Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Tax freedom at last

05 April 2013

alex-philipatosThis Sunday is Tax Freedom Day! It is the day when Australians stop working for the government and begin working for themselves. It is the point in the year when the average Australian has theoretically paid off their annual debt to the government, and is able to keep the fruits of their labour henceforth to spend however they choose.

A Tax Freedom Day on 7 April means that roughly 26% of the wealth created by each working Australian throughout the entire year is sacrificed to pay for government services.

This year compares rather well against recent years. Throughout the 2000s, Tax Freedom Day has on average fallen on 19 April, which implies that Australians today are working less for the government and more for themselves.

This is a comforting statistic, but it is not the whole story.

The real impact of government largesse is not how much it taxes but how much it spends, for any shortfall in revenue creates a deficit which must be serviced in the future. Deficits mean higher taxes and less economic freedom for Australians.

We should recall that Treasurer Wayne Swan recently complained of collapsing commonwealth tax revenues since the Global Financial Crisis. What has happened in recent years is that tax revenue has declined, but spending has not declined simultaneously. Instead the government has recorded consistent deficits since the 2007-08 financial year.

If we were to calculate Tax Freedom Day according to spending, the situation would become more ominous. Government spending amounts to 34.5% of GDP, implying that Tax Freedom Day would fall on 7 May. Australians are, in fact, working over four months to pay for their government.

The trend towards greater government spending needs to be reversed. The CIS recently launched a campaign aimed at reducing the size of government. The campaign, called Target 30, provides practical and pragmatic solutions to reduce government spending to below 30% of GDP within the next ten years.

Should our ambitions be achieved, Tax Freedom Day under a balanced budget would fall on 21 April. This is an important and attainable goal that would reduce the tax burden on working Australians and ease their cost of living pressures.

Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.

Bottom up and entrepreneurial, not top down bureaucratic health reform

05 April 2013

jeremy-sammutIt is good to see that the need for productivity improvements in the health sector is starting to receive policy and media attention.

Discovering cost-effective ways to deliver health care is essential to address the financial burdens that rising health costs associated with the ageing of the population are set to place on government budgets.

Unfortunately, many are wedded to the idea that the best way to achieve efficiencies is for the government to develop ‘new models of care.’

The well-rehearsed theory – which featured heavily in the rationale for GP Super Clinics and in the report of the National Health and Hospitals Reform Commission – is that the chronically ill should be kept well and out of expensive acute hospital beds.

This can allegedly be achieved through the provision of coordinated primary care delivered by GPs, nurses, and allied health professionals, in the belief that chronic conditions can be ‘best managed in the community…to prevent complications arising’ that necessitate hospital admissions.

But as this paper details, the evidence that coordinated care has reduced use of hospitals (particularly by elderly chronic disease patients) is ‘weak at best.’

This finding was supported by a 2012 report by the United States Congressional Budget Office that examined 34 coordinated care demonstration programs run by the US Government, which found, on average, little or no effect on hospitalisation.

There are a range of reasons why even ‘promising pilot programs’ are not successfully replicated when translated into larger population-based interventions. An excellent list (drawn in part from the work of Megan McCardle) is in John Goodman’s recent book on market-based health policy.

The reason most pertinent to health reform is that coordinated care programs are examples of ‘top down’ reform. They involve health bureaucrats and central planners in charge of the funding purse strings mandating what frontline health providers do and how they do it.

This is the antithesis of the process by which efficiency is increased in the rest of the economy. In other sectors, independent providers, driven by competitive incentives and market-disciplines, discover innovative ways to deliver higher quality goods and services at lower cost, which they can market to their customers.

This begs the obvious question – how do we unleash the entrepreneurial spirit in health?

Contestability – creating real buyers and sellers of health services – is the key. Creating a contestable health system is one of the main arguments for transforming Medicare into an insurance voucher system along the lines of the Medicare Select proposal.

If all Australians were free to choose with whom they insured their health, health funds would aim to contain costs and attract members by providing access to the best quality care at the most efficient price.

The competitive pressures would encourage health entrepreneurs to enter the market and find better, more cost-effective ways to treat chronic illness in order to win service contracts from health funds.

Reforming health from the bottom up, not the top down, is the only way to achieve more efficient outcomes. The theory that assisting chronic patients to avoid having to go to hospital will only become a reality if the right market incentives are put in place in the health sector.

Jeremy Sammut is a Research Fellow at The Centre for Independent Studies.

Exposing the dysfunctional old beast of Indigenous policy

05 April 2013

sara-hudsonOver the years I have received many emails from people who have read my work. While some have been critical of what I have written, most have been supportive. I have particularly enjoyed hearing from readers with direct experiences of the places or issues I have written about, for example the Aboriginal Health Worker and Remote Area Nurse who wrote to me after reading Closing the Accountability Gap: the First Step towards Better Indigenous Health. Their support and appreciation touched me and have been some of the best rewards for my work I have received.

For most of my research papers I have been lucky to have knowledgeable people working in Indigenous affairs who have been prepared to speak candidly to me about the problems they face. Without their input many of my papers would not have been written. In fact, the impetus for some of my papers came from people I met on field trips to remote Indigenous communities.

For instance, the title of my policy monograph, Charlatan Training: How Aboriginal Health Workers Are Being Short-changed, came from a conversation I had with a Western Australian health employee. Many of the resources I used in my ‘Charlatan’ paper were provided to me by the Remote Area Nurse who had contacted me after reading my ‘Closing the Accountability Gap’ paper.

This wonderful symbiotic relationship was not something I ever imagined when I first started working at the CIS. I feel privileged to have met so many incredible people through my writing. For this reason, in particular, I am sad to be leaving the CIS. After five years as a Policy Analyst/Research Fellow I am leaving to work as a consultant. I will still be working on social policy (including Indigenous policy) but will no longer have a public profile.

Although I am leaving the CIS, the Indigenous Affairs Research Program will continue. Working in the field of ideas it is hard to know the exact impact of your work but over the course of eight years the Indigenous program at the CIS has helped influence public opinion and change the debate. It is heartening to see more people now acknowledging the devastating impact that ‘the culture of separatism’ has had on Indigenous people. While everyone should be entitled to their cultural differences, state sanctioned difference has led to lesser standards and lower expectations for Aboriginal and Torres Strait Islanders. I am grateful for the small role I have played in exposing the ‘dysfunctional old beast’ of Indigenous policy and thank all of you for your support.

Sara Hudson is a Research Fellow at the Centre for Independent Studies.