The Real Cost of A Long Life

By Adam Cresswell, The Australian 

January 28, 2010 

Australia

Joyce Clifford would once have been referred to as a miracle of modern medicine. Now aged 84, the Brisbane great-grandmother had her first knee replacement nine years ago, after the crippling bone condition osteo-arthritis had left her battling pain every day for years.

The operation was a success. Since then, she has had three more artificial joints fitted: a second knee, a hip and a shoulder. And thanks to Australia's publicly funded health system, this bionic granny has not had to pay a cent towards the cost.

And that cost has been considerable, if still some way short of the $6 million spent on the bionic man in that famous television show from the 1970s.

Knee replacement operations in public hospitals typically cost in the order of $23,600, while a hip replacement is about $24,800.

But the benefits to Clifford have been commensurately large.

Previously, she was unable to manoeuvre herself into a car seat because of her pain and mobility problems, much less drive. Now, her physical freedom has returned to the extent that she has recently been granted a driver's licence for another five years.

"I was most surprised when my doctor referred me to Prince Charles Hospital to have the first knee done, Clifford says.

"I really didn't know these sorts of things could be done. I thought you just had to tolerate it . . . it took the joy out of living."

The numbers of hip and knee replacement operations in Australia have shot up in recent years, rising 121 per cent from 32,006 in 1994-95 to 70,796 in 2007-08, figures from the National Joint Replacement Registry show.

There is no question that such procedures are a good thing, in that they bring untold improvements in quality of life for the patients who benefit from them.

In the case of joint replacement, there is even good evidence that the procedures may benefit the community, by being cost-effective.

Having a new hip may prevent falls, delay or remove the need for an elderly person to enter residential care, and reduce mental health problems by allowing older people to remain socially connected.

The question is how do we pay for all these whiz-bang treatments that did not exist 30, 40 or 50 years ago.

The rising figures on joint replacement procedures form just one tile in the mosaic of factors driving up Australia's health expenditure. Others include expensive new drugs for cancer and for other conditions.

The ageing of the population is also creating a much larger pool of patients who have chronic diseases, such as diabetes and chronic obstructive lung disease, that are difficult and time-consuming to manage.

And there is a greater sense of expectation among patients that they are entitled to receive the best treatments available, or close approximations, through the subsidised public system.

These factors combine to form a heady cocktail. Australia has been sipping it for some time, but only now is it finally beginning to turn the heads of politicians. During the past fortnight Kevin Rudd has been warning the time is approaching when Australia's governments will no longer be able to afford to pay for the health care of the country's citizens generally.

In one of a series of speeches, the Prime Minister said that the country's "core economic problem for the future . . . is the ageing of our population", and health costs were going to rocket as a result.

As Rudd warned, the share of the population over the age of 65 will increase from its present level of 12 to 13 per cent to nearly 25 per cent by 2050.

While in 1970 there were 7.5 people in the workforce for every person over 65, that has already dwindled to 5.5, and the figure will have plunged further, to just 2.7, in 40 years.

Rudd pointed out this has dire implications because of the extra health costs the elderly soak up. On average, those aged 65-74 rack up double the health expenditure of those 10 years younger.

For those aged 85 and over, spending is almost five times higher. Real health spending on people aged over 65 during the next four decades is thus expected to increase seven-fold, while that for those aged over 85 is forecast to rise 12-fold.

"If current spending and revenue trends continue, Treasury projects that the total health spending of all states will exceed 100 per cent of their tax revenues, excluding the GST, by around 2045-46, and possibly earlier in some states," Rudd told an Australia Day reception in Sydney on Sunday.

The problem is not exactly new. A paper published in the journal Australian Health Review in 2006 found the demand for bed-days would increase by between 70 and 130 per cent by 2050, with the greatest pressures coming from the elderly. Number of bed-days provided for the over-60s would rise by 145 per cent from 2005 to 2050, and by 320 per cent for those aged 85 and over.

But while politicians are starting to take notice, the list of just three options Rudd gave in his recent speeches to address the challenges was oddly curtailed.

Two of the options - cutbacks in spending or services, and running budget deficits indefinitely into the future - he dismissed almost as quickly as he had mentioned them.
His third and preferred solution is to boost future productivity growth, on the basis that this would increase tax revenues and propel the budget books back into the black.

This option, sceptical observers may note, also has the added advantage of resembling an untestable magic pudding solution that defers the need for taking difficult decisions now.

But according to many experts, the solutions lie in more tangible changes to the health system to improve its efficiency and cost-effectiveness.

Health economist Jane Hall, director of the Centre for Health Economics Research and Evaluation at the University of Technology, Sydney, says the picture Rudd has painted is, paradoxically, a kind of "success story" for the health system. "We are keeping people alive to live healthier, longer lives," Hall says.

"And the forecasts of what's coming through in terms of various medical technologies, particularly pharmaceuticals, are that many more conditions will be treatable."

These technological changes are already evident with the arrival of highly targeted drugs such as Herceptin, effectively an engineered antibody that interacts with a specific protein expressed in one type of breast cancer.

It costs about $60,000 to treat one patient for a year with Herceptin, a cost largely transferred to the taxpayer when the drug was added to the Pharmaceutical Benefits Scheme in 2006.

The listing came after a vigorous campaign by patient groups, who were more interested in lobbying MPs to back a PBS listing than they were in demanding the drug's maker lower its stratospheric cost.

Hall thinks the spiralling cost of new treatments will not only exceed the capacity of state governments to pay, as Rudd has warned, but will also force the kinds of structural changes to the health system the government has so far shown no particular appetite for pushing through.

As such, she suggests the speeches may be part of a softening up exercise designed to convince the states and voters to back whatever reforms the federal government announces later this year. Whether those reforms will include the kinds of shifts Hall believes are required remains to be seen.

Hall thinks the focus on which level of government pays for public hospitals is a distraction, and change in this area is unlikely to fix the system's ills.

Instead, she believes we may need to "move away from face-to-face consultations, to greater use of electronic means like tele-health consultations".

Real-time monitoring of patients should also be introduced, allowing data on blood pressure, blood glucose and other variables that can betray the progression of disease to be transmitted automatically from a patient's home to a central point where an alert is triggered when preset thresholds are breached.

But others are more critical of what they perceive to be Rudd's reluctance to countenance options that are bound to be electorally unpopular - such as higher taxes and rationing of services.

Rationing is another word for the spending cuts that Rudd was so quick to rule out. Yet Jeremy Sammut, a research fellow at the Centre for Independent Studies, says rationing already happens and the real challenge for the health system will be to remould public hospitals so they are "cost-conscious" and spend money more efficiently and eradicate waste.

And he is sceptical that the government's biggest health reform theme to date - refocusing the health system to improve preventive care, on the grounds that this will keep people out of hospital - will make much difference.

"The reality is that the population is rapidly ageing - that is, prevention has already worked," Sammut says.

"Hospitals don't have enough beds to cope with the demand that will inevitably arise as people get older and sicker because of the onset of conditions linked to age. That means reform efforts have to focus on fixing the problems in hospitals.

"The government has already rationed care by cutting beds, to the point that one-third of emergency patients wait longer than eight hours for a bed," Sammut says. "While long waiting times are politically poisonous, rationing is the reality right now."

Bone surgeon Ian Dickinson sees the age-related rise in demand for health care first-hand, as well as the costs.

He jokes that while combined hip and bone prostheses, used to replace joints eaten away by cancer, "used to be the cost of a small Volkswagen, now they are the cost of a small Mercedes".

"When I was in medical school, in the late 60s and early 70s, two-thirds of Australian men were dead at 65," says the Brisbane-based Dickinson, who is president of the Australian Orthopaedic Association and vice-president of the Royal Australasian College of Surgeons.

"Now, half live to 79. So in a generation, there has been this extraordinary increase in the numbers who live to an age where they get the age pension, and expect the health system to keep them in a reasonable state."

Doctors have been responding to the pressures, he says, citing the Joint Replacement Registry as one initiative that is succeeding in ensuring more doctors choose to implant joints shown to be the most reliable and trouble-free. But he thinks governments are too beholden to ballot box pressures, avoiding solutions deemed electorally unpopular, such as rationing.

Dickinson says the Howard government's encouragement of private health insurance should be seen in this light: as an acknowledgement that governments could not afford to pick up the full cost of health care, and individuals should be encouraged to contribute to their health costs.

The problem now, he says, is that governments don't have the gumption to countenance capping services, increasing taxes or finding and excising wasteful practices.

Federal Health Minister Nicola Roxon this week flagged a greater role for private hospitals. These, she said, have "a bit of extra capacity" that the overstretched public facilities don't have and the government is "certainly interested in looking at that".

Meanwhile, the costs of health care and the demand for it continue to spiral upwards.

Joyce Clifford - who in many ways exemplifies the health system's successes - says, "I have a friend who will be 92 this year, and she has had both knees done at the same hospital." Operations that were unheard of when Clifford was young are now common, and they are becoming more so. 

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