Baird’s higher GST plea won’t improve health system

NSW Premier Mike Baird’s plea for a higher GST is a sugar hit, which is unlikely to improve our mostly unreformed and fragmented health system.

That is because free hospitals and fee-for-service rewards busy systems but not effective ones. We have private health where the faster one works the richer one gets, next to public hospitals where the faster they work the quicker they go broke. There is no guarantee that extra GST would make any difference to health outcomes because our services are blind to performance and value. Clever economies worldwide are shifting risk onto insurers and providers, who can make the tough calls where governments can’t.

We have just been through the Rudd years of fiscal expansion. Few could argue there is much to show for it. Overtaxing and spending arrogantly presumes current problems trump future challenges. Now states are discovering the obvious; switching off spending is exquisitely painful and leads to being voted out.

As John Howard has alluded: going into debt is like taking an elevator down. Paying off debt is like climbing back up the stairs.

Of course Howard’s restraint wasn’t congenital. As Malcolm Fraser’s treasurer he presided over deficits and accumulating debt. Only by defeating Keating and promising better did the Coalition mantra of budget responsibility germinate. A legitimate part of that balance is increased revenues but only as a last resort.

State premiers naturally turn to a federal tax because it is an easier sell. But Mike Baird’s 15 per cent GST proposal simply rewards reform procrastination, particularly in the other states which lag behind New South Wales’ which proudly delivers the lowest costs per hospital admission.

The reality is that Australia is a laggard on health restraint. Last decade we were 24th out of 34 developed economies for managing health costs. Among responsible economies with high-quality health systems, we came last. Only the Eastern European economies, Turkey and Chile contained health spending more poorly. Our performance tied us with Greece.

Take Netherlands, topping the euro Health Cons umer Index. They got there not by spending more money, but with sensible reforms like mandatory health insurance and patient choice. Private insurers, not the government, carry the risks of overspend. Since 2000, Dutch health expenditure increased less than 1 per cent a year compared to Australia at 1.7 per cent. Under Julia Gillard, Australia increased to 2.2 per cent in 2011 while the Netherlands bent the cost curve back to an astounding 0.4 per cent that year.

In 2011, Japan shrunk their health expenditure despite facing the ageing avalanche. Belgium, Denmark, Switzerland, Ireland and the UK all grew more slowly than us. If these nations can, clearly Australia must also.

The big costs are biomedical innovation, hitting the states harder than the Commonwealth, which predominantly funds services. During the last 10 years, state expenditure grew 78 per cent, twice the speed of Commonwealth spending at 37 per cent.

The most significant practical federal reform has been in pharmaceutical funding. In 2006, I exposed Australia’s pharmaceutical suicide gene, which insists on paying top dollar for off-patent drugs, leading to consecutive price disclosure policies on both sides of politics to ratchet down unwarrantedly high drug costs.

What Australians expect and deserve, as Baird says, will always exceed what we can afford. That’s the same for every developed economy. Right now Australia is short on health and hospital reform, not short on revenue. That is why premiers should resist tax hikes; particularly where temporary improvements to budget health will have little impact on population health.