Month: August 1997

It is unfortunate that Prime Minister John Howard’s first public reaction to the Health Ministers’ tacit go-ahead for the heroin trial was on talk-back radio, particularly on Alan Jones’s talkback radio show. It is a show that panders to the instant opinion and the knee-jerk reaction. Talk-back of its nature is not profound, reflective or thoughtful.

The trouble with the problem of heroin addiction is that it has already defied the simple “”solution”: ban it and lock the users up. Heroin is killing between 500 and 600 people a year. Its prohibition is causing addicts to entice others to addiction to help finance their habit. It is also causing addicts to turn to crime to pay for a drug whose price has sky-rocketed with prohibition.

It is politically difficult for Mr Howard, when confronted by an interrogator like Alan Jones on talk-back radio to say anything favourable about a heroin trial. In that medium there is no time or opportunity to do into detail of fact or argument. To his credit, Mr Howard acknowledged that a lot of people in the community wanted the trial to go ahead, not least the friends and families of dead addicts who quite cogently argue they would rather have had their loved one alive using heroin than dead and abstaining. Mr Howard also stated that he was expressing his personal opinion when expressing opposition.
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At last major tax reform is firmly on the agenda. It is on the agenda not through the courageousness of politicians but because the High Court decision a week ago to invalidate a major part of states’ taxation provided a catalyst.

There are two glaring follies in the present system of taxation in Australia. The first is that taxation is levied too heavily on productive elements in the economy and not enough on consumptive elements. The second is that the level of taxation raised by each level of the three tiers of government does not correspond to the level of expenditure, thus creating an accountability gap. The federal government carries the opprobrium of levying high levels of tax, notably income tax, while the states and local governments which spend the money do not have to carry the odium of levying the taxes to support the expenditure. They can just blame the federal level for not giving them enough money to spend.

There is a significant national interest in squarely addressing these two follies. The interest is to improve efficiency and equity. The efficiency argument is threefold. First, broad-based consumption taxes can be collected far more cheaply than existing taxes. Secondly, moving tax from income and production to consumption will result in greater incentives to produce and export and greater disincentives to spend and import. Thirdly, narrow state taxes are economically distorting. High stamp duties, for example, are a disincentive for people moving to more efficient and appropriate housing.
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The ACT Labor Party has announced that in government it would reintroduce annual testing of motor vehicles. It would test new cars and then at the third, fifth and seventh year and every year after that. It would reopen Phillip testing station to serve the southern suburbs and to lessen waiting times.

Labor argues that the cost saving of $600,000 a year in closing Phillip and testing only on change of ownership is a false economy because a road death costs the community an average of $750,000 and a serious injury more than $100,000.

The trouble with Labor’s argument is that the chain of causation is a long one. It assumes that defective cars cause significant death and injury and that the defect would have been picked up in an annual test and remedied. There are no firm data on defects and injury, but most put defects as a contributory cause of accidents at less than 5 per cent. It is likely that most of these defects would exist even in a testing regime because cars deteriorate during the year after the test.
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Canberra solicitor Bernard Collaery has highlighted to foolishness of two aspects of legal practice in the ACT, and indeed, other parts of Australia. The first is the folly of having a profession split into barristers and solicitors. The second is the folly of lawyers dressing up in wigs and gowns.

The ACT is technically a fused profession because solicitors can appear as advocates in the superior courts. In the past only barristers, instructed by a solicitor who must sit at the Bar table in court, could appear in the superior courts.

Mr Collaery practises as a solicitor. Recently he appeared for an accused man before a Supreme Court with a jury. The Crown was represented by a barrister bedecked in wig and gown. Mr Collaery correctly thought he should not allow his client to be at a disadvantage and put a wig and gown on himself. But he did not have an instructing solicitor. This earned him some questioning from Chief Justice Jeffrey Miles who said the court’s preference was for solicitor advocates not to wear wigs and gowns, but if the solicitor insisted there was nothing the court could do about it because the solicitor had a legal right of appearance.
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At last a majority of the eight Australian Governments have seen the obvious and are going to support the heroin trial in the ACT. It probably became obvious to thoughtful politicians quite some time ago that the policy of prohibiting drugs on pain of heavy penalty as primary method of controlling drug addiction was not working. However, they also realised that many less thoughtful voters would reel with horror at the thought of dealing with heroin addiction in any other way. Heroin is a nasty, addictive drug and we should do all we can to curb its use, but there has been so much propaganda about heroin that a large majority of the population greatly over-estimate its effect on the human body. But it seems, particularly in the ACT, that a large number of people in the population are beginning to realise that the effect of heroin prohibition on the body politic is far more pernicious than its effect on the human body of those unfortunate to be addicted.

The new realisation is not just that prohibition is not working, but that the policy is actually creating more addicts — the very opposite of what the policy was designed to do.

With prohibition and penalties in place, providers of the drug have to take higher risks or have to pay other people more to take those risks for them. It means the price of the drug on the street goes up. If it were a non-addictive product, this would not matter too much; people would just stop buying it. But heroin is addictive. A significant proportion of users (but by no means all) become addicted and are willing to pay a very high price for their drug. Invariably, they spend their own assets with destructive effects on family and friends. They also borrow and steal. But more perniciously they try to get others hooked so that they can share their drug costs as small-time dealers. Prohibition, over the years, has created large numbers of small-time dealers who actively try to get others hooked.
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While Australians, particularly skiers and people who live in and around the Snowy Mountains, will be saddened by the deadly landslide at Thredbo, they will also be asking questions about the cause of the landslide and the resourcing and state of preparedness of rescue services.

It seems this might not be purely a case of a natural disaster out of the blue. Thredbo is an unusual town. It is built on a very steep slope up from the Thredbo River opposite the ski slopes. Real estate prices are some of the highest in the country because space is at a premium. There is very little building space in Australia within walking distance from a downhill skiing resort.

The question arises whether the valley has been over-developed, putting too much strain on the steep slope. The disaster will also give rise to broader questions of how much development should be allowed in the Snowy Mountains not only on safety grounds, but also related environmental ones.
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A REPORT into Tasmania’s political and economic system by former Fraser government minister Peter Nixon points excessive over-government as a key reason for the state’s dismal economic performance. It is a pertinent point. Tasmania has a Lower House of 35 members and an Upper House of 19, that is 54 politicians for a population of 500,000. Tasmania has 11.42 politicians per 100,000 people. The ACT has less than half that.

Mr Nixon said government attempts at reform were constantly being frustrated by the Upper House.

He recommended that Tasmania have a single house of Parliament of 27 seats. There is merit in this. But Tasmania should be careful that in embracing necessary reform it does not go too far the other way. There is danger in having a system that gives too much power to the executive. Queensland’s single-house system combined with single-member electorates delivered excessive power to the National Party in the 1980s. Inevitably, the power was abused. Executives should be checked by the legislature and the judiciary to make them accountable.
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How could the Government have been so dumb over health costs?

A year ago the Government promised to stem the exodus from private health insurance.

It offered incentives to low-income people to enter or stay in private cover and hit high-income earners with a penalty levy unless they entered or stayed in private cover. It budgeted $500 million for the low income people and expected $75 million in penalty levies.

What as been the result? As predicted, it was a total waste of money. The sums did not add up. This week’s figures show that for the 52nd consecutive quarter the percentage of people with private cover has fallen. Talk about a recession in private health cover. And the greatly heralded measures last Budget to stem the exodus have made no change.

The incentives have changed no-one’s behaviour and the penalties have done precious little. All the Government has done is give a subsidy to people who would have stayed in private cover anyway. Moreover, the cost of that subsidy has apparently risen from $500 million at budget time to $1.7 billion now. As to the penalty for high-income earners not taking private cover, on the Government’s own figures it will cajole only 60,000 to 70,000 into private cover, increasing the participation rate by a mere 1.5 per cent.

The Private Health Insurance Administration Council says 91,000 people dropped their private cover in the three months to June, on top of the 100,000 who left health funds between January and March.

Now 31.9 per cent of the population compared to 62.8 per cent in 1983.

And there was the Health Minister, Michael Wooldridge, bravely saying that the hemorrage from private cover is over.

“”So effectively what’s happened today draws a line under the sand of 10 to 15 years of inactivity in private health care,” he said. “”It’s all on from here.”

What an apt analogy the line in the sand is. After all, Saddam Hussein is still there.

So what has gone wrong?

The first point is that the Government has defined the wrong problem; small wonder it gets the wrong answer. The problem is not people opting out of private cover. The problem is fewer funds (public or private) goin gin to health care at a time when health costs are rising with increased medical technology and an aging population.

The shortfall is huge. The Commonwealth outlays about $20 billion for health and recovers only $4 billion from the Medicare levy. You cannot hope to fund a health system that costs 8 per cent of GDP (with GDP continually rising) on a levy of 1.5 per cent of income. Even allowing for large expenditures on pharamcueticals and other non-medicare non-hospital helath spending, the gap remains impossible.

It cannot be breached by pathetic subsidies for low-income earners or comparatively small penalties for high-income earners.

People will continue to desert private cover until the govenment addresses several fundamental defects in it.

The first is that Medicare is too good. At present anyone with a serious illness or catastrophic injury is better off in the public system. You get treated for nothing. There is no delay and there are no bills. If you opt to be a private patient you get the same treatment at the same time and yet you cop a bill at the end.

This farce must end. Medicare patients must get a means-tested bill and private patients must be able to insure for the gap so they get no bill. Otherwise why be a private patient. At present the only reason for being a private patient is to jump the queue for elective surgery.

In any event, the Medicare levy should match costs. Surely, this user-pays government should realise that. The levy should be about 3 per cent of income.

The second is that Medicare and private insurers should compete at an even level. At present everyone pays the Medicare levy. Privately insured people should not pay it, but the insurance company should pay the whole rebate of medical costs (in addition to hospital costs). It may be they insure for 100 per cent of costs or something less. And those in Medicare would get their whole rebate from Medicare. Provided coverage remains universal with some sort of annual cap on patients’ costs, this would work better than the present system.

It is likely that Medicare would do very well because present administration costs run at 3 per cent of premiums, whereas the private funds’ administration runs much higher.

Then something must be done about health costs. At present the funds have no control over costs; they are decided by doctors, hospitals, governments and marginally by patients. Moreover, four or five organisations pay for patient care in hospital: the fund, the Commonwealth (through the inter-government hospitals agreement), the state, the patient and Medicare. Typically, they all shift costs from one to the other without addressing the base line.

All the financial risk is borne by those who pay for the care (fund, patient, and govenrments), who pay up if anything goes wrong, and none of the risk is borne by the providers of the care (doctors and hospitals). So there is no financial incentive on the providers to contain costs, be efficieint and effective.

And there is no informed choice by patients. Most patients have no idea who is a good specialist, what is a good hospital, or what treatment regimes are most effective.

The funds should, on behalf of the patient, draw together and pay for full treatment options for entire maladies to get the best outcome for patients. The funds would have a vested interest in seeking out the best medical outcome, not just the best financial outcome in the short term. Some in the medical profession may not like this becuase it would show them up; others (the more competent) would welcome it.

In any event, Dr Wooldridge should stop playing in the sand and look at the fundamentals before the aging population makes the costs of the ideal of universal coverage impossible.

The High Court has done it again — dealt with a big-ticket item that Australian politicians have run away from. This time tax reform. Earlier it was land rights and freedom of speech.

After yesterday’s decision invalidating state taxes running to $5 billion a year, the federal and state governments will now have to deal with tax. They should have dealt with it long ago.

The High Court judgment is dramatic because it is immediate. It declared NSW tobacco taxes invalid with immediate effect. It means tobacco retailers no longer have to add state taxes to the price of a packet of cigarettes.
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