding. Distributions of $20 million are expected in 2015-16.

It comes as the government warns of unsustainable health-care spending, which currently costs 4.1% of GDP, expected to rise to 7% if no changes are made.

From July 2015, the government will introduce a $7 co-contribution payment for GP consultations and out-of-hospital pathology. Concession card holders and children will also pay the fee, capped to the first ten services. Of this, $5 of every $7 will go to the medical research fund.

Australians will also pay an extra $5 towards the cost of each Pharmaceutical Benefits Scheme (PBS) prescription from July next year. Concession card holders will pay an extra 80 cents.

In a major blow to the states, the government will pull back from its commitment to increase public hospital funding, indexing funding to a combination of growth in the consumer price index and population, from 2017-18.

From 2016, a new Medicare Safety Net will be introduced with lower thresholds for most people. Indexing on all Medicare rebates, excluding GP services, will remain frozen until July 2016, and the Medicare Levy Surcharge and Private Health Insurance Rebate income thresholds will not be indexed.

“Primary Health Networks” will replace the Medicare Locals established by the former Labor government. The networks are expected to align more closely with state and territory health network arrangements to “reduce duplication of effort,” and align with recommendations made by former chief medical officer John Horvath following his review of Medicare Locals.

The Abbott government will honour its commitment of $200 million for dementia research, and contribute $95.9 million in 2014-15 to expand the National Bowel Screening Programme. It will also provide an additional $14.9 million over four years to establish ten new headspace sites and conduct an evaluation of the program.

The government will also provide $22.8 million to replenish the National Medical Stockpile, renegotiating responsibilities for the stockpile with the states, and commit more than $100 million to encourage school children to take part in sport activities.

The government will abolish Health Workforce Australia, which is tasked with ensuring the health workforce has appropriate skills and training, and consolidate its functions into the Department of Health, saving $142 million over five years.

The National Preventative Health Agency will be abolished, saving $6.4 million over five years.

The government will also provide funding to defend international legal proceedings initiated by tobacco companies as a result of the Plain Packaging Act, however has not disclosed the funding amount.


Stephen Duckett, Professor of Health Policy at La Trobe University and Director of the Health Program at Grattan Institute

Pre-budget softening up does not obscure the harsh reality of the 2014-15 budget decisions. Bulk billing is gone, health reform agreed by all states and territories is demolished, funding to the states is slashed and promises are broken.

The big decision is about a $7 co-payment for GP visits. Floated five months ago, ramped up by the Commission of Audit, universally condemned by health experts, the budget introduces a co-payment of $7 for each general practitioner visit and any out-of-hospital pathology and X-rays.

The existing rebate for these services is reduced by $5 but doctors will be allowed to recoup $7 by levying a patient charge. A “safety net” is introduced after the first ten services for pensioners and card holders.

The effects are known: budget savings will be made – over $1b a year – off the backs of the poorest and most vulnerable. People who miss out on the safety net will now miss out on care as well.

States will be allowed to charge $7 for hospital emergency department visits, but probably won’t. Despite the pre-budget airing, abolition of bulk-billing was not disclosed pre-election and surely counts as a surprise from a government that promised no surprises. Co-payments are increased for pharmaceuticals, more rapidly than inflation, further increasing patient hardship.

The Rudd-Gillard national health reforms were a mixed bag, slowly being implemented and agreed by the states and territories. The big change, making the Commonwealth share in the cost of increases in hospital admissions and other activity, comes into effect in six weeks time.

This meant the Commonwealth would meet 45% of the cost of increased admissions, but would only pay what was the “efficient” cost of that growth. This was to rise to 50:50 sharing in 2017, but the budget tears up that signed commitment and goes back to funding population growth only. Hundreds of millions of grants to the states are also for the chop.

But while the ink is barely dry on those agreements and the legislation, more changes are foreshadowed. The alphabet soup of agencies created by the reforms are to be rationalised. It is unclear whether the savings will come from back-room bureaucrats or from programs. If the former, it can be supported. If it is the latter and we lose an emphasis on prevention, better transparency of funding flows and better measurement of hospital activity, we’ll all be the poorer.

Another big surprise in the budget is to hypothecate much of the savings to a $20 billion dollar endowment for medical research. How the endowment will work (and whether the interest from the endowment will be truly additional research funding) is unclear. This is certainly a positive move for research, but there will be few researchers who will like where the money is coming from.

Medicare co-payment

Anne-marie Boxall, Director of the Deeble Institute for Health Policy Research, Adjunct Lecturer at University of Sydney

The government has announced a co-payment for general practice (GP) services of $7 for all patients, starting 1 July 2015. GPs can choose to waive the co-payment, and they will be paid an incentive payment if they do not charge concession card holders or children under 16 more than the $7 co-payment.

To discourage people who should be going to a GP from going to emergency departments, the government is removing the restriction that prevents state and territory governments from charging co-payments for GP-like visits to hospital emergency departments.

The GP co-payment is expected to deliver savings of $3.5 billion over five years. These savings will be achieved in two ways.

First, the government will reduce the Medical Benefits Scheme (MBS) rebate for standard GP consultations by $5; currently, the rebate for Level B consultations (less than 20 minutes duration) is $36.30. The MBS rebate will only be reduced for concession card holders and children under 16 for the first ten visits in a year. After that, it will be increased to current levels. The reduction in MBS rebates is a direct saving for the government.

The co-payment will also generate savings by acting as a deterrent for GP use. The rationale is that if people have to pay, they will only go to the GP if they really need to. Fewer visits to GPs mean less expenditure on the MBS.

The co-payment proposal has been widely criticised by many in the health sector because out-of-pocket costs in Australia are already relatively high by world standards, and there are concerns that increasing them further will:

  • reduce necessary use of GP visits (for preventive services such as immunisations, for instance, or cancer screening), and

  • be an unfair burden on people with lower incomes, who also tend to be in poorer health and are most likely to defer visits to the GP because of cost.

These concerns are justified based on international evidence where co-payments for health care have already been trialled (see for example here and here).

International bodies, such as the World Health Organization and OECD, are also critical of the over-reliance on co-payments as a means of financing health care because they are a relatively blunt instrument for controlling costs, and exacerbate inequalities.

There is little reason to believe that the impact of co-payments will be any different here, which means that the most vulnerable in our society will bear the brunt of this short-term savings initiative.

Co-payments for Pharmaceutical Benefits Scheme (PBS) medicines

Philip Clarke, Professor of Public Health at Melbourne University

In regard to pharmaceuticals, the main change has been the adoption of the recommendation of the Commission of Audit to raise the patient contribution for general patients by $5 (from $37.70 to $42.70) and for concessional patients by $0.80 (from $6.10 to $6.90) in 2015.

They will also raise the level of the safety net at which these contributions are reduced. All these changes will deliver savings of $1.3 billion over four years.

As I argued in my recent article for The Conversation, general co-payments are already quite high by world standards and these are at a level that may discourage use of beneficial medications. They also have the potential to increase downstream costs, for instance, through increased hospitalisations.

What the budget has not taken up is the Commission of Audit report recommendations on reducing the cost of generic drugs and other pricing anomalies. For example, we are current paying more than $1 extra per tablet to add aspirin to the drug clopidogrel.

Forgoing these savings here will be costly as more than $1 billion each year is being spent relative to other countries, such as England and New Zealand, which have more efficient health-care systems. In these circumstances, it’s hard to understand why the government has not tried to tackle this waste, particularly as they have budgeted for an additional $380 million over four years to fund the listing of a range of new drugs.

Clearly, it is consumers, particularly those with chronic diseases, rather than the pharmaceutical industry or pharmacists that will feel the pain from these budget measures.

Preventative health

Mike Daube, Professor of Public Health Policy at Curtin University

This is a distressing budget for anyone concerned for the community’s health. Among massive health system cuts and increased personal health costs, the once-modest funding for prevention has become almost invisible.

The loss of the National Partnership Agreement for public health will mean cuts to important programs around the country dealing with obesity, cancer prevention, diabetes and other conditions that result in massive costs to the health system.

The Australian National Preventive Health Agency and Australian Institute of Health and Welfare are gone.

It looks as though even new funding for medical research (and note – “medical research”, not “health and medical research”) seems to have been taken from prevention funding.

Increased health-care costs for individuals will discourage people from seeking medical help - resulting in more preventable and expensive health problems.

There are two positives: it is a huge relief that tobacco media campaigns will continue – we desperately need those to complement tobacco tax increases and plain packaging.

And the commitment to an expanded bowel cancer-screening program is also welcome.

But those apart, it’s a dark day for Australia’s health and health services, and especially for prevention. Nobody can doubt our health services and future health are the big losers. The crazy part of all this is that it’s preventive programs that ultimately save the system money.

Medicare Locals

Fran Baum and Sara Javanparast, Southgate Institute for Health, Society & Equity at Flinders University

The cuts to the Medicare Local program proposed the Hovarth Review released yesterday have been confirmed in tonight’s budget. Medicare Locals will be replaced by Primary Health Networks, which will be set up through open tender and encouraged to partner with private health insurers – a major policy change.

This is a retrograde step for the Australian health system.

Sixty-one Medicare Locals were introduced by the Gillard Labor government and progressively established by mid-2012. Since then, they have been conducting needs assessments and devising plans designed to improve locally provided primary health care services. These services include GPs, mental health, physiotherapy, speech pathology, podiatry and community nursing.

Most Medicare Locals have been planning and implementing after-hours care plans, mental health, Aboriginal health, e-health, and aged care programs. Some have also addressed social determinants of health and community capacity-building strategies.

Medicare Locals were established to deal with the symptoms of a fragmented system that offers an uncoordinated patchwork of service plagued by cost-shifting battles between federal and state governments. It’s too early to have made a definitive judgement about their success.

The new Primary Health Networks will be much larger, clinically focused, and there will be a significant period of inactivity while they’re being set up. They seem to have no mandate for health promotion or disease prevention even though these are very important.

This structural change risks losing the investment and work that has been conducted and reduces the chance that we will have a more efficient and effective disease prevention primary health care sector that can help stem the tsunami of demand for expensive hospital services.

Join the conversation

20 Comments sorted by

  1. Scott Tunaley


    Will residents in nursing homes have to pay the $7.
    Will the $7 apply to all Medicare items such as Care Plans for chronic conditions?
    Will there be a $7 payment for allied health services?
    If this is all true then the patients who need the services the most, usually the poorest and sickest in our community will think twice about getting preventative services they need, eg the diabetic with ischaemic heart disease, cataracts, and chronic renal disease. If Emergency departments do not charge they will be overloaded with this type of patient. I think this is really a false economy and the long term costs with worsening chronic disease in an ageing population will put further strain and cost on the public system.

    1. Sue Ieraci

      Public hospital clinician

      In reply to Scott Tunaley

      It's also likely that people will go to EDs for pathology and imaging services, as out-of-hospital pathology and XRays will cost more.

    2. Anne-marie Boxall

      Director, Deeble Institute for Health Policy Research, Australian Healthcare and Hospitals Association; Adjunct Lecturer at University of Sydney

      In reply to Scott Tunaley

      The details are not yet clear and in many ways will be determined by what GPs decide to do. There is also the extra administrative burden to consider for GPs who presumably will have to collect small amounts of money.

  2. Len Moaven


    Another query! The 10 that just for GP attendances or could it be a mixture of ten GP / pathology / imaging 'encounters'?

    I certainly remember that back in 1991 quite a few doctors waived the co-payment.......essentially taking it as a fee cut.

    1. Anne-marie Boxall

      Director, Deeble Institute for Health Policy Research, Australian Healthcare and Hospitals Association; Adjunct Lecturer at University of Sydney

      In reply to Len Moaven

      Yes, this is entirely possible. Unclear as to whether or not the 10 services includes pathology and GP services. Depends on who is responsible for monitoring the total number of visits. Complicated when people go to more than one GP as well.

    2. Rebekah Cox

      Primary Health Care Nurse

      In reply to Anne-marie Boxall

      Primary health care nurse here (GP practice nurse). Looks like this budget is going to confuse & dissuade A LOT of people from coming to the GP -especially the ones who need it most for regular preventative health screening!!

      Often find it hard enough to convince patients to have a blood test done let alone now trying to get them to pay to have it done!!!!????

      Also how is this not creating more paperwork/more billing confusions to add to the already confusing billing system!? Are GP's now…

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    3. Dorothy L Robinson

      logged in via email

      In reply to Len Moaven

      Back in those days, it was possible to find a bulk-billing doctor in rural areas. Now a typical fee for a standard consultation is $70. A $5 reduction would take the rebate to $31.30, meaning most people in rural areas will be paying $38.70 to see a doctor, plus up $42.70 (per item?) for prescription medicine.

      This is a very inequitable change.

  3. Brandon Young


    100% of the proceeds should go towards preventative health care. Research that investigates the effects of lifestyle factors on disease, and how non-drug therapies can help the body's natural immune systems fight off disease, and also new health services provided to the public, co-payment free, to keep people well.

    If the fund is used for drug based research, then the poorest of our citizens are being forced to contribute to what is effectively a slush fund for big pharmaceutical companies.

    Public funding must be dedicated to preventative health care.

  4. David Kemp

    Professor of Agricultural Systems at Charles Sturt University

    Interesting how medical research is now only a political football. The Abbott Government has a clear anti-science bias and the cuts to CSIRO and other Agencies are severe. The cost shifting to the new medical fund doesn't seem to have much to do with research.
    But one implication that needs some care is that next time a medical charity rings up wanting some funds I wonder how many people will say no on the grounds that they are already contributing through the GP tax.

  5. Meg Thornton


    I'd be a lot happier if I thought I had any say whatsoever in where the money I'm contributing to this "medical research fund" was going. I have a chronic thyroid condition (hypo-thyroidism, or under-active thyroid) which necessitates at least four GP appointments and blood tests per year, more if it turns out my levels are slightly over- or slightly under-replacing the amount of thyroid hormones I need. So that's a total of at least $56 I have to find in my budget straight up to cover my "co-payment…

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  6. allan matschoss

    prefer not to say

    So when I go to the doctor and he orders 10 different blood tests, will I be up for $77. $7 for the Dr. and 70 for the blood pathology. If so, will the pathology costs be counted as part of the 10 visits and it's free scheme?

  7. Trevor Kerr


    "The Medical Research Future Fund will be invested and managed by the Future Fund Board of Guardians" from
    Seems to me there is no provision for private benefactors to drop the odd $m into the Future Fund. Not that many would want to, since such donors would like to have their philanthropy recognised forever by way of specific, named projects. On that score, then, the capacity to greatly expand a bank of funding is strictly curtailed. I mean, a genuine attempt to provide a new means of funding medical research would be designed with private inflows in mind, wouldn't it? As it is, the parent Future Fund is not even bound by law to abstain from investments in socially destructive industries, is it?
    The MRFF smells like a political ploy to neutralise the strife from co-payments.

  8. Kerryn Herman

    Wildlife Ecologist

    ........ and the contraceptive pill? Perhaps removing the requirement for prescriptions for women over a certain age would reduce some of the "unnecessary" GP visits.......

    1. AnonymousGP inAustralia


      In reply to Kerryn Herman

      For the last couple of years I've been keeping a rough tally of women who come to see me for "just a pill script." In all these consults, I take around a quarter to a third OFF their current pill - either because they shouldn't be on it at all (eg. migraines, noone having asked before), would like to try a different brand, or were not aware of other options (eg. Mirena IUD). In addition, the average number of issues at these consults is three. It's also a chance to tie it to other health issues like pap smears and STD screening, and a chance to do some pastoral care (which I think gets overlooked a lot when we talk about what GPs offer). All of this is to say, it's NEVER just a pill script. I think people are likely to come to see me with long lists of problems (store it all up) now that we're facing this co-payment. I hate this, in addition to the large evidence-base showing it to be inefficient and inequitable.

  9. Tammy Jackson

    logged in via Facebook

    I just cant fathom the logic of getting rid of the National Preventative Taskforce and Medicare Locals - with the burden of chronic disease and hospitalizations spiralling out control, why would you then get rid of the small % of money that was being invested into this area? At a state level, the QLD liberals got rid of every health promotion position across the state (bar a select few in Brisbane) when they came into power a couple of years ago. Leaving Medicare Locals to somehow fill the gap of preventative work at a community level. What determines health outcomes is largely a product of the socio-environmental context to which people live and often have little control of. Providing supportive policies and environments for people to gain control over their health is the most effective way of improving health outcomes. The budget cuts that have been proposed will only worsen the gap between the rich and poor and ultimately leading to worse health outcomes.

  10. joe smith


    why are there so many sick people in Australia, it is like a epidemic people only living to 50 years old ?most look like 90 years old .?any reasoning person can see the problems of health and $20 billion is a waste in medical wasted fat cats pockets ? maybe it is in the chemical laced foods people eat ?if you shop at supermarkets you will notice 99% of foods are not fit for human consumption ?fruits are off season and frozen ,meats same years old? all vegetables are chemically grown…

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  11. joe smith


    billions of $ the government would save in costs,if it .looked at foods,air,water and created work relating to health like clean energy , clean fresh foods,clean water , stop the use of coal , stop the use of oil imports? get ford factory to start hydrogen gas cars trucks, start building magnetic engines for cars? and power stations?99% of environment problems solved relating to pollution ?Aqua-phonics fish farming and food grown in every house .Australia is surrounded by sea to use hydro gas?Australia sits on 99% underground water,clean fresh water to create city's in the desert??

  12. Morgan Swaby


    Effects of the newly introduced $7 co-payment have already been seen, with many patients deciding to put off visiting the doctor, with a number of clinics already reporting a drop in visits since the budget was announced last month (Aston, 2014). This is an unsettling insight into what the co-payment holds for the future health of Australians considering that the payment is not implemented until July next year and is already having a negative impact to people access to health care. The introduction…

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