Introduction
When I addressed a CEDA forum in June this year, I spoke of our responsibility to look ahead. To envision where we want Australia to be, and to do what needs to be done in order to get there.
Todays pressures are also the imperative of the future.
Governments are responsible for providing today, and also for putting in place the settings to ensure that we can deliver tomorrow.
And it is in this context that I see my role in the health care debate.
Seeing the Finance Minister involved in any portfolio can often cause some alarm for stakeholder groups.
And I dont shy away from my role in maintaining a tight budget discipline across Government.
But I dont believe my role should just be seen through the narrow prism of spending cuts. Like you, my motivation is to get the best outcomes with the resources that we have.
Like you, I want a health system that is strong and sustainable, a system that provides for Australians today, and tomorrow.
This demands that we look ahead that we consider how todays priorities shape tomorrows choices.
And it demands that we face up to some uncomfortable facts.
Our health system
As a nation we have worked hard over many decades to build a universal health system.
A system where all Australians have the right to good quality health care.
A system where access is based on health needs rather than simply an individuals ability to pay.
A system that is equitable, where lower income earners receive a higher net benefit.
And those with significant health costs - often as a result of chronic or serious illness - receive greater assistance.
These three principles - universality, access and equity are the core values of our health system that have been forged by generations of Labor Governments.
It was the Curtin Government in 1944 which first passed laws to give all Australians access to subsidised medicines.
Under the Whitlam Government that Medibank was first introduced.
True to core Labor values, Labor Governments have prioritised building a universal health system defined by equity and accessibility.
We now have a health system that is the envy of many others in the developed world - a universal system that is accepted by the vast majority of Australians and now has bipartisan support.
Compare this to the situation in the US - where health reform has been a hard fought debate for many decades. And it is the patients that suffer.
A recent report found that 62% of all personal bankruptcies in the United States in 2007 were driven by medical incidents.
In light of this type of comparison, it would be easy to sit back and take our health system for granted.
To believe that because we have such a system now it will always continue.
But securing our health system into the future will not happen by accident.
Health practitioners across the country work hard each and every day to deliver good health care and positive health outcomes for Australians. They know that this requires good planning, good decisions and ongoing commitment.
It is the same for our health system.
We must look beyond the next political cycle, and consider where will be in 20, 30 and 40 years if we do not act today.
Long-term projections
The Intergenerational Report starkly illustrates where we are heading - with Australian Government health expenditure projected to increase from 4.0 per cent of GDP in 2009-10 to 7.1 per cent of GDP in 204950.
The simple reality of this equation is that we will be spending more and more of our nations overall resources on health.
By 2049-50, Australian Government health expenses are projected to account for approximately 29.0% of the Commonwealth Budget compared to the current 15.2%. At the same time this is occurring, the pool of taxpayers to support this increase is diminishing.
This is the inherent dynamic that will shape healthcare funding and health policy for the decades to come.
Between now and 2050 the number of people aged 65 to 84 years will more than double; and the number of people aged 85 and over will more than quadruple.
This means that there will be only 2.7 people of working age for every person aged 65 and over, compared with 5 people today.
In simple terms this means our children will be bearing a significantly higher burden for health care expenditure than we do today.
Unless we are prepared to confront some uncomfortable facts, the mathematics will eventually win out.
Current health spending
Health sustainability is not just a problem of the future.
We have already seen significant growth in health expenditure over the last fifteen years. In 1996 the Australian Government spent $19 billion on health expenditure, or some $1037 per person.
This year we will spend $60 billion on health, or some $2,662 per Australian - more investment in health than any previous Government in our nations history.
Over that fifteen years health spending has grown at an average of 7.9% per cent each year.
And the demand for health spending continues to grow.
As our population grows and ages, our health spending will need to increase. The incidence of chronic disease is rising.
If this trend continues as expected, we will see more people using more health services more frequently.
Health technology and innovation is also improving. With this comes improved quality of life and life expectancy.
But it also comes with additional costs.
Looking forward, in another 15 years time, Australian Government expenditure on healthcare is expected to reach approximately $140 billion, or around $3,600 per person in todays dollars.
The choice for Governments is whether they act now so their health system can cope with increased demand and challenges, or to sit back and let health systems and budgets gradually be overwhelmed.
An easy response would be to ignore the problem - to sit back and let future generations deal with the consequences.
But lets be clear. Doing that risks a crisis point in the future - a point in the future where there is simply not enough funding to cover costs - and where the only option is the erosion of the health system we have fought hard to build over many years.
As a Labor Government we are determined to see this avoided.
We need to reform now, so that future generations can enjoy standards of service at least comparable to our own.
Overall health Budget
As Finance Minister it is my role to consider the global picture - to look at how we can meet the countrys needs not in just one area, but across the whole Budget.
And the truth is that one sectors priority is another sectors pressure.
Stakeholders - across the board - come to Government to make the case that their particular area needs greater investment.
Or they maintain that their area is too important to the Australian population for spending growth to be reduced.
And in isolation, there is of course merit in these positions.
But the reality is that there is a finite pool of resources.
Any spending increase in the short-term must be sourced from a reduction in spending elsewhere. This is the reality of a tight fiscal environment.
We have a responsibility to ensure that we make the best use of scarce resources.
And in health this means making sure our investment gets the best possible results in terms of health outcomes, which Nicola will cover shortly. This has required frank assessment of the rapidly growing and poorly targeted programs we inherited from the Liberal Government, such as the Private Health Insurance Rebate and Extended Medicare Safety Net.
It is not just about funding today and tomorrow, it is about making sure we can continue to fund the policies we put in place into the future.
Private Health Insurance
Private Health Insurance means testing is one such example.
In terms of outcomes - currently around 12 per cent of families and individuals earning $150,000 or more each year receive around 21 per cent of the total rebate paid. This program is clearly not equitable - with most funding going to those on high incomes.
It terms of accessibility - it is important to help low and middle income earners access private health insurance. And under our changes, these families will continue to receive the 30% rebate.
And with a long-term prism - the Inter-generational report shows us that this is the fastest growing area of health expenditure with real spending on the health insurance rebate projected to grow by over 50 per cent per Australian in the ten years to 2022-23.
Over the short-term means testing would save the Budget $2.8 billion - no small amount - and over the next forty years this will provide an additional $100 billion.
This additional resource enables Government to continue to invest in health. To cover the growth that comes from an ageing population.
To list new and improved medicines on the PBS.
To fund new procedures that have not even been conceived of today.
We have a choice - we can continue to provide Private Health Insurance rebates to individuals earning more than 1.8 times the average weekly wage, or we can prioritise other health services, such as listing a new medicine, or funding cancer screening.
These are the trade-offs and decisions we face as leaders. Responsible leaders will make the hard choices.
Pharmaceutical Benefits Scheme
There has also been some recent attention in relation to the Pharmaceutical Benefits Scheme. Access to affordable medicines is a cornerstone of our universal health system.
In fact, we were one of the first countries in the world to deliver subsidised access to medicines, with the earliest version of the PBS introduced in the 1940s.
There is no doubt that innovations in pharmaceuticals have and will continue to generate massive value to the Australian community as a whole - healthier people and longer lives.
But we also have a responsibility to balance additional investments in the PBS against other health interventions, and broader government spending. And we make no apology for that.
Again - responsible Governments must look to long-term trends, rather than point in time snapshots.
Fifteen years ago, the PBS cost the Australian Government $2.5 billion per year and subsidised 548 medicines.
Today, it costs around $9 billion per year, and subsidises about 760 medicines. Average yearly growth over the fifteen year period ending 2010-11 was some 9.5 per cent.
Over the next four years, the PBS is estimated to cost some $42 billion, and that is without including spending for new medicine listings.
And we know that between 2007-08 and 2010-11 Government decisions to provide new medicines through the PBS has cost some $2.1 billion.
Technological change and innovation within the pharmaceutical industry mean that the cost of new medicines listed will only continue to grow as more targeted, innovative medicines are brought to the market.
And we must make room within the Budget to ensure that these medicines can continue to be provided at low cost to the Australian community.
We have started this process, working closely with the medicines sector - through a Memorandum of Understanding, which will reduce the cost of the PBS by $1.9 billion over five years from 2010-11.
But we need to continue to work together to ensure that we can continue to provide important new medicines to the Australian people, in the near term and into the future.
Conclusion
Australia has forged a world class universal health system, based on the core values of access and equity.
Values supported widely in the Australian community.
But the simple reality is that the long-term trends pose a risk to that system.
Every decision we make today in health spending on both sides of the equation will impact upon our future ability to fund and sustain our health system into the future.
Delivering future generations a health system that continues to provide equitable access to health care requires difficult decisions today.
By making the right choices now, we can ensure that future governments continue to provide the level of health care Australians deserve.
 
ENDS