The pandemic – and developments in health care – have forced the Commonwealth government to commit to a massive increase in spending on health care this year.
In the 2019-20 budget, the Commonwealth promised an increase of A$540 million in health spending in 2020-21. In this year’s version, delivered by Treasurer Josh Frydenberg last night, the promise is an order of magnitude greater: an uplift of $5.347 billion since the last economic statement.
During 2020-21 and 2021-22, likely to be the biggest years for the COVID-19 response, the Commonwealth is promising almost $10 billion of extra spending. Never before has the federal government opened the health purse strings to this extent.
Although there are 35 items in the health budget measures table – all detailed in a 163-page “Stakeholder Pack” – just five of them account for 94% of the increase in spending.
1. Pharmaceutical Benefits Scheme (PBS)
The government has committed to listing on the PBS all new drugs recommended as cost-effective. Even though each new drug must meet a cost-effectiveness threshold, the PBS spend is the biggest item in the health budget: $4.3 billion over the next two years, and more in the years beyond.
Although drug listings have been politicised recently, they are in fact technocratic decisions based on clinical, epidemiological and economic analysis.
The difference this year is the government is committing funds in advance for new listings, with a “PBS New Medicines Funding Guarantee”. In essence, this means Treasury has given up trying to extract savings from the health portfolio to offset the cost of new drugs. The cost of this new guarantee may be partly reduced by a price drop for medications approaching the end of their patent, with an increased price cut after 15 years.
2. COVID-19 vaccines
No one knows if or when a COVID-19 vaccine will be proven to work, which one of the hundreds of candidate vaccines it will be, when it can be manufactured at scale, or how it will be distributed across the world. The government seems to be banking on mid-2021 for a vaccine, with population vaccination programs to follow shortly after that.