Article Commentary: Ageing time bomb will ‘overwhelm’ hospitals and budgets
Summary: "The $250 billion healthcare system will be overwhelmed by a four-fold increase in the number of people turning 80 and put extraordinary financial pressures on younger taxpayers, patients and the industry"
1. Australian Financial Review: Ageing time bomb will ‘overwhelm’ hospitals and budgets (John Kehoe)
Full Text:
The $250 billion healthcare system will be overwhelmed by a four-fold increase in the number of people turning 80 and put extraordinary financial pressures on younger taxpayers, patients and the industry, the chief executive of health insurance and wellbeing company Australian Unity has warned.
Rohan Mead said unless there was an urgent redesign of the healthcare system to better manage ageing diseases through technology and a broader range of allied health professionals, throwing more money at the demographic time bomb would not fix the problem.
In just two years – in 2027 – about 80,000 baby boomers will turn 80, compared with an average of about 20,000 new octogenarians each year between 2000 and 2020. The number of people turning 80 will hover around 60,000 for the next 20 years, according to projections from the Australian Bureau of Statistics.
Mead said not only would the outdated healthcare system be unable to cope, it would have a massive financial impact and suck away workers from other parts of the economy.
“These numbers will overwhelm current systems,” Mead said in an interview with The Australian Financial Review.
“This will present as crises of bed blockers, absence of aged care beds and facilities, too few doctors, ambulance ramping etcetera.
“These matters are becoming so fiscally serious that if we don’t attend to the policy shape of these healthcare systems, then we will actually impact adversely on the prosperity of Australians.”
Australian Unity chief executive Rohan Mead. Elke Meitzel
Mead, who is also chairman of the Business Council of Australia’s health and care economy committee, said the simple but wrong panacea would be for federal and state governments, health insurers and patients to just pump more money into a flawed system.
“The temptation will be just to throw money at this,” he said. “We will just be feeding the old model, which is not fit for purpose.”
Mead’s comments come as Prime Minister Anthony Albanese makes healthcare funding a key part of Labor’s re-election platform, including $8.5 billion to boost Medicare bulk billing and $644 million for urgent care clinics.
Labor on Tuesday unveiled a further $2.6 billion to help fund an extra 12 per cent pay rise for aged care nurses, taking to more than $20 billion in taxpayer-funded wage increases handed to the aged care sector since the Albanese government came to office.
Speaking from Canberra Hospital, acute medicine physician Nick Coatsworth said Mead was right that the primary healthcare system needed to be less reliant on doctors.
Former deputy chief medical officer Nick Coatsworth. Jamila Toderas
“Increased rebates for general practitioners is not the solution,” Coatsworth said.
“What you need is more at-home care or a one-stop shop for 80-year-old patients between general practice and hospital care.
“You have to change the model away from the GP at the centre of the system, to allied health professionals, physiotherapists, occupational therapists, pharmacists to check medications and social workers who can direct people to services.”
Intergenerational divide
The ageing population challenge has been known since former federal treasurer Peter Costello’s first intergenerational report in 2002.
Former Treasury secretary Ken Henry warned last month the social compact with working-age taxpayers was at risk of breaking down as they were forced to fund more government spending on an ageing population requiring healthcare and aged care.
Mead agreed. “That sets up a range of pressures, including raw fiscal affordability, but also pressures around intergenerational equity.”
The old-age dependency ratio – which measures the number of people aged 65 and over for every 100 people of traditional working age (15 to 64) – was 15 per cent in 1983, rose to 26.5 per cent in 2023-24 and is tipped to hit 39 per cent in 2065, according to Treasury.
Health, aged care and the $49 billion National Disability Insurance Scheme are three of the five fastest-growing costs to government.
Mead said Australia must improve the “care economy”, including health, aged care and the NDIS, by responding to demographic pressures.
“We’ve got to get on to building a system that is designed for the reality of decades of a large proportionate number of Australians who are going to be over 80 and large consumers of health and aged care services.”
He said the old healthcare business model had been successful at treating acute diseases on a periodic or transactional basis. Typical examples included visiting a GP for an infection to receive an antibiotic prescription, going to hospital for an accident or emergency such as appendicitis or heart attack, or receiving a reference from a doctor for a radiographer.
“As the burden of disease has shifted, that has disproportionately gone to people who are older,” Mead added.
“We now have a world where we see the rise of not acute disease per se, but chronic illness that’s non-communicable such as the rise of osteoarthritis, osteoporosis, emphysema, or COPD [chronic obstructive pulmonary disease] as we call it, long term chronic diabetes, dementias and cancers.”
A more flexible system was needed, through workforce adaptability, embracing technology and serving patients for a variety of issues.
Patients would need to be able to see not just a doctor, but also a nurse, a pharmacist, community support person, social worker and other allied health professionals, Mead said.
Appointments would need to take place at home, at work or in community centres.
“We need to have business models that are supportive of people in locations of care beyond an acute hospital setting.”
Workforce flexibility needed
But governments and health regulators would need to allow non-doctors to perform a broader set of activities through so-called workforce microcredentialling, he said.
For example, giving pharmacists limited prescribing rights for a limited set of diseases or presentations, and allowing higher qualified nurses to undertake medical work such as that currently restricted to gastroenterologists for digestive systems.
In some overseas jurisdictions, practice nurses and other allied health clinicians are placed in emergency ambulances to avoid the vehicles needing to travel to hospitals and suffer ramping problems.
“We’ve got highly capable and very committed workforce in this area, but if we’re going to take advantage of technological advantages, then we need to make sure we’re in there with micro credentialing so that we can skill our allied health professionals and our other participants in the workforce to be able to take on broader scopes of practice,” Mead said.
Better use of technology and data sharing would also be critical, he said.
Reserve Bank sees employment implications
Healthcare employment has surged since the 2020 pandemic and grown much faster in Australia than overseas peer economies such as the United States, according to the Reserve Bank of Australia.
“Strong demand for labour in the health care industry has drawn in workers from other industries, as well as some who were not previously employed,” the RBA said in February.
“These workers have tended to come from the administrative services and household services industries, including hospitality, arts and recreation, and education.”
The strong expansion of the low-productivity non-market sector such as healthcare, disability support, education and the public service, had reduced average productivity growth by 0.3 percentage point each year over the six years to 2023-24, the RBA estimates.
However, it was difficult to measure productivity in these services sectors, such as hospital services, and Productivity Commission research suggests healthcare industry productivity may be higher than thought, RBA economist Michael Plumb said last week.
2. Business Council of Australia: Supporting a Healthy and Productive Nation
Website and report: BCA: Supporting a Healthy and Productive Nation
Case for acting now
Without decisive action, Australia risks:
Jeopardising future prosperity by having a less healthy and productive nation.
Failing to lift productivity, which will compound the national challenge to raise living standards.
Missing major technological and business advancements that can improve and save lives.
Worsening the intergenerational equity divide – the financial burden on younger Australians will increase without reform.
Having a financially unsustainable system – the current trajectory of spending is not viable for the long term which could leave people without care.
3. How Australia Really Works Commentary
- This is going to be an archetypal train crash anyone could see coming but Australia's "conspiracy of producer interests" (see Rohan Mead podcast below) and incompetent politicians and bureaucrats (who'll keep coming up with ineffectual fixes measured by throwing more money at the same broken system) are going to combine to ensnare the country in a decades-long aged care and health care crisis.4. Further Info
"In truth, the historical economic framework of healthcare has been effectively a conspiracy of producer interests. And it has resisted consumer orientation."
