Health | Ageing

We need to look at cost of health care in broader context: Martin Bowles PSM

We need to move past the notion of health care costs and look at them in a broader economic context, Federal Department of Health, Secretary, Martin Bowles PSM has told a CEDA audience in Sydney.

Speaking at the report launch for CEDA’s major research Improving service sector productivity: the economic imperative, Mr Bowles said health care “will cost more before it costs less.”

“If you look at the health system today, about 65 per cent of the rising cost is in technology,” he said.

“Most people think it's aged care and obviously, technology gets applied in the aged care context and to people who are ageing, and yes that plays into it but technology itself is going to keep driving things.”

Mr Bowles said for example, technology shifts in pharmaceuticals over the last five to eight years would have saved the country approximately $20 billion.


“Where next? We really don’t know what’s going to happen in the next five years even in health care,” he said.

“The world of genomics and precision medicine…better diagnosis, better understanding, better treatment, therefore better outcomes are really going to drive these debates.

“At the end of the day we are a large economic driver, and what we do matters to the economy as well as anything else,” he said.
“We spend over $160 billion a year on health care in this country, and that’s a mix of Commonwealth, state and private sector funding.
“If we don’t think about it in that way, we actually miss a lot of the picture because for instance 33 per cent of funding in this country in health is actually from the private sector.
“In the Commonwealth context, I spend about 20 per cent of the Commonwealth budget.
“The way I try to look at this which gets to the broader economic question is we are 10 per cent of the economy, and 13 per cent of the workforce of the country and we need to start thinking differently, I believe, around health care.”
Also speaking at the event was NIB Health Funds, Chief Executive Officer and Managing Director, Mark Fitzgibbon who said that while Australia has a world class health system, it doesn’t excuse the ‘naked efficiencies’ in the system.
“What is at the heart of this inefficiency?” he said.
“There’s two old fashioned economic axioms; one is information symmetry.
“We’re really very ordinary purchasers of health care because we simply don’t have the same level of information and therefore power, of the sellers, and the second one is good old fashioned moral hazard.
“Funding health care through indemnity whether it be a social insurance scheme as medicare is or a private scheme such as NIB…used to suit our spending on healthcare because the vast majority of health care spending was non-discretionary.
“What we’re seeing with health care spending is shifting away from non-discretionary to discretionary.
“In light of those restraints…how do we get information to consumers in a way that helps them make better decisions around their choice of treatment and choice of doctor, and how do we think about how we finance future health care spending and ensure that we mitigate the obvious moral hazard we see in the scheme?
“Of course I see the private sector playing a role in tackling those challenges.”
Healthdirect Australia, Clinical Governance General Manager, Maureen Robinson discussed the benefits telehealth is providing across Australia such as access to remote or rural populations, after-hours access, reduced dislocation as well as an improvement in productivity.
“In a telehealth scenario you have a ratio of ‘one to very many’ delivery,” she said.
“In some digital services like an online symptom checker for example, which provides great benefit to people, you can provide that with a ‘none-to-hundreds’ ratio. We can get great productivity out of that.
“That is not to say that telehealth can cover everything and there’s not a need for face to face services, there is, there always will be.”
Ms Robinson said that it was essential with these services to have a very good governance framework in place to ensure those services are clinically safe and sound.

CEDA Consultant, Alan Mitchell opened the event and discussed highlights from the CEDA report. This report, Improving service sector productivity: the economic imperative is available to read and download here.