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					       FEDERAL BUDGET

Making People the Top Health Priority

          FEBRUARY 2003
Making People the Top Health Priority
AMA Federal Budget Submission 2003/04

This submission is made by the Australian Medical Association, a professional organisation
representing more than 27,000 Australian doctors.

The Australian health system including the PBS is a major success in national and
international terms. Australians experience one of the highest disability-free life expectancies
in the world.

Nevertheless, there are wide and worsening disparities in the health of major groups within
Australian society. Indigenous, low income, aged and rural Australians are frequently unable
to access or afford basic primary care, elective surgery or rehabilitation or nursing home
services and in many areas this situation is deteriorating.

The AMA believes the 2003/04 Federal Budget is the time to seriously address these issues by
refocussing the health budget and increasing it as necessary.

Dr Kerryn Phelps
Federal President
Australian Medical Association
PO Box E115

Ph: (02) 6270 5400
Fx: (02) 6270 5499

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Making People the Top Health Priority
AMA Federal Budget Submission 2003/04

AMA Submission to the 2003/2004 Federal Budget
Budget Summary

The AMA Recommends:

1. That the Government increases expenditure on health through the Commonwealth Medical
   Benefits Schedule (CMBS), the Pharmaceutical Benefits Scheme (PBS) and the Australian
   Health Care Agreements as a percentage of GNP to address the current severe health
   workforce shortage and increasing costs associated with an ageing population and new
   technology and drugs;
2. That the Government refocus current health expenditure to ensure access and affordability
   of health care to disadvantaged groups such as indigenous, aged and low income
   Australians and people living in outer urban and rural areas. Programs that do not meet
   this objective should be scaled back or discontinued;
3. That the Government commission broad comprehensive reviews (White Papers) of the
   state of the medical workforce and the future of the PBS; and
4. That the Government increases the Medicare levy in order to meet funding shortfalls.

The AMA has not attempted to make specific recommendations on all aspects of the health
budget in this submission but the key areas for Government‟s attention are considered to be:
1.     General practice, including non VR GPs;
2.     Aboriginal and Torres Strait Islander Health
3.     Public hospitals
4.     Private health insurance rebate
5.     Veterans‟ health
6.     PBS expenditure
7.     Medical Indemnity
8.     Aged Care

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Making People the Top Health Priority
AMA Federal Budget Submission 2003/04

AMA Proposal
That the Government provides funding to:

   increase General Practice participation in Australia to cover doctor shortages.
   increased training numbers for General Practice to meet serious structural shortages in the
    longer term.
   develop, in consultation with the AMA, a Workforce White Paper.
   increase medical school university places in consultation with medical colleges and the
    medical profession.

Key Issues
There is a national shortage of about 2,000 GPs (about 10% of the workforce) with shortages
most severe in outer urban and rural areas.

Other medical specialties based on consultative medicine (eg. psychiatrists) or aged care (eg.
geriatrics, rehabilitation) are also facing serious shortages.

In 2002 about 1,200 medical students graduated from Australian universities while there were
about 1,500 training places for doctors in general practice and other specialties.

There is a declining participation rate by GPs as a consequence of a relative fall in
remuneration, the medical indemnity crisis, the Trade Practices Act, red tape and unrewarding
practice conditions. One of the main contributors to the declining participation is the low
CMBS rebate. The evidence is a serious decline in the bulk billing rate.

Most new entrants to the GP workforce will not replace retiring doctors. The average outer
urban/rural GP is male, in his fifties and working 50 – 60 hours per week. The new GP
trainees in 2002 were largely born outside Australia (65%) often trained outside Australia
(35%) and 56% female. Most of this group will not wish to move beyond the major cities for
family, cultural and religious reasons.

In recent years Federal and State governments have tried to rely on attracting doctors from
overseas to deal with areas of severe shortage. However, even with a rapid expansion of this
program, it has not met the need for doctors either in total number or in relation to the
maldistribution of doctors.

Continued reliance on overseas-trained doctors has two major drawbacks. Firstly, it depends
on attracting doctors from developing countries which face very severe doctor shortages and,
secondly, Australia‟s capacity to compete with Europe (particularly the U.K. and Ireland) and
North America for doctors in the face of major recruiting campaigns is quite limited.
In calling for a Workforce White Paper, the AMA has put a number of specific proposals to
Government (see attachment). These can be summarised as follows:
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AMA Federal Budget Submission 2003/04

1.    In the short-term, the existing workforce must be encouraged to stay in medicine and
      be given every incentive to provide optimal care in the areas where there are severe
      shortages, including increasing the non-vocationally registered (non-VR) GP rebate to
      93% of the VR rebate.
2.    For the medium-term, the number of training placements needs now to be increased –
      for GPs from 450 to at least 600 per year.

      Work by the Productivity Commission has shown a major “red tape” imposition on
      GPs time. If GPs could increase patient time by 5% it would be equivalent to another
      1000 GPs, more than twice the output of the GP training program in a given year.

3.    For the longer term, the number of medical school places in Australian universities
      must be significantly expanded depending on projected workforce requirements.

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AMA Federal Budget Submission 2003/04

AMA Proposal
That the Government doubles its allocation of funds for primary health care for Aboriginal and
Torres Strait Islander people. Additional funding is also required to establish a National
Training Plan to produce the workforce required and for improved environmental services for
all communities.

Key Issues
The health of Aboriginal and Torres Strait Islander people is the poorest of any group in
Australia with lower life expectancy and higher infant mortality rates. Age-standardised death
rates are approximately three times higher with significantly higher rates of death for specific
conditions, particularly chronic conditions. Effective and timely treatment has been shown to
reduce mortality significantly particularly from chronic conditions.

Professor John Deeble has estimated that, in 1998/99, relative to need and spending on non-
Indigenous people, equitable funding for Aboriginal and Torres Strait Islander health would
have required an increase in of the order of $245 million per annum. The estimate of the
additional amount required is currently being updated. The preliminary estimate is $260 m
for clinical care and a further $50 m for expanded preventive programs. This is despite
increased spending on Indigenous health over the last few years. In 1998/99, total actual
Commonwealth funding for health services in Aboriginal and Torres Strait Islander
communities was $113m. In 2001/02, this totalled $181.485 m. The Commonwealth
government, however, has spent much more on health services for the rest of the population in
the last three years. Equity would require a similar increase for Indigenous people.

The Primary Health Care Access Program is an innovative program that needs to be funded
on a national basis. Funding of $78.8 m has been allocated over the past four years with a
total recurrent base of $54.8 m for 2003/04. This falls far short of what is required. Funding
should be commensurate with the Deeble estimates of overall funding.

Provision of such care is dependent on an accessible and appropriate workforce. The AMA
has called for a National Training Plan to produce the health and administrative personnel
required, with increased representation from Aboriginal and Torres Strait Islander people. The
minimum increase is 3,200. This necessitates further financial commitment.

For progress in health to be achieved it is essential that all communities have access to well
maintained services. Many communities still lack functional amenities. The AMA calls on
the Government to increase funding to ATSIC for this purpose.

The experience of other countries such as Canada, the US and NZ indicates that it is possible
to make progress. In the 20-year period between 1974 and 1994, the Maori death rate declined

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AMA Federal Budget Submission 2003/04

by 45% and the US Indigenous rate by 35%. No significant reduction occurred in the death
rate for Aboriginal and Torres Strait Islander populations between 1985 and 1995.

It is unacceptable that Australia falls behind the rest of the developed world in making
progress in this area. This requires significant commitment from the Federal

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AMA Federal Budget Submission 2003/04

AMA Proposal
The Government should maintain its funding effort for public hospitals despite the upsurge in
private hospital utilisation and use the opportunity of the new Australian Health Care
Agreements to pursue structural change which will benefit patients.

The Government should provide funding of $100 million to facilitate further development of
„step down‟ or convalescent services for the aged. The AMA, together with the rest of the
aged care sector, is very keen to explore with government the various options for expanding
the variety of transitional care service types.

Key Issues
Private health insurance participation and private hospital utilisation have both surged.
However, there should be no claw-back in the level of Commonwealth funds available for
public hospital care as a result of these factors.

The public hospitals have been historically underfunded and the flattening off in demand as a
result of the private sector upswing has merely enabled pent up demand in the public sector to
be met.

The formula in the current Australian Health Care Agreements (AHCAs) for age sex adjusted
population and cost based growth factors for escalating the base grant should be maintained
and enhanced.

In the renegotiation of AHCAs, the AMA advocates Federal funding for demonstration
projects seeking solutions to issues such as blockages in the emergency departments of public
hospitals. This would help Australia to develop a plan to tackle the approaching crisis in
emergency departments with an appropriate timetable, before it becomes a national crisis.

The renegotiation of the AHCAs provides the opportunity to improve the continuum of care
for older Australians between aged care, health care, and rehabilitative care. The current
innovative pool trial is a positive step, and should be expanded. The implementation of a
national pharmaceutical expenditure program in the life of the current agreements should also
receive identified funding in this agreement.

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AMA Federal Budget Submission 2003/04

AMA Proposal
The Government should continue to provide sufficient funding to enable the private health
insurance rebate to be maintained at its current level and try to achieve bipartisan political
support for the rebate. However, the Federal and State governments need to work together to
ensure that there is most efficient use of that expenditure.

Key Issues
Total contributions income for private health funds was $7.266 billion in 2001-02 which
means the rebate is costing the Government approximately $2.2 billion per annum. The
introduction of the rebate was the prime factor behind the 50% increase in the level of private
health insurance participation from 30% to 44% of the population and the continuation of the
rebate is essential to the long term stability of the private health sector.

The upsurge in private hospital participation on the back of the rebate has enabled the public
sector to provide reasonable access at current funding levels. Removal of the rebate would
destabilise the equilibrium.

If the Government had to fully finance, through the public hospital system, the substantial
increase in private hospital utilisation brought about by the rebate and its predecessor, the cost
to governments would be substantially more than the $1.6 billion component of the rebate
notionally spent on private hospital care.

It is essential the Government maintains the rebate in its entirety and seeks to achieve
bipartisan political support for it.

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AMA Federal Budget Submission 2003/04

AMA Proposal
That the Government provides an additional $195 million to maintain veterans‟ access to high
quality private medical services with no out of pocket costs to eligible veterans.

Key Issues
Successive Australian governments have recognised veterans‟ service to the Australian
community by providing them with access to the highest quality of private medical care. This
commitment has been supported by the medical profession, which has willingly subsidised the
costs of this care through acceptance of the Commonwealth Medicare Benefits Schedule
(CMBS) fees for the provision of medical services to veterans.

The capacity of the medical profession to continue to deliver the Government‟s promise to
veterans by participation in the Local Medical Officer (LMO) Scheme and the Repatriation
Private Patient Scheme (RPPS) has come under significant pressure.

These pressures include the increasing age and complex health needs of veterans, the increase
in the numbers of “gold card” holders, the shift of veterans‟ medical care from public to
private hospitals and the failure of the CMBS to keep pace with the rising costs of medical
practice, including the escalating cost of medical indemnity.

Hundreds of medical specialists have withdrawn from the RPPS since late 2002 and many
more specialists have closed their books to new veteran patients. Over 2500 general
practitioners have withdrawn from the LMO Scheme since late 2002 and many more are
expected to do so when their contracts with the Department of Veterans Affairs approach
expiry in June 2003. As a consequence both the RPPS and LMO Schemes are becoming
progressively non-viable, particularly in rural and regional areas.

The total appropriation for the Department of Veterans Affairs in the 2002/3 budget was in
excess of $9.1 billion. Only $650 million of this appropriation was for services provided by
medical practitioners. Barely $195 million in additional funding for medical fees would
enable the medical profession to continue its participation in the LMO and RPPS Schemes and
ensure the Government‟s promise to veterans remains fulfilled.

Some of this $195 million could be found through the refocussing of benefit eligibility criteria
and the improved targeting of compensation and income support payments to ensure that the
original and primary intent of Australia‟s repatriation scheme, to recognise the war service of
veterans, is retained.

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AMA Federal Budget Submission 2003/04

AMA Proposal
The AMA recommends that the trend rate of growth of spending under the PBS remains at 10-
11% pa for the next five years. This should be accompanied by a White Paper into PBS
expenditure that examines the role of generics, prescriber support through electronic software
and decision support and other means, the role of expenditure on Medication Review
programs, dispensing arrangements and consumer education.

Key Issues
1.     The Australian health system including the PBS is a major success in national and
       international terms. Australians experience one of the highest disability-free life
       expectancies in the world.
2.     The Government has claimed it is necessary to make cuts, because of unsustainable
       increases in the cost of the PBS. The PBS cost $1 billion in 1987 and reached $4
       billion in 2000/01. The trend rate of growth of spending under the PBS has been
       around 10-11% but the listing of new drugs – Celebrex and Zyban – caused a cost
       blow-out that has now settled to previous levels of growth.
3.     The growth of PBS schemes internationally is driven by a range of factors including
       increased demand with an ageing population with chronic disease and more expensive
       drugs as a result of technological advances.
4.     Australian expenditure in this area compares well internationally, due to the
       monopsony purchasing power of the PBS. Canada, for example, spends a significantly
       higher proportion of national health expenditure on pharmaceuticals than Australia.
5.     The AMA Federal Council is concerned about the future of the PBS as a key and
       integral part of Australia‟s health care system. Council has reiterated its support for
       the principles of the PBS to provide universal access to medicines in an effective,
       efficient and equitable manner.
6.     The future of the PBS must be examined with all stakeholders, including the AMA,
       and within the context of the health care system as a whole. The PBS should not be
       seen as a discrete item of financial budgeting. Higher PBS costs may save overall
       health care costs through effective and early treatment.
7.     The AMA considers that increases in co-payments will hit lowest income groups who
       do not qualify for concessional PBS access, with adverse effects on their health. This
       undermines the principles of the PBS.

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AMA Federal Budget Submission 2003/04


AMA Proposal
Medical indemnity is still a major cause for concern among doctors and many are considering
early retirement or scaling back their medical practices to avoid higher risk procedures.

The Government should change its high claim subsidy scheme from paying 50% of all
settlements over $2m to paying 100% of all settlements in excess of the insurance cap under
the new Prudential Regulation Act, introduce a Government funded long-term care and
rehabilitation scheme for severely injured patients and assist in ensuring that when doctors
retire they are not faced with excessive medical indemnity insurance costs.

Key Issues
Under the proposed Prudential Regulation Act, doctors will have to take out capped insurance
contracts to cover medical indemnity in contrast to the uncapped discretionary cover they
received in the past.

The AMA‟s concern is that a small number of settlements will exceed the cap, particularly
when cases take many years to settle. Therefore, the Association proposes that the
Government guarantees any excess above the cap as this is an ongoing concern for doctors in
the higher-risk specialties.

A long-term care and rehabilitation scheme, separate from the court-based settlement process,
is essential to ensure that patients are treated equitably and the cost of medical indemnity to
doctors and the community are kept under control.

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AMA Federal Budget Submission 2003/04

8      AGED CARE
AMA Proposal
The Government redress the chronic underfunding of residential aged care by an immediate
injection of $100 million per annum earmarked for salaries to enable parity with the acute care

The Government should urgently review the Medical Benefits Schedule to provide appropriate
incentives for doctors to provide medical services to residents of residential aged care facilities
(RACFs), in particular:

-      Revising MBS items 20, 35, 43, and 51 so that General Practitioners visiting RACFs
       receive more than $1.45 per patient visited after the 7th patient, given the complex care
       needs of most RACF residents;
-      Revising MBS items 700-886 so that the Enhanced Primary Care, Multidisciplinary
       Care Plan, and Case Conferences items provide more realistic incentives to enable
       GPs, geriatricians, and other specialists, as appropriate, to provide Comprehensive
       Medical Assessments, and to fully participate in residents‟ care plans and in
       medication management reviews, both within residential aged care facilities and in the
       community setting.

The Government should provide funding of $20 million as a trial to enable residential aged
care facilities to appoint GP Facility Advisers similar to the Visiting Medical Officer
arrangements to private hospitals.

The Government should provide funding of $20 million as a trial to encourage residential aged
care facilities to provide consultation rooms with adequate treatment facilities and plug-in
computer facilities that would facilitate access to patient records for doctors and other health

Key Issues
The Commonwealth Own Purpose Outlays (COPO) system of indexation for residential aged
care subsidies has been estimated to have cost aged care between $193.9 million and $265.8
million from 1996-97 to 2000-01, making it increasingly difficult for the aged care sector to
attract and maintain staffing levels and skills.

Quality health care for older Australians depends on the effective integration of medical,
nursing, allied health and other care. Currently, medical care is not effectively integrated with
other services that are provided in aged care facilities.

There are at present no adequate incentives to encourage doctors to participate in care
management planning for older Australians in residential care, for example to participate
effectively on medication management reviews for residents of residential aged care facilities.

These initiatives would help develop system incentives to encourage doctors, nurses, and other
health professionals in aged care.
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