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Budget 2017 sees Medicare rebate freeze slowly lifted and more funding for the NDIS: experts respond

Here are some reactions to the 2017-18 Federal Budget from health policy experts, published on Tuesday at The Conversation. It is expected to be updated.


As expected, the government has announced a progressive lifting of the Medicare rebate freeze. Together with removing the bulk billing incentive for diagnostic imaging and pathology services, as well as an increase in the PBS co-payment and related changes, this will cost a total of A$2.2 billion over the forward estimates.

Other announcements include:

  • From July 1, 2019, an increase in the Medicare levy from 2% to 2.5% of taxable income, with the extra half a percent directed towards the NDIS
  • $1.2 billion for for new and amended listings on the PBS, including more than $510 million for a new medicine for patients with chronic heart failure
  • an increase in hospitals funding by an additional A$2.8 billion over forward estimates
  • $115 million for mental health, including funding for rural tele-health psychological services, mental health research and suicide prevention
  • $1.4 billion for health research, including $65.9 million this year to help research into children’s cancer.

All up, these commitments equate to A$10 billion.

Medicare rebate freeze

Stephen Duckett, Health Program Director, Grattan Institute

As foreshadowed in pre-budget leaks, the government is slowly unthawing the Medicare rebate freeze, but at a snail’s pace. At a cost of A$1 billion over the forward estimates, indexation for Medicare items will be introduced in four stages, starting with bulk-billing incentives from July 1, 2017.

General practitioners and specialists will wait another year – until July 1, 2018 – for indexation to start up again for consultations, that make up the vast bulk of general practice revenue. Indexation for specialist and allied health consultations is slated to start from July 1, 2019.

Certain diagnostic imaging items (such as x-rays) will be the last cab off the rank. Indexation will start up again from July 1, 2020.

There is no mention of reintroducing indexation for pathology items. This may be due to the recognition that there is money to be saved in pathology.

Regardless of the reaction of medical lobby groups, it is too early to tell whether this glacially slow reintroduction of indexation will be enough to keep bulk-billing rates at their current levels. Practice costs and income expectations of staff have not increased dramatically over the freeze period as the Consumer Price Index has been moving slowly. But each additional day of a freeze means costs and revenues fall further out of alignment.

The jury will be out for a while on whether reintroduction of indexation is enough to restore the Coalition’s tarnished Medicare credentials with voters.

Certainly, the slow phase-in may attract cynicism, with a legitimate perception the government is doing the minimum necessary and at the slowest pace to ensure the issue is off the agenda before a 2019 election.

There is no sign in the budget that the government has sought any trade-offs from the medical profession in exchange for the reintroduction of indexation, so we will have to wait to put in place better foundations for primary care reform.

National Disability Insurance Scheme (NDIS)

Helen Dickinson, Associate Professor, Public Service Research Group, UNSW

Since its inception, there have been a number of bitter political battles over how the National Disability Insurance Scheme should be funded. Many have been nervous the current Productivity Commission review into the costs of the scheme could lead to a scaling back of the NDIS before it is fully operational.

The NDIS operates under a complex funding arrangement split between federal, state and territory governments. Until now it has been unclear where the federal component of this commitment will come from, and a significant gap was emerging from the middle of 2019.

Today’s budget promises to fill this funding gap, in part through an increase by half a percentage point in the Medicare levy from 2 to 2.5% of taxable income. Of the revenue raised, one-fifth will be directed into the NDIS Savings fund (a special account that will ensure federal cost commitments are met).

A commitment has also been made to provide funding to establish an independent NDIS quality and safeguards commission to oversee the delivery of quality and safe services for all participants of the NDIS.

This will have three core functions: regulation and registration of providers; complaints handling; and reviewing and reporting on restrictive practices. While such an agency will be welcomed by many, the devil will be in the detail as to whether it is possible to deliver this in practice.

Generic Medicines

Chris Del Mar, Professor of Public Health, Bond University

The government is set to save A$1.8 billion over five years by extending or increasing the price reduction for medicines listed on the Pharmaceutical Benefits Scheme (PBS).

This will be achieved in part by encouraging doctors to prescribe generic medicines that name the active ingredient (as in “90 octane petrol”) rather than the brand name (as in “BP”, or “Shell”). This has the effect of pharmaceutical companies selling the drug that is cheapest.

It doesn’t work for drugs still under patent (which allows only pharmaceutical companies holding the patent to negotiate a price, compensating it for the drug development costs). But when drugs come off patent, any other pharmaceutical company can manufacture the generic drug for the best price.

Some doctors worry different brands might have different effects, but there are very few examples of patients being harmed by this. Australia’s Therapeutic Drugs Administration (TGA) makes sure drugs are manufactured to tight standards.

However, many patients know their medications by the brand name rather than the generic name. This same problem can happen right now (when patients are prescribed the same drug with two or more different names when they are prescribed by GPs, hospitals, or specialists).

Doctors are already alert to ensuring that different drugs names do not confuse patients – the danger is that they take the same drug twice, thinking they are different drugs.

Aged care

Michael Woods, Professor of Health Economics, University of Technology Sydney

The government has held the line on restraining growth in funding to residential aged care providers in this budget by implementing its pre-announced indexation freeze for the year, and a partial freeze in 2018-19.

The freeze was in response to concerns some providers were wrongly over-claiming payments under the Aged Care Funding Instrument (ACFI). The instrument determines the level of funding the government pays to providers to care for their residents.

The government has stopped publishing its annual target number of ACFI audits, so any proposed changes in compliance activity are now unknown.

The long-awaited consolidation of the Home Care Packages (that aims to help ageing Australians remain at home for as long as they need) and entry level support through the Commonwealth Home Support Program has been put off for another two years, until at least 2020-21. This will be disappointing to consumers as a more seamless set of support services will improve their ability to remain in the community.

A welcome initiative is the additional A$8.3 million for funding more home-based palliative care services, although this extra support is budgeted to end in 2019-20.

Overall, the biggest unanswered issue facing the government in aged care is the need to develop an evidence-based and sustainable funding regime for residential care. To date we have seen short-term budget fixes and the commissioning of opaque rushed research reports.

The health minister needs to step back and establish a proper policy review process that undertakes sound research and consults widely. The review needs to establish a set of core funding principles, model options that address the varying incentives of residents, providers and taxpayers. It needs to adopt the one that transparently empowers consumers, provides market competition and results in long term sustainability and certainty.

Stephen Duckett is Director, Health Program at the Grattan Institute

Chris Del Mar is Professor of Public Health at Bond University
Elizabeth Savage is Professor of Health Economics at the University of Technology Sydney
Helen Dickinson is Associate Professor, Public Service Research Group, at UNSW
Michael Woods is Professor of Health Economics at the University of Technology Sydney

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Summer reading 2020-2021
Tasmanian election 2021
Testing Croakey News category 1
The Croakey Archives
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Croakey Conference News Service 2013 – 2019
2013 conferences
Australian Centre for Health Services Innovation Forum 2013
Australian Health Promotion Association Conference 2013
Closing the Credibility Gap 2013
CRANAplus Conference 2013
FASD Conference 2013
Health Workforce Australia 2013
International Health Literacy Network Conference 2013
NACCHO Summit 2013
National Rural Health Conference 2013
Oceania EcoHealth Symposium 2013
PHAA conference 2013
2014 conferences
#IPCHIV14
AIDA Conference 2014
Congress Lowitja 2014
CRANAplus conference 2014
Cultural Solutions - Healing Foundation forum 2014
Lowitja Institute Continuous Quality Improvement conference 2014
National Suicide Prevention Conference 2014
Racism and children/youth health symposium 2014
Rural & Remote Health Scientific Symposium 2014
2015 conferences
#CPHCEforum
#CRANAplus15
#HSR15
#NRHC15
#OTCC15
Population Health Congress 2015
2016 conferences
#AHHAsim16
#AHMRC16
#ANROWS2016
#ATSISPEP
#AusCanIndigenousWellness
#cphce2016
#CPHCEforum16
#CRANAplus2016
#IAMRA2016
#LowitjaConf2016
#PreventObesity16
#TowardsRecovery
#VMIAC16
#WearablesCEH
#WICC2016
2017 conferences
#17APCC
#ACEM17
#AIDAconf2017
#BTH20
#CATSINaM17
#ClimateHealthStrategy
#IAHAConf17
#IDS17
#LBQWHC17
#LivingOurWay
#OKtoAskAu
#OTCC2017
#ResearchTranslation17
#TheMHS2017
#VMIACConf17
#WCPH2017
Australian Palliative Care Conference
2018 conferences
#6rrhss
#ACEM18
#AHPA2018
#ATSISPC18
#CPHCE
#MHED18