09/05/2013 - 10:29

Rising health demand brings challenges

09/05/2013 - 10:29

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INNOVATE: Michael Stanford says the health sector should place greater attention on increasing productivity

BY any objective standards, the nation’s demand for healthcare services is growing rapidly.

A recent analysis by the Grattan Institute revealed Australian governments’ health expenditure had increased by 74 per cent, or more than $40 billion, in real terms over the last decade.

This is partly the result of changing population trends. Australia’s population is ageing and therefore more likely to require ongoing health treatment.

The Australian Bureau of Statistics predicts nearly one quarter of all Australians will be aged 65 or over by 2056 on current trends.

Migration has also boosted demand, particularly in Western Australia where a high intake of overseas workers has driven a population growth rate of 2.6 per cent per annum.

However demographic changes weren’t the key driver behind the increased utilisation of health services in recent years, the report said.

Rather, “people of any age saw doctors more often, had more tests and operations and took more prescription drugs.”

These factors have driven an unprecedented level of public and private sector investment in hospitals in Western Australia over the past five years, with the soon-to-open Fiona Stanley Hospital and New Children’s Hospital leading the way.

For St John of God Health Care chief executive Michael Stanford, WA’s sustained growth provides a sense of certainty which allows his organisation to make long-term investments in the state; however, this growth also brings challenges.

St John of God is currently building a 307-bed public hospital and a 60-bed private hospital at the new Midland Health Campus, set for completion in 2015. The coming years will see a major expansion of St John of God’s Murdoch hospital, and plans are also in the works for a 75-bed private hospital in Mandurah.

Speaking at the Committee for Economic Development of Australia’s healthcare policy launch last month, Dr Stanford said a key issue for St John of God was finding enough nurses to sustain its expanded operations.

“The adequacy of the nursing workforce, especially where we have expansion plans aimed at trying to meet the community need, is a real issue,” he said.

“It’s a real issue because as people get older they’re more likely to have occupational health and safety issues; they’re more likely to spend time off work and more likely to require compensation.

“That reduces the availability of workers but it also puts up the cost of doing business.”

Census data reveals more than a third of registered nurses in Australia are now aged over 50 years. A 2010 KPMG/Ipsos report predicted one third of the nation’s nursing population would retire within the next decade as they struggled to keep up with the labour intensive nature of the job.

With St John of God’s planned expansions set to coincide with the completion of several other major hospital developments, the company will pursue an innovative staffing solution.

“One of the things we’ll be doing at Midland is we will be setting up an overseas recruitment office that will run for several years at least in order to make sure we have enough staff,” Dr Stanford said.

“We’re absolutely confident in this city that with a combination of Fiona Stanley (Hospital), ourselves and our expansion at Murdoch, that there aren’t going to be enough homegrown nurses.”

While federal and state governments have invested in training initiatives to boost the supply of future nurses, the healthcare sector has increasingly turned to migrant workers to fill the present void.

More than 6,000 healthcare workers have been granted 457 visas in the financial year to date, second only to construction workers.

“The problem with natural increase is that a kid born today isn’t going to be a nurse or a doctor for a very long period of time,” Dr Stanford said.

“We have an absolute requirement for people coming from interstate and overseas for our healthcare workforce for a very long period of time.”

Spending pressures

Another consequence of the nation’s increased demand for health services is its negative impact on government budgets.

Australia’s health expenditure accounted for 9.4 per cent of GDP in 2009-10 and is expected to increase by a further three per cent of GDP by 2050. Around 44 per cent of funding came from the Commonwealth, while state and territory governments contributed a further 26 per cent.

The Grattan Institute warns rising health spending poses the greatest risk to the government’s fiscal balance, projecting deficits of around four per cent of GDP over the next 10 years unless significant reforms are made.

A key factor of this is that individual contributions to health funding have not kept pace with the increased utilisation of health services.

As Monash University health expert Johannes Stoelwinder points out in his CEDA submission, the current Medicare levy of 1.5 per cent of taxable income raises less than 20 per cent of the Commonwealth’s contribution to health spending.

In order to fully fund Medicare, the levy would have to be increased to around 14 per cent of personal income tax.

The Gillard government will introduce legislation in the coming weeks to increase the Medicare levy by 0.5 per cent from July 1 2014 to partially fund its proposed Disability Care scheme, raising an additional $3.3 billion in revenue per year.

However, the Disability Care scheme is estimated to cost as much as $8 billion once fully operational, and opposition leader Tony Abbott has pledged to ensure the levy increase is a temporary measure if a Coalition government is elected.

Professor Stoelwinder advocates a funding model similar to that of the Netherlands where health spending is linked to a hypothecated payroll tax, forcing politicians to raise the tax level in order to increase spending.

However, he warns that such reforms would require governments to look beyond the political cycle.

“The longish timeframe before government healthcare funding becomes unsustainable is part of the reform challenge,” he said.

“Because of the political nature of decision making about healthcare spending, the political strength of its vested interests and the emotive nature of the topic it is very difficult to make significant reform decisions to achieve policy outcomes in the (relatively distant) future.”

The Gillard government has ruled out quarantining a portion of the superannuation guarantee rate to cover healthcare costs, as recommended by CEDA.

With St John of God forced to innovate in order to secure a private public partnership contract for the Midland Health Campus, Dr Stanford said the state should look to the private sector in order to reduce healthcare costs.

“I would say to you that it would be great idea if the WA government perhaps more broadly thought about getting back to an era where there was more contestability,” he said.

“It’s my clear view that any existing WA hospital could be run by the private sector (and) in fact any existing operational service in WA health could be run by the private sector.

“If the state was fair dinkum about productivity, I suggest it should be funding and regulating and seeking best value for money rather than continuing to seek to operate.”

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