Budget 2017 sees Medicare rebate freeze slowly lifted and more funding for the NDIS: experts respond

As expected, the government has announced a progressive lifting of the Medicare rebate freeze. Together with removing the bulk billing incentive for diagnostic imaging and pathology services, as well as an increase in the PBS co-payment and related changes, this will cost a total of A$2.2 billion over the forward estimates.

Other announcements include:

• From July 1, 2019, an increase in the Medicare levy from 2% to 2.5% of taxable income, with the extra half a percent directed towards the NDIS
• $1.2 billion for new medicines
• an increase in hospitals funding by an additional A$2.8 billion over forward estimates
• $115 million for mental health, including funding for rural tele-health psychological services, mental health research and suicide prevention
• $1.4 billion for health research, including $65.9 million this year to help research into children’s cancer.

All up, these commitments equate to A$10 billion.

Stephen Duckett - Health Program Director, Grattan Institute

As foreshadowed in pre-budget leaks, the government is slowly unthawing the Medicare rebate freeze, but at a snail’s pace. At a cost of A$1 billion over the forward estimates, indexation for Medicare items will be introduced in four stages, starting with bulk-billing incentives from July 1, 2017.

General practitioners and specialists will wait another year - until July 1, 2018 - for indexation to start up again for consultations, that make up the vast bulk of general practice revenue. Indexation for specialist and allied health consultations is slated to start from July 1, 2019.

Certain diagnostic imaging items (such as x-rays) will be the last cab off the rank. Indexation will start up again from July 1, 2020.

There is no mention of reintroducing indexation for pathology items. This may be due to the recognition that there is money to be saved in pathology.

Regardless of the reaction of medical lobby groups, it is too early to tell whether this glacially slow reintroduction of indexation will be enough to keep bulk-billing rates at their current levels. Practice costs and income expectations of staff have not increased dramatically over the freeze period as the Consumer Price Index has been moving slowly. But each additional day of a freeze means costs and revenues fall further out of alignment.

The jury will be out for a while on whether reintroduction of indexation is enough to restore the Coalition’s tarnished Medicare credentials with voters.

Certainly, the slow phase-in may attract cynicism, with a legitimate perception the government is doing the minimum necessary and at the slowest pace to ensure the issue is off the agenda before a 2019 election.

There is no sign in the budget that the government has sought any trade-offs from the medical profession in exchange for the reintroduction of indexation, so we will have to wait to put in place better foundations for primary care reform.

Helen Dickinson, Associate Professor, Public Service Research Group, UNSW

Since its inception, there have been a number of bitter political battles over how the National Disability Insurance Scheme should be funded. Many have been nervous the current Productivity Commission review into the costs of the scheme could lead to a scaling back of the NDIS before it is fully operational.

The NDIS operates under a complex funding arrangement split between federal, state and territory governments. Until now it has been unclear where the federal component of this commitment will come from, and a significant gap was emerging from the middle of 2019.

Today’s budget promises to fill this funding gap, in part through an increase by half a percentage point in the Medicare levy from 2 to 2.5% of taxable income. Of the revenue raised, one-fifth will be directed into the NDIS Savings fund (a special account that will ensure federal cost commitments are met).

A commitment has also been made to provide funding to establish an independent NDIS quality and safeguards commission to oversee the delivery of quality and safe services for all participants of the NDIS.

This will have three core functions: regulation and registration of providers; complaints handling; and reviewing and reporting on restrictive practices. While such an agency will be welcomed by many, the devil will be in the detail as to whether it is possible to deliver this in practice.

More to come