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Close examination of the Health Budget

By Lesley Russell - posted Thursday, 19 June 2008

Government budgets send powerful messages about vision, priorities and commitment, especially when it is the first budget from a government that came to office promising reform. On that basis the Rudd Government’s 2008-09 health budget is deserving of special scrutiny. That scrutiny must be tempered by recognition that the development of most major reform policies and strategies must await recommendations from a raft of commissions, advisory committees and taskforces.

The Rudd Government has two stated goals in health policy: to end the cost shifting and the blame game between the Commonwealth and the states and territories; and an increased focus on prevention and primary care in order to address the predicted impact of a growing burden of preventable chronic illness on acute care costs and resources.

The 2008-09 Budget demonstrates the commitment to taking a leadership role in a partnership with the states and territories to address needed reforms in the provision of acute care services through public hospitals.


Over the next 12 months, while funding and performance agreements for the new Australian Health Care Agreements are negotiated, the states and territories will have an immediate boost of $1 billion in additional funds to public hospitals, plus $150 million to conduct an immediate national blitz to clear the backlog of people who have been waiting for elective surgery and $142 million for improvements and upgrades in health care facilities and the provision of new medical equipment and technologies.

Over the four years 2008-09 to 2011-12, in addition to the funding provided through the Health Care Agreements, there will be a further $397.5 million for health infrastructure, new technologies and hospital improvements such as new day care facilities which will help reduce elective surgery waiting lists. There is $300 million for incentive payments to those states and territories which meet the targets for improved hospital services.

However the benefits of the reforms which the National Health and Hospitals Reform Commission will generate and this new funding will support will only fully eventuate when the government also implements promised reforms in prevention and primary care.

There are major lessons to be learnt here from the United Kingdom. As a result of unprecedented levels of government investment in the National Health Service (an increase of nearly 50 per cent, more than £43 billion, since 2002), the health of the population has improved, targets for increased numbers of procedures have been exceeded, and elective admissions and outpatient attendances have increased.

The system has been able to cope with large increases in emergency presentations and care, and waiting times for inpatient and outpatient treatment have improved considerably.

However the expected productivity gains have been elusive and decreased costs for hospital services have not been realised. Experts have attributed this to the fact that the recommended framework of public health objectives for tackling the prevalence of important determinants of health status - things like smoking, obesity, physical activity and diet - was not taken forward with the same commitment.


Clearly for the Rudd Government, major policy changes and investments in this area must await the deliberations of the National Preventative Health Taskforce, the funding bonanza that will result from the application of higher taxes to alcopops, and the development of the National Primary Health Care Strategy.

But it is disappointing to see some lost opportunities in this budget to progress the agenda on prevention and primary care reform. And this raises the issue of whether politicians will continue to favour quick fixes such as more hospital beds over preventive health strategies that require cross-portfolio co-ordination and where the benefits may be deferred for years.

Budget and earlier announcements provide $53.3 million to tackle binge drinking, $29.5 million for anti-tobacco programs and $21.9 million for obesity and healthy nutrition initiatives, but this is a puny response when the annual direct and indirect costs of obesity and obesity-related diseases, smoking and alcohol abuse total almost $70 billion.

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See for a detailed analysis of the 2008-09 health budget prepared by the Macroeconomics health team.

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About the Author

Dr Lesley Russell is the Menzies Foundation Fellow at the Menzies Centre for Health Policy, which is co-located at The University of Sydney and the Australian National University. She also a senior adviser on health economics, policy and program analysis to Macroeconomics, an economic modeling and consulting business.

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

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