The Iron Law of Medicare

The Abbott Government has finally ditched the $5 GP co-payment. This comes in the same week that the latest Intergenerational Report has once again warned about the budgetary consequences of the rising cost of Medicare.  

Regardless of the pressures health expenditure will place on federal finances in an ageing Australia, the Prime Minister has said that the plan to introduce a modest amount of cost-sharing for GP services is 'dead, buried and cremated.'  
 
Advocates of a 'free and universal' health system will undoubtedly rejoice. But inconsistencies across the health system persist, including the co-payments for the Pharmaceutical Benefits Scheme, especially the $6.90 per script paid by concession card holders. Also contradictory is Medicare Levy Surcharge which, by forcing higher income earners to take out private health insurance to gain an exemption, is a de-facto Medicare means test.  
 
The overarching hypocrisy remains the fact that a 'free' health system isn't free. It has to be funded by governments that have to choose between competing priorities when deciding how to allocate scare resources.  
 
These decisions involve opportunity costs. That health spending crowds out other government activity is lost on those who argue that political considerations should dictate health policy because the Australian people 'regard universal health care as a right.'
 
What needs to be factored in to the health debate is that the so-called 'right to Medicare' involves trading off other important 'rights', such as:

• The right to affordable housing and getting to work – Since the inception of Medicare in 1984, the ever-increasing cost of the 'free' public hospital system has consumed higher proportions of State government budgets. This has lead to cut backs or under-investment in other key areas such as housing and transport infrastructure. Longer travel times due to congestion, and higher house prices due to lack of land release, are the results.
• The right to chronic care – Medicare is primarily a fee-for-service payment system for medical services, which also provides access to hospital care subject to waiting times for many treatments. What Medicare does not do is provide full courses of treatment, including allied health services and medications, for patients with chronic conditions. Like hospital waiting lists, this is a form of rationing, or restricting the availability of services, to offset the high cost of providing 'free' GP and other medical care to all comers.  In order to receive all beneficial care, many chronically-ill patients face high out-of-pocket expenses.
• The right not to beggar future generations – Pay-As-You-Go taxpayer-funded health systems such as Medicare were created during an era when health care was relatively cheap and basic. The increased sophistication of modern medicine, combined with longevity (increased life-spans), is remorselessly driving up health costs. This will impose considerable burdens on the smaller proportion of the population that is of working age in the years ahead, who will face either higher taxes, or cuts to other services, or both, to pay for Medicare. This may mean that future generations will not enjoy rising living standards at the same rate as previous generations.

The rights we don't have because of the right to universal health care might be termed the Iron Law of Medicare: a government big enough to give you free health services, is too big to give you many important things you need.

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