Media Release

GP Co-payment and Medical Research Future Fund Essential Budget Reforms

MC 83/14

Senator the Hon. Mathias Cormann
Minister for Finance

22 August 2014

Our proposal for a $7 co-payment to help cover the cost of accessing a medical service is an essential structural reform, which will help make public funding for our world class health care system sustainable for the long term.

The key public policy challenge we face in health care financing is how best to ensure that all Australians can have timely and affordable access to high quality health care in a way that is also affordable for taxpayers over the medium to long term.

How do we ensure that the necessarily limited resources of taxpayers are deployed to maximum effect, to service all the genuine health care needs of a growing number of patients in the context of an ageing population over the next few decades and beyond.

An appropriate price signal is a proven way to improve the efficiency of allocating limited resources to a growing demand for services.

It will help ensure that everyone in need of timely and affordable access to high quality health care can have that access in a way that is also affordable and sustainable for taxpayers.

To completely exclude one of the largest and most rapidly growing user groups of medical services from such a price signal, as has been suggested by some, defeats its purpose.

Under our proposed reform there are appropriate safeguards however, to ensure that no pensioner or other concession card holder would have to pay more than $70 a year for access to an unlimited supply of medical services.

The same applies to children under the age of 16.

Labor asserts that a $70 a year co-payment for unlimited access to medical services for pensioners is unfair. Yet they support the $360 a year co-payment for pensioners to have access to pharmaceutical products.

Indeed, successive Labor governments since 1983 have supported co-payment arrangements for access to pharmaceuticals, including for pensioners and concession card holders, and the Hawke government sensibly sought to introduce a co-payment for access to medical services to put their public funding on a sustainable footing

That was good public policy then and it is good public policy now. The only reason it did ultimately not happen then is because of internal Labor Party politics and division in government, not because the reforming Hawke government got the policy wrong.

Now, Labor is making the entirely irrational argument that a $360 price signal a year for pensioners accessing pharmaceutical products is good, but a $70 a year price signal for unlimited access to medical services is bad.

The reality is that the co-payment for access to medical services is unfinished business from the health care financing reform agenda initiated by the Hawke government in 1991.

There is another Labor attack on our proposal which is wrong.

They suggest it is a tax which wouldn't do anything to help repair the budget, as the revenue raised would be spent on medical research anyway.

That is completely inaccurate and shows what little understanding Labor has of good financial management in government.

Firstly, a co-payment is not a tax, it is a user charge. But even if we conceded that it was a form of tax, which it isn't, we are not proposing to 'spend' the money it will raise at all.

Under our proposal, the revenue from the co-payment accumulates, together with the proceeds of other efficiencies on the health expenditure side, into a $20 billion capital fund - the Medical Research Future Fund.

That fund will not be spent but invested, generating a regular return.

When you accumulate recurrent savings or revenue into a capital fund, that capital fund becomes an asset on the government's balance sheet, reducing government net debt by $20 billion once fully accumulated.

Under our proposal it would take about 6 years for that $20 billion capital fund to accumulate.

Importantly, that $20 billion in capital investment stays in perpetuity. Only the regular net investment returns generated by that fund are invested in additional medical research.

As the fund builds, those investment returns will grow and over time enable us to double annual funding for medical research on a fiscally sustainable basis.

At the same time we are also locking in structural efficiencies in the public financing of health care in perpetuity.

This means an ongoing positive impact helping to make our spending growth trajectory in health structurally more sustainable and helping to improve our budget bottom line over the long term.

Add to that the exciting prospect that Australian medical research, backed by a sustainable increase in public funding, will help deliver tangible improvements in the quality and efficiency of health care services and this proposal becomes a win-win-win.

The truth is that those most likely to need regular timely and affordable access to high quality health care services in the future are also those who most need this important health financing reform package to successfully pass the Senate.