Moritorium on health tax and spend policies

We urgently need to change the conversation about health. The Intergenerational Reports have warned for more than a decade about a health financing sustainability crisis — a crisis which has now hit, given the push to raise the GST and Medicare levy to fund state health systems.

Nevertheless, state governments have spent the last decade trumpeting their ‘record’ funding for health when the real issue is not inputs but outputs. Re-focusing of the health debate around finding ways to get more hospital services for the same (or even less) public resources is overdue.

There is something immoral about creaming even more resources off the traded goods sectors – where principles of efficiency and competition  more or less apply – and pouring more taxpayer’s money into the non-traded public utilities like public hospitals, which are monopolies and don’t even have an obligation to make a return on capital and pay tax like private for-profit hospitals.

There is an endless debate about so-called ‘middle class welfare’ without focusing on real middle class welfare. Public hospital systems are forms of workforce protection that underwrite the incomes and lifestyles — and provide secure employment on favorable terms and conditions — for tens-of-thousands of public hospital employees.

According to Alan Kohler, the idea to raise the GST and ‘hypothecate’ the proceeds for health came from NSW Department of Premier and Cabinet. That agency gives the vibe of being all about achieving whole-of-government accountability and innovation — but this idea makes it look likes it’s running a fiscal protection racket for the public health system.

Over the last decade, growth in health spending has significantly outstripped growth in GDP, and spending on public hospitals has increased above GDP more than any other area of health. Lack of funding is hardly the problem.  There is little evidence of improved productivity.

Instead of raising taxes, a clear signal should be sent that the era of ever increasing spending on health is over.

The states should declare a moratorium on tax and spend policies, and commit to no real increase health funding for the next decade. This would but the onus back on health departments to lift their game, innovate and enhance productivity in order to meet demand for public health services more cost-effectively.