2014 budget cuts to health spending

Spending cuts to health from the 2014 federal budget are likely to hit anyone who gets sick.

Can you afford to get sick?

The first budget from the Hockey/Abbott team is a tough one. The government has made significant cuts and changes to health spending, and the new measures may hit your wallet hard.

CHOICE looks at what the 2014/15 budget will mean for Australians, including:

CHOICE is lobbying against these changes. CHOICE CEO Alan Kirkland says, "Besides the impact on consumers' hip pockets, the concern with these changes is that they will deter people from seeking preventative health care, which is bad for public health, and bad for the health budget in the long run."

Higher costs for GPs, tests and X-rays

Australian consumers will face higher costs for seeing their doctor and getting diagnostics. Changes from 1 July 2015:

  • A $7 co-payment for GP visits and out-of-hospital pathology and X-rays that are currently bulk billed, with a cap of a maximum of 10 patient contributions per calendar year across these services for concession cardholders and children under 16.
  • The states will be allowed to charge a $7 co-payment for visits to emergency departments (though whether they choose to do this remains to be seen).
  • The Medicare rebate for the above services will be reduced by $5, so if you currently aren't bulk billed you won't pay a co-payment but will receive $5 less from Medicare.

Higher costs for medications

Those who are prescribed medication will also see increased costs. From 1 January 2015:

  • You'll pay an additional $5 contribution for medications subsidised under the Pharmaceutical Benefits Scheme (PBS) that cost more than $37.70.
  • Concession card holders will pay 80 cents more for PBS prescriptions that cost more than $6.10.

Higher thresholds for PBS safety net

If you spend over a certain amount on PBS medicine (prescription drugs covered by the government-subsidised scheme) within one calendar year, you can get the rest of the year's medication cheaper or for free. While the safety net will remain, it will get decidedly less supportive.

Under current arrangements, from 1 January 2015:

  • Concessional card holders can get free PBS medicine for the rest of the year once they've spent over $366. This is equivalent to 60 prescriptions a year.
  • Other Medicare card holders who spend more than $1452.50 on PBS drugs pay only up to $6.10 for subsequent PBS medications in a year.

But under proposed new arrangements, from 1 January 2015:

  • The concessional safety net will kick in only after you've paid for 62 prescriptions (or $427.80 for the year) and will get progressively worse, increasing by two prescriptions each year for a further three years — from 62 in 2015 to 68 in 2018.
  • The general safety net threshold will only kick in once you've spent $1597.80 per calendar year and will increase by 10% above inflation for a further three years.

Higher costs for specialists

From 1 July 2014, you may pay more if you visit a specialist, allied health professional, nurse practitioner, midwife or dental surgeon. Here's why:

  • Indexation of all Medicare Benefits Schedule fees has been suspended since 1 November 2013 and will continue to be suspended for a further two years.
  • Indexation of the fees in the Department of Veterans' Affairs (DVA) Schedule of Benefits will also be suspended from 1 July 2014 for 24 months.
  • The suspension excludes GP visits and bulk billing incentives paid to GPs.
  • Changes won't affect fees for pathology and diagnostic imaging services that are not indexed annually.

Lower threshold for Medicare Safety Net but huge holes

The good news is that the Medicare Safety Net, which kicks in once you've spent a certain amount (depending on your circumstances) on doctor's visits in a year, will in most cases kick in at a lower amount.

From 1 January 2016 a single Medicare Safety Net (SMSN) for out-of-hospital services will replace the Extended Medicare Safety Net (EMSN), the Original Medicare Safety Net (OMSN) and the Greatest Permissible Gap (GPG). The thresholds are:

  • $400 – for singles with a concession card or families with a concession card.
  • $700 – for singles with no concession card or families receiving Family Tax Benefits Part A with no concession card.
  • $1000 – for families with no concession card.

From 1 January 2017 the thresholds will be increased each year in line with inflation. But while this may seem rosy, there is plenty of bad news.

  • There will be new limits on the out-of pocket costs for each service that can accumulate towards the safety net threshold.
  • Once you have reached the threshold, you'll receive 80% of your out-of-pocket expenses (down from 85%) up to a cap of 150% of the Medicare Schedule fee. This means that if your doctor charges more than 150% of the fee (which is quite possible when it comes to specialists), you're on your own for whatever is on top - you'll only have limited protection against out-of-pocket costs.

No tax relief for medical costs

Up until last year, if your out-of-pocket medical expenses were over a specified limit, you may have been eligible for a tax offset (depending on your income). However, the tax offset is being phased out (this started from July 2013). This means:

  • From 1 July 2013, if you received the offset in 2012-13 you will continue to be eligible for the offset for 2013–14 if you have expenses above the relevant claim threshold.
  • Similarly, if you receive the tax offset in 2013-14 you will continue to be eligible for the offset in 2014-15.
  • The offset will continue to be available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019.

Longer waiting lists in public hospitals

According to reports, the national partnership agreement on public hospitals, which begins on 1 July, has been cut. This is bad news for healthcare, with cuts from public hospitals of:

  • $217m in 2014-15
  • $260m in 2015-16
  • $133m in 2016-17

The big cuts begin in 2017-18. From then on, Commonwealth public hospital funding increases only in line with inflation and population growth. There will be no Commonwealth contribution towards increases in costs in line with rising treatment costs and the ageing population.

State premiers say this means that 1200 hospital beds across Australia will get cut almost immediately. This would obviously lead to longer waiting lists for elective surgery.

Thresholds for Private Health Insurance Rebate and Medicare Levy Surcharge frozen

Just when you thought it might be a good idea to take out private health insurance, it gets more expensive. Once you earn over a specific income level ($90,000 for a single or $180,000 for a family or couple) you will no longer get the maximum private health insurance rebate on your premiums. The maximum rebate used to be 30%, but from this year is only 29.04% and will diminish every year. On top of that, the income level will not be indexed between 2014-15 and 2017-18 so more and more people will get a lower rebate.

The same income levels apply for the Medicare Levy Surcharge (MLS) so if you think it might be better not to have hospital insurance because of the high premiums, think again: basic hospital policies are usually cheaper than paying the MLS.

For more on the new budget, see CHOICE's full 2014 federal budget wrap-up.