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Health care - doing the sums

By Kevin Pittman - posted Friday, 28 October 2005

With a health funding crisis on its hands, the Queensland Government is now edging towards co-payments in public hospitals and is encouraging patients with health care funds coverage to use that cover when they receive services in public hospitals.

The proposal has excited a range of fairly predictable reactions, from shock and horror on the part of the Opposition parties to grudging approval by anyone, including the AMA, who understand the economics of health and the size of the problems facing us.

Those who understand just how big those problems are going to be includes the Federal Government Productivity Commission who recently bluntly stated that the expected increase of public spending on health, from eight per cent to 16 per cent of GDP over the next 20 years, will be unsustainable.


Let’s review some of the main problems discussed in earlier articles:

  • Our society is getting sicker. Most forms of chronic disease are increasing by three to four times or more the rate of population growth. Chronic disease has two main characteristics. It is incurable, though often manageable, and it requires a lot of work on the part of health care providers to keep chronic disease sufferers reasonably well and out of hospital. Make no mistake. An adult of 50 with diabetes can generally be managed to ensure quality of life into their 70s. Young children now getting what used to be known as adult onset diabetes are looking at major problems in their adult years, including blindness, amputations, kidney failure and significantly reduced life expectations. Maintaining life, let alone quality of life for those patients is going to be enormously challenging and time-consuming.
  • Our society is getting older. Like any mechanism, as humans get older we need more attention. People over 65 need an average four times as many health care services as those under 65. Can we keep that up as the number of over 65s increases dramatically after 2010? Answer - yes, but. There is a limit to how many services we can provide and fund, as we note in the next point.
  • Against the rapidly rising levels of demand for health care, we have a rapidly declining health workforce. More than half of all doctors and nurses are over the age of 50 and will be retiring within the next five to 10 years. According to the South Australian Department of Health, we are graduating fewer than half the number of doctors we need to cope with rising demand and retirements in the medical workforce. A massively increasing workload and a decreasing workforce - it just doesn’t add up, does it?
  • Finally, the cost of health care has been increasing rapidly and will go up further and faster. On unchanged health policy settings, federal and state governments’ budgets will eventually go into sustained deficit as larger and larger expenditures are funded by a workforce shrinking relative to the size of the population.

So, we’re looking for answers - what can we do to manage this looming crisis of health care in Australia.

Certainly we can (and will) look at a range of solutions for the issues of chronic disease, healthy ageing and a shrinking medical workforce. What is more difficult is cutting the cost of health care.

One of the first things we need to review is the “pricing signals” we give to people.

Since 1983 when Neil Blewitt stood up and re-introduced Medicare, the federal government has been giving a simple pernicious message to the electorate - “No matter what health care you need, you can have it for nothing”. And the electorate has responded magnificently.


A major irony of health care in Australia is that people who will happily pay $70 to go to an often unqualified “natural” health care provider will then complain about a co-payment of $10 for a 10-year trained, 20-year experienced doctor. And sue their doctor but never their colonic irrigator.

Patients sit in doctors’ and hospitals’ waiting rooms with ingrown toenails, minor cuts, colds and vague aches and pains. Things that would once have been written off as the inevitable consequence of ageing are now things that we want fixed, immediately and for free. The general belief is that, whatever it is, whatever you want, you can go to your local doctor or hospital and have it fixed for nothing.

The simple lunacy of the Medicare Gold proposal in 2004 was the message that, if you were over the age of 70, you could have absolutely anything you wanted done for you and federal government would pay the bill. No credible health economist has ever had anything positive to say about that policy because that is totally the last message we want to be giving to people.

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About the Author

Kevin Pittman is the principal of Solomon Reynard Pty Ltd, a boutique consultancy specialising in health and organisational management.

Other articles by this Author

All articles by Kevin Pittman

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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