Small tilt toward health equity in the federal budget

Last night’s budget edges closer toward equity but a broader view of health is required if we are to make real progress. winnifredxoxo/Flickr

Health took a back seat in this year’s federal budget. While the proportion of money being spent on health is increasing in 2013-14, the bulk of it is due to spending commitments made in previous budgets.

Headline grabbers include additional money to expand screening for breast and bowel cancer, as well as other new funding to improve cancer research and support services. And there are some additional funds for the mental health nurse incentive program.

While such investments may well produce health benefits, it would be interesting to understand the process that informed the decision to invest in these areas and not others.

Were the decisions based on estimates of the relative value of a range of alternative investment options? Do they align with the public at large, or more so with the mass media? And it’s always interesting to have an insight into the relative influence of alternative lobby groups.

Private health insurance rebates

Despite the introduction of means testing for the private health insurance rebate, the government is still spending $5.4 billion on these subsidies.

The means testing to be introduced in July will remove support for high earners. It’s predicted this will lead to savings of $149 million in 2013-14 and rise to $279 million in 2016-17.

Such small changes are unlikely to affect uptake of private insurance, and hence population health outcomes will remain the same at lower cost to the government. A coalition government would remove means testing, while a (less likely) Greens government would scrap the rebate completely.

All this leads to the question: how far should or could the government go with respect to reducing what it is still spending in this area? What would the consequences of further means testing be on the uptake of private health insurance? And what else could the government be funding with this money, so what associated benefits are we missing out on?

Indeed, why should the search for equity stop at the private health insurance rebate? The government is reviewing some Medicare-subsidised items and the Coalition has indicated that it would also do the same.

And while savings are being made by the decision to delay indexed increases in Medicare item fees, the whole system of Medicare funding for inpatient services is a subsidy for higher earners, who are more likely to use private inpatient services.

The government might be spending less on such services than if they were wholly provided (and funded) by public hospitals, but could the Medicare fee levels be reduced with limited impact on private health insurance uptake? In the United Kingdom, private health care is not subsidised at all.


Over $10 billion will be spent on pharmaceuticals over the next year, and this figure excludes a large proportion of pharmaceuticals prescribed in public hospitals.

Despite cited savings in the pharmaceutical budget due to expected price reductions for some existing drugs, spending on new drugs is expected to eclipse these savings. A net pharmaceutical budget increase of $143 million is predicted for 2013-14.

A broader view

An important area that was not addressed in any significant manner is the issue of variation in clinical practice, which has been shown to have a large impact on both health service costs and patient outcomes.

It’s likely that dollars spent reducing variation in clinical practice will produce greater benefits than dollars spent funding new drugs and services.

This is an internationally recognised area of importance, and countries such as the United States and the United Kingdom are spending large sums to tackle the issue head on. Of course, Australia can learn from the experiences of these countries, but the Australian health system is unique in many ways and overseas solutions may not be transferable.

Solutions are complex, involving better data collection, negotiation, and potentially regulation. It’s time to switch funding priorities from new technologies with marginal benefits to informing actions so we can improve the use of existing technologies and services.

Overall, looking at the new announcements, the 2013-14 federal health budget is relatively balanced. But previous funding announcements have loaded considerable additional costs onto this year’s budget and beyond.

A deeper analysis of the health budget requires consideration of not only alternative funding options within the health sector, but the broadly defined value of funding options outside of the health sector. By broadly defined, I mean the direct effects on individual quantity and quality of life, as well as the long-term sustainability and equitable distribution of societal well-being.