Counting the cost of ageing

MICHAEL Ridley is a walking advertisement for the benefits of modern health care: he had his fourth hip replacement last December.

With the cost of a full hip replacement now running at about $25,000, such care does not come cheap. But then again, had the artificial hip not been developed this affable regional doctor would possibly, by now, not be walking at all.

"This enables me to be still working, and still trout fishing," says the GP from Coffs Harbour, NSW, who had his first hip replaced in 1993 at the age of 57.

"The big, key thing is that an awful lot of these people who we spend this sort of money on do go back in the workplace, and to a large extent replace it by paying their taxes."

They don't just live longer, they live better: Ridley's joints had been damaged by the painful and common condition osteoarthritis, and the hip replacements gave immediate relief from pain as well as preserving mobility.

Ridley's experience is a particularly poignant example of the rising costs facing Australia's health system as the population ages &endash; and also the benefits.

This week's Productivity Commission report, Economic Implications of an Ageing Australia , found that health care costs will indeed rise as the population ages into the future &endash; but that people will be significantly healthier as a result.

As the report makes plain, costs are going to skyrocket, and a number of factors are behind it. By 2044-45, the proportion of the Australian population over 65 is expected to double to over 25 per cent.

Partly as a result, the Productivity Commission says, the amount the Government spends on health care will also nearly double, from 5.7 per cent of gross domestic product in 2002-03 to 10.3 per cent in 2044-45. And that's not even counting the costs of aged care.

The reasons why age and health care spending are linked are not hard to fathom.

Older people consume far more health care resources than the young and healthy, particularly right at the end of life &endash; various studies have shown costs in a person's final year can be six or seven times higher than just two or three years earlier.

The higher cost associated with ageing is particularly apparent when it comes to drugs: average costs for men aged 65-74 are more than 18 times the average costs of those aged 15-24.

Hospital costs show a similar profile and Medicare costs &endash; which cover out-of-hospital medical services such as pathology tests and consultations with GPs or specialists &endash; also rise, albeit not quite so dramatically.

But overall, the ageing of the population is only expected to account for about half of the anticipated increase in health expenditure.

Other factors also play a role: rising demand for health care, fuelled in part by greater affluence and higher expectations, and by technology, meaning newer and better treatments that cost more.

The report says that over the last 20 years demand and technology have had a bigger role in driving up health costs than has ageing. But then again, only now is the rate of ageing in Australia's population starting to speed up.

Other factors driving up health costs may have nothing to do with ageing &endash; such as the increasing burden of some major diseases.

The Productivity Commission cited an as-yet unpublished report, compiled by the University of Queensland' School of Population Health and the Australian Institute of Health and Welfare, showing that while the incidence of stroke, coronary heart disease and lung cancer are all expected to fall over the next 25 years, the overall numbers of these cases will still rise as the population grows.

Even when costs seem directly linked to ageing there are confounding factors to be considered. For example, spending $25,000 for a hip replacement may in fact keep someone mobile and independent much longer, avoiding the need for them to go into a nursing home &endash; potentially saving as much money.

Helen Owens, a commissioner with the Productivity Commission, will next week release another report &endash; predicting a big upsurge in the number of new health technologies targeted at older people designed to keep them healthier for longer.

Although the Productivity Commission was not asked to produce policy recommendations as part of its ageing report, it did include a couple of suggestions for making health dollars go further.

These were a more flexible labour market, better co-ordination across services and jurisdictions, and more emphasis on preventative health care.

Owens says better labour flexibility includes something rapidly becoming a hot topic in health &endash; using a different professional group, such as nurses, to do some of the work traditionally done by another group whose time and expertise costs more, such as GPs.

"You could have nurse practitioners or practice nurses doing more, you could have pharmacists carrying out advisory roles of GPs, which I think the Government's already rejected," she says.

"Within hospitals there probably is greater scope for enrolled nurses to do more of the work of the RNs, and there are other nursing assistants who could be doing more of the mundane tasks.

"At the moment there seems to be a lot of demarcation between groups."

That's possibly an understatement.

Only last week the Australian Medical Association said using nurse practitioners who were independent of a doctor's supervision would "dumb down" the health system.

"It would be consigning patients in areas of workforce need to inferior health care. The State Governments endorsing independent nurse practitioners are looking for an easy, and vastly inferior, solution &endash; which is also an irresponsible and dangerous path to follow," said the chairman of the AMA's council of general practice, Rod Pearce.

Owens notes that in rural areas, the barriers between the professions aren't so fiercely defended.

"There has to be, they just don't have the choice," she says.

But overall, she says it's important to remember that a more costly health system is not necessarily a problem as such. Rather, the "real question" question is who should pay for it &endash; taxpayers or individuals?

"Having an ageing population does cost more in terms of providing health services," she says.

"Is that a problem? There's also benefits on the other side of the equation &endash; because as a community we probably do want to buy better health, and as our incomes rise, that's one thing we spend our money on.

"So if you're thinking about the fiscal implications for government, somebody's got to pay for it. The question is who &endash; is it done through taxes, or is it done increasingly through out-of-pocket costs?"

Other efficiencies that could be pursued to mitigate the fiscal effects of ageing include better co-ordination of services, which she says means "getting into commonwealth-state issues about who should be doing what".

"One of the problems is when you have different jurisdictions responsible for different bits of the system. Like you've got the commonwealth largely responsible for aged care, the states looking after hospitals," she says.

"You get a disjoin between hospital services and aged care. You get the bank-up of the nursing-home type people in hospitals because there are not enough aged care beds.

"So you're not getting appropriate efficiencies through the system. And . . . the patient is having to negotiate through a system where there's different responsiblities. It's complicated for patients."