Centre for Policy Development's Blog, page 125

Tim Hamilton | Costing us the house: Reforming policy for affordability

In 2007 Associate Professor of Economics and Finance at the University of Western Sydney, Steve Keen, wrote a paper for the Centre for Policy Development, Deeper in Debt: Australia's Addiction to Borrowed Money, where he warned that Australia's current borrowing trends cannot go on forever (Keen 2007).

According to the Reserve Bank:

Australians now owe financial institutions more than $1 trillion in housing mortgages, almost 15 times as much as 20 years ago.
Reserve Bank figures reveal that people paying off their own homes now owe banks and other lenders $763 billion – almost 12 times more than the $65 billion owed in January 1990 (Colebatch 2010).

Rental investors have increased their mortgage debt even more substantially:

In January 1990, landlords owed banks $10.5 billion, but by January 2010 the figure had grown to $324 billion.
Tax Office figures show 1.1 million Australians declared negatively geared property investments in 2006-07.
In the 13 years to 2006-07, landlords as a group went from declaring net profits of $399 million to net losses of $6.4 billion.
Those reporting profits grew by 36,000. Those reporting losses grew by 594,000.
Last financial year alone investors used negative gearing concessions to claim $8.6 billion in losses (Colebatch 2010).

In economic theory they speak about government spending crowding out private investment. In the housing market what we see now is investors crowding out genuine homebuyers, aided and abetted by generous taxation arrangements, with the likelihood future generations will not be able to afford their own home.

From 1995 to 2007, the Bureau of Statistics reports, home ownership among people aged 25 to 34 shrank from 52 per cent to 43 per cent.
Among people aged 35 to 44, it shrank from 73 per cent to 65 per cent.
40 per cent of lending to people buying established homes now goes to investors (Ibid).

The impact of the increase in property investment on Australia's house prices can be seen in the following chart.

As the Chart illustrates, despite flat rental growth, house prices surged from 2000 as investors piled into investment property on the back of the new tax rules that enabled them to partly socialise income losses from holding investment properties via negative gearing, whilst privatising more of the gains achieved through capital appreciation via the capital gains tax concession (Onselen 2010).

It is important to note that the new tax rules for capital gains abolished indexation which means that over one year, say, the capital gains tax is indeed halved, but over the longer term it can even be higher. At 3.0% annual inflation, over 25 years an asset with no real capital gain doubles in nominal value, wiping out the 50% reduction. From then on, the capital gains tax take is actually higher than it was under the previous regime, because it is taxing nominal gains. What this does is enhance the distortionary incentives for short-term speculation (McAuley 2009).

The Henry Tax Review addresses the issue of negative gearing and discounted capital gains and proposes a 40 per cent discount. Those declaring a loss from a rented property would receive a deduction from their tax bills 40 per cent smaller than at present. The present 50 per cent discount for capital gains would be reduced to the same 40 per cent figure. According to Henry the current system for taxing assets that yield capital gains and which allow for interest to be deductible at the full marginal tax rate encourages households to take on too much debt and risk when undertaking these investments (Australia's Future Tax System 2010).

The last government to reform negative gearing was the Hawke government in 1985 which, as a part of a broader tax reform package, quarantined losses from negative gearing by stopping them from being deducted against other income. After strong lobbying from the property industry, however, which claimed investment in rental accommodation had declined significantly and rents had risen as a result of the changes, the old rules were restored in 1987.

The claim by the property industry that the abolition of negative gearing had such a significant impact was not reflected in ABS data at the time. Rents rose in both Sydney and Perth, were flat in Melbourne and Adelaide, and fell in Brisbane. If the abolition of negative gearing caused rents to rise, rents should have risen Australia-wide since negative gearing affects all rental markets. Clearly, based on this evidence, the property industry claim about the impact of negative gearing on rents was exaggerated (Onselen 2010).

This conclusion is supported by Saul Eslake, former Chief Economist at the ANZ, using different rental data. According to Mr Eslake:

"It's true, according to Real Estate Institute data, that rents went up in Sydney and Perth. But the same data doesn't show any discernable increase in the other State capitals. I would say that, if negative gearing had been responsible for a surge in rents, then you should have observed it everywhere, not just two capitals."

The claim that negative gearing increases the supply and availability of rental accommodation has not occurred. According to Reserve Bank data the share of investment in new construction has fallen for the past 25 years, from around 60% in the mid-1980s to around 5% currently. So despite the favourable tax treatment provided to property investors in Australia, for every 20 investment homes purchased in 2010, only one is a new dwelling that has actually added to housing supply and rental availability (Ibid).

The data on new home construction by investors is even more revealing. It shows a significant increase in investor loans for existing properties from around 2000 onwards, at the same time as the reduction in capital gains tax. By contrast, loans for new construction have remained relatively flat for the past 25 years. As a comparison, the ratio of investor lending for existing dwellings to new dwellings was around 2:3 in 1985; 7:1 in 2000; and 15:1 in 2010 (Ibid).

Based on this evidence Leith van Onselen, former economist from the Australian Treasury and currently working for a leading investment bank, concludes:

"There is clearly little merit in Australia's tax concessions for property investment. Negative gearing and the capital gains tax concession do not provide any incentive to invest in new housing because they are available for both existing homes as well as new ones. And since these concessions do not increase housing supply, they also do not put downward pressure on rents.

Rather, the increase of investment in existing dwellings has merely significantly added to housing demand, reduced housing affordability, and displaced potential owner-occupiers, forcing them onto the rental market. While the cost to the taxpayer is immense, the costs to younger Australians, in particular, from reduced housing affordability and increased debt levels is even greater."

The Henry Review provides a sensible policy direction that would begin to address the impact of negative gearing and capital gains tax concessions on housing affordability. There is also Steve Keen's recommendation of abolishing negative gearing on existing houses, along with the beneficial treatment of capital gains, and allowing it only on new buildings. This would address supply side issues and discourage speculation on existing dwellings (Keen 2007). Ian McAuley from the University of Canberra believes it would be far better public policy to re-introduce indexation of capital gains without any discount which would also address the issue of speculation (McAuley 2009).

It is the politics, however, that make even moderate reforms like this difficult. If the reformist zeal and courage of Paul Keating can be reversed as it was in 1987 on the issue of negative gearing, what chance does moderate reform have in a political culture that baulks at change in the face of unfavourable media coverage and the 24 hour media cycle.

Grandfathering existing provisions so that pre-existing investment property owners are not disadvantaged would make the political sell easier, or in the case of capital gains, the case could be argued of the advantages of indexation over the 50 per cent discount. Negative gearing's cost to the Government and impact on house prices would be greatly reduced if, from a certain date in the future, it was retained on newly constructed dwellings but abolished where an investor purchases an existing dwelling. Tax deductible interest would over time begin to fulfil its economic purpose of encouraging investment in new housing supply. Such an approach would most likely be supported by the home building and property development industry because it promotes higher building levels. Moreover, the increased housing supply would be likely to increase the availability of rental properties and lower rents (Onselen 2010).

No government wants to preside over a fall in house prices. But if we consider a recent measure by The Economist of Australia's housing market, which indicates it is overvalued by about 56%, reforms to tax concessions on housing would actually address the issue of an inflated real estate market. More importantly, however, if governments are serious about addressing housing affordability it's not just about running a tight budgetary policy in order to influence monetary policy decisions. It's about taxation reform that will facilitate better access to affordable housing for first homebuyers and owner-occupiers.

Short-termism in policy has dominated the political landscape over the last decade as successive Australian Governments seek to indulge segments of the electorate and vested interests rather than provide visionary policies that may be difficult politically, but are necessary to promote sustainability. Generous taxation policies in housing are an example of unsustainable policy and have created an inequitable market whereby genuine aspiration for home ownership is dashed on the rocks of exorbitant house prices.

References:

Keen S, 'Deeper in Debt: Australia's Addiction to Borrowed Money', Centre for Policy Development, September 2007.
Colebatch T, 'In the red, mortgage burden soars to $1 trillion', The Age, February 2010.
Colebatch T, 'Housing at these prices will leave us all a heavy debt to bear', The Age, March 2010.
Van Onselen L, 'Negative Gearing Exposed', The Unconventional Economist, May 2010.
McAuley I, 'The case for restoring capital gains tax neutrality', University of Canberra, 2009
Australian Government, 'Australia's future tax system: Report to the Treasurer', The Treasury, December 2009.
Finance and Economics, 'Hong Kong phew-whee', The Economist, March 2011

 

Ian McAuley | Is Barry A Big Spender?

After the landslide, NSW voters expect to see earthworks from Barry O'Farrell very soon. How will Barry spend up big to fix the state's infrastructure? He'll need to go cap in hand to the Commonwealth, writes Ian McAuley.

Read Ian's quick & sharp analysis in the aftermath of the NSW state election in New Matilda here.

Ben Eltham| He's a Can-Do Guy, But Can He Do It?

The move from local to state politics will test the Brisbane Lord Mayor's mettle. He has a real chance of winning – but if he doesn't, he'll take the Liberal-National Party down with him.

Read Ben's article on whether Campbell Newman can unite the LNP and take on a resurgent Premier in Anna Bligh in New Matilda here

James Arvanitakis & Spike Boydell|Is Crown Land Indigenous Land?

What happens to Crown land if we ditch the monarchy? Spike Boydell and James Arvanitakis think Prince William's visit provides a good opportunity to rethink republicanism in the context of reconciliation.

Read James' and Spike's thoughtful piece on what an Australian Republic should look like in New Matilda here

Ben Eltham| Our Asylum Seeker Policy is Brutal

Australia's leaders continue to make political hay from the suffering of asylum seekers. Our system of mandatory detention is morally bankrupt, and must be abandoned, writes Ben Eltham

Read Ben's scathing critique of Australia's treatment of asylum seekers in the wake of rioting in Christmas Island Detention Centre in New Matilda here

Innovation Conference 14 April | Laura Eadie presents

Innovation – driving resilient energy and economic futures

14 April 2011 | The Australian National University, Canberra

A conference presented by Australia 21.

How can innovation and economic reform assist in developing the new energy sources required to reduce the impact of climate change? Intergenerational equity needs to be considered when developing enduring climate change solutions.

This conference will deal with these issues and aims to offer many benefits for those operating in varied policy, planning and management contexts in energy, environment, planning, economics, communities and more.

This conference will contribute to the debates on the practical application of innovation to the shifts required by industry, government, and the community in addressing climate change.

CPD's Sustainable Economy Research Director, Laura Eadie will join prominent and insightful presenters such as Prof Will Steffen, Dr John Hewson, Anna Skarbek Dr David Martin to explore the themes of Australia's innovation performance, creating new energy markets, climate prosperity and intergenerational equity.

Laura Eadie is presenting on  'Policy and Market Incentives & Impediments to innovation and commercialisation in energy businesses'.

Read more about the conference here and register here.

John Mendaue's searing critique of rural health

CPD's John Menadue was recently invited to speak at the 11th National Rural Health Conference, held in Perth in March 2011.

One in three Australian live in rural and remote Australia but they are often overlooked by a public health sector that is geared towards servicing city dwellers and securing hospital resources. Critical areas such as rural health, Indigenous health and mental health are squeezed out of the equation.

In his paper Beating the hospital obsession; the key to rural health reform is in primary care, John outlines the minority Labor Government's proposed reforms and actions thus far, and how concentrating on an integrated approach to primary care and the upskilling doctors and nurses will be key to driving real change.

Here's a summary of what John had to say…

- Power is the single biggest problem in the health sector, which is driven by providers and stakeholders who direct health resources to areas of self-interest

- Thanks to the rural independent MPs who hold the balance of power, Australia has a 'once in a lifetime' opportunity to effect significant rural health reforms

- We need to stamp out inefficiencies in our health system. The CPD estimates that $10 billion or 10% of our total health expenditure is wasted due to inefficiencies.

- Move away from hospitals to instead encourage primary care and the provision of integrated care. This means upskilling doctors and more nurse practioner-led clinics. There are more doctors per capita in Australia compared to New Zealand, the US and the UK, so the next challenge is to improve General Practice and make it more appealing as a long-time profession

- Improving health outside of the health portfolio. Social factors such as poverty, prevalence of junk food and alcohol in our culture, education and childcare all impact on health. The NBN also offers opportunities in improve health services, particularly in remote areas, in terms of facilitating online payments and the transfer of data-rich information in real-time high-definition videos and images.

READ the summary transcript of John Menadue's presentation here.

WATCH the video presentation John Menadue delivered at the conference here.

IN THE NEWS: John Menadues' comments get picked by Melissa Sweet in Crikey here and here.

John Menadue | Presentation at 11th National Rural Health Conference

CPD's John Menadue was recently invited to speak at the 11th National Rural Health Conference, held in Perth in March 2011.

Here is an edited version of John Menadue's speaking notes:

There are systemic problems in our health sector – a lack of guiding values and principles, governance confusion, exclusion of the community from health decisions, rapidly rising costs and the obsession with hospitals. We are bedevilled by powerful special interests.

But what are the particular issues which advocates of rural health reform should promote?

First, the driver of rural health reform must be primary healthcare with particular attention to the Medicare Locals and the roll out of the GP super clinics. The MBS schedule should be amended and contracts written with corporate and non-corporate general practices to promote integrated care.

Second, there are many health determinants and services outside the health portfolio that are vital – NBN, prevention and transport. Paper records are problematic enough in the cities. They slow down information transfers even more severely in the bush.

Third, unless there is an informed and open discussion about how the health dollar is spent, the media-savvy and the special interests in the city will squeeze out the major health priority needs in this country – rural health, Indigenous health and mental health.

Fourth, we need an upgrading and re-skilling of tens of thousands of people in the health sector who could help fill the gaps in the delivery of health services for country people. Particular attention must be given to expanding the roles of nurse practitioners, other allied health, pharmacists and ambulance officers. We don't so much need more doctors; we need an up-skilling of tens of thousands of other clinicians. We need also to make sure we make best use of the skills they already have.

Disappointment of health reform

I was sceptical about the claims of Kevin Rudd last June that the health reforms were 'the greatest since Medicare'.  I have seen little since then, including the Commonwealth Government announcement in association with the premiers last month that would change my mind. It is more muddling through.

What a disappointment it has been since the federal government came to power in 2007 with what I hoped were well considered strategies for healthcare reform and the means to implement them.

But before I become too pessimistic, let me acknowledge some incremental improvements that have been announced in recent months. They will be valuable – activity-based hospital funding, some local governance of hospital networks, primary healthcare organizations to aid primary healthcare integration and broader health service planning, including I expect, full Commonwealth responsibility for aged care.

At last there is some progress on e-health, although only this week the Victorian Government and the Liberal Opposition in NSW expressed reservations about the new systems being introduced in those states. There is clearly more money, but I believe that we are not getting value for the money we already spend. A survey of Canadians over 45, who were experienced healthcare users, showed that 58% did not believe that healthcare would improve if the government spent more money in health. I believe the same is true in Australia. We should be spending existing money much more effectively. We waste about $10 b pa or 10% of our total health expenditure.

Major problems and omissions remain

It is not at all clear that the government has any clear values and principles which guide its health policies, e.g. universality, equity, efficiency – both technical and allocative – subsidiarity and single-funder. Without such guiding principles health policy will continue to be subject to managerial fads, responses to hot-button issues and the placating of noisy and selfish special interests.


Governance problems between the Commonwealth and the States remain.  A 60/40, 40/60 or a 50/50 split doesn't make any difference to divided responsibility. It seems that the Australian public are better prepared for reform than the Government with a strong majority in most states favouring a Commonwealth takeover of state hospitals. In addition to the unresolved Commonwealth/state issue, I have also come to the view that the traditional minister/departmental model in health is no longer viable given the size of the health sector, its complexity, its inertia and the power of vested interests. (Professor Garnaut refers to these interests in carbon pollution and mining as 'diabolical'. They are more subtle, but just as diabolical in health.) For these reasons I have proposed a statutory Commonwealth Health Commission composed of professional and independent people, but subject to government guidelines to administer health programs in Australia. This would be similar to the way the Australian Reserve Bank acts in the monetary policy field. The health sector has broadly agreed for a decade about the general shape of necessary reform, but it has not happened because of the political power of health lobbyists to preserve corporate welfare, high prices and work practices, particularly by specialists who exploit their market power.


The community is still largely excluded from health discussions and decisions. The Prime Minister and the Minister deal overwhelmingly with special interests and ignore the community except for some token photo opportunities, mainly in hospitals.


Costs are continuing to rise at 5% real per annum. It is not, as often suggested, that it is ageing that is driving up healthcare costs. We all see our doctor or specialist far too much, across all age groups. In 1984/85, Medicare services per person per annum were 7.1 services.  By 2007/08 it had increased to 13.1 services and this increase was across all age groups. This is a doubling over 13 years of the number of times we see our doctor. The cosy deal between the government and the Australian Pharmacy Guild, results in Australian taxpayers and consumers paying $300 m more each year for statins compared with England and Canada. This is only for statin drugs which represent only about 16% of the costs of the PBS. We can't afford these exploitive high prices.


Fee for service is quite inappropriate for chronic care. It has perverse incentives. It encourages doctor shops and 'turnstile' medicine. It discourages integrated care. Present payment methods are underwriting the rapid growth of corporatisation of general practice in Australia, up to 30% in some metropolitan areas.


The health workforce is still mired in 19th Century work practices.


70% of health expenditure in Australia is for treating chronic disease – heart, cancer, neurological, mental and diabetes. But the public campaign, particularly in the media, focuses on waiting lists and emergency departments in hospitals.


Dental health is still a Cinderella as is mental health, although we may hear more about the latter in the near future.


But probably the most serious problem is the continuing obsession with hospitals, an obsession shared, I must say, by the media, many health professionals and the community. According to OECD data, we have for example more acute beds per 1000 of population than in the UK, Canada or Sweden. But the continual drum-beat in Australia is for more hospital beds to accommodate particular medical fashions. In the last decade caesarean sections have increased by about 50% and joint replacement by almost 70%.  We all know that about 10% of people in hospitals would not be there if there were proper alternatives available, and that it costs about ten times as much to treat a patient in hospital compared with treatment in the community. The Productivity Commission in 2008 said that 450,000 admissions to public hospitals could have been avoided if there was better community care in the three-week period before hospital admission.

Private health insurance and country people

A particular issue which should concern country people is the inequity and inefficiency of the $5 billion p.a. government subsidy to high cost private health insurance companies. Put simply, this corporate welfare enables relatively wealthy people in the cities to jump the queue for elective surgery in private hospitals and it deprives public hospitals of resources.  Recent data from the Australian Institute of Health and Welfare (Australian Health Expenditures by Remoteness, January 2011, page 41) shows how this subsidy short-changes country people because of the few private hospitals in country areas.

In 2006/2007, the latest year for which these figures are available, the expenditure per person in private hospitals in the country compared with major cities was 16% lower in 'inner regional'; 34% lower in 'outer regional'; 48% lower in 'remote' and 60% lower in 'very remote'. By contrast, public hospitals served the country community much better. Compared with expenditure in public hospitals per person in major cities, public expenditure in public hospitals in 'inner regional' hospitals was 10% higher, 28% higher in 'outer regional'; 68% higher in 'remote' and 250% higher in 'very remote'.

Country people are being duded by the $5 b p.a. subsidy. Yet National Party MPs allow themselves to be led by the nose by the Liberals. Because there are so few country private hospitals, the $5 b p.a. subsidy inevitably operates to the disadvantage of country people. The transfer of this $5 b subsidy to rural health, mental health and indigenous health would have dramatic benefits. That would be $50 b over ten years. The new hospital package that Julia Gillard announced last month is only $16 b over ten years.

Winning the case for country health reform

On almost any measure, country people have worse health outcomes than city people. Mainly due to lack of early detection, cancer sufferers outside capital cities are 35% more likely to die within five years. Country sufferers of heart disease are more likely to die early. The story is similar across the board – stroke, birth defects and mental disorders.

Four major issues on which country health reform should focus

First, primary care. The inequity in healthcare in Australia, rural, mental and indigenous, will only be effectively addressed through primary care, not hospitals. The dignity, autonomy and good health of all citizens are best served by delivering health services in the home or as locally as possible. It is the principle of subsidiarity.

Second, health improvements are just as likely to be advanced outside the health portfolio, eg broadband.

Third, winning the debate for priority-setting and allocation of health dollars depends on an informed community. Unless this is done, the well-organised and worried-well in the cities will continue to skew resources in their favour. Unless country people can win the debate, they will continue to be unfairly serviced in health.

Fourth, workforce reform.

Primary Care

In the hospital sector, it is hard to teach old dogs new tricks. Ministers, officials and professionals with their century-old ways of doing things, are hard to change. They think institutions and providers rather than people, and the almost sacredness of existing work practices. Primary care offers the best prospect of services for country people, integrated care, the curtailment of chronic disease, reduced service fragmentation and increased efficiency, particularly through new work practices. As Jennifer Doggett has set out in 'A new approach to primary care…' (CPD, June 2007), primary care provides

A greater focus on prevention
Faster medical action
Consolidated service delivery
A seamless one-step approach
Consolidated history with test results
Better access for all.

As Jennifer Doggett summarises it, 'Primary care reform is the single most important strategy for improving our health and making the health system sustainable. Community level prevention and primary care is essential to restoring universality and efficiency in Australian healthcare'. Health decisions and health services must be made at the most local level possible – the principle of subsidiarity.

In the long and recent statements arising from the government's obsession with hospitals, there has been included, almost as a footnote, that 'the Commonwealth will have full funding and policy responsibility for general practice and primary care … including community health centres … and aged care'. Those few lines if properly and fully implemented could really reform and transform healthcare in Australia. That reform won't come through hospitals.

How Medicare Locals develop will be an important key. The first thing that government should do is change their name to make it clear that these entities will not be delivering care. This is not just a cosmetic issue. They must be seen to be, and in fact become, regional planners and co-ordinators with adequate funds based on population and socioeconomic needs and for the purchasing of some services. They must be proactive in prevention. They must develop so that they can influence all hospital and non-hospital services in their region. These newly named entities must have resources and government support to drive regional planning and the delivery of services by others, e.g. early childhood, schools, welfare, housing and transport both for patients and families. Dialysis is a major problem. These new entities must be judged by their health outcomes and not their health inputs. They must get away from the medical model based on sickness that determines so much of what we do in health.  If they in fact become a new name for the Divisions of General Practice, they will fail. I suggest that the rural health alliance should be focusing its activities on the development of these new entities, mistakenly called 'Medicare locals'.

We also need to improve General Practice.  I spoke earlier about fee-for-service dramatically putting up costs and discouraging integrated care. The government should consider two possible changes. The first is that the MBS schedule be amended to permit private practices to remunerate a supervising general practitioner in their practices. That supervising GP would be remunerated for over-sighting the treatment and referral of patients and their records. The second is that the government should offer to negotiate contracts with practices, both corporate and non-corporate, that will commit to the delivery of integrated care. I expect that the government would be agreeably surprised at the number of GP practices that would respond because of their concern about the 'turnstile' nature of a lot of general practice in Australia today.

What of the GP super clinics that the Commonwealth is rolling out? Including this year the Government will be spending $650 m over two years on 64 clinics. It is not yet clear that these clinics are on the right track. I hope we don't have another insulation mess.

I can't see that the roll out of these clinics is part of a universal program.  Only six of the planned 64 are operating. Why call them 'super'? I should have thought they should be ordinary and common-place. They do appear to be part of a marginal-seat strategy rather than a health strategy.
'GP' suggests that it is doctor-centric, when the emphasis should be on multi-disciplinary teams with enrolled patients/families. Often the need is not even for a clinician, particularly for people who face lifestyle and social problems. Often a case-manager is necessary to access other agencies, e.g. education, housing and justice.
Are the clinics the right size to enable the team to be made up of a wide range of health professionals, or will they be GP clinics with a few and limited professional add-ons?
Emphasis seems to be on bricks and mortar and co-location, rather than the provision of integrated care. Accommodation under one roof does not necessarily lead to integration.
How can the MBS be amended to promote more team treatment and payments to all professionals in the clinic?
Two vitally interested organisations, the Australian Nurses' Federation and the Australian Practice Nurses' Association have heard very little about the program.
The Australian Pharmacy Guild has refused to allow professional pharmacists to join the clinics unless they do so as shop-keepers. That clearly tells me that the APG is more concerned about shop-keeping than the professionalism of its members.
There is a 'deafening' silence about the superclinics and how they are performing. The fact that the AMA is saying little, suggests to me that the program is not going well.

Improving health outside the health portfolio

The mis-named Medicare Locals must also drive improved health services outside the health portfolio.

Ministers for Health in Australia are seen very largely as ministers in charge of health services rather than health. The fact is that some major issues causing poor health or which could be the means to improve health are outside the normal health portfolio.

Medicare has become a payments vehicle, and an efficient one, rather than a health insurance commission as its name suggests was intended. How can we have integrated health funding, even at the Commonwealth level, when the Minister for Human Services, not the Minister for Health, has administrative responsibility for Medicare.
The major health problems caused by junk food, alcohol and tobacco are best addressed through taxation and restrictions on advertising, particularly for children. (Health improvement is made very difficult when the major sponsors of sport in Australia are interests associated with alcohol and junk food. They are complicit in promoting bad health habits and undo a lot of the good work on prevention. How can our sporting codes discipline players for excessive alcohol consumption, when the main sponsors of the codes are liquor companies?)
We know that because of social and economic disadvantage, the death rate for those with the lowest socio-economic status is 13% higher than the Australian average, and for those living outside capital cities it is 8%. Poverty is the principal cause of poor health in Australia.
Education, childcare, including pre-natal, spacial planning, housing, trade (particularly relating to intellectual property in pharmaceuticals), population, transport, taxation and social security, employment, justice and the environment, all have direct impacts on the health of Australians.
We are coming to appreciate how electronic health and the national broadband network offer great opportunities for improved health services, particularly for people in remote areas. They offer a new model of care particularly for remote and chronically ill patients. It will hopefully be possible to bill Medicare for online treatments. But the NBN is not within the health portfolio. NBN can transmit data-rich information such as scans and close-up real-time high definition videos, say, of a burn or a cancerous skin mark.

In short, the health Minister and her department must have expertise beyond 'health services' and particularly economic expertise in a joined-up government approach.

As Ian McAuley has put it:

One problem … is a reluctance by policy makers to look on healthcare as an industry and to apply the normal evaluative mechanisms which are applied to other industries. Such a blinkered view allows the development of an idea that health should be exempt from the normal economic considerations of efficiency and equity. It's a notion that pushes economic thinking to one side, in the erroneous belief that economics is intrinsically illiberal and dismissive of human welfare. For a country reviewing its healthcare industry, it is useful to take a broad view and consider the whole industry. Only in such a way is there likely to be policy coherence and resulting economic and equity benefits of integration of programs into one system, underpinned by principles which align with the community's values and priorities.

Setting health priorities

Unless there is an informed community debate, rural health will continue to be squeezed out by organised city-centric interests. You just do not have the lobbying power of the AMA, private health insurance funds, the Australian Pharmacy Guild and hospital interests. But you do have Independents who hold the balance of power in the House of Representatives. The case must be won that choices have to be made and priorities set. It will be a red-letter day in Australia when we have a prime minister, premier or health minister who will publicly say that we can't have all we want in health. We need to shift the debate away from hot-button issues of more beds, and emergency departments, to the longer-term issues of priorities in spending the health dollar. I happen to think that the major priority areas of need in Australian health are rural health, mental health and Indigenous health. But that is not reflected in informed community debate. The squeaky city wheels get the oil.

Healthcare is rationed on a vast scale. But it is done behind closed doors to the benefit of the powerful and the media savvy. Canberra has 34 full-time lobbyists for every Cabinet minister. They are very influential in determining priorities in government health spending.

Unless the debate is continuously conducted about limited resources and choices, we will always be applying bandaids rather than ensuring genuine long-term reform. The urgent will be addressed rather than the important. In speaking about community engagement – I am not speaking about opinion polling, marketing and focus groups. If that is all we do, we will only get a snap shot at a particular time on community attitudes formed by the West Australian, talk-back radio or hospital vested interests.

We must move beyond this superficial debate of community attitudes. The object must be to educate and inform the community about new ways of doing things. It is about being truthful with the community about what is possible. There are a whole range of ways of doing this where the methodology has been validated – citizens' juries, town hall meetings and deliberative polling. Country health in Western Australia has had some success. Professor Gavin Mooney will be talking further on this subject. My experience is that when the community is informed and engaged in structured discussions it comes to good decisions about the choices that need to be made and the priorities set. This makes it easier for ministers to make hard decisions when they confront the special interests. This would greatly benefit country people and country patients.

Julia Gillard was derided in the last election campaign for her proposed citizens' assembly on climate change. But it has the germ of an idea for an informed public discussion and informed government decisions on health spending priorities at every level in Australia – national, state and particularly, local.

Workforce

There is certainly more money in the COAG package for workforce training, although it is largely to do the same things, the same way that we have done for decades. A break-through has been made in nurse-practitioner prescribing and accessing MBS ($59.7 m over four years), and $18.7 m over four years in the budget for the evaluation of the role of nurse practitioners in aged care. Hopefully, we will see many nurse practitioner led clinics being established.  In Canberra, such a clinic, established in mid-2010 had 10,000 patients in the first nine months. Other clinics are operating out of pharmacies. There is also $390 m in the budget over four years to assist in the employment of practice nurses. But there are vast areas where we need to restructure work practices. We have tens of thousands of health professionals whose skills are under utilised or undeveloped – nurses, allied health, pharmacists and ambulance officers. We need clinical assistance at almost every clinical level, e.g. a physician assistant. We don't have so much a shortage of doctors as a misallocation. In 2007 we had 1.5 GPs per 1,000 of population. In other countries it was much lower, NZ 0.8, Canada 1.0, USA 1.0 and UK 0.7. (AIHW, Australian Health, 2010, p.461) We have problems because doctors refuse to share territory with other clinicians, in the name of 'safety'- a notion that ignores the danger of people finding it difficult to access any services. Auctioning provider numbers by postcode may not be politically do-able, as I suggested at your Albury conference, even though 80% of doctors' incomes come from the Commonwealth Government. Perhaps we could start by capping the number of new provider numbers in areas already in over-supply.

About 10% of normal births in Australia are managed by midwives. In NZ it is over 90%. We have about 400 nurse practitioners when we should have thousands. The medical colleges have disproportionate influence in controlling access to the professions.  Medical training is strongly focused on acute care in hospitals, whereas most of the work of future doctors will be with chronically ill patients in the community. Few are trained to work in team practices and certainly not in country areas. Primary care is not seen as an attractive option for young doctors. Only 13% of final year students have any interest in working in primary care, and only 13% would consider working in rural areas. General practice must be made more attractive and better paid, but not via fee-for-service.

Health is the largest part of the Australian workforce (825,000 in 2008). It is the fastest growing – 23% growth in five years. We are regularly told that we need to improve the productivity of the Australian workforce. Every cocky in every aviary is cackling on about it, but the largest part of the Australian workforce is not mentioned. We have seen the dramatic benefits in productivity improvements through workforce reform on the waterfront. But those gains are small beer compared with the potential gains with health workforce reform, leveraged by such means as wider access to MBS and making all Commonwealth health funding conditional on substantial workforce reform.

It's time to take on the vested interests

Professor Robyn McDermott referred to the "enormity, complexity and inertia" of the health system, as outlined by Menadue, and said Australia is facing a worsening misallocation of health care resources, and that this is being driven by vested interests, particularly pharma companies, and is leading to a "dumbing down of medicine".

She argued that too many resources go to futile end-of-life care, and described the over-treatment of the elderly, and the problems caused by polypharmacy. We're prescribing too many pills to old people for conditions that would be much better served by other treatments, she said.

While health dollars flow into medical treatments whose value is often over-stated, far fewer dollars go to community-based and non-medical interventions with the potential to have a far greater impact upon population health, particularly in preventing and controlling obesity, she added. The whole system is biased in favour of expensive pharmaceutical and medical interventions rather than population health. "We're investing in all the wrong areas," she said.

McDermott noted that many of big-ticket drugs are being prescribed for conditions related to obesity. We're medicalising a problem we can much more effectively deal with by legislation, regulation and community activity, she said.

McDermott also called for reform of funding models to reward quality and continuity of care with some accountablility for outcomes, rather than the billable six minutes.

She made a rousing call to arms for public health advocates; it is time for them to stand up and challenge the statements made by vested interests in public debates about health.

"We need to call things for what they are," she said. When the AMA, Pharmacy Guild and others came out with "motherhood statements", dressing up self interest in concern for community good and patient care, there needs to be a "much more open and sophisticated calling of those people who make those kinds of statements".

Otherwise, politicians would continue to be caught in the spotlight as a result of "those simplistic and often quite stupid statements", she said.

McDermott said that when she went to SA in 2004, it was said that by 2043, the whole state budget would be spent on health care. This had since been revised back to 2023.

Ben Eltham | The copyright lobby's loose facts

"opaque, unverifiable and unreliable", Ben Eltham finds a recently released report concerning the economic impacts of internet piracy on media industries is somewhat dubious in it's facts and methods.

The obsecurity of this report highlights the need for journalists to check the facts.

Read Ben's article in Crikey here

Some Searing critique of the health system from John Menadue | Melissa Sweet

CPD founder, John Menadue gives a very critical perspective on the realities of the health system for Australians in rural areas. An emphasis on primary care is vital, he maintains, as it is the most effective form of treatment for the vast majority of the population. John also highlights the inadequacies of the current health workforce which is still stuck in 19th century practices.

In order to address the "systemic problems in our health sector" we must spend existing money far more effectively instead of wasting a massive 10% of our total health expenditure.

"We are bedevilled by powerful special interests", John stated at the recent Rural Health Conference and notes that a lack of guiding principles in health policy is allowing special interest groups and lobbyists to shift public discourse and funding away from the country where it is most sorely needed.

Read John Menadue's solution to the problem in Crikey here