Image courtesy of The Conversation

The May 2014 Budget was the first of the Abbott government's and outlined a new vision for Australia's future. It was a marked departure from previous Budgets under both Labor and Liberal governments.

The Liberal Party 2013 election campaign highlighted both the economic and political failures of the minority Gillard/Rudd government. Under Tony Abbott the Liberal party ran a very disciplined campaign. Oppositions don't win elections, governments lose them. Everyone knew what a Liberal government would do. It would stop the boats, end the waste, scrap the carbon tax and there would be no new taxes. 

As with previous changes of governments, the first six months was spent looking at possible ways for implementing the new Liberal policies. A number of audits and review were undertaken but very few of these were made public. When the option for reintroducing a six dollar co-payment was raised in late 2013, it seemed unlikely that it would ever be implemented. Such a scheme had been tried previously under the Hawke Labor government but had been abandoned within a few months. The money saved was insufficient for the political pain it caused. 

It was with some surprise come Budget night that we were presented with a seven dollar co-payment ... but with a couple of wrinkles.  

The Medicare rebate was cut by only five dollars but GPs could charge a seven dollar co-payment allowing the government to claim GPs would pocket a half billion dollar windfall profit. The transaction costs of dealing with the co-payment and the reduced number of services expected by the change did not figure in the Minister's back of the envelope calculations. They would have, however, been studied extensively in the Department of Health's models. 

The clever part of the scheme locks bulk billing GPs into the new co-payments. Under the old arrangements GPs were offered a six to nine dollar incentive payment for bulk billing children under 16 and those on concession cards. This incentive continues but only if the GP charges exactly the seven dollar co-payment. For largely bulk billing practices the decreased Medicare rebate and the loss of the bulk billing incentive will amount to a 25% loss of income. Practice costs are about 50% of income so this will mean a 50% loss of income for the GP practice owner. This is untenable. 

The co-payment scheme is designed to send patients and GPs a price signal about the cost of GP consultations, radiology and pathology investigations. The proposal as espoused by the Minister for Health is laudable in principle but flawed in practice. Many patients on the North Coast are not bulk billed and the pain they will feel is the five dollar smaller rebate from consultations. 

It will be the poorer members of society, particularly those with chronic disease, that will feel the brunt of the new changes. It is expected that they will attend less often for investigations, monitoring and treatment. The costs over time of badly managed diabetes and heart disease are likely to be significantly higher than the short term savings. 

The Minister has also foreshadowed allowing the private health sector into the primary care insurance market. While replacing the Medicare monopoly with a market of private insurers sounds like it should be economically more efficient, experience from the United States would suggest otherwise. Medicare has been very effective at controlling and reducing GPs' incomes over the last thirty years. Abandoning monopoly control appears to more motivated by ideology than economics. 

Nearly all of this has been discussed in the press and social media in the last month. Tony Abbott has said that there may be room to tweak the system but once again any government plans are shrouded in secrecy. Exemptions for Aboriginal Medical Services and chronic disease management have been mooted but would be administratively difficult to manage.

The Government's view is at odds with the advice from professional Australian health economists. John Deeble, Stephen DuckettJames GillespieAnne-Marie Boxhall and Jeff Richardson have all highlighted the difficulties and inequities of the co-payment system. 

In the health arena the Government seems to be taking advice from a number of private think tanks, the independence of which has been questioned. Terry Barnes of the Australian Centre for Health Research (ACRH) was the first to reintroduce the concept of co-payments. The ACRH receives funding from health funds and private hospitals. 

Similarly support for the former government's progress in food labeling, alcohol and tobacco control is gradually being eroded away by industry supported bodies arguing for a less restrictive trading environment. This is promoted under the moniker End the Nanny StateWhile this concept is appealing, "No running with scissors" remains good advice. 

 It is still too early to determine if the government remains impervious to the objections of the profession, the economists and general public. The birth of the first "Medicare" was brought about through a double dissolution. One wonders if its demise will require the same.