Higher costs, smarter health

AMA president Tony Bartone warned on Wednesday of the “enormous strain” on our hospitals as the country ages. It’s true Australia has by global standards an enviable health system with pretty good outcomes relative to costs. Some of the issues adverted to by Dr Bartone are First World problems in the sense that we usually have the means to pay for costly medical technology. Even so, the pressure on hospitals is undeniable and will increase as the baby boomers age. For that reason, rising health costs are a powerful argument for building up budget surpluses, paying down debt, boosting productivity and improving the efficiency of health services.

In 1975, the number of people aged 15-64 for every person 65 and over was about seven. In 2015, it was less than five, and it’s projected to be just under three in 2055. Demography is leaving us with fewer people to earn and pay taxes, and more people to support and receive payments. Health costs spike rapidly with age, and the number of people 65 and over is expected to more than double between 2015 and 2055. New technology and drugs can reduce the unit-cost of treatment, and cut hospital stays, but the enabling of safer, more widespread use among the elderly can push up the total expense.

The latest Intergenerational Report from the federal Treasury noted the rise in healthcare spending per person, in constant dollars, from $670 in 1975 to $2830 in 2015 and an estimated $6460 in 2055. Most of this is driven not by demography but by rising incomes, wage costs, disease rates and technological change. Yet these factors interact with ageing, since much medical R&D targets the elderly, who are often the first and heaviest users of new treatments.

Dr Bartone makes the point that hospitals have to contend with rising demand for elective surgery, longer waiting lists and congested emergency departments. It’s never been easy but both levels of government have to do more to avoid wasteful cost-shifting. As paymasters, suppliers and employers they need to get a sharper focus on health sector areas where reform is especially in need and can pay sizeable dividends. Inflexible public sector arrangements and the stimulus of private competition both demand careful attention.

It’s a truism that with better primary care, the strain on hospitals can be eased. Advances in treatment can certainly assist, although the net effect on cost is hard to predict. Allowing private health insurers to offer comprehensive cover for treatment outside hospital would help rebalance the system towards primary and community care, as well as underpin overall financial viability.

As for emergency rooms, excess demand in the regions may indeed reflect scarcity of GPs — hence the proposal to reward versatile bush GPs with specialist rebates. While costly, the move would improve doctor numbers in the country. In the cities, problems too often arise from misuse by patients. There is no substitute for personal responsibility, and well-designed co-payments can nurture this. Diseases of lifestyle can be averted, with good choices promoting a healthier future.