If, as Scott Morrison keeps telling us, the trouble with the budget is a spending problem, not a revenue problem, the government's decision last week to greatly increase our spending on defence has just made the problem a lot worse.
That's the problem with saying government spending is the problem. Politicians – of all stripes – are much keener on increasing spending than on reducing it.
A lot of the growth in spending – especially if you include the state governments – is coming from spending on healthcare. Part of it's the ageing of the population, but most of it's the higher cost of new pharmaceuticals, prosthetics and medical procedures.
There's actually nothing terrible about that. If we're getting a little more prosperous each year, what's more natural than that we choose to spend a fair bit of that increase on improving our health?
If so, the problem isn't our spending, it's our reluctance to pay for it. Which means the real problem with the budget is the aversion of pollies on both sides to confronting voters with that simple truth: if you want more spending on better healthcare you're welcome to it but, as with everything else in life, you'll have to pay more for it.
But to say that spending on healthcare should and will continue growing strongly is not to say that every dollar spent on health is a dollar well spent. Trouble is, just because the government judges a payment unnecessary doesn't mean there isn't someone for whom that payment is part of their income. Threaten to take it away and all hell breaks loose as they fight to protect that income. Especially if they're a doctor.
Late last year the Turnbull government proposed saving $650 million over four years by removing bulk-billing incentives for pathology services and reducing them for diagnostic imaging.
The boss of the nation's most powerful union, aka the Australian Medical Association, was out of the blocks within moments, prophesying death and destruction. Doctors would have no choice but to impose their own charges on patients, many of whom would struggle to afford them, leaving some poor people declining to get the tests they needed. Yeah, sure.
Some years ago the Labor government tried to save money by cutting the rebate for eye operations. The ophthalmologists created an enormous stink, telling every little old lady they could find they'd have to start charging thousands for a cataract removal and urging them to write to their local member.
It worked. The Labor government beat a hasty retreat. Some years later, a doctor mate told me everyone in medicine knew the opthos were raking it in. The fees in the medical benefits schedule had been set long before the procedure had become highly automated, allowing surgeons to do far more operations in a day.
It's a similar story with pathology rebates. Advances in automation have made the rebates far higher than they need to be – which is why the special bulk-billing incentives aren't needed.
And because automation also offers big economies of scale, we now have about three-quarters of the nation's pathology tests being done by just two big companies, both listed on the stock exchange – a small fact the AMA boss didn't feel he needed to mention.
For once, this isn't about greedy specialists. This is a fight to protect the excessive profits of two big listed companies. But please still write to your local member.
- Ross Gittins is the Sydney Morning Herald's economics editor.
