THE establishment of the (projected) $20 billion Medical Research Future Fund poses two big questions for public policy: Why have a future fund in anything, and why medical research in particular?
Government future funds come and government future funds go.
Who is to say the Medical Research Future Fund won’t go the way of others?
The Rudd government, for example, established three “nation-building funds” in 2009: the Building Australia Fund for transport, communications, energy and water infrastructure; the Education Investment Fund for higher education, research, vocational education and training; and the Health and Hospitals Fund for health infrastructure.
The Education Investment Fund replaced the Howard government’s Higher Education Endowment Fund, which was established in 2007.
The Education Investment Fund together with the Building Australia Fund will be poured into the Asset Recycling Fund, which will fund the states’ and territories’ investment in infrastructure.
The Health and Hospitals Fund will be poured into the Medical Research Future Fund.
The Abbott government has also announced that the National Workforce Development Fund would close.
Lesson one: funds can be undone.
The Howard government established the Future Fund in 2006 to meet the cost of public sector superannuation liabilities.
Sensible people recommend that the Future Fund be wound up and its assets transferred to the trustees of existing public sector superannuation schemes to match the liabilities each scheme has accrued.
As Robert Carling and Stephen Kirchner argue in their Centre for Independent Studies monograph Future Funds or Future Eaters?, the investment returns on the Future Fund’s assets are inadequate compensation for the forgone alternative uses of these funds.
Lesson two: future funds can rob taxpayers of future opportunities.
Joe Hockey proposes to “build the biggest medical research endowment fund in the world”. Are Australians that sick? Australians enjoy one of the highest life expectancies in the world, at 82 years. So it seems not.
The fund will receive all the savings from the introduction of a $7 Medicare co-contribution, changes to the Pharmaceutical Benefits Scheme and other changes until the fund reaches $20bn. Payments from the fund are expected to reach $1bn a year from 2022.
The government decided not to pay down debt with the money because of voter sensitivity to the co-payment but also because medical researchers are one of the biggest lobbies in Australia.
The Australian Society for Medical Research, for example, is the peak professional society representing Australian health and medical research.
In addition to direct members, the ASMR represents an additional 18,000 people actively involved in health and medical research through 56 affiliated professional societies and medical colleges. The society has a long history of public, political and scientific advocacy.
It certainly had a big payday last week.
The Treasurer argued, “If we start investing now, this new and historic commitment in medical research may well save your life, or that of your parents, or your child.” Maybe, maybe not, but there is so much investment in the pipeline, no one would notice the difference.
Medical Research Week starts at the beginning of next month in Australia. There are no fewer than 110 days of the year devoted to some aspect of health awareness, almost all to a particular disease — for example, breast cancer. The second UN “international year” was 1961, International Health and Medical Research Year. Get the picture? This is a big industry of professionals. And who is going to say no to a man or woman who may hold your life in their hands?
Nevertheless, the Australian taxpayer may be interested to know that the largest British cancer charity raises £500 million ($900m) a year and that there are 4000 researchers and medical staff in that field in Britain. The Australian taxpayer may like to know that at least $US6bn was devoted to cancer research in the US in 2012, and more than 8000 PhDs graduate from US universities every year in biological and biomedical sciences.
At the margin, think of the impact of the next Australian dollar poured into medical research. Although the incidence of disease may vary from place to place, medical research is universal.
How does the Australian taxpayer benefit when the same investment is made elsewhere? The same dollar could be spent on medical care, or on defence, or anything the taxpayer desires with absolute assurance that the rest of the world would not spend on those things (although Australia relies on US taxpayers’ spend on defence).
Lesson three: there are better things to do with the money. Future governments will almost certainly decide as much.