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Health gap widens as wage growth falls



It may be touted as a fundamental human right, and something rather fecklessly taken for granted by the majority, but health is a peculiarly political imperative, particularly come budget time.

Cardiovascular diseaseUniversal health care is an ostensibly bipartisan prerogative, but what universal actually means and how it's achieved is a somewhat moveable feast.

Spending, we are told, is unsustainable as the population ages and we move toward ever-more personalised and technologically-advanced treatment paradigms. The objective of this rhetoric is to rationalise the privatisation of our health system by stealth, incrementally shifting the onus onto patients through out-of-pocket expenses and private health insurance.

The latest wages figures are something of an inconvenient truth in this 'unsustainable spending' fiction. With average pay rising just 0.5 per cent in the first quarter of 2017 and 1.9 per cent across the year (1.8 per cent in the private sector), wages growth is now at its lowest since Australian Bureau of Statistics records began.

There are several reasons for this — inflation, productivity and labour demand are all suppressed as we continue to feel the effects of the mining bust — but it ultimately translates into less money in the bank for workers. (It also makes rather risible the decision by our lawmakers to reward themselves with a two per cent payrise from 1 July.)

For a government crying poor when it comes to health, it has the perverse effect of decreasing spending pressure, with some 70 per cent of the $110 billion annual public spend on health going on wages.

'Lower wages growth ostensibly puts less pressure on public spending,' said the Grattan Institute's Stephen Duckett. 'You can see this in the effect of the Medicare rebate freeze, that many doctors did not give up bulk billing because the costs were growing relatively slowly — CPI, for example was only going up one per cent or so — so they were able to absorb the rebate freeze more readily than anticipated.'

Because inflation — the price of goods — is even more stagnant than wages, the 'affordability' of health care remains largely unaffected, according to Duckett. But what if your starting point is already one of profound disadvantage?

Universal or user-pays?

Universal health care is something of a misnomer in Australia, particularly when it comes to primary care, prevention and managing complex conditions.

While the government funds around two thirds of health care, drawing on income tax receipts and the recently expanded Medicare levy, the remainder is met by the taxpayer themselves, through a mix of direct payments, gap fees and private health insurance contributions — the latter rising year upon year out of all proportion to both inflation and wages (45 per cent since 2010, compared with 16 per cent and 20 per cent respectively). Safety nets are supposed to keep a lid on these expenses, but the reality is that plenty of people fall through the gaps, particularly those on lower and middle incomes.

Compared with other OECD countries, and particularly for a nation that prides itself on universal access, Australians pay a lot for health care, contributing almost a fifth of all spending through fees. Among wealthy nations we rank third highest for out-of-pocket payments — only Switzerland and Belgium pay more — and these costs account for more than three per cent of household spending, above the OECD average.

In contrast to government spending on health, which is currently growing at less than one third the average rate for the decade (just 1.3 per cent in 2014-15), payments by the non-government sector (individuals, private health insurance and other sources) continue to accelerate — expanding 5.9 per cent in 2015-16 and 5.4 per cent across the decade.

Where fees have increased, they've skyrocketed most severely outside of the major cities. For patients seeing a metropolitan GP, average costs have climbed 24 per cent; in very remote areas this figure is almost double (43 per cent).

The result is that people don't access care. According to an ABS survey, more than 1 in 20 Australians skip GP and specialist visits due to cost and almost 1 in 5 can't afford to see a dentist. For those with lower incomes, access is an even greater issue — they are (65 per cent) more likely to skip the doctor and twice as likely not to fill a prescription or take a test. Out-of-pocket costs account for more than 20 per cent of all disposable income in the poorest households, where the squeeze on wages will be acutely felt.


"The question ought not be how much we're willing to spend on health, but what, as a nation, we'd like our health to be. If the true measure of a just society is how it treats its most vulnerable, we're far from a clean bill of heath."


These households are already among the most chronically ill, with much higher rates of cardiovascular disease, diabetes and cancer than the most wealthy. 'It means the average family has less money left over after they have paid the essentials — rents, mortgage, food, energy, school — and choices affecting health are made,' said Lesley Russell from the University of Sydney's Menzies Centre for Health Policy of the wages slowdown. 'Australians are not protected despite so-called universal healthcare, and now pay on average higher out of pocket costs than Americans.'

Barriers to accessing care mean people present later, and sicker, to tertiary services, ultimately increasing strain on overburdened hospitals at much greater cost to the system.

Value over volume

There is a fundamental problem with the way health care is valued and financed in Australia. Medicare in its current form is a relic of the 1960s and 70s, when Australians were younger, healthier and the system was geared to managing acute episodes, through a fee-for-service model rewarding volume — the seven-minute superclinic churn. But chronic conditions now account for two thirds of the overall burden of disease, with just six categories — cardiovascular disease, oral health, mental disorders, musculoskeletal conditions, respiratory disease and diabetes — accounting for about half of all disease costs.

The government spends about $1 billion every year on managing chronic disease, and another $2 billion on potentially preventable hospital admissions from these conditions. Yet funding for prevention is woeful compared with our peers, comprising just 1.75 per cent of all health spending, and outcomes on modifiable risk factors are poor. We rank in the bottom third of the OECD for obesity in adults, and rate poorly on alcohol consumption; about half of all diabetics who see a GP have poor control of their blood sugar, cholesterol and blood pressure.

There are perverse incentives built into Medicare (and to a lesser extent, activity-based funding for hospitals) which reward throughput — number of patients seen, procedures and tests performed — over quality, according to the Productivity Commission. Allied and community health are also given short shrift by the illness-based MBS and PBS system.

It's been almost ten years since the National Health and Hospitals Reform Commission warned that Australia was becoming a two-tiered system where those with deeper pockets could expedite their care, and a gap was widening between the universal entitlement to care and its realisation. The question ought not be how much we're willing to spend on health, but what, as a nation, we'd like our health to be. If the true measure of a just society is how it treats its most vulnerable, we're far from a clean bill of heath.


Amy CoopesAmy Coopes is a medical student, journalist and editor at Croakey.org. You can follow Amy on Twitter at @coopesdetat

Topic tags: Amy Coopes, health



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Existing comments

Sadly, I think we are becoming more like America and less like the Scandinavian countries in regard to health care. There is tremendous incentive for the private health care system to focus on the profitable side of the equation and leave the rest to the public sector. Being in the older age group I, and others like me, need to focus on preventative measures such as exercise, diet and maintenance of mental health as much as we can. We do need appropriate education about exercise and the maintenance of health and specific facilities and programs for exercise. There's no point having been a star ruckman for Collingwood in your 20s and early 30s and an obese, coughing, stooped 'old man' in your 60s and early 70s if you can avoid it. Our healthcare system is an incredibly valuable community resource: we need to treasure, protect and not exploit it.

Edward Fido | 27 June 2017  

Thanks Amy ...a word in season -starting a necessary conversation. Some of the privatisation creep is incremental and largely under the radar. Other parts of it are blatant and in plain view. As a retired clinical psych, I served as a company director with Central Qld Medicare Local. In 3 years, we were highly productive across a challenging, diverse region; broad GP-public progressive partnerships; federally funded; highly cost effective. Yet, when the Abbott govt replaced us with the current Primary Health Network model, the influx of top dollar private sector providers was stunning. Your emphasis on the social AND ECONOMIC determinants of health is critical to good policy and primary care health services fit for purpose.

Wayne Sanderson | 28 June 2017  

Australian men live longer than all but the residents of five other countries. The difference between ourselves and the next 3 countries is small. Health adjusted life expectancy ( how long you live without health problems) is also high. Our problems lie in over-consumption of healthcare ie high use of inappropriate antibiotics, hospital admissions and perhaps births by Caesarean Section. The out of pocket costs are high but skewed because the ABS counts the costs of over the counter medications such as vitamins and trips to unconventional therapists such as naturopaths in health expenses. Other countries do not. Unequal distribution of health practitioners, the so called inverse care law remains a problem. As we have discovered with Gonski in education changing this is a wicked political problem. Our public and private hospital systems and aspects of our publicly provided community services are not subject to competition and have become inefficient and complacent often serving the interests of their employees rather than the community. However as the Medicare scare released by the ALP demonstrates emotion beats reality any day in health. There is no crisis but there are problems which our adversarial politics and vested special interest groups exploit but do not address.

Gerard Gill | 28 June 2017  

Health and education are not areas that can be left to "for profit" organisations. Their record so far is appalling and possibly, we are only seeing the tip of the iceberg. The opportunity for them to be taken over by unethical rogues is too great, but why should profits be made in these areas anyway?

Sheelah Egan | 28 June 2017  

Amy You correctly cite obesity, alcoholism and poor diabetic control as major failures of preventive medicine. Could I suggest that these have nothing to do with funding for preventive medicine but are entirely due the patient irresponsibility. How much should we be required to outlay for that? Australians pay more per head of population for over the counter useless patent medicines and unnecessary vitamin supplements that any major economy. It is stunning than rather advancing with education, Australian society becomes progressively more ignorant and reverts to the witch craft of the snake oil salesmen who had almost disappeared after the Second World War. Patent medicines and vitamins have become "ethical", "natural' and even "nutrient" with a high price tag. We have even established faculties in some so-called universities espousing the non-existent science of alternative therapies. None of this is directed towards health of the population but to the bank accounts of the slick operators, the snake oil salesmen, who espouse there useless therapeutic solutions which at best act as placebos with benefits that exist only in the mind of the consumer. Welcome to the great dystopia of the "brave new world" but please, as a potential carer of the sick , don't be seduced by it.

john frawley | 28 June 2017  

After Pauline Hanson’s recent look-at-me, Waleed Aly recounted a saying supposedly familiar to parents of children with autism to the effect that if you’ve met one person with autism, you’ve met one person with autism. Perhaps the clients of the conceptual bucket called the Australian Healthcare Universe aren’t quite so diverse, but they do fall into different categories, perhaps not all of whom need to be married for life to the one bucket. While there are many Americans who wish their relatively tidy First World nation didn’t share a land border with a messy Second World Mexico, others (and their insurance companies) are happy that it takes only a short trip as a medical tourist to get what you need done cheaper than at home. It’s 8.5 hours by bus from Melbourne to Adelaide, only 6 hours flying from Sydney to Honiara, 6 40 to Bali, 8 to Dili. If you’re 80, on a full pension and debilitated with old people illnesses, the AHU will be your service provider. But for many others, where’s a paradigm-smasher who can put together a cheaper package for Australians, their insurance companies and the Federal Treasury? Attack the problem in bites?

Roy Chen Yee | 28 June 2017  

Oral health? Only for the 'more well off'. The purpose of the Dental Hospital (Melb) is to fleece the 'less well off '(haha) of $28 to give students practice at ripping out teeth (that could often be saved) so they will be competent at that when they graduate to work in implant clinics for the' more well off.' The whole racket stinks, and has since the intro of Medicare without dental care. At that time the dentists were advised (they had a choice) by their doctor mates(who had no choice) to refuse intro of Denticare and they'd "clean up like bandits". And after a while the quacks would find their own way into the honeypot - endless rounds of pointless appointments for the sick, suffering, exhausted, desperate and dying at hospitals charged to Medicare. Still had appts notices from the hospital being sent to my address months after the addressee had died there.

Jaq Spratt | 07 July 2017  

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