Don’t expect any major health surprises in next week’s federal budget, says health policy analyst Charles Maskell-Knight, though he does also include the caveat, “I have been wrong before…”.
Charles Maskell-Knight writes:
Next week’s federal budget will be unusual in that it will be presented in spring rather than autumn, as has been the custom since 1994. There have been other spring budgets – 2020 when budget preparation was derailed by the onset of the COVID-19 pandemic, and 1996 following the election of the Howard Government in March that year – but they have been exceptions.
The budget will be even more unusual in that it will be the second budget for 2022-23. The Treasury website is describing it as the “October budget” – not to be confused with the October revolution.
While it is not uncommon for governments to have non-budget fiscal statements setting out changed priorities, Australia has adhered to the principle of one budget a year since 1901.
The new policy initiatives in post-election budgets are entirely predictable, and reflect the dutiful implementation of commitments made by the incoming government during the election campaign. Next week’s budget in the health area will include funding for urgent care centres, aged care reforms, the reduction in Pharmaceutical Benefits Scheme co-payments, and so on.
It is highly unlikely that there will be any funding for new health policies that were not included as election commitments, no matter how worthy these policies may be.
The much more interesting parts of post-election budgets are the proposals to save money by reducing funding for existing programs.
These are sometimes presented as faits accomplis, but are sometimes preceded by a program of more or less strategic leaks. The mandatory GP co-payment included in the 2014 Budget came as no surprise, because it had been recommended by the “Commission of Audit” established by the Abbott Government following the 2013 election.
At present there does not seem to be much scope in the health budget to contribute to the Government’s desire to address the structural budget deficit, and there have been no hints of health program cuts so far.
The table below shows year on year growth in major health functions, based on Budget Statement 6 from the March 2022 budget.
The decline in total health spending reflects reduced spending on special COVID-19 measures in the public hospital funding and health services functions due to the (assumed) end of the pandemic. All other health functions are growing at less than the combined rate of population growth and price inflation.
There is already significant pressure on the Government to increase MBS expenditure in the face of growing access and affordability problems. PBS expenditure will increase as the Government wears the cost of reduced patient co-payments. The states and territories are arguing that the Commonwealth should remove the cap on annual growth in its contribution to public hospital services, and meet half the cost of increased services as the elective surgery backlog caused by COVID-19 is addressed.
Current private health insurance premium rebate policy settings have resulted in a steady reduction in the rate of subsidy and a transfer of cost to policy-holders. However, increased inflation will lead to growth in nominal expenditure on the rebate. There are no solutions to reduce government expenditure which do not transfer costs to policy-holders and flow through into increased inflation.
Finally, the current forward estimates for aged care do not reflect the cost of the Government’s commitment to fund any wage increase for workers in the sector determined by the Fair Work Commission. As the Commission will not be handing down its findings before the budget, the impact is unlikely to appear in the forward estimates for the aged care function. However, it should be included in the so-called budget contingency reserve as a cost which is extremely likely to be incurred but cannot yet be specified.
In conclusion, I expect that the health section of next week’s budget will be a lot less interesting than recent editions. But I have been wrong before…
Charles Maskell-Knight PSM was a senior public servant in the Commonwealth Department of Health for over 25 years before retiring in 2021. He worked as a senior adviser to the Aged Care Royal Commission in 2019-20.
See Croakey’s archive of articles on the October budget