Facing up to our challenges

Australia has a world-class health system – the challenge confronting us today is to keep it that way. The Minister for Health, Peter Dutton, writes.

Our health system is facing threats on multiple fronts, threats that will severely test our nation’s ability to cope with our ill and pay for their treatments and medicines. Decisions we take today – and these will be difficult decisions – will determine how and whether our nation can meet these challenges.


The ageing population

The first challenge is the ageing of our population. Australians are now living 25 years longer than they did a century ago, and the aged component of the population is growing.

A decade ago there were 2.5 million Australians aged over 65. Today it is more than three million, and in another 10 years it will be heading toward five million, to make up around a quarter of the population. The older we get the more health issues we deal with. As we age these issues and the treatments become more complex – and significantly more costly.

Diseases of the brain – the various forms of dementia – threaten to overwhelm us with their capacity to cripple our health and aged care systems. There are now more than 300,000 Australians with these devastating illnesses and the number is rising rapidly. Around one out of every 11 people aged over 65 has dementia, and that incidence escalates exponentially with age.

The number of Australians with dementia is predicted to reach 400,000 by 2020 and almost one million by 2050. At that time it is estimated 7,500 people a week will be being diagnosed with dementia, or other diseases of the brain. From a cost of $5 billion in 2010, in coming years the cost of caring for Australians with dementia is likely to spiral to reach 1 per cent of GDP (gross domestic product).


Critical and chronic diseases

The second major challenge confronting us is a predicted tsunami of critical, chronic and lifestyle-related diseases. One-third of Australia’s burden of disease is due to ‘lifestyle’ health risks such as poor diet, physical inactivity, obesity, smoking and alcohol misuse, and the diseases and illnesses they bring on such as diabetes and cancer.

The report from the Australian Institute of Health and Welfare (AIHW), Australia’s Health 2014, found that chronic diseases were our leading cause of illness, disability and death – accounting for 90 per cent of all deaths in 2011.

The number of overweight and obese adults in Australia is rising steadily – 63 per cent in the latest 2011-12 figures. That is two out of every three adults.

Even more concerning is the health of our children. A quarter of children aged between two and 17 years of age are considered overweight or obese. Data released earlier this year as part of an AIHW working paper indicated that in 2012 there were 2,200 young Australians with Type 2 diabetes and there were 400 new cases being diagnosed in children and young people each year.

These are the seeds of a future health crisis.


Personalised medicine

The third challenge is the future itself – a world of personalised medicine and treatments that can boost our ability to prevent or reduce disease. It is worth recalling that the first mapping of the human genome cost more than $1 billion. New technologies have made it cheaper and quicker to find and study large amounts of genetic information. Today it can be done for less than $1,000.

The dream of creating medicines designed for the individual based on their genetic make-up is moving closer to reality, and genomics are increasingly influencing diagnosis and care. Genomic testing, which reveals a predisposition to a disease or particular variant of a disease, will create its own demand for early medical intervention. These advances will likely result in more personalised and targeted medicines for smaller and smaller patient populations. This is the future of healthcare, but it does not come cheap. The costs to develop these medications remain at the same levels as today’s more generalised medications.

Such extraordinary advancements open the way for significant improvements to patient outcomes and have the potential to substantially relieve pressure on our health system. Patients will expect to receive the benefits of genomics, technological development, and the cures and advances produced by research, but we have to be able to afford the solutions they offer.

The problem this government and future governments face is that none of these threats or solutions has been factored into current or future spending projections. Worse still, our 1980s model health system is tracking on an unsustainable path with no prospect of meeting the health needs of our nation in the 21st century.

Total expenditure on healthcare in Australia has increased by 122 per cent over the decade to 2011-12, when it totalled $140 billion. That is more than $6,000 per person per year – a decade earlier it was around half that figure.

Governments – that is, taxpayers – contribute the bulk of this funding, around 70 per cent of the costs. Individuals directly contribute around 17 per cent towards the costs of their healthcare through out-of-pocket payments. Spending on medical services through Medicare is spiralling. Commonwealth health expenditure is forecast to rise from $68 billion today to $75 billion in just the next two years.

In 2002-03 the Commonwealth spent $8.1 billion on 221 million Medical Benefits Schedule (MBS) services. A decade later, in 2012-13, we spent $18.6 billion on 260 million services. The 2002-03 spend would today only buy 150 million services. In the next decade, spending could skyrocket to $34 billion annually. Services are becoming more expensive in real terms. We are spending more, but getting less.

Likewise, expenditure on the Pharmaceutical Benefits Scheme (PBS) is a significant and growing component of federal government health spending – costing $9 billion in 2012-13. In the past decade the cost of Medicare (MBS) has risen almost 130 per cent and the PBS by 80 per cent.

PBS-listed medications are very heavily subsidised by the government. Some medicines cost as much as $17,000 per prescription, while the patient pays only around $37 for the drug. A concessional card holder will pay just $6 for the same script. Commonwealth funding for public hospitals is around 90 per cent higher now than 10 years ago and without change would rise by a further 150 per cent over the course of the next decade. Far from the Opposition’s claims of “cuts”, funding increases each and every year by 9 per cent over the next three years and then around 6.5 per cent each year.

Australia’s Health 2014 showed that health expenditure, as a whole, has grown in real terms at an average rate of 5.4 per cent in the past decade, far outstripping growth in the broader economy, which has only grown at 3.1 per cent.

These are cost increase trajectories that are unsustainable. Australians know all is not well with our health system. They understand that nothing comes for free and that you cannot keep racking up charges on the credit card; at some point you have to pay the bills and live within your means. That is where we find ourselves today.

No government can meet the insatiable financial demands of health over the coming years without significant structural change now. Our ability to meet the challenges of the future, respond to the threats and access the benefits of innovation in the years ahead, will depend on the action we take today.

We must strengthen our health system, make it sustainable and set it on a sure footing – not just for the current generation, but for those in the future.

That is the challenge this government faced on coming to office – that is the challenge that confronts us as a nation. Doing nothing about sustainability is not an option, so we have moved decisively in our first budget to secure the future of the system. Necessarily, it meant taking action on two of the fastest growing areas of health expenditure – Medicare and the PBS.

The government is asking patients to make modest contributions to the cost of their care. With visits to GPs, for pathology and diagnostic services, this has meant the proposed introduction of a $7 co-payment. The government has not made the co-payment mandatory; doctors retain the ability to bulk bill and discretion about how and who they charge for their services, just as they do now.

This represents a balance between introducing a price signal and maintaining access for people who cannot afford to pay a fee. Co-payments are capped at 10 per year for children under 16 and concession card holders, after which they will be bulk billed and treatment is free.

Co-payments have been paid and accepted as part of the PBS by Australians for more than half a century. They have also been supported by both sides of politics – until now. A return to that bipartisan support is needed for the greater good of the system.

We want to provide access to new medicines in as timely a manner as possible. Since coming to government we have been listing new drugs on the PBS at almost twice the rate of the previous government.

But as more high-cost medicines and personalised medicines are listed and more patients require access to them, the cost to the taxpayer increases. Longer term growth in PBS spending is expected to average between 4 and 5 per cent a year.

We must manage this to keep medicines affordable and we are asking Australians to make a modest increased co-payment – an additional $5 per script for general patients and just an additional 80 cents for concession card holders. Safety nets will also remain an important component of both the MBS and the PBS.

At the start of the year I called for a frank and far-reaching discussion on our health system. The government has put forward reasonable and moderate measures aimed at dealing with the issues facing our health system. If we do not start to build sustainability now – in a planned, cohesive, controlled and measured way – sudden adjustments may be forced upon us in the future. The government’s measures are on the table and we are prepared to listen to other good ideas that work to strengthen Medicare, the PBS and the health system more generally. To that end we are working with the Australian Medical Association and the Senate and will continue to do so.

Other government action

Apart from moving to reinforce the key financing mechanisms of the health system, the government is acting with other budget measures to deliver better outcomes in healthcare, streamline bureaucracy and administration, bolster frontline services and make significant forward-looking investments in medical research.

Funding is flowing for our $200 million commitment to counter the impact that dementia will have on older Australians and our health system in the years ahead – it is now the nation’s third leading cause of death.

This funding boost will foster intensive, world-leading research to find ways to prevent, or cure, these debilitating brain illnesses and establish a National Institute for Dementia Research to ensure our efforts are focused and coordinated. In recent weeks we have called for the first applications for research funding under this initiative.


Medical research: Medical research holds the potential – across the board – to provide better health outcomes, sustainability for the health system and, at the same time, create national wealth. This is why we have established the Medical Research Future Fund – a capital guaranteed $20 billion fund for ongoing research.

It will start adding to Australia’s annual investment of around $800 million for medical research from 2015-16 and eventually provide an additional $1 billion a year for research efforts in this country. We are already a world leader in research; this will ensure we stay there with all the benefits that groundbreaking discoveries hold for the nation.


Obesity: To tackle the issue of obesity, from January 2015 more than $100 million will start to flow to the Sporting Schools initiative. This will encourage children in more than 5,000 primary schools to take part in sport-based physical activity before, during and after school, and teach them the benefits of regular exercise and good nutrition, reducing the risk of our kids developing lifestyle-related chronic diseases, such as diabetes.


Diabetes: We are developing a new national strategy to tackle the nation’s Type 2 diabetes epidemic with an expert advisory group working from late-2013 to develop the strategy to combat this serious health issue. $35 million dollars has also been provided to a special research initiative for Type 1 Juvenile Diabetes to find a cure for this life-long autoimmune disease.


Bowel cancer: The government has also invested almost $100 million to fast-track full implementation of the biennial bowel cancer screening program for Australians aged 50 to 74. It is the second most common cancer in Australia, and one of the most treatable if detected early.


GP practice: This budget also begins the government’s plan to strengthen general practice, which is fundamental to achieving better health outcomes across Australia. The Medicare Locals’ Review found many had not fulfilled their roles and that the 61 organisations should be replaced by a smaller number of Primary Health Networks (PHN). PHNs will offer greater economies of scale, align better with local hospital networks, provide support to individual general practices, and link up services to meet community needs.

The government is also doing more to strengthen GP services through greater investments into training and infrastructure. From next year, the number of Commonwealth-funded GP training places will be expanded from 1,200 to 1,500. This significant increase will create more vocational training opportunities for this workforce, freeing up more junior doctor training positions for new graduates coming through.


Training: The government has committed $40 million over the next four years for Australian-trained international graduates to complete their training in private hospitals and in regional areas through up to 100 medical internship positions each year.

The Practice Incentives Programme payment to GPs for training medical students will double from $100 to $200 benefitting approximately 3,000 general practices expected to provide teaching to around 20,000 students each year. A rural loading of up to 50 per cent will also be applied to payments to practices in rural and remote locations.

Infrastructure grants of up to $300,000 each will be offered to up to 175 general practices in remote settings to build training facilities.

The Australian General Practice Training Program, which the government has expanded, has a distribution target that requires 50 per cent of training to occur in rural and remote locations (ASGC RA 2-5).

The government has also provided additional funding for the General Practice Rural Incentives Programme, which encourages doctors to practice in regional and remote Australia through relocation and retention grants. These investments will allow more medical graduates to pursue careers in general practice, and more doctors to practice in areas of greater patient need.

To complement this, the government is funding additional scholarships for nurses and allied health workers through a further $13.4million investment.

The government’s approach is to put value into existing general practices after the previous administration’s GP Super Clinic debacle.


Mental health: Mental health remains a key priority for the government. We are committed to building a world-class mental health system that delivers appropriate services to support people experiencing mental illness. The National Mental Health Commission is carrying out a wide-ranging review of all mental health services nationwide and is due to report late this year.


e-Health: Incredibly important is the area of e-Health. The budget provided $140.6 million to support the continued operation of e-Health and the Personally Controlled Electronic Heath Record (PCEHR) system for 12 months while the government considers its response to the recent PCEHR review. The government fully supports a national e-Health record system, but it must be one that is functional and easy for all Australians to use, while being clinically relevant to frontline healthcare providers.

The 2014-15 budget demonstrates the government’s commitment to better health for all Australians. It rebalances our health system to position it for the future and the multiple challenges that future holds.


One Response to “Facing up to our challenges”

  1. Darcy Anderson says:

    There are some real challenges in the health system and I appreciate the predicament which the government is in however, working with the AMA (which is essentially a doctor union), is not going to help solve this problem. Australians already pay a significant amount for health through our Medicare Levy, private health insurance and the numerous gaps payments for GP and specialist visits, pathology and diagnostics.
    There is a significant amount of waste already in the system which should be addressed first before adding more costs to the consumer. Addressing waste in hospital services and specialists’ use of MBS items alone could save millions. By introducing a co-payment in general practice, the government is placing an additional cost on the more efficient and cost effective part of the system – this seems counter productive!
    Furthermore, the government is abolishing 61 medicare locals and establishing 30 PHNs. How can PHNs with huge geographical areas, multiple regions and communities provide local support to GPs and their community’s? It’s hard to see how PHNs will cost less than Medicare Locals when they will still need people and an organisational structure to deliver essential services at a local or regional level. The PHNs seem more like a self-fulfilling prophecy of the Health Minister based on poor policy and seems destine to be throwing the baby out with the bath water resulting in another layer of bureaucracy which this government is trying to avoid. Rather than wasting money on creating these new monstrous PHN organisations, it would been much better to keep medicare locals roughly as they, change the name, amalgamate a few, adjust some of the boundaries and make them more accountable for what they deliver. I was hoping to Reform out of this government, unfortunately it’s just change of ideology sake. Darcy Anderson (GP)

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