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The Federal Budget and health: how to read between the lines

Introduction by Croakey: At the COP26 meeting in Glasgow last year, Australia did not join 50 other national governments in pledging to develop climate-resilient and/or low carbon, sustainable health systems, as we reported at the time.

So it’s a fairly safe bet that the forthcoming Federal Budget will not include significant funding to help health systems and services deal with the massive task of responding to the climate crisis.

However, there will be many other key areas to watch, including possible announcements on COVID-19, aged care, public hospitals and mental health, writes health policy analyst Charles Maskell-Knight, who provides some timely tips on how to read the budget and decipher the political spin.

Note: Croakey encourages readers to use #HealthBudget2022 to share news on the Federal Budget and health.


Charles Maskell-Knight writes:

Before the Federal Budget last year I wrote an article for Croakey on how to make sense of it. As the Government prepares for its pre-election budget next week I thought it worthwhile to revisit the topic.

Be prepared for ministerial media releases promising record levels of spending on health. Ignore them, as they are meaningless.

As long as the population keeps increasing and ageing, universal programs such as MBS, PBS, and public hospitals will always cost more than the year before. Even if the Government made no new policy decisions about health, every year would be a year of record spending.

Budget papers produced by Treasury and Finance are generally more reliable than “fact sheets” produced by departments.

In particular, Budget Paper 2 setting out the policy decisions included in the budget usually provides a largely spin-free version of what has actually been decided. (Although last year a decision that saved the Government $300 million was characterised in Budget Paper 2 as “improving the affordability” of private health insurance.

Division matters

When thinking about the real impact of government decisions to establish new programs, remember to divide.

For example, the 2018-19 budget included $82.5 million over four years for improved access to psychological services in residential aged care facilities. What will this mean for a person in residential aged care?

As a rough approximation, $82.5 million, divided by four years, divided by 200,000 residents, divided by $100 fee per psychologist consultation, equals one consultation per resident per year.

This is clearly inadequate for a population, half of whom are suffering from depression.

The baseline

Budget paper 1 includes in Statement 6 a breakdown of expenditure by function (for example, health), sub-function (for example, medical services), and sub-sub-function (for example, Medicare Benefits Schedule) for the current year, the budget year, and three forward estimates years.

This allows a reader to examine growth rates over time, and to compare this budget’s estimate for 2022-23 and the two subsequent years with estimates for the same years from the last budget. The differences are due to parameter variations (changes in assumed population growth or cost increases) and policy decisions.

The tables below show the 2021 budget estimates for health and aged care, and the year-on-year percentage growth.

Between the 2021 budget in May and the release of the Mid-Year Economic and Fiscal Outlook statement (MYEFO) in early December, the Government made a number of decisions increasing expenditure on health and aged care. These mostly related to COVID-19 and increased spending mainly in 2021-22, with some impact on 2022-23 but nothing in later years.

The two most expensive were a decision to provide COVID-19 vaccine boosters ($895 million in 2021-22 and $115 million in 2022-23) and to provide additional funding to public hospitals ($809 million in 2021-22 and $128 million the following year.

However, these decisions have little impact on the underlying growth projections in the main health and aged care programs.

What do the baseline projections show?

The Government is assuming that COVID-19 will not be an ongoing problem. (Given the ongoing mutations of the virus, uncertainty about the long-term efficacy of vaccines, and the possible impact of long COVID, this assumption seens unduly optimistic.)

The slow growth in MBS funding forecast for 2022-23 is due to cessation of COVID-19 measures such as PCR testing, and the decline in the “health services” sub-function reflects the absence of any funding for further COVID-19 booster vaccinations.

The low estimates for growth in the private health insurance (PHI) premium rebate are due to the ongoing freeze of the income thresholds for different rebate rates. The Government is benefiting from a form of bracket creep as more and more people earn more and fall into lower rebate bands.

The relatively low growth in public hospital funding in 2022-23 reflects the cessation of some COVID-19 specific measures. The growth rate of around six percent in the later years shows the Government expects moderate growth in public hospital activity, but no major post-pandemic surge.

The estimates for the Aboriginal and Torres Strait Islander health sub-function are probably not growing at all in per capita terms after adjusting for inflation. Little wonder the gap is not being closed.

The tailing off in the rate of growth in the aged care estimates highlights the emptiness of the Government’s claims of once-in-a-generation reforms. A growth rate of 4.4 percent in 2024-25 will not keep pace with inflation and increases in the aged population – it does not include provision for more registered nurses, improving care time, or paying staff wages commensurate with their work value.

And finally, while it is too small to show up in the figures above, there is no provision to extend or replace the $108 million a year agreement under which the Commonwealth provides funding to the states for adult public dental services.

What to watch for?

COVID-19: There is a growing body of evidence that immunity after three doses of vaccine wanes fairly quickly and that further doses – or a regular booster program – may be required. Will the budget include any funding for ongoing vaccine purchases?

Public hospitals throughout the country are under pressure, with waiting times for elective surgery increasing as the system tries to deal with the pandemic-induced backlog. The Australian Medical Association is running a “hospital logjam” campaign to argue for additional funding. The Commonwealth has already agreed with the states to pay 50:50 for COVID-19 cases, and to keep paying what would have been paid for other public hospital activity even though that activity has been reduced. It is unlikely to agree to further increases, although the South Australian ALP election win based on health issues may lead to second thoughts.

Private health insurance: The Government continues to benefit fiscally from Rudd-Gillard era decisions to income test the premium rebate, cap increases in the rebate to the Consumer Price Index (CPI), and freeze income test thresholds. All these measures increase the price of private health insurance for households. A budget intended to reduce cost-of-living pressures might see some of these policies reversed.

Aged care: Now that unions and employers have filed an agreed statement with the Fair Work Commission supporting increased pay for aged care workers based on increased work value, the Government’s failure to engage in the process looks like simple obstruction. It clearly does not want to spend any more than it spent in last year’s budget. Will ongoing complaints from providers of their inability to attract or retain staff lead to a policy change? Or will the enlarged Australian Defence Force be posted permanently to support aged care providers?

Dental health continues to be the glaring omission in the Australian system of universal health care. Associate Professor Lesley Russell and Professor Heiko Spallek made the case for dental care to be on the election agenda, echoing many other commentators over the last 20 or 30 years. The Commonwealth Government now spends about $750 million on privately insured dental services through the private health insurance premium rebate, and $340 million for children through the Child Dental Benefits Schedule. It has agreed with the states three successive annual extensions to its contribution of $108 million to state public dental services – will this be the year that a longer-term agreement is put in place to support dental care for the most vulnerable groups in the country? Or will it be left to a future Government to take some action to address the avoidable morbidity due to inaccessible dental care?

Funding for strategies and plans: In a recent edition of The Health Wrap, Lesley Russell noted that the Commonwealth Department of Health had been ticking off its to-do list before the election in releasing various plans.

After a three-year gestation, the National Obesity Prevention Strategy was released on 4 March (World Obesity Day). While the Strategy is comprehensive and has been well-received, there is no commitment to funding by the Commonwealth. Will this change in the budget?

The National Aboriginal and Torres Strait Islander Health Workforce Strategic Framework and Implementation Plan for 2021-31 was released on 13 March. As Russell said, the document is an excellent beginning, but it needs to be funded if it is to have any impact.

Other plans are progressing more slowly. The much-hyped Primary Health Care 10-Year Plan seems to have disappeared, even though consultation on the draft ended in November last year. Will it emerge from the mists of the budget?

And the 6th National Mental Health and Suicide Prevention Strategy appears to have been delayed due to a row between the Commonwealth and the states about funding.  Minister Hunt is now claiming that mental health will be a “key budget focus” ()  Will the budget contain some extra funding to sweeten the deal with the states?

Post budget announcements?

Most budgets contain a provision for “decisions taken but not announced” – now often used as a war chest to allow announcements during an election campaign which have already been included in the announced budget bottom line.

Due to the likely very short period between the budget and the start of the real election campaign (as distinct from the shadow campaign that has been going on all year), it is unlikely that such announcements will figure prominently in this budget.

However, it is something else to check for on budget night.

• Charles Maskell-Knight PSM worked as a senior public servant in the Department of Health for over 25 years before retiring in early 2021. He worked as a senior adviser to the Aged Care Royal Commission in 2019-20.


See Croakey’s archive of stories on #HealthBudget2022

 

 

 

 

 

 

 

 

 

 

 

 

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