Tax overhaul the key to Medicare reform

Reforms to structures such as Medicare are important, but reforming the tax system, which provides the funding for important Australian institutions, must come first.

Medicare hasn’t been fit for purpose for a while now: declining bulk billing rates, fewer doctors staying in general practice and hence less access to a GP sit alongside skyrocketing fiscal pressures within the health system more broadly. Covid made a bad situation even worse, and it’s only going to get worse still if government doesn’t reform the system.

That can’t mean simply injecting more money, although that will also need to happen if we want to maintain services. The ageing of the population is putting particular strain on aged care and acute health services, a strain that will only become greater in decades to come. Living longer isn’t cheap.

Obesity is also on the rise, and with it associated healthcare costs. Greater awareness of mental health issues has also resulted in higher health costs, one reason this government controversially cut back the number of supported psychology visits in recent days.

Healthcare reform needs to include federation reform, given the shared policy responsibilities between the commonwealth and the states. However, for all the growing failures of Australia’s health system, to adapt Winston Churchill’s famous quote about democracy, on the international stage it remains the least bad system on offer. More egalitarian than the US system, more dynamic than the UK’s National Health Service. Any reforms are about maintaining that advantage.

Labor this week announced what it claims will be the biggest shake-up of Medicare since the system was established. It plans to maintain the universal care provisions, but substantially modify them. In an era of user-pays means-testing, it’s hard to understand this decision beyond raw politics and base ideology. Politically, Labor worries taking away subsidies for rich people seeing a GP will cause a backlash which might be exploited by the opposition. Ideologically, it has always spruiked the importance of Medicare’s universality despite Labor legislating means testing in all manner of other policy domains. So the sort of easy save ending universal healthcare could offer in favour of means-tested access is off the table.

At the heart of the reforms being proposed are plans to layer healthcare options in order to take the strain off GPs. This comes from recommendations made by the Strengthening Medicare Taskforce Labor established after taking office. Key rec­omm­endations included expand­ing team-based care as part of reforming the fee-for-service GP model.

In the past year, bulk billing rates among GPs have declined sharply. In a high inflationary environment, the government hasn’t lifted the Medicare rebate.

The Australian Medical Association has talked about “a state of crisis in general practice”, calling for the rebate to be lifted. Not unreasonable in a high inflationary environment if the government simply wants to lift bulk billing rates as a temporary fix. But Health Minister Mark Butler could hardly have been more clear when he said: “Our government is not simply going to be adding more money to the existing system.” That line spelled out quite clearly that fiscal imperatives are at the vanguard of these reforms. Despite Butler also pointing out “for the first time in the history of Medicare the average gap fee is more than the Medicare rebate”.

As a consequence of the Medicare rebate not keeping pace with the times, many GPs are understandably putting up their fees, which isn’t covered by the taxpayer, resulting in greater difficulty for people who can’t or won’t pay to visit a GP.

Some therefore choose to visit emergency centres instead, putting more strain on an important part of the health system that’s already pushed to the limit. Others simply don’t visit a doctor at all when they need to, which flies in the face of the importance of preventative healthcare as a way of curbing longer-term costs.

Among the slew of reforms on the table, Labor is looking to layer healthcare options such that Medicare can be better extended to nursing, paramedic and perhaps even pharmacy services – taking the strain off GPs.

Get such changes right and the reforms can successfully set Medicare up for the decades to come. Fiscally sustainable and fit for purpose. Get it wrong, however, and the care provided could be sub-standard even though the costs of delivering it could rise courtesy of greater access to subsidies.

This reform isn’t as new as Labor would like to make out. The Coalition in government was looking at similar reforms, but didn’t act, fearful of a community backlash. Let’s face it, if it had tried to act it would have been accused of eroding Medicare or even seeking to abolish it, which was the ­Coalition’s goal back in the 1980s. Remember Bill Shorten’s entirely false 2016 platform that Malcolm Turnbull and the Liberals would “abolish Medicare” were they re-elected? It almost delivered Labor an unlikely victory. The close result certainly put the nail in Turnbull’s leadership before his second term had even started.

Truth in political messaging continues to elude us, and, yes, it’s a bipartisan problem.

The public has far greater trust in Labor when it comes to health policy, believing their hearts are in the right place. Why would the architects of Medicare want to destroy it? But good intentions don’t guarantee good outcomes. The policy implementation has to be first rate.

Before any government can embark on such reform, we need a debate about what Australians want and expect from their government. How much tax are we prepared to pay for state-funded services we want or expect? Without that discussion, the risk of any social policy is it becomes too costly, or, conversely, too crimped by a tight-fisted fiscal approach.

The current Medicare debate is playing out in the countdown to the May budget, which the Treasurer has repeatedly assured us won’t be a big-spending one. Even if he honours that promise, it only caters to one part of the nation’s economic needs.

Fiscal conservatism is the new black post Covid, as we come to realise the difficulties future generations are going to have paying down debt as well as funding the service provision needs of the future. Reforms to structures such as Medicare are important, but reforming the tax system, which provides the funding for important Australian institutions, must come first. A tax structure that also needs to fund burgeoning fiscal burdens such as the NDIS, the wider welfare system and state education.

Government can move financial pieces around its policy board all it likes. If it doesn’t start with tax reform (coupled with federation reform), it is squibbing the hardest and most important task.

Peter van Onselen is a professor of politics and public policy at the University of Western Australia and Griffith University.