AS the nation’s income continues to grow, we must decide how best to spend it.
If you had a problem that required an operation and the doctor offered a procedure with a 90 per cent success rate or one with a 10 per cent failure rate, which would you pick?
Most people say they prefer the one with the high success rate but, of course, they’re equally risky.
Point is, we can react quite differently to the same information depending on how it has been “framed”, as the psychologists say.
When politicians engage in “spin” they’re framing a problem or a solution in a way they hope will maximise the public’s sympathy.
A way that highlights those aspects the pollies want to draw attention to and draws attention away from aspects they don’t want us to think about.
As Tony Abbott and Joe Hockey soften us up for an especially tough budget in May, we’ll be subjected to much spin.
Already the idea of imposing a $6 patient co-payment on GP visits has been floated, and Health Minister Peter Dutton has said the growth in the cost of Medicare was “unsustainable”.
It’s a safe prediction the real incomes will continue growing by a per cent or two each year in the coming 10 or 40 years, just as they have in the past 40.
As each year passes our incomes will grow a little faster than what we’ll pay for the things we buy.
We won’t be devoting our additional real income to spending more on food, clothing and other basics.
Their share of our total spending is likely to continue falling.
We will be spending proportionately more on housing, televisions, home computers and the like and probably more on educating ourselves and our children.
And it’s a safe bet we’ll want to spend more on healthcare.
And the good news is medical science is forever coming up with better pills and prosthetics, as well as better and less invasive surgery.
The bad news is the new stuff is invariably much more expensive than the technology it replaces.
And, as surgeons get better at doing particular operations, they’re able to perform them on a wider range of patients, particularly the elderly.
If healthcare was something we bought in the marketplace that would be the end of the story.
We’d go on spending a growing proportion of our increasing real incomes on healthcare and there isn’t an economist or politician in the country who would see a problem.
In fact, most of the nation’s spending on healthcare is done by governments.
Public hospitals are “free”, visits to doctors are subsidised and so are pharmaceutical companies and chemists.
We do it this way because, like other rich countries, we believe healthcare shouldn’t be denied to those who can’t afford it.
That’s fine, but doing it this way introduces a host of additional problems: scope for greater inefficiency in the delivery of care, ideological responses from those who believe government spending is wasteful and excessive by definition and cognitive dissonance by all those punters who want ever more healthcare available to them, but don’t want to pay more tax to cover the cost.
We know from successive Treasury studies the ever-rising cost of healthcare — caused not so much by the ageing of the population as by the ever-rising cost of advances in medical technology — is by far the greatest reason for the projected increase in budget deficits.
It’s rarely made clear, however, that all these studies assume a limit on the growth in taxation.
Contrary to politicians’ framing of the matter, the growing cost of healthcare is sustainable for the simple reason the electorate’s demands leave them with no choice but to sustain it.
What’s unsustainable is the politicians’ pretence that taxes won’t have to rise.