Medicare becoming a luxury we cannot afford

Medicare is becoming an anachronism.  The "free and universal"' taxpayer-funded health systems of the twentieth century were created in an age when medicine was rudimentary and inexpensive, the old died relatively young, and doctors mainly saved people from misadventure rather than the consequences of their lifestyle choices.

As the population ages over the next 40 years, Medicare will become increasingly unsustainable. The federal government's Intergenerational Reports have highlighted the burden that health care for the elderly will impose on younger generations. But this issue isn't on the election agenda. During last week's debate between health minister Tony Abbott and the Opposition's Nicola Roxon, no mention was made of the intergenerational challenges facing Medicare. Both made the standard spending promises and talked of "investing" in public hospitals and "prevention"'. Bipartisan support for Medicare prohibits real debate about its future.

In this federal election campaign, as in the last, both major parties have failed to display even a vestigial concern for intergenerational fairness. Such is the rush to buy votes. The Prime Minister's $4 billion election pitch to older voters  especially doubling the Seniors Card allowance for affluent, tax-free superannuated retirees  is only one example of promised spending which will exacerbate financial problems in years to come.

The same thing happened with health spending before the last federal election. The Opposition's bid of "Medicare Gold" - free public hospital care for all Australians aged over 75 - was gazumped by Government's counter-bid: the open-ended and un-means tested, Extended Medicare Safety Net for out-of-hospital medical expenses. Pundits gloomily predict that the increasing size of the grey vote will tempt politicians to spend increasing sums on health and other services for the elderly, despite the cost to younger taxpayers.

But this can't continue indefinitely because of the crisis Medicare faces. By the middle of the century, the number of people aged over 65 will treble. The higher volume of health care a larger elderly population requires is not the only problem. A medical revolution is underway and is set to deliver an array of sophisticated and expensive medical technologies to treat chronic diseases associated with old age  dementia, arthritis, cancer, heart disease and diabetes. The 2007 Intergenerational Report predicts a rise in Commonwealth health expenditure from 3.8 per cent to 7.3 per cent of Gross Domestic Product by the mid-2040s, which will outstrip economic growth and see a 3.5 per cent gap emerge between government spending and revenue.

In interaction with ageing, the rising cost of medical technology will exacerbate the pressure on Medicare. If governments are to sustain Medicare, the proportionately smaller base of pay-as-you-earn taxpayers of tomorrow will have to pay higher taxes than do current generations.

But in an ageing society and globalised economy, there are limits to how high taxes can rise to pay for health. Sooner or later, governments will have to slow the take up of new technology and strictly ration access to new treatments. The bottom-line is that either the tax-burden on the young will increase considerably, or not all Australians will receive subsidised access to all the state-of-the-art medicine able to improve and prolong our lives.

The underlying issue is that Medicare is a system designed to provide health care to a younger and healthier population. In the 21st century, the assumptions underpinning taxpayer-funded "free and universal medicine"' are unraveling.

An implied social contract traditionally obliged each generation to care for the elderly through the pension and health system. When few people lived long enough to enjoy extended retirements, and when medical care was relatively cheap and basic, the cost imposed on each generation was light.

Ageing and modern medicine are rewriting that contract. While the baby boomer generation is retiring on tax-free superannuation and negatively-geared property, over-taxed and debt-ridden younger taxpayers are expected to supply ageing "boomers" with health care of a far superior quality and quantity. Add in the generational wealth divide created by the housing boom, and the stage is set for real intergenerational conflict over the future of Medicare.

Demography will dictate Australia's political destiny and the new politics of ageing will not be about vote buying sprees. Future generations will have to decide where to draw the line between taxing the young and health spending for the elderly. Election-driven spending promises are only adding to their problems, and, ultimately, our children and grandchildren will curse the politicians making them.