The Pharmaceutical Benefits Scheme, under which the government pays for pharmaceuticals along with a co-payment from consumers up to a threshold where the co-payment cuts out, is the second biggest item in the health budget.
Even after the government last year proposed to implement the National Commission of Audit’s recommendations on PBS and significantly increase the size of the co-payment, and lifted the threshold at which the co-payment cuts out, it would have cost $9.2 billion.
Neither change — they would have saved $2 billion a year — has yet made it through the Senate. The budget papers last year estimated the scheme would reach $10.2 billion in 2017-18, even with those savings. In comparison, the Medicare Benefits Schedule will cost $20.3 billion this year, while private health insurance rebate will cost $5.8 billion.
That’s why the government is keen to push simple over-the-counter medicines like pain relief off the PBS. A long-running gaming of the co-payment and cut-off threshold by pensioners involves getting a prescription from your doctor for a cheap over-the-counter medication so it counts towards the cut-off threshold, after which a pensioner stops paying the co-payment.
It is, as Health Minister Sussan Ley says, a perverse incentive within the system.
Purging such incentives from the PBS system augurs poorly for a push by nanny statists to make over-the-counter pain relief impossible to obtain.
Public health lobbyists, ever vigilant for opportunities to impose tighter surveillance and control on Australians, are looking to use abuse by a tiny number of consumers of pain relief products as the basis for banning access to drugs like Panadeine and Nurofen without a doctor’s prescription — something that would dramatically increase GP visits and PBS costs. Either that, or you’ll have to sit and suffer with herbal pain relief.
There’s an even better way to curb growth in the PBS. The National Commission of Audit recommended making people who’d reached the cut-off threshold continue to make a small co-payment ($2).
It also urged, as pretty much everyone else outside government for years has done, to deregulate the pharmacy industry, which the government appears keener to use as an implied threat to force pharmacy costs down through the negotiation of the next Community Pharmacy Agreement (the rort that locks in the pharmacy monopoly) rather than actually implement it.
And it recommended a more ruthless, streamlined approach to approving new additions to the PBS, which would last about as long as it took for someone to be blocked from accessing a new, lifesaving medication.
A better way would be to introduce further means-testing of the PBS co-payment (the net medical expenses tax offset, which includes PBS co-payment costs, is already means-tested) so that high-income earners would pay a higher co-payment than low- and middle-income earners, who in turn would pay a higher co-payment than pensioners, who would pay a higher co-payment than those who’d reached the cut-off threshold.
People like me — I’m a big PBS consumer — should have to pay more for our medicines than Australians on lower incomes. It would increase the potential effective marginal tax rate at whatever the income threshold was set at, especially for double-income couples with kids, but that could be addressed using the cut-off threshold, so that families with sick kids didn’t face a dramatic rise in chemist costs because of a small rise in income.
The more substantial impediment is effective implementation. A PBS IT system that shared in real-time information with the tax system and could identify high-income earners at point of sale would be highly intrusive and, judging by the e-health debacle, an IT disaster waiting to happen.
Alternatively, everyone could be charged a higher co-payment, and low- and middle-income earners permitted to claim the difference in their tax return. But the principle of means-testing the PBS co-payment is already in place and merits being extended so that the wealthy are subsidised by taxpayers via the PBS at a lower level than currently.