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What does the MYEFO mean for health and research?

(An update was added to the bottom of this post on 23 Oct: analysis from the ANU’s vice chancellor, Professor Ian Young.)

The details of the Federal Government’s Mid‑Year Economic and Fiscal Outlook (MYEFO) can be found here.

A quick summary of the major health and research-related news follows below, covering:

  • private health insurance
  • research
  • national health reforms
  • media spending
  • medical indemnity insurance
  • telehealth
  • preventative health.

And at the bottom of the post is a statement from a less-than-impressed university sector, warning that the Government has wiped $1 billion off forward estimates for higher education.

The Government says the cuts in health spending will be used to help finance dental and disability reforms, as well as extra health outlays to Tasmania.

The statement says there will be “a reduction and movement in funding to a number of grant programs across a range of Government portfolios by $157 million in 2012‑13”. No doubt more detail on these will emerge.

The papers also say: “Longer‑term growth in some research funding to universities will be temporarily slowed to ensure that research funding to universities remains sustainable.”

***

Private health insurance  

The Government’s contribution to private health insurance will be calculated using commercial premiums as at 1 April 2013 and then indexed annually by the lesser of CPI or the actual increase in commercial premiums. This will be used to determine an individual’s private health insurance rebate.

In conjunction with this measure, the Government will streamline arrangements for the 2013 premium setting round. The Government will undertake discussions with industry and consumer groups on options for further simplification of premium setting that will drive competition and continue to deliver strong consumer protection from 2014.

The measure will take effect from 1 April 2014, and result in savings of $699.7 million over four years.

As well, the Government will remove the Private Health Insurance Rebate on the Lifetime Health Cover (LHC) loading component of PHI premiums.

The LHC loading is an additional two per cent charge to a person’s PHI premium for every year elapsed after their thirty-first birthday before they take out PHI. LHC loadings are only payable against the hospital component of a person’s PHI premium. The measure will take effect from 1 July 2013 and will result in savings of $386.3 million over four years.

The Government says: “The reforms to the PHI rebate in MYEFO will control one of the fastest growing areas of health expenditure.”

The papers also note that the Government’s PHI payments are expected to increase by $313 million in 2012‑13, reflecting a higher than expected increase in the prepayment of PHI policies in June 2012, with a consequent increase in the PHI rebate paid by government in 2012‑13.

***

Research

The Government will slow the rate of funding increases for Sustainable Research Excellence by maintaining funding at the 2012 level for the 2013 calendar year, then increasing funding over the three years to a maximum amount of $300 million in 2016. This will decrease payments by $79 million in 2012‑13 ($499 million over four years). Funding will then be indexed annually from 2017 by the Higher Education Indexation Factor.

 ***

Health reform funding

National Health Reform Funding is expected to be $254 million lower in 2012‑13 ($1.5 billion over four years), reflecting downward revisions to the weighted population used to calculate hospital utilisation following the 2011 Census and the Australian Institute of Health and Welfare health price index, which has been driven by a higher Australian dollar leading to lower prices for medical equipment that is sourced from overseas.

States will receive increased NHR funding in 2012‑13 of $716.3 million compared to 2011‑12, with NHR funding expected to grow at an average of 8.2 per cent across the forward estimates. This reflects the Commonwealth’s commitment to provide at least $16.4 billion of additional funding under NHR over the period 2014‑15 to 2019‑20.

Tables outlining health funding to the States begin here.

***

Media spending

The Government will save $18.7 million in 2012-13 by reducing media spending across the health portfolio.

***

Qld mental health

The Government will not proceed with funding for the Queensland Regional Acute/Subacute/Extended Inpatient Mental Health Services project following a decision by the Queensland Government to withdraw its support for the project. This is estimated to save $20.1 million over four years. Funding for the project was announced as part of the Health and Hospitals Fund 2010 Regional Priority Round in the 2011-12 Budget.

Savings from this measure will be redirected to support a new $21.4 million Cancer Centre in the growth centre of Springfield, Queensland.

***

Medical Indemnity Insurance

The Government will achieve savings of $22.9 million over four years by reducing the level of subsidy that applies under the Premium Support Scheme (PSS).

The PSS was introduced in 2004 to help doctors with the costs of their medical indemnity insurance. The PSS provides a subsidy to cover the proportion of medical indemnity insurance costs of eligible doctors that exceed 7.5 per cent of their gross medical income. The subsidy will be reduced from 80 to 70 cents in the dollar in 2012-13, then to 60 cents in the dollar from 2013-14 onwards, reflecting more affordable premiums for medical indemnity insurance.

This measure was included as a ‘decision taken but not yet announced’ in the 2011-12 Budget.

 ***

Telehealth changes

The Government will restrict telehealth services to those patients for whom distance is the most significant barrier to accessing specialist care.

This is estimated to save $134.4 million over four years. This restriction will align eligibility to Medicare Benefits Schedule (MBS) telehealth items with the Australian Standard Geographical Classification Remoteness Area (ASGC-RA), the standard remoteness classification used by the Australian Bureau of Statistics.

From 1 January 2013, geographic eligibility criteria for MBS telehealth services will be amended to exclude patients in outer metropolitan areas and major cities of Australia, in accordance with the ASGC-RA. The amendment to geographical eligibility will not affect services that are provided to patients of an Aboriginal Medical Service or care recipients of a residential aged care facility.

The Government will introduce new Medicare Benefits Schedule (MBS) items from 1 January 2013 for short consultant physician and specialist video conferencing attendances where the time and content is less than that usually expected for initial consultations.

This measure is estimated to generate savings of $4.5 million over four years by creating new MBS items such as telehealth triage and short consultations for referrals to screening services. The new MBS items will be restricted to patients located in eligible geographic areas and other eligibility requirements will apply consistent with current telehealth items.

MBS items for specialist video consultations have been in place since 1 July 2011 in line with the 2010 election commitment Connecting Health Services with the Future.

The Government will change its approach to developing the video conferencing capabilities of the after hours GP helpline. A staged approach to the rollout of the video conferencing capabilities will allow the technology to be fully tested and developed in 2012-13 to ensure appropriate consumer experience before a national rollout in 2013-14.

The telephone helpline commenced operation in July 2011 to enable people who require after hours medical advice, and who cannot access their usual GP, to speak to a GP over the telephone if necessary.

Video conferencing will continue in selected residential aged care facilities where it has been available since July 2012.

***

Preventative health initiatives

The Government will provide $74.1 million over four years to support preventive health activities. Of this funding, $29.1 million will support the Australian National Preventive Health Agency’s (ANPHA) core activities and research as well as initiatives to combat eating disorders. The remaining $45.0 million will fund social marketing to discourage tobacco use, complementing the plain packaging initiative.

*** *** ***

 Statement from Universities Australia

University budgets are set for review as the Federal Government wipes $1 billion off forward estimates for higher education, according to the peak national body representing universities.

“Universities acknowledge the Government has invested substantially in the sector in recent years and are relieved that grants under the National Health and Medical Research Council and Australian Research Council have not been affected,” said Universities Australia’s Chief Executive, Belinda Robinson.

“We are also pleased that the demand driven system and indexation for student funding has been preserved.

“However, with respect to the $500 million to be removed from the Sustainable Research Excellence program, the sector is bitterly disappointed that the gains recently made in funding the indirect costs of research are being eroded.

“Investing in research is a long-term endeavour and any reductions will have long term consequences.

“While research grants cover the direct costs of research, they do not meet the many other administration and infrastructure costs that accompany research.

“These costs are very substantial and universities have fought for years to have them recognised.

“Universities thought the battle had finally been won when the Government announced as part of the 2009-10 Budget that it would provide funding to meet the indirect costs of research.

“The announcement was premised on the basis of a gradual increase in the funding from 20 cents per research grant dollar in 2008, to 30 cents in 2012 and 50 cents in 2014.

“What this announcement means is that the contribution will remain at or below 30 cents for the indefinite future,” said Ms Robinson.

“With approximately 70 per cent of this funding going to the Group of Eight universities, these research-intensive institutions will be hit particularly hard and it will have a substantial impact on those universities that have made investment commitments on the basis of the funding announced in the 2012-13 Budget.

“This also comes on top of a further reduction of $60 million over the next 18 months that will be required to keep some national research infrastructure projects operating at the time when National Collaborative Research Infrastructure Strategy is abolished.

“The irony is that we are in this budget pickle at least partly as a result of Australia’s economy being over reliant on the resources sector. By reducing research funding we are cutting the very area that provides us with the greatest hope of underpinning long-term industrial diversification and economic transformation.

“The removal of $270 million in facilitation performance funding set to commence in 2014 has also disappointed the sector.

“The way this funding was to be provided means that its removal is a real reduction in the per student funding for universities at a time when repeated reports have found that universities are under-funded and require at least a 10 per cent increase per student just to tread water,” Ms Robinson concluded.

Savings announced to be made from higher education:

– Changes to the payment formula for Sustainable Research Excellence ($498.8 m)
– Facilitation performance funding from 2014 will be deferred ($270.1m)
– Changes to support for masters degrees ($167.0m)
– Student start-up scholarships to be frozen rather than indexed to 2017 ($82.3m)
– Not proceeding with funding for university research infrastructure (NCRIS) past 2013.

***

Update added on 23 October: A note to staff from the ANU’s vice-chancellor, Professor Ian Young

Dear Colleagues

You may have been following the mid-year economic forecast (MYEFO) released today by the Australian Government.

I would like to share some information and give you a rough idea of what it means for us.

The statement has significant implications for the higher education sector, and for ANU.

As you know, there was considerable concern amongst researchers that grants were ‘paused’; that ‘pause’ has now been lifted, and there has been ‘no change to the level of grants’ allocated to the Australian Research Council and to Cooperative Research Centres.

Indexation has been preserved and there are no changes to the demand-driven system for student enrolments at this stage.  There are changes for some student income support programs.

However, the promised growth in ‘Sustainable Research Excellence’ (SRE) funding, which supports the indirect costs of research, will be significantly slowed. The expected uplift in SRE funds will not take place in 2013 as promised, and I estimate a $500 million cut to the program over the next four years.

This will have an impact on all universities, but most acutely on strong research institutions. ANU, like many other universities, has already factored the SRE funding into our budget for next year. We expect the decision will cost the ANU budget an approximate $3.4 million in 2013, and at least $10 million in 2014.

Also the loss of Facilitation Funding, associated with the Governments Compacts, will see $270 million cut from the sector, costing ANU around $4.7 million in 2014.

There has been no announcement on replacement funds to support the National Collaborative Research Infrastructure Scheme (NCRIS), which will also impact on research-intensive universities.

Comments 2

  1. Margelis George says:

    The changes to the telehealth rebates as part of teh MYEFO have the potential to kill telehealth in Australia. The uncertainty produced by 3 changes to the reimbursement for telehealth consultations in less than 18 months means clinicians will just not get involved. They have better things to do than constantly adapt their practice to fluctuating reimbursement models and new levels of administrative stress.
    I have posted more details on my blog: http://georgemargelis.wordpress.com/2012/10/23/is-telehealth-dead-in-australia/

    Dr George Margelis

  2. Margelis George says:

    Interesting how some of the short sighted saving in healthcare spending in the mini budget seem at odds with their other initiatives. The cuts in telehealth are particularly bizarre, after making it an election issue in 2010 we have seen the rapid dissolution of promise since its introduction in July 2011. Within a year new limitations were introduced, and six months after that even greater restrictions placed on it to the stage that it has become a mere shadow of the original promise. The new budget envisages a saving of $134 million by limiting access to telehealth consultations for the bulk of the Australian population. I assume this means that those same people will just not access specialist services as that is the only way that sort of saving can be delivered. Of course when they end up in the emergency department due to the poor management of their underlying health issues, that is state government money that is being spent, so it won’t appear in the current budget.
    Even more bizarre is the fact that the same government is investing some $40 billion to deliver the required infrastructure for a national telehealth service through the NBN. It has been argued by them that telehealth is one of the primary business cases for the NBN, and yet at the same time they have decided to effectively make telehealth unavailable to the bulk of the population.
    In my blog http://www.georgemargelis.com I have argued that as a result of this action telehealth in Australia is dead. That may seem to be over the top, but the repeated downgrading of the service promised at the 2010 election,and the uncertainty that causes in the industry has led to that.
    If we really believe that we need to use technology to drive fundamental reform of our healthcare system then we need the government to have the political courage to stay the course and deliver on its promise.

    Dr George Margelis

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