Overall the health budget measures are a clever response to a difficult situation. There is a mixture of some genuine reform (but not much!), modernisation of infrastructure and equipment and rebadging of some tired old programs that have not been particularly effective.

The headline winners are cancer and midwifery. For cancer there is significant new infrastructure, more money for services and an innovative boost for cancer care in regional areas.

Access to midwifery through Medicare will be available for those who choose those services. The measure provides a choice that is more likely to be available in urban areas and those from smaller rural communities, whose preferred choice would in fact be able to have their babies delivered in their local town, will not be helped much. The really disappointing feature of this approach is that it introduces another provider-focused measure when more innovative service redesign measures might have had a better impact for consumers.

The much touted rural measures are disappointing. They are mainly a consolidation and rebadging of a variety of workforce incentives brought in over the past decade, most of which have been marginally effective only. Again the opportunity to look seriously at service restructuring has been missed. A new classification system for grading “rurality” will replace the long outdated RRMA system. There will be winners and losers but there is an air of rearranging the deck chairs rather than dealing with the sinking ship of rural health services.

The gems of genuine reform are to be found in the “modernising Medicare” and “sustainable safety net” measures. These represent a significant restructuring of the Medicare benefits schedule and a challenge to some entrenched medical vested interests. The changes recognise that some procedures such as cataract surgery, once very time consuming and intensive are now performed in minutes rather than hours and rebates have been adjusted accordingly.

Similarly some of the outrageous rorts under the Medicare Safety Net have been addressed without destroying the safety net itself. This is the first time that a government has been prepared to take on the specialist doctors in this way to redress clear anomalies and distortions in Medicare funding. It remains to be seen how the affected doctors will respond.

The private health insurance subsidy “rebalancing” is less draconian than had been mooted in the official pre-budget “leaks” and achieves a relatively modest$1.9 billion in savings over four years. The tapered “rebalancing” is complex and itself will be a job creation measure with an army of clerks to determine who will be eligible for what.

The measure is unlikely to result in a mass dropping of insurance cover thanks to the ratcheting up of the tax penalty for those high income earners who do drop out. The real advantage of private health insurance is the opportunity it provides to bypass the queues for publicly provided elective surgery. Nothing in this measure changes that. The big pity here is the lost opportunity. If a government is going to wear the opprobrium of a broken election commitment it may as well bite the bullet and make something of it. At this stage it looks like a relatively easy budget balancing measure.

While the government is to be congratulated on a well crafted set of measures in these difficult times, there is a downside to the approach they have taken. The government’s own national Hospitals and Health Reform Commission has indicated the need for major structural reform to the Australian health system. The focus should shift from professional and provider interests to service improvement and innovation to cope better with the changing health and age profile of the community. This budget introduces new groups into the outdated fee-for-service approach and entrenches some of the disease silo funding arrangements.

Robert Wells is Director, Menzies Centre for Health Policy