Should today’s patients have to fund tomorrow’s medical research?

Background information

Most Australians respect the Abbott government’s ambition to set up the world’s largest medical research future fund (MRFF) but may resent the prospect of paying $7 of their own  money each time they visit their general practitioner.

It is just one of a raft of measures to reduce Australia’s increasing dependency on welfare payments, and to lower the growing national debt.

With ageing of Australia’s population the cost of social security and welfare has swollen to 35% of the Budget, or about $145 billion in 2014-15.

The national debt will reach $667 billion by the year 2024-25 unless the tough measures advocated by the Coalition are adopted.

“Belt-tightening” by all Australians was necessary to reduce the debt to $389 billion in that year. The savings in interest payments could then be channelled into projects that would build the economy.

Instead of being acclaimed for their fiscal responsibility, demonstrating their credentials as the better of the two parties in managing the economy, the government has had to become defensive, and has struggled to justify their actions to an electorate that sees the changes as unfair  even draconian. To make matters worse, they have had to negotiate with a large (18 members) unruly Senate cross-bench.

Budget changes to social security and welfare

Revenue Saving measures to be adopted:

  • increasing the pension age to 67 by 1 July 2023.
  • further increasing the pension age to 70 by 2035.
  • the Aged and Disability Support Pensions will be indexed to more slowly increasing inflation than wages from September 2017. Eligibility thresholds to be paused for three years.
  • the Commonwealth Seniors Health Card thresholds will be indexed from September 2014, and will include untaxed superannuation income.
  • eligibility for Family Tax Benefit Part B (introduced by John Howard) will be tightened, particularly when the youngest child is six or over.
  • Income support from 1 January 2015 for those up to 30 year of age will have to work for the dole and satisfy job search requirements for up to six months before receiving Newstart or Youth Allowance payments

 

Welfare payments that will be increased;

  • Low income single parents will receive $750 per child aged between 6 and 10
  • Wage subsidy of $10,000 over two years for employers of eligible mature-age job-seekers from 1 July 2014.
  • Paid parental leave scheme with an income cap of $100,000 for six months to help mothers stay in employment.

The Co-payment proposal

The $7 payment will be paid not only for GP consultations, but also for out-of-hospital pathology and radiological imaging services.

$5 of this amount is invested in the MRFF, with the $2 balance meeting the providers administration costs. The government benefits from the $5 MRFF contribution by paying $5 less Medicare benefit on each service.

For concessional patients and children under 16 the contribution will be for the first ten services. Health Assessment Services and Chronic Disease Management will be exempt.

From 1 July 2015 the incentives for providers accepting bulk-billing payment will be replaced by a low-gap incentive arrangement if providers restrict the patient gap payment to no more than $7, and do not charge concessional patients for more than 10 services per year.

The Medical Research Future Fund Proposal

It is an ambitious undertaking that seeks to amass $20 billion by 2020. It commences 1 January 2015 with $1.1 billion of seed capital from the existing Health and Hospital fund (HHF) which now has $2,170 million in the kitty.  Like the HHF which it replaces, the MRFF will be administered by the board of the existing Future Fund.

Distributions for research will not exceed the interest income and are projected to be $20 million after the first year in 2015/6, to increase to $500 million in 2019/20, and ultimately from 2022-23 onwards to be around $1 billion per annum. These investment projections are probably realistic in view of the investment track record of the Future Fund.

The Future Fund was established in May 2006 by then Federal Treasurer Peter Costello, who is now the Chairman. The government’s residual holding in the privatised Telstra was folded into the new fund at its inception.

The Future Fund has been a widely applauded measure of the Howard/Costello Coalition government, and to its credit has grown to $101 billion with the assistance of an extensive panel of Investment Managers. At a 7.1% per annum return since inception despite the global financial crisis, the Board’s aim of CPI plus 4.5% has been achieved. The original contribution was $60.5 billion, to which has been added $40 billion.

Distributions for medical research will be mostly directed through the National Health and Medical Research Council (NHMRC) in nine priority areas including cancer, cardiovascular disease and diabetes for the work of the various research institutions.

Two specific areas of medical research funded through grants to the Australian Research Council (ARC)  in 2015-16 are:

$42 million to the Tropical Health & Medicine Institute at the James Cook University.

$26 million for Dementia Research.

http://www.budget.gov.au/2014-15/content/overview/download/Budget_Overview.pdf

http://www.futurefund.gov.au/

What high income earners will pay

 The imposition from 1 July 2014 to 30 June 2017 of a Temporary Budget Repair Levy on taxpayers (around 400,000) who have a taxable income in excess of $180,000. They will pay 2% on the taxable income amount over $180,000. Estimated revenue is $5.7 billion.

This is perhaps a token measure towards equality. Someone on $200,000 a year would be levied on $20,000 and would pay $600 over the three years of the levy.

On a salary of $300,000 per annum the bill would be $7200 over the three year period.

 

 

 

 

 

 

About Kenneth Robson

I studied at Adelaide Boys' High School, and the University of Adelaide, Medical School. graduating in 1961. My field of specialisation was Plastic and Reconstructive Surgery. Prior to establishing my practice in Adelaide, I spent 5 years working in India, and Papua-New Guinea, in the field of reconstructive surgery for leprosy. In retirement I joined the Australian Technical Analyst Association and passed the two examinations for a Diploma inTechnical Analysis, and the designation Certified Financial Technician (CFTe) by the International Federation of Technical Analysts.
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