As the Abbott government casts around for a third version of its Medicare copayment policy, it’s surely time for it to ask the basic question: “Why are we doing this again?”



The reasons for abandoning the second copayment policy are clear: voters hated it; doctors were going to the barricades over it; it wasn’t going to pass the Senate; it was going to cause serious trouble for Campbell Newman’s Queensland election campaign.

In short, they were political. (And foreseeable, but that’s another story.)

But the policy reasons for cutting Medicare in the first place have been various and confusing – to return savings to the budget but also to provide money for a medical research fund, to reduce “unnecessary” visits to the doctor, to force payment from those who can afford it and to “save” the long-term future of a scheme with costs “ballooning out of control”.

“Medicare will not survive in the long term without changes to make it sustainable,” the new health minister, Sussan Ley, said, repeating a talking point the government has been using since last year’s budget as she fronted for the unenviable task of half-ditching a policy conceived before she took over the portfolio. (The $5 rebate cut slated for July will stay.)

“In the last decade, spending on Medicare has more than doubled from $8bn in 2004 to $20bn today, yet we raise only $10bn from the Medicare levy. Spending is projected to climb to $34bn in the next decade to 2024,” she said.

But a few facts quickly raise questions about whether this rationale makes sense.

As the Grattan Institute’s health program director, Stephen Duckett, points out, if the numbers are adjusted for population growth and inflation, the increase in spending over the decade isn’t 200%, but closer to 50%. Whether or not 50% is “sustainable” depends on whether we’re getting value for money for our extra government spending. But there’s good evidence that we are. We have much lower health spending than other advanced economies (the US, for example, spends 17.7% of its GDP on health compared with Australia’s 9.5%) and we have better average life expectancy or, to use a different measure, Australia’s “amenable death rate” (death from illnesses that can be prevented) has for the past decade been steadily falling. And spending money on primary care – stopping people from getting sick – is far more efficient than spending it on hospital admissions later. So why look for savings from GPs?

The fact that the Medicare levy raises “only” $10bn of the $20bn we are spending on Medicare is another example of spin-by-numbers. It sounds bad if you don’t take into account the fact that the Medicare levy never has paid for all government spending on Medicare. The proportion it paid for in 2014 was a little lower than in 2003, but slightly higher than the previous year, as this table – prepared from a parliamentary library paper – shows. Is is entirely unclear what proportion of Medicare costs the minister thinks the levy should cover. The 55% it currently covers is not much lower than its historical average. Ley told Guardian Australia it was “clear that revenue raised from the Medicare levy, as a proportion of total spending, would not keep pace with growing cost of Medicare”.

Figures from parliamentary library papers. Photograph: Supplied

The facts suggest Medicare is not in crisis. Its costs are rising but not careening out of control. It might need changes, but the only reason Medicare would not “survive” is if a government deliberately chose to kill it.

So as she starts consultations to find more savings (which seems to be the real point of the exercise) from Medicare payments to GPs, Ley might want to take a wider look around her new portfolio.

Australia’s overall health spending is not wildly out of control either but there are places where the government could save money – on top of the $5 rebate cut which will probably become a $5 copayment for everyone except children and pensioners.

Freedom of information documents reported by Sean Parnell in the Australian this week – and now available on the department’s website – revealed the Health Department’s “strategic policy group” had advised the government could save as much as $15bn a year from cutting “low value” drugs and therapies.

Duckett has suggested savings of $1bn a year are available from reducing inefficiency in public hospitals, $500m a year from workforce reform in public hospitals, or $400m to $500m a year from adopting benchmark pricing for generic pharmaceuticals.

The Australian Council of Social Service suggests saving $6.6bn a year from abolishing the private health insurance rebate, although given the Coalition’s strong ideological support for private health that would appear unlikely. It says another $400m a year could be saved from scrapping the Medicare safety net, which helps families with out-of-hospital expenses over a certain threshold and largely benefits the better off.

If Ley really consulted widely, if the answer to the question “Why are we doing this?” was “to use the available government money to help keep Australians healthier”, she could find significant savings that deserve public support and deserve to pass the Senate.

But if she’s just biding time until Queensland goes to the polls, or looking for another makeover, or if she really thinks the problem with the government’s second copayment was just “misinformation … causing confusion for patients and confusion for doctors” (as she said at her press conference), she’ll be repeating the mistake the Abbott government has made so many times. She’ll be presuming the problem is “communications” or spin, rather than chaotic processes and poorly thought-through policy substance.