Australia’s efforts in tobacco control had favourable mention at the World Health Organization’s 65th World Health Assembly in Geneva this week, including this from the Director-General, Dr Margaret Chan:
“In its fight to wrap a deadly product in a plain package, Australia leads resistance to the tobacco industry’s latest onslaught of aggressive tactics. No government seeking to introduce measures that protect the health of its citizens should be intimidated by an industry, especially by one with the reputation of Big Tobacco.”
Chan also addressed the challenges of the global financial crisis for global health, but said the news was not all bad. More than 60 countries had approached WHO seeking technical support for their moves towards universal coverage since publication of the 2010 World Health Report on health system financing. She said:
“What we are seeing goes against the historical pattern, where social services shrink when money gets tight. I think this drive to expand coverage is a powerful signal. Despite deepening financial austerity, the will to do the right thing, the fair thing, for people’s health prevails.
All of these examples, all of my personal experiences over the past five years, bring me to one overarching conclusion. Universal health coverage is the single most powerful concept that public health has to offer.
Universal coverage is relevant to every person on this planet. It is a powerful equalizer that abolishes distinctions between the rich and the poor, the privileged and the marginalized, the young and the old, ethnic groups, and women and men. Universal health coverage is the best way to cement the gains made during the previous decade. It is the ultimate expression of fairness. This is the anchor for the work of WHO as we move forward.”
Chan had three suggestions for countries struggling to balance health and financial imperatives:
1. Get back to the basics, like primary health care, access to essential medicines, and universal coverage.
2. Shift to thrift. Develop a thirst for efficiency and an intolerance of waste.
3. Look to “frugal innovation”.
“Innovation does the most good when it responds to societal concerns and needs, and not just to the prospects of making a profit. These days, the true genius of innovation resides in simplicity. This is not rocket science. This is frugal, strategic innovation that sets out to develop a game-changing intervention, and makes ease of use and affordable price explicit objectives. There is another good reason to promote frugal innovation. Unlike other areas of technology development, like computers and mobile phones, advances in medical products nearly always come with greater complexity and a much higher price. The complexity increases the price further, as highly skilled staff are needed.”
In a timely publication, the 16 May edition of the Journal of the American Medical Association focuses on global health, including this article from Sir Michael Marmot, warning that European governments’ pursuit of deficit reduction is an “economic experiment” resulting in great physical and mental illness and possibly death.
He urges governments and global decision makers to put health equity at the heart of all policy making.
Meanwhile, Hobart-based consumer health advocate Martyn Goddard has also taken a global perspective in his examination below of Tasmania’s health budgetary woes. But his conclusions are not nearly so optimistic as Margaret Chan’s.
The worst is yet to come
Martyn Goddard writes:
Every ten years or so, Tasmania goes broke. Once a decade, budgets and services are slashed, government employees sacked, capital programs deferred or cancelled and oppositions make hay.
It’s that time again. With last year’s budget, the regular period of voluntary receivership began again. Schools were slated for closure. Police lost their mobile phones. Health services were slashed, and large swathes of elective surgery effectively abolished. Doctors, nurses and patients held noisy rallies around the state to retail their horror stories.
But there are limits to the government’s death-wish. This year’s budget, released last week, has been sold by the Premier and Treasurer, Lara Giddings, as being good news for health.
Health, she promised, will be spared from further cuts, though there is to be no rebuilding of the damage inflicted last year, and the state will borrow to tide itself over for the next couple of years before – according to the budget projections – GST revenue bounced back and we can all relax.
There are two problems with this rosy outlook. The first, and least, is that new budget represents no good news – though continuation of the bad news may seem good compared with what many people in the health business expected. Nothing is being done to repair the damage that has been done. The most one can say is that things are getting worse at a slightly slower rate.
Meanwhile, health cost inflation continues. It costs a bit extra each year to treat a patient, so if there’s no extra money, the number of people treated will necessarily fall further. There is also a hidden cost of failing to treat people on time: their productivity is down, and they either remain in need of treatment or develop further complications so that complex and expensive emergency care can no longer be denied and must finally be given. Most of these costs will eventually find their way back to the debit side of the state budget and nobody has the slightest idea of what that cost will be.
The Premier (repeated in the budget papers) said that as the GST clawback from the RHH building program ‘washes through’ over three years, GST receipts will return to trend. She does not mention the $225 contribution the state itself has to make to this project. That will drain $22 million from the budget this financial year and next, $46 million in 2014-15 and $85 million in 2015-16.
But the real danger for the future of health services comes not from the budget itself but from its very optimistic assumptions about the future. The budget strategy (including the health cuts ‘reprieve’) is predicated on the notion that by the end of the forward estimates GST receipts will bounce back, borrowings can be paid off and we can start to rebuild. Those projections are supposed to be valid for four years but they are already being overtaken by events.
The government’s future income streams are hostage to events over which no Tasmanian government has any control. The danger to our hospitals is in events which are now rapidly unfolding in Europe. The exit from the Euro by Greece is now looking fairly certain, and the costs to the global financial system of this has been estimated by European banking officials at 1 trillion euros – one million million euros.
The losses to European and other international banks, many of which are already vulnerable, will be immense. Greek government 10-year bonds – those issued since the 70% ‘haircut’ which was supposed to make them commercially attractive – are now at an astonishing yield of 23%. As such, they are debt at least as toxic as the American collateralised debt obligations and ninja housing loans were in 2008.
Spanish government debt is heading in the same direction. There was a very difficult bond auction in Madrid this week and yields are now around 6.3%, getting into territory most economists regard as unaffordable. At these rates it is becoming impossible for the Spanish government to fund its budget deficit. If yields continue to rise, Spain will require another set of massive bailouts from the EU, the European Central Bank and the IMF, with no end in sight. Spanish debt will join Greece’s toxic debt sloshing around the financial world.
The other day the Spanish government was forced to bail out the nation’s fourth-biggest bank, Bankia, partly nationalising it and transferring many of its liabilities from the private to the public sector. The government now owns 45%. This again is what was happening in 2008. Bankia shares plummeted overnight, amid rumours of a run by depositors. A run has been denied by the government. Perhaps it’s a matter of how you define a run.
In Greece, a full-scale banking run is developing as increasingly panicky depositors queue up to get their money out while they still can. All this year, depositors have been emptying their accounts and investors have been taking money out of the country. In the past week or so the rate of this capital flight has increased dramatically.
Alistair Darling, who was the British chancellor at the time of the Lehman collapse, is quoted in the Guardian about his fears of a second global credit crisis. ‘In my experience,’ he said, ‘these things can happen within hours’.
Most of Europe is already in recession, kept in narrowly positive growth territory only by Germany.
Europe buys more of China’s exports than the United States does. In 2008, we saw Chinese industrial production slow in the context of reduced world demand, and this had a catastrophic effect on the Australian resources industry. This year, Chinese output has already slowed as a result of government actions to control inflation and an asset price bubble in property. If Europe goes further into recession, and there is serious disruption of global credit markets, the Chinese domestic consumer will not be able to replace export markets.
Chinese demand for Australian resources will suffer along with demand from the rest of the world. This will have, again, a profound effect on Australian government receipts. Some of this has been factored into the federal budget; much has not been because the outlook is so uncertain. Already, though, the national GST pool is forecast to fall by $11 billion. It is likely, in the light of the past week’s events in Europe, to be worse.
The chairman and CEO of BHP Billiton, and the CEO of Rio Tinto, among others, have both flagged that major planned expansion projects are in doubt.
Taken as a whole, these projects are vast. The big one is BHP’s Olympic Dam project in South Australia but there are other huge expansion plans for the north-west shelf, the Pilbara, the Queensland coalfields and elsewhere. The construction phase of these projects would be a huge boost to GST receipts, and Tasmania’s share would increase along with everyone else’s. But the mining companies are not about to invest such large amounts of money on increased production at a time they believe demand will decline.
Tasmania’s budget will suffer in three ways: directly, through a declining GST pool; indirectly, through a reduced capacity of the federal government to invest in state-based programs; and through the state’s own declining economy and state tax base. If people are thrown out of work, their employers won’t pay payroll tax.
In the light of further financial chaos in Europe – even without a global credit meltdown – the Commonwealth will find it increasingly difficult to fund the budget surpluses to which both major parties are committed. About 40% of Commonwealth fiscal transfers to the states are in the form of specific-purpose payments (such as the National Health & Hospitals Fund) which, unlike the GST, happen at the pleasure of the Commonwealth. It is easy to see how vulnerable this payment stream could become to substantial cuts.
For the state government’s budget forecasts to be translated into reality, everything in Europe and elsewhere would have to go swimmingly, the European Union and the ECB would have to be far, far smarter and more decisive than they have ever been, and strong economic growth would have to suddenly and miraculously appear. It is impossible to see where growth of than magnitude could come from.
A far more likely scenario is that the Eurozone is headed either for a complete breakup or for some very significant (and unforecastable) structural change. Either will be messy. Both will disrupt world economies and, inevitably, the state budget and Tasmania’s capacity to fund its health services.
The worst is yet to come.
Martyn Goddard’s previous Croakey posts:
And here is the Tasmanian Government’s take on its health budget.