After the drama of last year’s slash-and-burn budget, the Abbott government’s second federal budget was designed to underwhelm the health sector and, in this respect at least, it delivered. In fact, the lack of organisation at the Department of Health lockup appeared to bother some groups more than the $2 billion of cuts to the health portfolio announced by the Treasurer.

This is partly because there were few surprises left for the Treasurer to reveal Tuesday night, with most of the measures either announced or leaked prior to budget day. In fact, health scored barely a mention in the Treasurer’s speech, with only a brief outline of new funding for Pharmaceutical Benefits Scheme drugs, coming after a long list of announcements on small business, farmers and regional communities, families and childcare, retirees, job-seekers and northern Australia.

This was no accident. With the government still scarred from the damage it received last year through opposition to proposed budget measures, including the proposed GP co-payment, it was in no mood for risk-taking.

The biggest surprise of the night was the lack of any announcement on structural changes to the PBS, as had been reported in the media. Only the new funding for new medicines was announced, despite media reports of large savings being delivered via changes to pricing arrangements. In fact, the three biggest areas of spending in the health portfolio (public hospitals, Medicare and the PBS) were effectively kept out of this budget by being deferred to other negotiation and review processes.

Public hospital funding is to be discussed at a “retreat” hosted by the Prime Minister for state and territory leaders in July. Medicare funding is subject to an expert review, in which the government is working closely with the “medical profession and the AMA” via a “clinician-led taskforce” and Medicare funding for primary healthcare will be reviewed by a new primary healthcare advisory group, which will include “primary health care professionals, health economists and health academics”. The mooted changes to pricing arrangements under the PBS are now the subject of negotiations between the pharmaceutical industry and government “on reforms to pricing and remuneration across the supply chain to underpin the future sustainability of the PBS”.

None of these processes are transparent and none explicitly invite the consumer and community input necessary to combat the vested-interest groups involved. Joe Hockey may have started his budget speech by claiming he was “speaking directly to you, the people of Australia”, but it seems that when the big ticket items of health spending are on the agenda, the people of Australia are ignored in favour of a closed-door dialogue with the pharmaceutical industry and the medical profession.

Without addressing these three main areas of expenditure, the budget cannot be seen as a comprehensive account of health spending. However, it did provide some additional funding in areas that have been welcomed by the sector.

The Medical Research Future Fund, which was first announced in last year’s budget, has been reinstated despite the fact that its main funding source — the GP co-payment — has been scrapped. It will be established by August and will distribute $10 million from the fund in 2015-16 and more than $400 million to projects over the next four years. Other new spending initiatives include a $26 million package to support immunisation, $485 million funding to promote electronic health records (via an “opt-out” system) and $963 million for “rationalising and streaming” health programs.

There were also cuts made across the portfolio, spread out across a large number of programs (death by 1000 cuts, according to American documentary filmmaker Michael Moore and the Public Health Association). These include programs focused on: rural, regional and remote Australia; indigenous health; communicable diseases; substance-abuse treatment services; health assessments for children; the Child Dental Benefits Schedule and scholarship programs. The Department of Health will also have its budget reduced and may have to lose more staff, further reducing its capacity to support existing programs and initiatives.

Some non-health initiatives that may impact upon the health sectors were also announced, including small business tax incentives, which could benefit GPs, private allied health providers and other health services. The restrictions on salary packaging may negatively impact on the not-for-profit and charitable sectors, which rely on salary packaging provisions to compete with the private sector for staff.

Overall, this budget has managed to escape the political and policy disasters of last year. However, in avoiding major changes in the big spending areas of Medicare, public hospitals and the PBS, the government has merely deferred the need to make some tough decisions and take on the powerful interest groups whose dominance of the health system so often obstructs sensible and consumer-focused reforms.

Peter Fray

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