Explainer: how much does the NDIS cost and where does this money come from?



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More Australians are joining the NDIS than predicted, so cost predictions have had to be updated.
Shutterstock

Helen Dickinson, UNSW

Although the National Disability Insurance Scheme (NDIS) is relatively young, there has been much debate over how it will be funded.

Treasurer Scott Morrison recently said Labor had left a A$57 billion shortfall in funding for the NDIS. So many were left scratching their heads at the announcement that next year’s proposed increase in the Medicare levy – which was supposed to cover some of this shortfall – would be scrapped.




Read more:
Turnbull government abandons $8.2 billion Medicare levy increase


So how much does, and will, the scheme actually cost? Who is supposed to pay for it and why is there debate over the funding?

Calculating the costs

These are difficult questions to answer because we lack high-quality data about the extent and nature of disability in Australia. The information we do have is based on predictions, and work is underway to check these are accurate.

The case for creating an NDIS was made by the Productivity Commission in its 2011 inquiry on Disability Care and Support. The commission recommended Australia’s system of inequitable, fragmented and inefficient disability services be replaced by a new national scheme that would provide insurance cover to all Australians in the event of significant disability.

The one thing all sides of politics agree on is the NDIS represents a significant increase in disability spending, which stood at around A$8 billion per year at the time of the initial Productivity Commission report.

Original estimates suggested the NDIS would cover 411,000 participants and cost A$13.6 billion at maturity. However the Productivity Commission now estimates that around 475,000 people with disability will receive individualised support at a cost of around A$22 billion per year.

The A$8.9 billion difference between the Productivity Commission’s original estimates and the current estimate is a substantial gap. But A$6.4 billion of this difference is due to pay rises awarded to social and community services employees.

The remainder is due to the growth in the population and also the inclusion of participants over 65 years who were not included in original estimates. Once we account for these, estimates are fairly close to those originally predicted.

Last year’s Productivity Commission review of costs found the NDIS was broadly coming in on budget. Greater-than-expected numbers of children with autism and intellectual disability were accessing the scheme, but not all those with an individualised plans were able to spend their budgets.

So, for now, the NDIS seems to be tracking as intended. The NDIS budget is estimated to gradually increase over time to 1.3% of GDP by 2044-45 as participants age. Estimates also suggest the scheme will produce benefits adding around 1% to the GDP.

Where the money comes from

The original Productivity Commission report suggested the federal government be the single funder of the NDIS and that revenue to support the NDIS be paid into a separate fund (the National Disability Insurance Premium Fund) to provide stable funding for the scheme.

The Productivity Commission suggested this approach because disability services have long been subject to debate about who should bear the costs of these services: the Commonwealth or the states and territories. Indeed, part of the reason for the NDIS was to guarantee funding for disability services and stop these debates and blame-shifting.

But this isn’t what happened.




Read more:
The NDIS costs are on track, but that doesn’t mean all participants are getting the support they need


The way the NDIS is funded is complex, with revenue coming from a number of sources. The NDIS is funded via a pooled approach from Commonwealth and state and territory governments. The Commonwealth provides just over half of the funding for the NDIS and the rest comes from state and territories. This arrangement is governed by a number of bilateral agreements that are revisited every five years.

At the creation of the scheme, all existing money spent by various governments was directed into the NDIS to cover costs. Then, in July 2014 we saw a first increase in the Medicare levy: from 1.5% to 2% of taxable income.

However, the increased Medicare levy doesn’t meet the full costs of the scheme – just as the levy doesn’t cover all the annual costs of Medicare. This revenue was directed into a special fund for the NDIS, DisabilityCare Australia, which is designed to reimburse governments for NDIS expenditure.

Any additional funding the NDIS needs has to come from general budget revenue or borrowings.

The NDIS Savings Fund Special Account was established to collect the Commonwealth’s contribution to the scheme. This fund pools underspends or savings from across government, protecting these as a forward contribution to the scheme as it grows over future budgets.

Behind the funding debate

Warnings have been sounded about the NDIS’s reliance on multiple sources, fearing it creates a risk of future instability of financing.

When the Labor government originally introduced the NDIS, it said it would fund the scheme through an increase in the Medicare levy, reforms to private health insurance and retirement incomes, and a range of “selected long-term savings” including an increase in tobacco excise and changes to fringe benefits tax rules.

Labor said the combination of these revenue streams would ensure the NDIS was fully funded to 2023. But many of the savings Labor promised were intentional, rather than set in stone, and were not dedicated to the NDIS as the Medicare levy was.

It’s estimated the Commonwealth will contribute around A$11.2 billion to the NDIS in 2019. Of this, around A$6.8 billion will come from the redirection of existing disability funds and the Commonwealth’s share of the DisabilityCare Australia Fund.

This leaves an annual funding gap of around A$4 billion once the scheme becomes fully operational, accumulating to around A$56 billion by 2028.

The Commonwealth announced it would increase the Medicare levy from 2% to 2.5% of taxable income from July 2019 as a way of filling the funding gap. Estimates predicted this would raise an additional A$8 billion in revenue over its first two years.

The bill needed to do this had stalled in the Senate, with Labor and the Greens opposed. They suggested the increase should only be applied to those in higher income tax brackets.

Last week the Treasurer announced tax receipts were running A$4.8 billon higher than was estimated in December, meaning the levy was no longer needed.

For now it looks like funding for the NDIS is assured, but many within the disability community have expressed concern this does not assure funding for the long term and uncertainty may continue to prevail.


The Conversation


Read more:
Disability workers are facing longer days with less pay


Helen Dickinson, Associate Professor, Public Service Research Group, UNSW

This article was originally published on The Conversation. Read the original article.

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Turnbull government abandons $8.2 billion Medicare levy increase



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Treasurer Scott Morrison will say in a speech on Thursday that with a stronger economy, the fiscal position has improved compared with a year ago.
AAP/Luis Ascui

Michelle Grattan, University of Canberra

The government is scrapping its $A8.2 billion planned increase in the Medicare levy, declaring a stronger budget outlook means it is not needed to fund the National Disability Insurance Scheme.

The levy, the biggest new revenue measure in last year’s budget, had no foreseeable prospect of passing the Senate in full, because Labor only supported a rise for those with incomes of more than $87,000.

Abandoning the measure will give more credibility to the budget numbers, which will be carefully scrutinised by the credit-rating agencies, and enable the government to sharpen its differences with Labor in the election battle on tax.

The increase in the levy – which would have taken it from 2% to 2.5% of taxable income – was due to start from July 1 next year. The $8.2 billion revenue was over the forward estimates.

The budget will include income tax cuts. But while it kept the levy rise on the books the government faced the criticism that it would be giving with one hand and taking with the other.

Treasurer Scott Morrison will say in a speech on Thursday that with a stronger economy, the fiscal position has improved compared with a year ago.

“That is why we are now in a position to give our guarantee to Australians living with a disability and their families and carers that all planned expenditure on the NDIS will be able to be met in this year’s budget and beyond without any longer having to increase the Medicare levy,” he will tell an Australian Business Economists function.

The government has not abandoned its argument that Labor left a gap in the funding of the NDIS – which the ALP flatly denies. Morrison will stress: “What I am announcing today is that gap can now be made up over time by continuing to deliver a stronger economy and by ensuring the government lives within its means”.

In an upbeat address just under two weeks out from the May 8 budget, Morrison will say that the economy “is finally shaking off the dulling effects of the downturn in the mining investment boom.”

“Naturally, a stronger economy provides for a stronger budget.”

He will say that company profits were “savaged” in the long come-down from the mining investment boom. This took a heavy toll including on government revenues.

“During this time, businesses put their hands in their own pockets to keep their employees in jobs and provide the modest wage increases they could.

“Since then, the clouds have been lifting. The tangible evidence of this is found in the increased tax receipts to the Commonwealth.

“Tax receipts up until February were running $4.8 billion higher than we estimated at MYEFO in December, including $1.2 billion in higher individual tax receipts and $3 billion in higher company tax receipts.”

Morrison will also emphasise the government’s action in controlling spending, and point out that it has not relied on commodity price assumptions to prop up the budget.

Outlining some themes for the budget, Morrison will say it will see the government “living within its means”. It will continue to give priority to strengthening the economy, and that will “enable us to shore up the nation’s finances and guarantee the essential services that Australians rely on both now and into the future.

“Only a stronger economy, backed up by a government that knows how to live within its means, can provide a real guarantee on these essential services – Medicare, schools, hospitals, aged care and disability services.”

Morrison will say Labor’s proposal to raise the Medicare levy for those earning more than $87,000 and to increase the top marginal tax rate were not to fund the NDIS, but “just another tax increase on working Australians”.

“This is in addition to Labor already boasting of and getting ready to hike more than $200 billion in additional new taxes on Australians if they win power.

“Taxes on small businesses, taxes on retirees and pensioners, taxes on family trusts, taxes on mums and dads who negatively gear their investment properties and taxes on workers.

He will say Labor plans for higher taxes will weaken the economy, ”‘putting at risk the benefits, the jobs, the wages, the incomes and the essential services that depend on a stronger economy. And we all know Labor can never live within their means”.

The ConversationLabor is now expected to abandon its commitment to a rise in the levy for higher income earners.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

The NDIS costs are on track, but that doesn’t mean all participants are getting the support they need


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Many people who are dissatisfied with the scheme have reported they couldn’t find care providers to deliver their funded and approved plans.
from shutterstock.com

Helen Dickinson, UNSW

The National Disability Insurance Scheme (NDIS) is “on track in terms of costs”, according to a position paper released by the Productivity Commission this week. The report further stated that:

if implemented well, it will substantially improve the well-being of people with disability and Australians more generally.

But the Commission’s paper also expressed some significant concerns at the speed the scheme is being rolled out, and that this could undermine its overall effectiveness. The report highlighted a number of areas that are proving challenging for those accessing the scheme. It noted that such barriers to access are, in fact, contributing to keeping the costs on track.

Where the NDIS is succeeding

Rarely a day has gone by in recent months without a news story about the perceived failings of the NDIS. The scheme has been reported as “plagued with problems” and concerns aired about a potential “cost blowout” .

As a result, the government asked the Productivity Commission to undertake an independent review into the overall costs of the scheme, its value for money and long-term sustainability. The full report is due by September.

The current position paper goes to great lengths to acknowledge the size of the challenge in delivering the NDIS. It argues that the

scale, pace and nature of the changes it is driving are unprecedented in Australia.

When fully implemented, the scheme will involve the delivery of individualised support to 475,000 people at a cost of A$22 billion per year.

There is no doubt the NDIS is complex, but the Commission finds that there is “extraordinary” commitment to the success and sustainability of the scheme. It notes that making the scheme work is not simply the job of the National Disability Insurance Agency (NDIA), but also that of government, participants, families and carers, providers and the community.

Based on the data collected, the Commission finds NDIS costs are broadly on track with the modelling of the NDIA. A greater number of children are entering the scheme than expected, leading to some cost pressures, but the report notes the NDIA is putting initiatives in place to help deal with these challenges.

The report also finds benefits of the NDIS becoming apparent, with many, but not all, NDIS participants receiving more disability support than previously and having more choice and control.

Problems with the scheme

Many people who are dissatisfied with the scheme have reported they couldn’t find care providers to deliver their funded and approved plans. This kind of under-utilisation of services is a factor contributing to keeping costs on track. Such findings are in line with recent independent research into consumer experiences of the scheme.

Overall the report finds there is insufficient flexibility in the NDIA’s operational budget and that money could be spent more in a way that reflects the insurance principles of the scheme, such as greater amounts of funding being invested in prevention and early intervention services.

The process of care planning needs greater attention. Pressure on the NDIA to get numbers of people on to the scheme means that the quality of the care planning processes have been decreased in some cases. This has caused “confusion for many participants about planning processes” and has resulted in poor outcomes for them.

There is a significant challenge in relation to the disability care workforce. The Commission estimates that one in five new jobs created in Australia in the next few years will need to be in the disability care sector. The report notes that current approaches to generating greater numbers of workers and providers are insufficient.

A range of responses required to address these include a more targeted approach to skilled migration, better market management, and allowing formal and informal carers to provide paid care and better price monitoring and regulation.

The interface between the NDIS and other disability and mainstream services has also proved problematic. There is a lack of clarity in terms of where the responsibilities of different levels of government lie and who should be providing which services. Some people with a disability have lost access to supports they used to get as state government disability services close down.

Need for political will

The Commission describes the roll-out to the full scheme as “highly ambitious” and expresses concern it risks not being implemented as intended. Indeed the speed of the NDIS roll-out is described as having “put the scheme’s success and financial sustainability at risk”.

The report concludes that if the scheme is to achieve its objectives there needs to be a

better balance between participant intake, the quality of plans, participant outcomes, and financial sustainability.

The NDIS is taking a number of steps to deal with these issues but the Commission “is unable to form a judgement on whether such a refocus can be achieved while also meeting the roll-out timetable”.

The ConversationWhat all of this means is that we will need to see some enormous political will to enable the scheme to be supported to reach its full potential. This will likely involve some slowing of the timetable for implementation and some difficult work to deal with a number of the areas that have been identified as problematic. Whether the government has an appetite to see this through remains to be seen.

Helen Dickinson, Associate Professor, Public Service Research Group, UNSW

This article was originally published on The Conversation. Read the original article.

Budget 2017: Medicare levy rise finances NDIS and banks hit for budget repair


Michelle Grattan, University of Canberra

Taxpayers will be hit with a rise in the Medicare levy and the big banks face a new tax in a budget that pitches to win back disillusioned voters and to reassure the rating agencies. The Conversation

The government will fully plug the funding hole in the National Disability Insurance Scheme (NDIS) with an increase of 0.5% in the Medicare levy from July 2019, taking it to 2.5%. The increase will raise A$8.2 billion over the budget period.

In the other major tax hike in the budget delivered by Treasurer Scott Morrison on Tuesday night, the five major banks will pay a levy raising $6.2 billion over the forward estimates “to support budget repair”.

Morrison cast the budget as based on the principles of “fairness, security, and opportunity”. It commits to more and better paying jobs, guaranteeing essential services, putting downward pressure on the cost of living, and Australia living within its means.

It is squarely directed at trying to undo continuing damage from the harsh Abbott government 2014 budget. Morrison confirmed a raft of so-called “zombie measures” that have failed to pass parliament have been dropped, at a cost of $13 billion. Morrison called the extra revenue raising needed to cover these measures “a Senate tax for things not going through”.

Among its initiatives directed to avoiding a future “Mediscare” campaign, the budget promises to “guarantee” Medicare, progressively unfreeze the Medicare rebate, and maintain the bulk-billing incentives for pathology and diagnostic imaging services.

A Medicare Guarantee Fund will be established to pay for all expenses of the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme (PBS). Revenue from the Medicare levy will be put into this fund plus the amount from general income tax that’s needed to cover the total cost. Morrison said this would “provide transparency about what it really costs to run Medicare and the PBS and a clear guarantee on how we pay for it”.

The government is also restoring the pensioner concession card to people that were hit by the pension assets test change this year.

A housing affordability package includes a “first home super savers scheme” that will provide a tax cut for those trying to get a deposit together. They will be able from July 1 to salary sacrifice into their superannuation account, separate from their compulsory superannuation contributions.

The contributions will receive the tax advantages of superannuation, with contributions and earnings taxed at 15% rather than marginal rates. Withdrawals will be taxed at the marginal rates, less 30 percentage points. Contributions will be limited to $30,000 per person and $15,000 per year.

Morrison said this plan would mean “most first-home savers would be able to accelerate their savings by at least 30%”.

Older Australians will be encouraged to downsize by being able to make a non-concessional contribution of up to $300,000 into their superannuation fund from the sale of their home.

While the general provisions of negative gearing are untouched, the government will disallow deductions for travel expenses related to the properties. For properties bought from now it will limit plant and equipment depreciation deductions.

There will be tougher rules for foreign investors in the housing market.

Morrison painted an optimistic picture of the economic outlook, while acknowledging the pain Australians have been feeling, saying that not all people had shared the country’s economic growth and “many remain frustrated at not getting ahead”.

He said there were signs of an improving global economy and “there is clearly the potential for better days ahead”.

The budget forecasts wages growth – which has been around 2% – will increase to as much as 3.75% by the end of the budget period. This is regarded by many economists as very optimistic.

For the coming 2017-18 year, growth is forecast at 2.75% and unemployment at 5.75%.

Morrison said the budget had a “fair and responsible path” back to balance, which is due to be reached in 2020-21, with a projected surplus of $7.4 billion, somewhat higher than previously estimated. The forecast deficit for 2017-18 is $29.4 billion.

The budget contains an extensive infrastructure program, pledging to deliver $75 billion in infrastructure funding and financing over a decade.

The government will inject up to $5.3 billion into the construction of the second Sydney airport. It will provide $8.4 billion in equity into the planned Melbourne-Brisbane inland rail project.

Morrison also said that as well as the intention to further develop the Snowy Hydro, “the Commonwealth is open to acquiring a larger share or outright ownership” of the scheme from the Victorian and New South Wales governments.

The levy on the banks will be 0.06% on their liabilities, starting on July 1. Morrison said it was similar to measures in other advanced countries and “will even up the playing field for smaller banks”.

He indicated that the banks should not pass the levy onto customers, said the Australian Competition and Consumer Commission would monitor the situation, and advised people to switch to one of the smaller banks if they thought they were being shortchanged.

A Financial Complaints Authority will be set up as a one-stop-shop to deal with grievances customers have with banks and other financial institutions.

The chief executive of the Australian Bankers’ Association, Anna Bligh, slammed the plan, saying it was policy on the run, and “reckless”. “They have done it because they think banks are an easy target,” she said.

Welfare recipients have again been in the government’s sights. There will be a drug testing trial for 5,000 new welfare recipients. JobSeeker recipients testing positive would be placed on the Cashless Debit Card.

“We will no longer accept, as an excuse from repeat offenders, that the reason they could not meet their mutual obligation requirements was because they were drunk or drug-affected,” Morrison said.

The disability support pension will be denied for a disability caused solely by a person’s substance abuse.

Shadow Treasurer Chris Bowen said the government had “tried to catch up with Labor but they have failed miserably”. But Labor signalled its agreement with the bank tax.

Business Council president Jennifer Westacott said it was a budget for “a reality world”. It was “practical and workable”.

“We welcome the government’s discipline in restricting real spending growth to 1.9% over the forward estimates,” she said.

But she said “the banking levy effectively represents double-taxation of some of Australia’s most successful companies, which already pay $11 billion in company tax each year”.

The Greens attacked the planned drug testing trial for some new welfare recipients was “a violation” and a “very dangerous precedent”. They would seek advice about its legality.

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Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Budget 2017 sees Medicare rebate freeze slowly lifted and more funding for the NDIS: experts respond


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The future of the NDIS is seemingly secured in this federal budget.
from shutterstock.com

Stephen Duckett, Grattan Institute; Chris Del Mar; Elizabeth Savage, University of Technology Sydney; Helen Dickinson, UNSW, and Michael Woods, University of Technology Sydney

As expected, the government has announced a progressive lifting of the Medicare rebate freeze. Together with removing the bulk-billing incentive for diagnostic imaging and pathology services, as well as an increase in the PBS co-payment and related changes, this will cost a total of A$2.2 billion over the forward estimates. The Conversation

Other announcements include:

  • From July 1, 2019, an increase in the Medicare levy from 2% to 2.5% of taxable income, with the extra half a percent directed towards the NDIS
  • $1.2 billion for new and amended listings on the PBS, including more than $510 million for a new medicine for patients with chronic heart failure
  • a A$2.8 billion increase in hospitals funding over forward estimates
  • $115 million for mental health, including funding for rural telehealth psychological services, mental health research and suicide prevention
  • $1.4 billion for health research, including $65.9 million this year to help research into children’s cancer.

All up, these commitments equate to A$10 billion.

Medicare rebate freeze

Stephen Duckett, Health Program Director, Grattan Institute

As foreshadowed in pre-budget leaks, the government is slowly unthawing the Medicare rebate freeze, but at a snail’s pace. At a cost of A$1 billion over the forward estimates, indexation for Medicare items will be introduced in four stages, starting with bulk-billing incentives from July 1, 2017.

General practitioners and specialists will wait another year – until July 1, 2018 – for indexation to start up again for consultations, which make up the vast bulk of general practice revenue. Indexation for specialist and allied health consultations is slated to start from July 1, 2019.

Certain diagnostic imaging items (such as x-rays) will be the last cab off the rank. Indexation will start up again from July 1, 2020.

There is no mention of reintroducing indexation for pathology items. This may be due to the recognition that there is money to be saved in pathology.

Regardless of the reaction of medical lobby groups, it is too early to tell whether this glacially slow reintroduction of indexation will be enough to keep bulk-billing rates at their current levels. Practice costs and income expectations of staff have not increased dramatically over the freeze period as the Consumer Price Index has been moving slowly. But each additional day of a freeze means costs and revenues fall further out of alignment.

The jury will be out for a while on whether reintroduction of indexation is enough to restore the Coalition’s tarnished Medicare credentials with voters.

Certainly, the slow phase-in may attract cynicism, with a legitimate perception the government is doing the minimum necessary and at the slowest pace to ensure the issue is off the agenda before a 2019 election.

There is no sign in the budget that the government has sought any trade-offs from the medical profession in exchange for the reintroduction of indexation, so we will have to wait to put in place better foundations for primary care reform.

National Disability Insurance Scheme (NDIS)

Helen Dickinson, Associate Professor, Public Service Research Group, UNSW

Since its inception, a number of bitter political battles have been fought over how the National Disability Insurance Scheme should be funded. Many have been nervous the current Productivity Commission review of the costs of the scheme could lead to a scaling back of the NDIS before it is fully operational.

The NDIS operates under a complex funding arrangement split between federal, state and territory governments. Until now it has been unclear where the federal component of this commitment will come from, and a significant gap was emerging from the middle of 2019.

Today’s budget promises to fill this funding gap, in part through an increase by half a percentage point in the Medicare levy from 2% to 2.5% of taxable income. Of the revenue raised, one-fifth will be directed into the NDIS Savings Fund (a special account that will ensure federal cost commitments are met).

A commitment has also been made to provide funding to establish an independent NDIS quality and safeguards commission to oversee the delivery of quality and safe services for all NDIS participants.

This will have three core functions: regulation and registration of providers; complaints handling; and reviewing and reporting on restrictive practices. While such an agency will be welcomed by many, the devil will be in the detail as to whether it is possible to deliver this in practice.

Generic Medicines

Chris Del Mar, Professor of Public Health, Bond University

The government is set to save A$1.8 billion over five years by extending or increasing the price reduction for medicines listed on the Pharmaceutical Benefits Scheme (PBS).

This will be achieved in part by encouraging doctors to prescribe generic medicines that name the active ingredient (as in “90 octane petrol”) rather than the brand name (as in “BP” or “Shell”). This has the effect of pharmaceutical companies selling the drug that is cheapest.

It doesn’t work for drugs still under patent (which allows only pharmaceutical companies holding the patent to negotiate a price, compensating them for the drug development costs). But when drugs come off patent, any other pharmaceutical company can manufacture the generic drug for the best price.

Some doctors worry different brands might have different effects, but there are very few examples of patients being harmed by this. Australia’s Therapeutic Drugs Administration (TGA) makes sure drugs are manufactured to tight standards.

However, many patients know their medications by the brand name rather than the generic name. This same problem can happen right now (when patients are prescribed the same drug with two or more different names when they are prescribed by GPs, hospitals, or specialists).

Doctors are already alert to ensuring that different drugs names do not confuse patients – the danger is that they take the same drug twice, thinking they are different drugs.

Aged care

Michael Woods, Professor of Health Economics, University of Technology Sydney

The government has held the line on restraining growth in funding to residential aged care providers in this budget by implementing its pre-announced indexation freeze for the year, and a partial freeze in 2018-19.

The freeze was in response to concerns some providers were wrongly over-claiming payments under the Aged Care Funding Instrument (ACFI). The instrument determines the level of funding the government pays to providers to care for their residents.

The government has stopped publishing its annual target number of ACFI audits, so any proposed changes in compliance activity are now unknown.

The long-awaited consolidation of the Home Care Packages (which aim to help ageing Australians remain at home for as long as they need) and entry-level support through the Commonwealth Home Support Program has been put off for another two years, until at least 2020-21. This will be disappointing to consumers as a more seamless set of support services will improve their ability to remain in the community.

A welcome initiative is the additional A$8.3 million for more home-based palliative care services, although this extra support is budgeted to end in 2019-20.

Overall, the biggest unanswered issue facing the government in aged care is the need to develop an evidence-based and sustainable funding regime for residential care. To date we have seen short-term budget fixes and the commissioning of opaque rushed research reports.

The health minister needs to step back and establish a proper policy review process that undertakes sound research and consults widely. The review needs to establish a set of core funding principles and model options that address the varying incentives of residents, providers and taxpayers. It needs to adopt the one that transparently empowers consumers, provides market competition and results in long-term sustainability and certainty.

An inequitable budget

Elizabeth Savage, Professor of Health Economics, University of Technology Sydney

The budget has increased the Medicare levy (from 2.0% to 2.5%). It also has removed of the 2% budget repair levy, which benefits individuals with taxable incomes above A$180,000.

In 2014-15, only 3% of taxpayers had taxable incomes above $180,000. By contrast, the Medicare levy increase affects almost all taxpayers. This is a tax increase designed to generate revenue to fund the NDIS. The Medicare levy is essentially a flat tax, except for those at the lowest end of the distribution of taxable income.

Revenue could have been raised more equitably by increasing marginal income tax rates for higher earners (including making the budget repair levy permanent) or lowering upper tax thresholds.

What’s missing from the budget?

The 30% subsidy for private health insurance was introduced in 1999, and cost the budget A$2.1 billion in 2000-01. This cost has grown steadily and was estimated in the 2016-17 budget to be about A$7 billion for 2017-18. Despite high population coverage, consumers question whether private health insurance provides value for money.

There is abundant evidence the subsidy is an ineffective and costly policy, but it seems the politics keep reform of the subsidy in the too-hard basket.

From the budget speech and budget papers, it is not clear that there is any reform of the pricing of prostheses for private hospital patients. The Prostheses Listing Authority, the government regulator, sets minimum benefits for prostheses for private hospital inpatients.

The levels set are far higher than both prices in comparable overseas countries and those paid by public sector hospitals in Australia. Private hospitals are major beneficiaries when the regulated minimum benefits exceed the negotiated prices paid to suppliers.

Private health insurance premium increases are being driven by hospital benefits, of which 14.4% are for prostheses. In 2015, insurers paid out almost A$2 billion in hospital benefits for prostheses.

The previous health minister, Sussan Ley, raised prostheses reform as a priority, noting that insurers pay $26,000 more for a specific pacemaker for a private patient than a public patient ($43,000 compared with $17,000). It appears from early documentation that this problem has not been prioritised in this budget.

Stephen Duckett, Director, Health Program, Grattan Institute; Chris Del Mar, Professor of Public Health; Elizabeth Savage, Professor of Health Economics, University of Technology Sydney; Helen Dickinson, Associate Professor, Public Service Research Group, UNSW, and Michael Woods, Professor of Health Economics, University of Technology Sydney

This article was originally published on The Conversation. Read the original article.