How Will The 2014 Budget Impact Healthcare?

A recurring theme of the 2014 Federal Budget has been to cut red tape to facilitate access to services while also reducing expenditure.

Pharmaceutical Benefits Scheme

The Productivity Commission recently estimated that, without changes to Government policy, health spending would increase from the current 4.1% of GDP, to above 7% over time; 11% of the increase which would relate to Pharmaceutical Benefits.

The Government can, however, claim success in controlling pharmaceutical costs, demonstrated in forecast savings from Pharmaceutical Benefits Scheme (PBS) reform of $10b over the next four years from a total PBS expenditure of $39b.

Further savings of $1.3b is expected from transferring PBS costs to patients through co-payment and Safety Net threshold increases between 2015 and 2019. Co-payment increases of $5.00 (from $37.70 to $42.70) for general patients and $0.80 (from $6.10 to $6.90) for concessional patients are on top of annual consumer price indexation increases. The Safety Net threshold will increase for general patients by 10% each year, from $1,452.50 to $2,287.90, and concessional patients will increase by two prescriptions each year, from the current threshold of 60 prescriptions to 68 prescriptions in 2018.

The impact of the combined increase in patient co-payments for medicines and to consult medical practitioners will mean that healthcare workers should monitor patient attendance and compliance carefully, to ensure that care is provided when needed rather than becoming an emergency hospital admission.

In fact, despite our ageing demographic and increasing standard of healthcare, Government PBS expenditure for general community medicines is expected to decrease in real terms over the next four years, while Highly Specialised Drugs and other drugs dispensed from hospitals, the Life Saving Drugs Programme, and the Herceptin Programme are to increase by 11.4%.

Many hospitals will also be pleased to see the “trial” for paperless claims at last concluding, with national implementation to be completed over the next five years, some 25 years after its successful initiation at HPS Pharmacies’ Knox pharmacy. This incentive will both reduce red tape, and improve safety by minimising the risk of transcription errors.

Rural, Regional and Remote Areas

Delivery of healthcare in rural, regional and remote areas is to be incentivised through:

• $238m to encourage direct teaching of medical students in general practices
• $52.5m in grants for general practices to add consulting rooms and spaces for teaching and training
• $35.4m to encourage medical practitioners to work in underserviced areas
• $23m to support the sustainability of community pharmacies
• $13.4m for 500 nursing and allied health scholarships in underserviced areas
• Consolidation of the Northern Territory Medical Programme with the Indigenous Transition Pathway and the Northern Territory Remote Clinical School Initiative
• $6m for the Royal Flying Doctor Service

Medical Research Future Fund

Additionally, the Government has made a significant commitment to better managing healthcare needs, by creating the Medical Research Future Fund (MRFF), billed as the largest investment of this sort in the world. The $20b in funds to be generated over 10 years will be initiated from the current $1b allocated to the National Health and Medical Research Council, and will grow to $2b annually over 10 years, through:

• $3.5b from reducing Medicare Benefits Schedule (MBS) rebates
• $1.8b from public hospitals
• $1.7b from pausing the indexation of MBS fees and income thresholds for the Medicare Levy Surcharge and Private Health Insurance Rebate
• $1.3b by increasing PBS co payments and Safety Net thresholds
• $390m by deferring the commencement of dental health reform
• $368m by ceasing the National Partnership Agreement on Preventive Health
• $276m in net earnings from the MRFF
• $267m from simplifying Medicare Safety Net arrangements
• $201m by ceasing rewards to States and Territories under the National Partnership Agreement on Improving Public Hospital Services
• $200m commitment to dementia related research
• $197m from ceasing selected Health portfolio Flexible Funds
• $115m from consolidating General Practice Education and Training Ltd into the Department of Health, and ceasing the Prevocational General Practice Placements Scheme
• $89.6m by reducing the MBS rebate for all optometry services
• $53.8m by deferring the establishment of 13 Partners in Recovery mental health organisations for two years
• $9.9m commitment to develop streamlined national clinical research trials administration procedures
• $6.4m from abolishing the Australian National Preventive Health Agency
• $0.4m from administrative efficiencies in the Northern Territory
• $0.2m from the Stoma Appliance Scheme

The Government anticipates that by reducing expenditure within these key areas of healthcare (Pharmaceutical Benefits Scheme, Regional, Rural and Remote areas, and the Medical Research Future Fund), that it will facilitate access to services to better meet the future needs of all Australians.

For further information on the 2014 Federal Budget, visit www.budget.gov.au.