Ideas@TheCentre – The Centre for Independent Studies


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.

Follow the French: Charge patients for public hospital accommodation

23 May 2014

jeremy-sammutMy colleague Dr Jennifer Buckingham has exposed the myth about the Abbott government's first budget cutting $80 billion from health and education: federal spending in both these areas will continue to increase. Revising the unaffordable and unfunded 'Gonski' and health promises of the Gillard government cannot properly therefore be defined as a cut.

Under the terms of the health funding agreement with the states in 2011, the federal share of hospital funding was to rise by 185% – from $14 billion in 2013-14 to $40 billion in 2024-25. This would have meant that federal funding alone in ten years' time would have totalled more than the combined federal and state expenditure on public hospitals today.

Under the new arrangements announced in the budget, federal funding will still grow to $25 billion in 2024-25. Naturally, state premiers are complaining about the so-called 'missing' funding. However, the other major health announcement – the $7 GP co-payment – creates an opportunity for the states to access an untapped source of non-taxpayer funded revenue. Health Minister Peter Dutton will allow states to charge people who attend emergency departments to try to avoid the new Medicare co-payments. This is a major policy change. Since Medicare's inception in 1984, federal government funding for state health services has been conditional upon all Australians receiving treatment in public hospitals without user charges.

If the Senate passes the Medicare co-payment, 'free' treatment will no longer need to apply to outpatient public hospital services. The Abbott government should seize this opportunity to also remove the obligation not to charge for inpatient public hospital services.

This would permit state governments to levy a daily accommodation fee. The fee would not cover the cost of medical care, but rather the cost of the 'hotel services' component of a hospital stay – meals, cleaning, etc.

When a person enters hospital, they are relieved of their normal living expenses, which are transferred to the hospital. An accommodation fee is standard practice in European social democracies, such as France, for example, where the forfait hospitalier is currently €18 per day, or approximately $27.

In 2012-13, there were over 5.5 million public hospital admissions in Australia, which equated to over 18.8 million bed days. If each day patient had been charged say, a $30 daily accommodation fee, approximately $565 million would have been raised.

This revenue would have defrayed a small, but not insubstantial portion of the $23 billion state funding to public hospitals. It would also have been a more honest way of charging for hospital care than the standard practice of imposing exorbitant parking fees.

Hospital accommodation charges might help draw attention to the irrationality and unsustainability of the health system. Like GP co-payments, an accommodation fee would signal that public health services were not 'free', and might encourage more informed debate about individuals directly contributing to hospital and other health service costs.

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


Gen Y to Vilma: Age pensioners are going to be just fine

23 May 2014

matthew-taylor There has been a considerable amount of hyperbole surrounding the alleged cuts to the age pension contained in Budget 2014.

Vilma Ward, a pensioner from Norman Park in Queensland, was on Channel 10 last week castigating the PM for his fiscal belt-tightening, asking him 'Why do you pick at the pensioners?', and exclaiming '…if we pull the belt any tighter we'll choke to death.'

It is not entirely clear from the budget papers exactly how age pensioners are being picked at. None of the proposed changes happen until 2017 – after the next federal election. To call these reforms cuts would be putting it strongly. They could more accurately be described as measures to slow the growth of the age pension which has been forecast by the Commission of Audit to reach $72.3 billion in 2023-24.

The means test thresholds for the age pension will be frozen for three years from 2017-18. As incomes increase, some pensioners will find that their incomes rise above the income threshold beyond which the maximum rate of pension begins to taper. Others will find that their pension payments fade-out altogether. However, this will only occur where pensioners have significant private incomes.

There will also be changes to the way that income from assets are included in the means test. Assets are 'deemed' to earn income, regardless of what income they actually earn, and this is included in the income test. From September 2017, the government proposes to change the thresholds used in the calculation of this deemed income thereby increasing the amount deemed to have been earned. This is projected to save $32.7 million in 2017-18 – little more than rounding error on the $50 billion age pension forward estimate for that year.

The age pension is currently indexed to increases in the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index, depending on which increase is greater. If the result is less than 25% of Male Total Average Weekly Earnings (MTAWE), the pension is topped up to that amount. With MTAWE outpacing CPI in recent times the pension has increased in real terms. This reform will put age pension increases in line with growth in prices; one of the recommendations made in the Emergency Budget Repair Kit.

It is certainly true that measures such as the Medicare co-payment that go some way to aligning the cost of healthcare with those who benefit from it will impact the elderly more than the young. However, to suggest that age pensioners have been unfairly singled out in the budget is difficult to reconcile with the content of the document. 

Matthew Taylor is a research fellow at The Centre for Independent Studies.


Minor parties causing a major stir

23 May 2014

cowan-simon In the 2013 Senate election, fully one in every four votes was cast for a party outside the main three. This resulted in the election of three senators for the Palmer United Party, and senators from each of the Democratic Labour Party, Family First, the Liberal Democratic Party, the Australian Motoring Enthusiasts Party and the Australian Sports Party (who lost out in the WA recount).

While the share of the vote for minor parties has been increasing over the last forty years, there has been a significant spike since 2007. The minor parties now hold the balance of power in the Senate. It seemed like the time of the minor parties had arrived.

Yet the 2013 results appear unlikely to be repeated, as the major parties are set to change senate voting rules that either give minor parties a chance or have been exploited (depending on your point of view).

Lost in the chaos of the lead-up to the budget was the report of the joint standing committee on electoral matters that said the system was being gamed and recommended introducing optional preferential voting in the Senate both above and below the line. The response to this from the minor parties has been predictably negative.

A couple of points should be noted. First, there is marked difference in terms of support and policy awareness between minor parties (such as Family First, the Liberal Democrats or now Palmer United Party) and micro parties such as the Motoring Enthusiasts and Australian Sports Party.

David Leyonhjelm, Liberal Democratic Senator-elect for NSW, received 9.5% of the vote, while Family First's Bob Day received 3.8% of the vote. This is many multiples of first preference votes higher than Wayne Dropulich of the Sports Party (0.23%) or Ricky Muir of the Motoring Enthusiasts (0.5%).

Second, while most of the cross bench senators needed preferences to get over the line, the elected micro parties only occurred because they harvested a large number of preferences from diverse groups. It is hard to imagine that all of the 5,000 people who voted for the Bullet Train for Australia Party or the 1,800 who voted for the Bank Reform Party would have supported the goals of the Motoring Enthusiasts Party, ahead of say the Greens, who have a platform on those issues.

The challenge is how to reform the system to stop the gaming of the preferences system without eliminating the voices of the minor parties altogether or completely entrenching the power of the major parties.

The circus of the budget should not distract from the importance of the joint committee's reforms.

Simon Cowan is a Research Fellow at The Centre for Independent Studies.