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A lack of vision on health reform

By Jeremy Sammut - posted Monday, 12 May 2008

While the federal government won applause for the range of perspectives represented at the 2020 Summit, one perspective, shockingly absent, was the perspective of younger generations of taxpayer, who will be footing the bill in 2020 for whatever comes of the Summit proposals.

Remember - as nobody seemed to do at the Summit - that younger generations already face an enormous bill for the rising health and aged-care costs of the large baby boomer generation.

On top of this, younger generations will also have to pay for their own superannuation, plus a great deal more for their houses than did previous generations. Petrol prices have also reached a new plateau thanks to the booming Chinese and Indian economies. And at the same time, the long boom in Australia appears to be coming to end.


For the decreasing proportion of the population in the workforce by 2020 and beyond, higher taxes, slower economic growth, and higher mortgage and transport costs may be inevitable. With the economic pressures faced by “working families” high on the agenda of government, one might have hoped how to relieve the “intergenerational stresses” caused by the escalating cost of public programs would have been firmly on the Summiteers agenda.

Alas, no. Take the health panel, for instance. We know that the cost of Medicare will start to rapidly increase over the next decade as rising numbers of baby boomers reach the ages of 65 and 75 when individual health costs rapidly increase.

For this reason, the Australian Private Health Association has supported the push to introduce super-style contributions over an individual’s working life into “Health Savings Accounts”, so people “save as they go” to meet their old age health and aged care costs. Such an initiative would replicate the visionary national policy response of the early 1990s, whereby the future cost of the old age pension has been significantly reduced thanks to the introduction of the Superannuation Guarantee.

But what was the big idea in health endorsed at the Summit? Even before proceedings began, leading attendees - the usual suspects who police the health policy debate - ruled out even discussing any of the alternatives to the principle of taxpayer-funded health care. In lieu of a real debate, the panel, instead, has come up with the old “new” idea of even more government spending on “prevention”, plus a tax on fast food paid by the fat and thin alike!

Rather than engaging in ideological indulgences, a positive step would have been for the Summit to restimulate debate about what needs to be done now to address the well-known challenges facing the Medicare - ageing, the rising chronic disease burden, and the escalating cost of high-tech medical technology.

What we need is a frank national debate about what these challenges will mean for younger taxpayers. For the fact is that unless government services are cut, younger generations are going have to pay considerable higher taxes to sustain Medicare. Since they won’t want their parents and grandparents to go without, it might be presumed that taxpayers will “gripe but bear” tax rises, but younger generations will face other pressures and have competing priorities.


Since nobody likes paying more tax, it is only fair that younger generations should be informed about the way ageing and present policy settings are dictating and limiting their options - and virtually guaranteeing that they will face a higher tax future. This is to say that try as 2020 participants might to shut debate down, the demographic and intergenerational realities cast a new and pro-change light on the subject of health reform.

From the perspective of coming generations, adapting the superannuation model is a positive way of reducing reliance on taxpayers to pay for health. However, an alternative proposal is to allow overburdened younger generations to choose whether they really wish to continue to prop up a public health system in which, as in New South Wales for example, one-third of employed staff have jobs that are administrative or not directly involved in patient care.

Rather than hand over higher and higher taxes to pay for waste in public system, younger generations might prefer to voluntarily opt out of Medicare. If the taxes they pay to support the public system were returned to them, they would be able to save their own money in their Health Savings Account to fund their own day-to-day medical expenses and private health insurance costs.

I can’t speak for all of Gen X (and at all for Gen Y), but the direction of health policy is of vital importance to their futures. The issues deserve the honest and open discussion they did not receive at the Summit.

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About the Author

Jeremy Sammut is a Research Fellow at the Centre for Independent Studies. Jeremy has a PhD in history. His current research for the CIS focuses on ageing, new technology, and the sustainability of Medicare. Future research for the health programme will examine the role of preventative care in the health system and the management of public hospitals. His paper, A Streak of Hypocrisy: Reactions to the Global Financial Crisis and Generational Debt (PDF 494KB), was released by the CIS in December 2008. He is author of the report Fatally Flawed: the child protection crisis in Australia (PDF 341KB) published by the CIS in June 2009.

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