In a first-take analysis of the health and aged care measures in the 2023/24 Budget, former senior public servant Charles Maskell-Knight analyses the impact they will have on spending growth in the portfolio and highlights whether the Budget has delivered in key priority areas.
Charles Maskell-Knight writes:
In a pre-budget article last week I set out the baseline estimates for health and aged care spending for the Budget, and speculated on how the Government might allocate the estimated $3.3 billion raised from increased tobacco excise.
The virtual ink on that article was barely dry before the government “announced” that the Budget would include $11.3 billion to fund a 15 percent wage increase for aged care workers.
There had been previous announcements of extra funding to support general practice and primary care, as well as vaping cessation programs (ironic that the Government is funding a public health campaign to help people stop vaping, when vaping was sold by the sector as a means of helping people stop smoking).
However, I was wrong to speculate about how to spend $3.3 billion – Budget Paper 2 includes a total of $7.4 billion of net new spending arising from policy decisions in the Health and Ageing portfolio (as well as almost $300 million on payments to the states included in the Treasury portfolio).
This is one of the largest increases in health and aged care spending for many years.
Spending and saving measures
Major spending decisions include:
- $5.7 billion to strengthen “Medicare”, including $3.5 billion for increased bulk billing incentives
- $2.1 billion for new listings on the PBS
- Other aged care measures totalling about $1.6 billion, including funding for regulatory reform, expanded home care, and incentives for better health care for aged care residents
- $511 million for a new national lung cancer screening program, nicotine vaping product regulation and reform, and cessation support activities for tobacco and vaping use.
- Extending the agreement providing assistance to the states for public dental services by two years ($216 million), and providing $3 million for work in developing “longer-term adult public dental reform”.
Most of the additional funding to support wage increases for aged care “will be delivered through increases that will flow through program indexation” and hence does not count as a policy decision in the Budget Papers.
On the other side of the ledger, the Government will save money from:
- A temporary reduction in the residential aged care provision ratio from 78.0 places to 60.1 places per 1,000 people aged over 70 years ($2.2 billion)
- A wide range of savings totalling $1.7 billion from diverse health and aged care programs
- Revisions to the Medicare Benefits Schedule ($325 million).
Growth in spending
One way of demonstrating the significance of this funding increase is to compare the current projections of expenditure growth in the health and aged care portfolio with those made before the delivery of this Budget.
Below are two tables, the first showing real growth rates following this Budget, and the second showing changes in the real growth rates between the October 2022 Budget and this one.
These tables show the impact of the substantial increases in funding for MBS and aged care services in this year’s Budget on real growth over the Budget and forward estimates, as well as very large increases in real growth in 2023-24 flowing from the Budget.
A measure of the cumulative impact of policy decisions on aged care spending following the Aged Care Royal Commission can be obtained by comparing estimates made in the 2020-21 Budget of how much would be spent on aged care in 2023-24 with those made in the current Budget.
In the 2020-21 Budget aged care spending in 2023-24 was estimated at $25.9 billion. It is now estimated at $29.7 billion, an increase of $3.8 billion or 15 percent.
However, the Aged Care Royal Commission estimated that inappropriate indexation had led to an annual funding shortfall in 2018-19 dollars of about $10 billion. There is still a lot of ground to make up.
In last week’s article I suggested the Government could allocate funding to:
- a substantial investment in Closing the Gap
- a significant increase in spending on preventive health
- spending to establish a robust Centre for Disease Control
- a long-term commitment to assisting the states with the costs of public dental services
- action on the Aged Care Royal Commission recommendations on improving access to health services for the 200,000 frail people in residential care.
How did I go?
Closing the Gap: the Budget included an additional $363 million on Aboriginal and Torres Strait Islander health – but despite this increase, total funding will still decline in real terms after 2024-25.
Preventive health: the Government will provide a little over $50 million, mostly to replace or extend previous initiatives for which funding had ended.
Centre for Disease Control: The government will provide $91.1 million over two years from 2023–24 “to commence the establishment of the Australian Centre for Disease Control”. What happens after 2024-25? Who knows!
A long-term commitment to assisting the states with the costs of public dental services: the existing agreement has been extended for two years (after a series of five annual extensions) – but there is funding for a long-term plan. Just as long as Baldric isn’t involved…
Improving access to health services for people in residential care: the Budget includes $112 million “to introduce a new General Practice in Aged Care incentive payment to improve general practitioner attendance and continuity of care in residential aged care homes, and to reduce avoidable hospitalisations”. This is a start, but more is needed.
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