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A closer look at the 2004-05 Health Budget: Access Economics analysis.



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12 May 2004

A closer look at the 2004-05 Health Budget: Access Economics analysis

The AMA today released Access Economics analysis of the 2004-05 Health Budget prepared for the AMA by Access Associate Director, Roger Kilham.

AMA President, Dr Bill Glasson, said Mr Kilham has a reputation for forensic budget analysis.

The Key Points of the Access Economics analysis include:

• There is more emphasis on health and aged care spending this year, both through the course of the year (Medicare Plus) and in the Budget itself (aged care). Health’s slice of total outlays is a bit larger.

• Budget measures amount to $2,753m in the four years 2004-05 to 2007-08. This decomposes into new spending of $2,804m, less very modest savings measures of $63m.

• In addition, the Government has brought forward no less than $700m of health and aged care spending into this year (2003-04), primarily the $513m sweetener for aged care services. This comes over as a slightly desperate attempt to reduce an embarrassingly large surplus in 2003-04 and avoid a deficit in 2004-05. But it is hardly a new ploy.

• The aged care package appears to be quite well directed at the raft of problems in residential aged care. Stakeholders may dispute the quantum of the increase and some may not get all they want, but the package looks at first glance to be a serious response to the Hogan report.

• The additional money for health and medical research and development is welcome. Otherwise there is not a great deal that is new. A number of the “small ticket” items appear to be well aimed at recognised problems.

• The jury is still out to a degree on medical indemnity, as not all the stakes appear to have been hammered into the ground.

• Public hospitals were frozen out of the gravy train despite the pressures on them, and it appears as though the Federal Government is prepared to stare down the State and Territory governments.

• Other opportunities were missed with Aboriginal and Torres Strait Islander health, GP issues, pneumococcal vaccination and tobacco control.

The full text of the analysis is attached.

CONTACT: John Flannery (02) 6270 5477 / (0419) 494 761 Judith Tokley (02) 6270 5471 / (0408) 824 306

HEALTH AND THE 2004-05 FEDERAL BUDGET REPORT TO THE AUSTRALIAN MEDICAL ASSOCIATION ROGER KILHAM ASSOCIATE DIRECTOR ACCESS ECONOMICS CANBERRA ACT May 2004

CONTENTS

KEY POINTS _______________________________________________________ 1

THE BUDGET STRATEGY—OVERVIEW ________________________________ 2

THE HEALTH BUDGET—OVERVIEW ___________________________________ 2

Chart 1: Health Outlays % of total _________________________________________ 3

BUDGET MEASURES________________________________________________ 3

TOO OLD TO RECOUNT OR TOO EARLY TO TELL _______________________ 4

MEASURES THAT APPEAR CONSTRUCTIVE____________________________ 4

Chart 2: Boost from Aged Care package ___________________________________ 5

MISSED OPPORTUNITIES & NON-PRIORITIES___________________________ 5

OTHER POINTS OF INTEREST ________________________________________ 6

Medical benefits ________________________________________________________ 6

PBS spending __________________________________________________________ 6

30% PHI rebate _________________________________________________________ 6

Medicare levy __________________________________________________________ 6

ATTACHMENT A—MEASURES TABLE _________________________________ 7

Box 1: What’s meant by “measures” ______________________________________ 8

DISCLAIMER

This report is an independent assessment commissioned by the Federal Secretariat of the Australian Medical Association (AMA) for the information of the AMA Federal Council. It does not purport to represent the views of the Council or the Secretariat, and may not be construed as an AMA view.

While every effort has been made to ensure the accuracy of this document, the uncertain nature of economic data, forecasting and analysis together with inadequate disclosures in the Federal Budget papers means that Access Economics Pty Limited is unable to make any warranties in relation to the information contained herein. Access Economics Pty Limited, its employees and agents disclaim liability for any loss or damage which may arise as a consequence of any person relying on the information contained in this document.

2004-05 FEDERAL HEALTH BUDGET—KEY POINTS 1

HEALTH AND THE 2004-05 FEDERAL BUDGET

KEY POINTS

• The Treasurer has brought down a pre-election budget, bulging with both new spending and tax cuts, and counting on the economy remaining robust.

• There is more emphasis on health and aged care spending this year, both through the course of the year (Medicare Plus) and in the Budget itself (aged care). Health’s slice of total outlays is a bit larger.

• Budget measures amount to $2,753m in the four years 2004-05 to 2007-08. This decomposes into new spending of $2,804m, less very modest savings measures of $63m.

• In addition, the Government has brought forward no less than $700m of health and aged care spending into this year (2003-04), primarily the $513m sweetener for aged care services. This comes over as a slightly desperate attempt to reduce an embarrassingly large surplus in 2003-04 and avoid a deficit in 2004-05. But it is hardly a new ploy.

• The aged care package appears to be quite well directed at the raft of problems in residential aged care. Stakeholders may dispute the quantum of the increase and some may not get all they want, but the package looks at first glance to be a serious response to the Hogan report.

• The additional money for health and medical research and development is welcome. Otherwise there is not a great deal that is new. A number of the “small ticket” items appear to be well aimed at recognised problems.

• The jury is still out to a degree on medical indemnity, as not all the stakes appear to have been hammered into the ground.

• Public hospitals were frozen out of the gravy train despite the pressures on them, and it appears as though the Federal Government is prepared to stare down the State and Territory governments.

• Other opportunities were missed with Aboriginal and Torres Strait Islander health, GP issues, pneumococcal vaccination and tobacco control.

• All told, this Budget has not treated health badly. The next one (post election) will see Treasury and Finance trying to claw back. That’s when the skin and hair start flying.

2004-05 FEDERAL HEALTH BUDGET—DETAILED COMMENTS 2

THE BUDGET STRATEGY—OVERVIEW

This is a full-blown election strategy budget. The proposed spending may gain wider acclamation than the tax cuts, as these exclude those on low incomes. Indeed, the tax cuts are carefully targeted at the “aspiring classes” (the middle classes) that the Government hopes will take them over the line later this year.

The scale of the new expenditure announced in the Budget is somewhat surprising given that the Government had, over the course of the 2003-04 year, committed a fair bit more than budgeted, for example with the enhanced Medicare Plus package. The 2003-04 Budget envisaged spending rising in that year by 4.0%. The 2004-05 Budget has a more ambitious 6.2%.

The Government is banking on the Australian economy continuing to remain sturdy. The economic forecasts are confident. Real GDP growth in 2003-04 is estimated at 3¾% and forecast to ease slightly, to 3½%, in 2004-05. Unemployment is forecast to remain below 6%. Price inflation is forecast to ease slightly from 2¼% to 2.0%, and growth in the wage cost index is forecast steady at 3¾%.

Economists are duty bound to point out the risks in the Budget strategy. Through 2003-04, the Government was virtually rolling in cash. A surge in profits saw company tax collections $5b above Budget forecasts, and total revenue $8b above. Despite its best efforts, the Government was not able to spend all of the extra loot, and the cash surplus was more than double the Budget forecast. Notwithstanding the rosy picture painted by the Treasurer, there are problem areas in the economy. Consumer debt and home lending have both racked up growth rates that cannot be sustained. Domestic inflation is high, offset for now by lower import prices from rises in the $A which won’t last indefinitely. Strong consumer confidence has been a mainstay of economic

growth and an associated boost to corporate profits. If anything dents that, the revenue surge will be seen in retrospect as a temporary phenomenon.

The budget strategy depends upon the good times rolling on. Compared with the figures of a year ago, the government intends to spend an extra $30b over 4 years. And, on top of that, it is handing back tax cuts with a net revenue impact of $2b in 2004-05, $3.8b in 2005-06, $4.25b in 2006-07 and $4.75 b in 2007-08, a total of $14.7b over 4 years (or $15.3b if proposed reductions in the SG surcharge are taken into account).

THE HEALTH BUDGET—OVERVIEW

Over the past year (and with the election approaching), the Government has started to pay a bit more attention to health and aged care. When the “Fairer Medicare” package failed to gain traction, little time was lost in bringing on the Medicare Plus package (in November last year). Health spending in 2004-05 is budgeted at just under $35b, 8.1% higher than the somewhat trumped up figure for 2003-04 (more of this in the Health Measures section below). And now, quite hard on the heels of the Medicare Plus package, we see a comprehensive $2.2b aged care package.

The simplest way to illustrate the slightly higher priority given to health is to show health spending as a proportion of total spending as per the functional classification of spending in last year’s Budget and this year’s budget.

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Last year 17.3% 17.5% 17.6% 17.7% 17.7%

This year 17.7% 18.2% 18.0% 18.0% 17.9%

Source: Derived from Table 3 of Statement 6, Budget paper No. 1, 2003-04 and 2004-05 Budgets.

Chart 1 over the page shows a long term history of health spending as a percentage of the total. It is, of course, axiomatic that health care will continue to claim a growing proportion of health

2004-05 FEDERAL HEALTH BUDGET—DETAILED COMMENTS 3

outlays in the context of an ageing Australia. It is also axiomatic that the higher health outlays rise as a percentage of the total, the harder it is for them to squeeze out other spending. One thing, however, is not axiomatic. The Budget inevitably shows a flattening, if not a downward kink (as seen this time) in the forward estimates period. The actual spending, when we get to those years, mostly seems to defy those predictions. There might be the odd year or two when spending is curbed, but we’ve yet to see three years in a row.

Chart 1: Health Outlays % of total

Federal Health Outlays as a Percentage of Total Federal Government Outlays

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

1974-75 1978-79 1982-83 1986-87 1990-91 1994-95 1998-99 2002-03 2006-07

Series break with accrual accounts

Forward estimates

Medibank (Whitlam) Medicare

(Hawke)

The following table provides a summary of the Budget and forward estimates for the “big chunks” of Federal health spending (Source: Budget paper No. 1, page 6.10).

All estimates in $m

Expense category

Estimated actual 2003-04

Budget estimate 2004-05

Forward estimate 2005-06

Forward estimate 2006-07

Forward estimate 2007-08

Medical services & benefits 13,122 14,154 14,615 15,023 15,457

Health care agreements 7,535 7,937 8,331 8,746 9,189

Hospital services 1,603 1,697 1,837 1,991 2,160

Pharmaceutical services & benefits 6,931 7,593 7,767 8,276 9,036

ATSI health 283 293 301 312 325

Health services 962 1,084 1,028 1,029 1,032

Other health services 1,256 1,473 1,542 1,590 1,635

General administration 524 598 611 625 638

Health assistance to the aged 138 156 163 172 183

Total Health1 32,354 34,985 36,195 37,764 39,655

BUDGET MEASURES

Appendix A contains an extract from the Budget Measures table for the Health and Aged Care portfolio, covering the four years from 2004-05 to 2007-08. Also at the end of Appendix A, in Box 1, there is an explanation of what “measures” means (if anything). The key points from and about the table are that:

• It covers the Health and Aged portfolio only, yet health care is a cross-portfolio responsibility. DVA has significant health outlays for veterans. And it is certainly noteworthy that, within the DVA portfolio, there is an extra $158m over four years to ensure that

1 The bulk of DHA outlays on aged care are not included in this concept of health spending but are classified among social security outlays as assistance to the aged.

2004-05 FEDERAL HEALTH BUDGET—DETAILED COMMENTS 4

veterans can continue to have access to medical specialists by increasing the fees the Government pays to specialists for seeing veterans.

• The bulk of the health and aged care measures are new spending (+$2,804m over four years) offset by very modest savings measures (-$63m over four years).

• For the four year period, the larger share of the net new spending is applied to aged care (+$1,680m) rather than health (+$1,062m).

• Somewhat curiously, the government lists in the measures a number of “continuations” of programs that involve no change in spending projections (because the programs were already encompassed in the forward projections of outlays). There are no fewer than 26 “measures” which do not affect outlays in the four year period.

• A number of the Budget measures involve spending in the current (2003-04) financial year. The scale of these is extraordinary, with $186m in health and $513m in aged care for $700m overall. Obviously the Charter of Budget Honesty places no obstacle in the way of bringing forward spending to massage down an embarrassing large deficit this year and massage away a potential deficit next year. The $513 million to be handed out to aged care facilities this year (to help them with their building standards including fire safety) will obviously be welcomed by the industry, which has been facing a struggle to find the capital needed for the challenges of the future. But of course, the money won’t be spent this year, merely warehoused. The same applies to several of the 2003-04 measures in health care.

• Including the 2003-04 expenditures, the five year measures in health and aged care add up to new spending of $3,526m with a very modest $85m in savings measures. In this election year, it is a case of spend, spend, spend. And next year Treasury and Finance will be looking to claw some of it back. It is worth recalling that these measures come on top of those rolled out earlier (notably the first tranche of Medicare Plus).

TOO OLD TO RECOUNT OR TOO EARLY TO TELL

Medicare Plus A great deal of water has gone under the bridge since the Medicare Plus package was first announced six months ago, including a lot of haggling with the independent Senators. In one sense, Medicare Plus is old news. In another sense, we still don’t have enough data to sensibly assess the outcomes from it. No further comment here.

Medical Indemnity The Budget includes funding for Medical Indemnity but one component, the run-off reinsurance vehicle, is still not costed but is footnoted “reliable estimate cannot be produced at this time”. It is too early to tell whether the medical indemnity rescue package will bring home the bacon because the devil will be in the detail.

MEASURES THAT APPEAR CONSTRUCTIVE

Aged care Some in the aged care industry may argue that the aged care package is not generous enough. On the face of it, however, the Government has responded quite decisively to the Hogan review of pricing arrangements and has crafted a package which tackles quite a number of the current issues in relation to aged care. That does not mean all stakeholders will be happy. It was left quite unclear, for example, if and how the disparity in nursing wages might be reduced. Save for the $513m “advance” this year, the spending is backloaded (the conditional incentive payment in particular ramps up quite sharply between 2004-05 and 2007-08). One of the key elements of the strategy is to try to direct the growth in aged care places into community care packages rather than residential subsidies. If it works properly and appropriately (so that people are in the appropriate care regime) then the

2004-05 FEDERAL HEALTH BUDGET—DETAILED COMMENTS 5

clients will prefer it and the cost to the taxpayer will be reduced. Chart 2 shows the extra funding which, at $2.2b, represents a 6.4% boost overall.

Chart 2: Boost from Aged Care package

Aged care before & after the 2004-05 package

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2003-04 2004-05 2005-06 2006-07 2007-08

New spending

Base spending

Health R&D Australia has runs on the board with health and medical research with some wonderfully gifted researchers. There are inevitably some philosophical debates around the merits of Government interventions through investment in R&D. Some “pure-hearted souls” in the Productivity Commission would no doubt express some reservations. That said, the social returns from investment in health and medical research appear very high and Government involvement can be tremendously important to fund basic research well removed from any obvious commercial application.

Tiddlers The 2004-05 health budget includes quite a number of “small ticket” items (items with a modest Budget cost) which nevertheless appear to be steps in a positive direction. Some have a focus on health quality alone (eg, safer haemoglobins), others touch both quality and equity issues (eg, the subsidy for insulin infusion pump consumables) while other again would lower administrative costs (the e-commerce partnerships with private health insurance). While there is always risk in the scattergun approach (risk that the money is spread too thinly to be effective), even small seed money can sometimes be enough to get a good thing going.

MISSED OPPORTUNITIES & NON-PRIORITIES

Public hospitals The Government is holding quite firm on the ACHAs which is unfortunate for the public hospitals (and for the State and Territory governments who will have less scope to truck public hospital money out the back door). The State and Territory governments may yet be forced to match the growth in Federal funding. Perhaps more of them will adopt the Egan model of State property taxes designed to inflict maximum harm on Federal tax revenues.

Indigenous health The Budget includes $40m over four years for an expansion of the Primary Care Access Program. The right area to be spending more, and the best way to spend the extra, but the quantum falls far short of what’s required to make a real difference to the indigenous health deficit. The Government claims that the Primary Care Access Programs is posting solid gains, but the

2004-05 FEDERAL HEALTH BUDGET—DETAILED COMMENTS 6

various indicators (life expectancy, infant mortality and morbidity, prevalence of long term conditions and health risk factors) all look very bad.

GP issues The Medicare Plus package seems to have drained the Government’s energies in the GP area. Missing in the action is: (1) a response to the Attendance Item Review Working Group proposals for a 7-tier structure of GP consultations; (2) a satisfactory outcome from the Red Tape review; (3) some immediate solutions to the workforce shortages (acknowledging that some longer terms steps have been taken); and (4) a solution to the MBS disincentives for the provision of primary care to aged care residents.

Pneumococcal The Government has again missed the opportunity to advance public health with a comprehensive vaccination policy. Pneumococcal vaccinations for all children under five looks like a no-brainer.

Tobacco control Tobacco remains the largest single cause of preventable illness by a large margin. It costs taxpayers a very large amount of money, claims huge health resources and causes patients untold misery. The scope for health prevention remains large, the will to do it minuscule.

OTHER POINTS OF INTEREST

Medical benefits

Medical benefits are forecast to rise from $8,618m in 2003-04 to $9,369m in 2004-05, an increase of 8.7%.

PBS spending

Pharmaceutical benefits are forecast to rise from $5,765m in 2003-04 to $6,230m in 2004-05, an increase of 8.1%.

30% PHI rebate

The Budget outlays cost (the largest part) of the 30% private health insurance rebate is forecast to rise from $2,362m in 2003-04 to $2,496m in 2004-05, an increase of 5.7%.

Medicare levy

Medicare levy receipts are forecast to rise from $5,450m in 2003-04 to $5,790m in 2004-05, an increase of 6.2%.

A mysterious turn

In Budget paper No. 1, general administration costs for health in 2003-04 are shown as $524m, compared with the last year’s Budget forecast of $1,402m. A footnote announces somewhat breathlessly that “The Department … and the HIC has revised the split of the department resourcing across sub-functions and this significantly reduces their impact on the General Administration sub-function and increases their impact on other health sub-functions”. Oh what joy there is to be found in the mysterious art of program budgeting.

RJK 12 May 2004

2004-5 FEDERAL BUDGET—HEALTH & AGED CARE MEASURES TABLE 7

ATTACHMENT A—MEASURES TABLE HEALTH AND AGED CARE BUDGET 2004-05 MEASURES TABLE 2004-05

$m

2005-06 $m

2006-07 $m

2007-08 $m

4-y Total $m

Avian Influenza - enlargement of diagnostic & reference capacity 2.5 0.5 0.5 0.5 3.9

Avian Influenza - information for arriving passengers etc 0.0 0.0 0.0 0.0 0.0

Avian Influenza - purchase of anti-viral medication 0.0 0.0 0.0 0.0 0.0

Avian Influenza - purchase of protective & monitoring equipment 2.1 0.0 0.0 0.0 2.1

Expand National Emergency Medicine stockpile 13.7 0.5 0.5 0.5 15.3

Australia’s security - biosecurity surveillance 6.4 1.3 1.2 1.2 10.1

Australia’s security - radioactive security & emergency response 1.3 1.2 1.0 1.0 4.4

Australia’s security - national health security & counter-terrorism 3.0 2.5 2.6 2.2 10.3

Food standards ANZ - continue funding 0.0 0.0 0.0 0.0 0.0

Food safety - OzFoodNet 1.0 1.0 1.0 1.0 4.0

Sub-total emerging/potential health risks 30.0 7.0 6.8 6.4 50.1

Health & medical research - overhead infrastructure support 26.0 27.0 28.0 29.0 110.0

Indigenous Australians - Primary Care Access Program 10.0 10.0 10.0 10.0 40.0

National Institute of Clinical Studies 0.0 0.0 0.0 0.0 0.0

Medical research infrastructure 0.0 0.0 0.0 0.0 0.0

Life saving drugs - treat Fabry’s disease 10.4 10.3 10.3 10.3 41.3

Human cloning & cloning research - legislative reviews 1.7 0.5 0.0 0.0 2.2

Menzies Foundation 0.0 0.0 0.0 0.0 0.0

National Blood Authority - safer haemoglobin levels 2.3 0.0 0.0 0.0 2.3

National blood cord collection 0.0 0.0 0.0 0.0 0.0

Revised purchasing arrangement s for diagnostic products 0.0 -1.8 -1.8 -1.8 -5.3

National Blood Authority - funding for contract negotiation 1.0 0.0 0.0 0.0 1.0

Extended safety net for out-of-pocket costs outside hospital 48.3 52.8 60.0 67.2 228.4

Incentives for GP bulk-billing in regional/rural/remote/Tasmania 39.0 40.5 41.9 43.5 164.9

New MBS items for certain health professionals & dentists 41.1 39.4 40.6 41.3 162.6

Improving after hours access to GP services 1.7 1.6 1.7 1.7 6.8

Additional funding for HIC 30.0 27.8 32.0 35.6 125.4

Return of capital to HIC for business improvement -14.1 0.0 0.0 0.0 -14.1

Divisions of General Practice - continued funding 0.0 0.0 0.0 0.0 0.0

Private Health Insurance Ombudsman - extra funding 0.2 0.0 0.0 0.0 0.2

Private health insurance - terminate simplified billing promotion -4.4 -4.5 -4.5 -4.6 -18.0

Therapeutic products - new policy advising role 1.2 1.2 0.0 0.0 2.4

Consumer & community involvement 0.0 0.0 0.0 0.0 0.0

Bali terrorist attacks - assistance to States & Terrorists re treatments 0.0 0.0 0.0 0.0 0.0

Sub-total quality measures 194.4 204.8 218.2 232.2 850.1

National Diabetes Services Scheme - infusion pump consumables 2.0 3.3 4.4 5.6 15.3

National Illicit Drug Strategy - extra funding 0.0 2.8 2.8 2.9 8.4

Investment in preventive health 0.0 0.0 0.0 0.0 0.0

Upgrade of cochlear implants - extra funding 2.4 1.7 1.7 1.8 7.6

Bowel cancer screening program 0.0 0.0 0.0 0.0 0.0

Metabolism - grant for high cost special foods 0.0 0.0 0.0 0.0 0.0

Women’s health - Australian longitudinal study 0.8 0.8 0.8 0.8 3.2

Lifeline - assistance 0.0 0.0 0.0 0.0 0.0

Kids Helpline - assistance 0.0 0.0 0.0 0.0 0.0

Preventing falls in older people 0.0 0.0 0.0 0.0 0.0

National Alcohol Harm Reduction Strategy 0.0 0.0 0.0 0.0 0.0

PBAC - enhancing evaluation expertise 1.5 1.9 2.3 2.9 8.5

Pharmaceutical benefits - better entitlement monitoring 4.7 -0.9 -3.7 -3.7 -3.5

Vietnam veterans’ children’s support program -0.5 -0.5 -0.5 -0.2 -2.1

Sub-total health prevention 10.9 9.1 7.8 10.1 37.4

Rural health strategy - continued funding 0.2 0.0 0.0 0.0 0.2

Continued higher rebate for OMPs in rural areas 0.0 0.0 0.0 0.0 0.0

Additional medical school places in Queensland 0.2 0.4 0.7 0.9 2.2

Regional medical schools - extension of funding 0.0 0.0 0.0 0.0 0.0

Regional health service centres - extension of funding 0.0 0.0 0.0 0.0 0.0

Regional medical students - extension of assistance 0.0 0.0 0.0 0.0 0.0

Sub-total health for regional, rural & remote 0.4 0.4 0.7 0.9 2.4

National Health Information Network -1.8 -4.4 -4.8 -4.1 -15.1

Private health insurance - e-commerce partnerships 10.8 11.9 13.2 12.4 48.2

Parental access to information 1.4 0.8 0.8 0.8 3.9

Sub-total health information technology 10.4 8.3 9.2 9.1 37.0

Premium support scheme 11.1 11.7 12.3 12.9 47.9

Run-off insurance vehicle (* no reliable estimate yet) * * * * *

2005 policy review working party 0.1 1.2 0.0 0.0 1.2

2004-5 FEDERAL BUDGET—HEALTH & AGED CARE MEASURES TABLE 8

Changes to UMP liability contributions 6.8 9.9 9.5 9.5 35.7

Sub-total medical indemnity 18.0 22.8 21.8 22.4 84.8

ALL HEALTH MEASURES 264.1 252.4 264.5 281.1 1,061.8

Conditional incentive payment 78.8 168.5 261.5 368.9 877.8

Additional viability support for rural homes 2.3 4.1 4.2 4.2 14.8

Sub-total quality initiatives 81.1 172.6 265.7 373.1 892.6

More aged care places 0.0 0.0 34.1 24.4 58.4

Increased supplements for concessional residents 123.4 113.0 104.1 98.1 438.6

Contribution to improved building standards 0.0 0.0 0.0 0.0 0.0

Guarantee fund 0.8 0.0 0.0 0.0 0.8

Sub-total better aged care homes 124.2 113.0 104.1 98.1 439.4

Better skills for aged care 14.2 26.2 29.3 31.7 101.4

Improved assessment & case management 10.1 15.2 11.2 11.4 47.9

Culturally & linguistically diverse communities 2.1 3.1 3.2 3.3 11.6

Aboriginal & Torres Strait Islander flexible services 1.5 2.7 2.9 3.1 10.3

Information, implementation & training 9.3 2.1 1.4 1.5 14.3

Additional funding for standards & accreditation agency 0.0 0.0 6.1 4.8 10.9

Web-based information on aged care homes 1.3 0.3 0.3 0.3 2.1

Sub-total care in the right places 24.3 23.4 25.1 24.4 97.1

New funding & payment arrangements 7.1 7.6 13.2 5.1 33.0

Fairer means testing 1.9 6.3 5.9 5.6 19.7

Strengthening review process 7.2 7.3 7.3 7.4 29.2

Sub-total streamlined administration 16.2 21.2 26.4 18.1 81.9

Quality assurance framework for community & respite care 3.7 3.2 3.3 3.5 13.7

Ensuring quality care for residents 0.0 0.0 0.0 0.0 0.0

Simpler income testing for residential aged care 0.0 0.0 0.0 0.0 0.0

National Strategy for an Ageing Australia 0.0 0.0 0.0 0.0 0.0

Subsidise accreditation fees for small facilities -1.2 -0.1 -1.9 -1.4 -4.6

Sub-total other aged care measures 2.5 3.1 1.4 2.1 9.1

ALL AGED CARE MEASURES 262.5 359.5 486.1 571.9 1,679.9

TOTAL OF HEALTH & AGED CARE MEASURES 526.6 611.9 750.6 853.0 2,741.7

Of which new spending 2,804.4

Of which savings measures -62.7

Box 1: What’s meant by “measures”

Whether savings measures (cuts) or new (additional) spending, figures for Budget measures represent the difference between two sets of Budget/forward estimates—the old set and the new. In other words, the new spending or the cut is the difference between two mythical forward-looking figures, neither of which might have much connection in hindsight with the actual level of spending. It is often assumed that the old set might have represented, in some way, the cost of an existing policy and that the new set in turn reflects a new or amended policy. However, it is not as simple as that. The forward estimates are manipulated and habitually display a downwards bias to fool financial markets into thinking that the Budget is on the rails in the medium term and to allow room for “new spending” which is really just a continuation of the old.

Sometimes, the forward estimates (old and new) are implausible. And the difference between two implausible numbers is one implausible number. At other times the forward estimates have “fat” built into them quite deliberately by manipulation of the parameters.

It is virtually impossible to ascertain after the event the extent to which budgeted cuts may have been achieved. There are so many things and so many ways to muddy the waters. Unexpected higher levels of spending can be attributed to higher inflation or other externalities. This opens the door to “Clayton’s cuts”—cuts which are included to make the forward estimates of spending appear modest and responsible even though the chances of the full extent of the cuts being achieved are slim.

—oOo—