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2010: The Year For Major Health Reform in Australia

Following two major reports outlining the effects of the aging population on our economy, Prime Minister Kevin Rudd declared that without policy change, State Governments will run massive deficits due to the rapid rise of health spending and limited growth of government revenue.

While health costs are growing at 11 per cent a year, tax revenue is growing at 4 per cent a year as a result of fewer individuals entering the workforce. If this continues, the Treasury projects that by 2045-46, the total health spending of all states will exceed 100 per cent of tax revenue.

Forty years ago, spending on health services and aged care amounted to some 1 per cent of Australia’s annual Gross Domestic Product, this figure has now increased to 4 per cent. By 2050, it is projected that it will increase to 7 per cent. In dollar terms, this would equate to $200 billion across 40 years. These figures do not include individual spending on private health insurance and out of pocket payments.

To overcome this threat to the sustainability of government budget and avoid the need to support a crushing deficit, the Rudd government is presented with two choices:

  1. Reduce spending on health services, pensions and aged care
  2. Boosting productivity and growing the workforce to increase tax revenue

Given the country’s aging population, reducing spending on health services and aged care is a far from feasible option, especially given that this money is also being invested in advances in medical technology that ultimately will improve health and increase longevity. With this, the government may be introducing a single funder model for hospitals, with the Commonwealth funding state run health facilities.

Therefore, the Prime Minister aims to reduce the slowdown in economic growth by improving productivity within the workforce by an average of 2 per cent per year. This action will ensure that the government can cope with the rapid increase in health spending in Australia without running into a deficit.


Changes to the Extended Medicare Safety Net (EMSN)

From the 1st of January 2010, the Australian Federal Government introduced a cap on some services paid through the Extended Medicare Safety Net (EMSN); an additional rebate for individuals or families who incur out-of-pocket costs for out-of hospital services including general practitioners and specialist visits.

Prior to this change, when an individual or a family’s out-of-pocket costs exceed a certain threshold amount in a calendar year, 80% of out-of-pocket costs incurred through the use of out-of-hospital services is paid through the EMSN for the rest of the calendar year.

For example if Jane undergoes a pregnancy scan which costs her $200. She will receive $60 back from Medicare under the standard Medicare benefits Schedule rebate, leaving her with $140 out-of-pocket cost.

Previous to 2010, if Jane had reached her EMSN for the year, she would receive $112 back from Medicare under the EMSN (80% of out-of-pocket). Therefore the maximum Medicare benefit Jane could claim was $172.

However, due to the introduction of benefit limits, she can only claim a capped amount of $35.55 under the EMSN rebate. Add this to the Medicare Benefit Schedule rebate; Jane would be only eligible to claim a maximum Medicare benefit of $95.05.

Services affected by new EMSN Benefit Limits include:

  • Obstetrics services
  • Some pregnancy related ultrasounds
  • Assisted reproductive technology (ART)
  • One type of cataract operation
  • Injections of therapeutic substances into an eye
  • Hair transplants for treatment of hair loss as a result of disease or injury
  • One type of varicose vein treatment

What does this change mean?

If you or a family member needs to see a doctor or have medical tests regularly you could end up with high medical costs. The new caps on EMSN benefits can have a dramatic affect on out-of-pocket costs. If you or a family member needs to undergo any of the following services in the near future...

  • GP and specialist consultations
  • Ultrasounds
  • Pap tests
  • Blood tests
  • CT Scans
  • X-rays

Its time to consider how your health insurance can continue to provide security for your family.