John Hill MP – Economic challenges to manage health with aging population

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John Hill MP Source Adelaide Now

John Hill MP Source Adelaide Now

“we need to have a good open public debate about these issues if our bonus years are not to become a burden on our children”

This morning the COSA ASM in Adelaide opened with some powerful presentations and speeches, these included a very candid and clear message from John Hill MP regarding the stark economic challenges to the national and state governments, the medical community and individuals.

Introduced as former South Australian Minister for Health and one of Australia’s longest serving and most respected health minsters.  In their introduction of the former Minister Professor Dorothy Keefe and Dr Robert Prowse highlighted his unique insight gained through being one of Australia’s longest serving health ministers – which has allowed him time to fully grasp his brief and gain valuable knowledge, insight and experience often lacking from other political health representatives who tend to vacate their positions more quickly. The former Minister has very kindly shared his very interesting speech with us.

He poses and provides his input into 5 important questions surrounding Economic challenges to manage health with ageing population:

1. From where will our future workforce come?

2. Will taxpayers be willing to see more and more of their taxes spent on health services for the elderly and less and less on their own needs?

3. What incentives [and disincentives]will work to reduce behaviours which lead to hospitalisation?

4. How do we develop a culture of reform in our institutions?

5. If all else fails how will we ration health resources?

Here follows the full unedited transcript provided by the Minister:

Full speech by John Hill MP

Economic challenges to manage health with ageing population

Kaurna acknowledgement

Good morning to everyone – especially visitors to SA.

When I became this state’s health minister in November 2005, there was frustration around the cabinet table about the inability of health to live within its budget, coupled with a concern that all this extra money didn’t seem to be doing much to address the ever-present complaints about long waits in emergency departments and for elective surgery.

As a neophyte health minister I asked my department to produce a plan to deal with all the issues – to make our system sustainable.

The SA Healthcare Plan was released in 2006 – a ten year strategy to modernise our system, change the health culture and redress the balance between in-hospital and out of hospital care.

The starting point for the strategy was the projection made by SA Health and Treasury in 2006 about the State health budget which showed that at the then rate of annual growth in health department expenditure – about 9% and double the State’s revenue growth – the entire State budget would be needed by 2032 to meet expected demand.

This growth is driven by our demography and, in particular, the ageing of our baby boomer population.

SA Health statistics produced in 2006 predicted that by 2016 the South Australian population will be growing at around 4% a year. That part of the population aged over 75 will be growing at around 9% while the under 15s will be growing at only 1%. These projections encapsulate all of the health economics issues that our community will face in the coming years.

The Sustainable Australia Report 2013 predicts that the Australian population over 65 will increase by 86% between 2011 and 2031 – ie an increase from 14% to 20% of the total population.

And we know that on average a person over 65 is twice as likely as a younger person, in the course of a year, to need a hospital bed. And a person over 85 is five times more likely to need one. So the ageing of our population will result in exponential growth in hospital demand.

We also know that this growth in our older population and its increasing demand for services will continue until about 2040 when the ‘baby boomer’ generation starts to die off.

Not only are there more baby boomers than previous or subsequent generations but we are living longer than previous generations. A double-whammy effect.

Around the end of the 19th century an average male life was about 47 years while a female could expect to live for 50 years. Just over a century on we have added about 30 years – a man on average can expect to make 77 and a woman about 80. What other century can boast such a substantial improvement in life expectancy? Think of all of the achievements of medical science, vaccinations, sanitation, housing, safer workplaces and better roads and cars. In particular think of the huge improvements in infant mortality.

However, the average number of years lived obscures what is happening at the older and more expensive end. In 1910 a man aged 50 could expect to live to 71.2 and a woman to 73.7; in 2011 that 50 year old man can expect 82 years and a 50 year old woman will reach 85.6 years.

And of course we are starting to see increasing numbers of the very old – my dentist told me a few years ago how he had attended a special training day focussed on managing the teeth of centenarians.

Before I continue with the nature of this anticipated growth and what we need to do about it – it’s important to say that these extra years should be seen as bonus years not burdensome years. We should not develop an argument about health economics based on a deficit model of a century of achievement.

Health consumes currently about 30% of the State budget. About ten years ago it was closer to 25%. That means that in today’s dollars we have to contribute about three quarters of a billion more dollars to run our system now than then. That means less money for other agencies. Especially the ‘softer’ areas – like the environment and the arts. Ironically, areas which have a positive impact on health outcomes.

The ageing of our population is not the only problem facing our health budget. When Medicare was introduced the Commonwealth offered the states a deal that they would pay half the running costs of hospitals if, amongst other things, the state’s stopped charging patients for using emergency departments.

Unfortunately, the Commonwealth reneged on that deal.

By the time Tony Abbott was Health minister in the Howard Government in 2007 the Commonwealth’s share of hospital funding had fallen to around 40%. In other words the State’s contribution had risen to 60% – and that, as I have already indicated, is 60% of a much bigger budget.

The Rudd Government’s Health commitment was not to restore the 50/50 funding model – sadly that seems gone forever – but to fund growth in demand on a 50/50 basis, but based on a nationally assessed and bench-marked ‘price’ for services. What that means is if we don’t run our system  efficiently – we will pay more. It will be interesting to see where Tony Abbott as Prime Minister takes health.

Ladies and gentlemen, as I hope I have demonstrated the economic and social issues facing us are immense and we have only a relatively short period of time to address them.

In the remainder of my speech I want to talk to the questions I listed in the printed synopsis provided for this event.

1. From where will our future workforce come?

2. Will taxpayers be willing to see more and more of their taxes spent on health services for the elderly and less and less on their own needs?

3. What incentives [and disincentives]will work to reduce behaviours which lead to hospitalisation?

4. How do we develop a culture of reform in our institutions?

5. If all else fails how will we ration health resources?


Firstly, our workforce – it is ageing at the same rate as the rest of the population. Over the next ten years or so we will see substantial numbers of senior clinicians retiring. There are two challenges: the recruitment of replacements workers and the retention of existing clinicians, including those who may have reached retirement age.

I am reasonably confident that given the status, pay and numbers required we will find it relatively easy to find new doctors. Maybe not in all specialties – and certainly recruiting for country areas will continue to be difficult.

However, nurse recruitment will be incredibly problematic. If it hadn’t been for the global financial crisis, it may have been already – ironically the GFC meant that the normal rate of nurse retirement and resignation fell quite dramatically and as a result a number of graduates have been unable to find employment in SAHealth. But in future years there will be shortages.

Workforce reform must accelerate to help retention and support recruitment – that means greater flexibility in working hours, the adoption of a skills-based rather than a job title approach to work, creation of new roles such as physician assistants and the expansion of existing roles  such as nurse practioners. We also should make more use in particular of the network of highly trained pharmacists, who seem to have morphed into glorified shop-keepers. They have great skills and I know are very keen to use them, for example providing vaccinations and support in primary health campaigns around smoking and obesity.

We will also be very dependent on immigration No sensible person looking at our nation’s demography could be in any doubt about this. We need bucket loads of younger people – if they have skills great; if not let’s educate them. A few years ago I signed a memorandum of understanding with the government of Vietnam to work with them to train in English and nursing young Vietnamese to help supply our future needs.

My second question relates to intergenerational equity. Will this generation of tax payers be prepared to pay more and more taxation to support the baby-boomer generation as it ages? Will they support the proposition that elderly citizens can move into subsidised nursing homes while the family home is left empty?

I see a very big political fight looming between the generations. On the one side will be the property owning and numerous ageing boomers demanding more and more support; on the other side will be the numerically smaller younger generations, struggling, if they are lucky enough, to be paying off a mortgage, managing rapid career changes and paying high levels of taxation while getting fewer and fewer services.

In order to prevent this potential conflict we have to work out a way to support the bonus years of life – without the burden.

To me that means that older citizens who can afford it will have to pay more for their support.

We have to challenge the idea that the State will pay for everything.

A few years ago a retired man came to see me in my electorate office complaining about the time he was told he had to wait before he could get hip replacement surgery through the public hospital system. He was anxious to have it done before he went on a luxury cruise through Europe that he had already booked and paid for.

Recently, I visited England and part of my reason for going was to visit a number of nursing homes. Unlike in Australia, English individuals have to pay for their nursing home care (1000 – 1500 pounds a week) if they have the means to do so, out of their income or assets, including their home.

We must debate this concept more seriously in Australia – recent national reports have suggested schemes to allow this to happen. Use the assets people have accumulated in their lifetime to support their last years, rather than passing them on to their children. After all what is the benefit to a generation inheriting property if their early and middle years are spent paying high taxes with few services?


The third issue is to do with personal behaviour, prevention and primary health care.

What incentives and disincentives will make our citizens more careful about what they do with and to their own bodies.

We have seen over the decades incredible changes in smoking rates – I’m pleased to say SA now has amongst the lowest rates in Australia and dropping. This has been brought about by concerted national and state efforts to educate people about the dangers of tobacco, to provide support to those giving up and to remove the glamour associated with cigarettes for young people. This has been an incredibly sophisticated and successful campaign which has reduced mortality and morbidity.

When I was young peer pressure was to take up smoking; for most of today’s kids the pressure is in the opposite direction. Sadly, not so for Aboriginal communities – yet. But good work is happening there too.

Other campaigns around road safety, alcohol consumption, drug use have had success as well.

The elephant in the room, of course, is obesity. How do we stop people from eating themselves to death? How do we fight fast food and sugary drinks?

We have been working on a model in this state called OPAL, based on a French social change model: EPODE, which is focussed around families, schools and communities. I am optimistic, if it continues to be funded, that we will make progress.

We have also moved to make sure fast food restaurants publish kilojoules next to their products. These are good steps, as is the announcement made this weekend by the Premier to double the number of schools with Stephanie Alexander gardens. But a lot more needs to be done.

I am enthusiastic about the possibility of a sugar tax on soft drinks. The lower the sugar the lower the tax.

We need a national focus on this issue with a bold agenda and bi-partisan support – backed up with the same kinds of energy and professionalism that has characterised anti-smoking campaigns over decades. We have to counter the vested interests and their supporters who cry ‘nannyism’ and who use terms like ‘individual freedom’ and ‘consumer choice’ to protect their markets.


My fourth question deals with the culture of our institutions and how to reform them. Somebody recently said about Adelaide ‘Everyone wants things to be different, but nobody wants change.’

We have made a good, some might say impressive, start in this state with the development of the health and biomedical facilities just down the road from here. When complete, the New RAH, Sahmri and the other research and training facilities will constitute the biggest such centre in the southern hemisphere – but more importantly a brave and bold new way of doing business. It will be, I hope, the poster child for change. A patient centred focus for the hospital, backed up by the most advanced technology available, in purpose built facilities – efficient, safe and comfortable. Strong connections with research and training – involving all three of our universities.

Along with these modern facilities we need modern working arrangements – I am pleased to note that as a result of the recent enterprise agreement with doctors we will have senior doctors available to assess and treat patients around the clock – this should lead to quicker and better decision making and shorter stays for patients. And this will be backed up with nurse led discharge of patients – something which was beginning to be trialled at Flinders at the time I stepped down from the portfolio.

In addition we must continue the push to increase the capacity of our primary health services, as we have with our GP plus concept, to take a population health approach. A recent survey revealed that almost 1 million Australians have been diagnosed with diabetes and there are another 231,000 who have the disease without knowing it and a further 700,000 are at risk. All of these people need to be identified and helped if we are to reduce their eventual impact on our health services.

My fifth question is the most challenging: if all else fails how will we ration health resources?

There are plenty of options – none of them particularly nice. Money is one way to ration – a user pays model. I think it’s fair to say most of us in this room have private health care or the means to buy services if we need them, so we and senior policy makers like us won’t ever be personally affected. But those who can’t pay would have to wait. I have spoken to too many people in pain while waiting for surgery to know that longer waits is a cruel option.

We could also discriminate on the basis of how well someone has looked after themselves – if you smoke, drink, eat too much – go to the end of the queue. But that’s just another way of discriminating against the poor and the vulnerable.

Some communities have rationed on the basis of age with a kind of actuarial assessment of benefit. If you are more than 90 should you be able to have a hip replacement? Or heart surgery? All sound and rational until we know someone so affected. We have got to be careful not to use modelling to ignore individual capacity and need.

Perhaps one way would be to develop some kind of health budget which could be nominally allocated to each person once they reached 65. A sum, that could be used to help pay for private insurance or purchase services in both the health and aged care areas and which when expended would mean that a person’s own assets would need to be accessed prior to further public funding.

Perhaps the banks or governments could develop reverse mortgage or interest free loans schemes similar to the HECS scheme which could become a charge on an estate – and which would not be payable if no assets are available. We have something like this through the Retirement Villages Act, which allows deferred payment schemes to operate which enable older citizens to access appropriate accommodation in village communities.

Ladies and gentlemen we need to have a good open public debate about these issues if our bonus years are not to become a burden on our children.

Thank you.



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