Dyson Heydon is in the news again. 

Several weeks ago he appeared to question the credibility of Bill Shorten as a witness before the Trade Union Royal Commission. He also had unusual things to say about the credibility of Julia Gillard when she appeared before the Commission. 

See below a repost of an article on the Liberal Party and royal commissions.

John Menadue

 

REPOST

With the Abbott Government there is a pattern of using Royal Commissions to attack former and current ALP leaders. See the links below to two earlier posts on the subject.

What we really need is a Royal Commission into billions of dollars of tax avoidance by major companies operating in Australia. They are avoiding proper scrutiny.

John Menadue.

The Royal Commission into the Home Insulation Program – a ‘dog’s breakfast’.

What a remarkable thing to say!

I have yet to hear anyone who supports the spending by Bronwyn Bishop of $5,000 in taxpayers’ money for a helicopter ride from Melbourne to Geelong for a Liberal Party fundraiser. It is surprising however that, as a member of parliament, she attracts so much attention for this relatively small misuse of public money, but little mention is made of large scale indulgences of companies that provide private travel, yachts, holidays and entertainment for senior executives at the expense of the taxpayer..

But the real issue at the moment is the damage that Bronwyn Bishop has been doing to our parliament and the lack of trust we all have in our members of parliament. She is a biased and partisan class warrior and quite unsuited to uphold and advance the dignity of parliament. In the current parliament up to February this year she had ejected 309 MPs of whom 304 were from the Labor Party. That bias is intolerable.

Tony Abbott speaks often of our constitutional roots in the UK parliamentary system. There are some practices in the House of Commons that we could consider. The first is that candidates for speaker must be nominated by at least twelve members of whom at least three be of a different party to the candidate. This ensures a degree of bipartisan support. Second, the speaker resigns from his or her party and does not attend party meetings. Thirdly, the speaker’s seat is not contested at the next election by a member of the opposition party.

The speaker of the House of Commons clearly sees his or her role as the servant of the parliament and not of the government or the ruling party. There is a long tradition in the House of Commons that the speaker must protect the parliament against the encroachment and power of the king/the government. It is a hard won tradition. House of Common’s speakers have been executed for placing the interests of the parliament ahead of the government. That is why we still preserve the fiction that the speaker has to be ‘dragged unwillingly’ to the speaker’s chair. But that’s as far as the relevance goes these days. Unfortunately, in Australia on taking the speakership, the speaker becomes not a servant of the parliament but of the government and the ruling party.

Our system has developed differently but there are still things that we could learn from the House of Commons. Most importantly, there are two things. The first is that a new speaker should have the support of both the government and opposition parties. Second, the speaker should never attend caucus meetings of the ruling party. If Tony Abbott and Bill Shorten could agree to such terms in a replacement for Bronwyn Bishop, I would be confident that we could begin to see a renewal of our parliament. Alternatively, if they could not agree, Bill Shorten could propose that he would adopt such an approach in the next parliament if he was able to win a majority. I am sure the public would respond very favourably.

The real problem is not so much $5,000 for the helicopter ride, but the way parliament has been damaged by a biased speaker who cares little for the reputation of the parliament.

Policy Series

In Part 1 of this series I described the areas in our health sector that need reform. In Part 2 I spoke of the obstacles, particularly those imposed by vested interests in the health sector to protect their own interests by delaying or stopping reform. In this article, I will be suggesting ways in which we can overcome these obstacles to health reform. But make.

Don’t rush the process

The political process encourages parties seeking election or re-election to address problems with high political salience – waiting lists in public hospitals, needs among certain groups with chronic illness, and identified funding gaps. The political response is to develop specific proposals, usually involving carefully calculated budgetary costs.

Such a process, while providing short-term solutions to proximate problems, fails to address the structural problems identified in Part 1 – the fragmented nature of our health care arrangements, inequities, gaps in services, such as dental care, the allocation of resources towards high-cost hospital interventions at the expense of promotion, prevention and primary care, and the distortions associated with private health insurance.

It also privileges those vested interests outlined in Part 2, who can mobilize resources to block all but the most minor reforms.

System-wide reform takes time. And it takes open minds. Governments need to realize that even when they can set aside their own financial or professional interests, “insiders” find it hard to imagine any significant departures from existing arrangements. That was a major shortcoming of the Rudd Government’s Health and Hospital Reform Commission. Outside perspectives are essential.

In order to lift the process beyond immediate concerns, those pursuing reforms need to set out basic principles, and, in a well-managed consultation process, inform the community of options, and invite the community to discuss and agree or amend these principles. Such a path to reform contrasts with the quick-and-dirty proposals which emerge from processes such as the Abbott Government’s Commission of Audit. Rather, reform can draw on the tradition of white paper – green paper policy development and the reform process pursued by the Hawke-Keating Government. The Senate Committee system should also be utilised.

Guiding principles

As in any public policy the basic principle should be pursuit of efficiency and equity. Contrary to some simplistic notions, there is not necessarily a trade-off between these principles. An inefficient system is a high-cost system, and a high-cost system generally tilts the balance towards those who have most ability to pay. That is the basic failure of the United States system.

Economic considerations should extend beyond governments’ own fiscal costs. Rather they should take into account costs and benefits throughout the community. There is no benefit in saving people $1.00 in taxes through Medicare if the result is that they have to pay $1.25 for the same or inferior services in private markets through PHI.

In efficiency we fall well short as a result of the $10 b p.a. taxpayer subsidy to high cost PHI which makes it more difficult for Medicare to control costs; the perverse incentives in FFS which reward doctors when they treat sick people rather than keeping people healthy; a health workforce which is riddled with restrictive work practices and demarcations and an MBS and PBS which are not rigorously and regularly reviewed. Clinicians are broadly agreed that there are more than 150 services in the MBS which are of doubtful value. There is a rigorous process for getting drugs onto the PBS but little attention to getting some drugs off the PBS. We also need an independent pricing authority like in NZ to reduce the high price for generic drugs and the inefficiencies of drug pricing generally.

Equity should be concerned with ensuring that income, wealth or personal influence does not give individuals preference in treatment, displacing those with greater needs but lesser means. In equity, we fall short as a result of out of pocket expenses that are amongst the highest in the world; a $10 b. subsidy for PHI which goes mainly to higher income people who can then jump the hospital queue; the plight of people with mental health problems, indigenous people and country people. Dental /oral health care is excluded from Medicare.

A related principle should be one of solidarity or social inclusion. In social inclusion we are falling short by steadily moving towards a two-tier health system with Medicare becoming a safety net for the poor. We have a two-tier legal system with a safety net called the Legal Aid Service. But that service is not as good as the top tier private offering. Just as a two-tier legal system does not serve the poor adequately, neither will a two-tier health service .All should have access to the same high-quality services. We should resist most strongly the conservative notion that Medicare should be reduced to a safety net for the poor. The same high quality service should be available for all .While people with different means may make different payments, they should all be using the same services. The present “two tier” arrangements, where those with means are more likely to use subsidised private hospitals, violate this principle.

Within such a shared system, there should be scope for users to exercise autonomy and choice, so long as these do not impose costs on other users. Financial incentives on providers and users should not detract from the principles of personal responsibility.

Health care services need to be perceived as components of a set of policies promoting good health. In this regard, the community’s health should be seen as an asset worthy of attention in all government policies – taxation, urban design, trade agreements (patents), labour relations and wages policy, social security, environmental protection, sport etc. Public health should be of concern across all portfolios. Health ministers, state and federal, should have the same standing as Treasurers. Unfortunately we are more concerned about health services than health. An obvious example is our failure to address the enormous damage that alcohol, sweet drinks and junk food is inflicting on the health of Australians.

The government should consider alternatives to fee-for-service remuneration for primary care and other services. The New Zealand Government, for example, pays episodic care by doctors on a fee-for service basis but chronic care is paid on an annualized basis.

Health programs should have a user focus, rather than a provider focus. The user drawing on different services should not have to confront multiple institutions with their own funding arrangements, records and protocols of care. Policies should aim to integrate and not merely coordinate medical services, pharmaceutical care, hospital care and rehabilitation. Instead of a user focus, successive governments and DHA have failed to break the grip of providers. Our health service is structured to serve the convenience and interests of providers not users.

Such flexibility should be guided by the principle of subsidiarity. That is, services should be managed at the most feasible local level, provided such autonomy does not conflict with needs for central standards in important areas. We fall short in subsidiarity by neglecting primary and general practice care which is close to the patient. Instead we favour the clamour of the hospital sector.

Funding needs to be based on a judicious balance between individual (“out-of-pocket”) payments and pooled payments. While a lack of means should never present a barrier to those who need care, there is no reason why those with means should not make personal contributions. The balance between individual and collective funding is one which needs community consultation. There are arguments for a completely free, tax-funded system, and there are arguments for more individual payments where price signals play a role. But the choice needs to be put to the community in a way that explains the costs and the benefits of each method of payment. Most probably the community, presented with an informed choice, will opt for some balance.

One option to consider is the Nordic model whereby, subject to means tests, all people pay for their healthcare up to a certain amount before their universal system or Medicare in our case, kicks in. The Nordic health systems are effective in balancing individual responsibility wherever possible with patients with high needs and limited means. The very high and unfair costs of out of pocket expenses in Australia must be addressed.

For that proportion of costs the community chooses to share, this sharing should be through a single national insurer, with the capacity to use its purchasing power to keep costs under control, and guided by principles of ensuring access for those with limited means and covering all against high expenses. As with other high-cost and heavily-subsidised industries, such as clothing and footwear, the $10b plus per annum subsidy to PHI should be steadily phased out. If people want private health insurance that is their right but there is no reason for the taxpayer to provide a subsidy.

While the government should take responsibility for pooled funding, provision of health services should allow for both government and private involvement. In regulated markets private providers should be assured of reasonable returns on their investments (including their investment in human capital), but they should not be permitted to take advantage of any privileged position in the market.

All systems of remuneration, to private or public providers, should be subject to full accountability, and all services should be subject to the general principles of competition policy but without promoting competition where it serves no public purpose, such as a proliferation of look-alike high-cost private insurers. Accounting systems should expose all instances of cost-shifting – from Commonwealth to state governments, from governments to individuals, and from present outlays to future outlays. While there may be reasons for costs to be reallocated between different parties, such reallocations should be for reasons of equity or efficiency, and not for budgetary impression management.

All health care services should be subject to professional governance and accountability, with clear charters of responsibility but at arm’s length from executive government. We really don’t know much about how well doctors perform in private practise. We hear about occasional mal practise but very little about general performance and competence. We fall short because Medicare data which would show, for example, under and over servicing by local government areas, is not available. Such localised data would show areas of unfairness and sometimes abuse. Just as we are now developing a My School data base, we should develop the same for ‘My Hospital’ or ‘My GP Clinic’. Subject to some confidentiality issues, ‘open data’ should be publicly available on incomes and performance across the health sector.

The related issue of Commonwealth-state relations-the blame game- needs resolution. One possibility is for health services to be administered by joint Commonwealth-state commissions in each state, with pooled Commonwealth and state funding. Tasmania with its small and comparatively aged population could provide the basis for a trial.  This issue is canvassed further in my article Making the Federation work better which was posted on 20 May 2015.

An efficient national and integrated electronic health system would also significantly contribute to a national health service. It would maintain an up to date health record for every person and make unnecessary so many repeat referrals and examinations. It would improve the quality of care and reduce costs. DHA has failed in this field as in so many others.

The role of institutions

Health reform is too important to be left to health departments particularly DHA and bodies with superficial mandates such as the recent Commission of Audit.

Fortunately the Commonwealth has bodies such as the Productivity Commission, an organisation with not only technical expertise to analyse policy proposals, but also with the capacity to sound out those with policy interests. Most important, it can bring an “outside” view to public policy, addressing questions and options that may be beyond the imagination of “insiders”.

While the Productivity Commission can bring forth practical recommendations, the questions in health reform are so basic; however, that they require a wider and continuing process before specific issues can be addressed. Questions such as how costs are shared, and how scarce resources should be allocated, particularly for high-cost interventions with minor benefits, involve moral considerations.

One possibility is to establish a Health Reform Commission composed of independent and professional people to inform and lead public discussion and advise on important health reform issues. Clinicians should be included, but none of the vested interests. The Law Reform Commission established by the Whitlam Government in 1975 is an example of how enquiries and consultations can be conducted with the community in order to make recommendations to government that are well-informed. The Law Reform Commission estimates that over 85% of its reports have been either substantially or partially implemented making it an effective and influential agent for reform. The Reserve Bank is another example of how a respected, professional and independent body can be a leader in public discussion of important issues. A major objective of a Health Reform Commission would be to outflank the vested interests and carry an informed discussion with the community, particularly of the key principles that should drive health care. Ahead of establishing such a commission in government it would be useful to establish an interim group of professional and independent people who can facilitate informed public discussion and provide advice.

A general remit to the HRC would be to encourage service cost discovery, price discovery and quality discovery, integrity (fraud and abuse) and fairness (access to care regardless of means or location)

In addition to these general responsibilities there could be specific referrals to the HRC or the interim body, e.g.

• Ways to phase out PHI and introduce a dental/oral health scheme within Medicare.
• How to establish ‘medical homes’ in primary care which include both private and public clinics that provide a range of services.
• Remove perverse incentives for the remuneration of doctors.
• Reshape the health workforce to the needs of the 21^st

There are various ways to deal with public participation but the basic approach and method is that communities should be consulted to find what they want, and in successive rounds experts should analyse and report back on the costs and consequences of their proposals. For example, explaining that a completely free system would involve higher taxes and may involve greater waiting times.

One other model is the “citizen jury” – so named because the citizens to be consulted are selected on a random basis, and are informed by professional and independent experts. They could be asked to provide their advice back to government on such key issues as: to what extent do we want to share the costs of healthcare and how co-payments should be reformed. End of life issues could also be canvassed as well as many expensive interventions that have limited effectiveness. These citizens’ juries in health could be important vehicles for an informed national conversation on health, a conversation that we do not have at present.

I see parts 1,2and 3 on Health Policy Reform as outlined as, hopefully, the means to put the debate on health reform onto a more constructive and pragmatic path. Unless we get our processes working more effectively and particularly how to bypass vested interests, reform will continue to be very difficult. When we improve our processes we can be more confident of addressing the particular policy issues outlined in these three papers.

Unless we address the issue of power and how and who exercises that power in the health sector we will not achieve worthwhile reform. Power is in the hands of providers. It is not really in the hands of the community, patients or even governments. That is the key issue. We need leadership, institutions and processes to focus on how we overcome this central issue.

Ministers of Health may be in office but they are seldom in power.

John Menadue chaired the NSW Health Council 2000 and the SA Generational Health Review 2003.

Policy Series.

In Part 1 on health policy reform I outlined the main areas where health reform is necessary. In Part 2 I examine the reasons why I think health reform is so hard. In part 3 I will consider ways in which the necessary path of health reform can be quickened.

The major barrier to health reform is the power of providers or at least their assumed power. The most recent budget showed that yet again.

A succession of Australian health ministers may have been in office but they have not been in power.

Aneurin Bevan who launched in the 1940’s in my view the best health service in the world knew a few things about health but more importantly he knew much more about political power and how to exercise it in the public interest. He drew on the strong support of the community, a minority of doctors and the majority of nurses. He won the day and not surprisingly the UK National Health Service was the centre piece at the London Olympic opening ceremony in 2012.

The power of insiders – or the faintheartedness of politicians

Reform disrupts established arrangements. In general, the longer those arrangements have persisted, the greater becomes the pent-up need for reform, meaning that reform is going to be disruptive to existing interests. By the same token, as arrangements become more entrenched, the more do those who benefit from them feel threatened, and the more political clout they develop to resist reform.

That resistance is often based on financial self-interest, but it also aligns with a general fear of change and professional conservatism. It is difficult for those who are “inside” a system – be they administrators, professionals or policymakers – to conceive of other ways of delivering services. Institutional inertia is a strong force. And in health care it is easy to lose sight of the fact that delivering services is not, in itself, the objective. That objective surely is serving the community by helping to keep the population healthy.

One group with a stake in maintaining current arrangements are those who administer health services. Health is a highly technical, large and complex field that is difficult for outsiders to come to grips with. This gives disproportionate power to health administrators on the inside to manipulate ministers.

“Joined at the hip” with these administrators are much the same vested interests (rent seekers) that batten on the health service and dominate the public debate. These are much the same vested interests who so selfishly and ferociously led the opposition to Medibank in 1974. They are still with us today but in a different guise. The AMA has a long and dubious history in opposing key health reforms going back to its opposition to the Pharmaceutical Benefits Scheme In 1942.

These vested interests include the AMA, the Australian Pharmacy Guild, the private health insurance funds, Medicines Australia and the state and territory health department bureaucracies. In addition, there is a general “pro-business” push to open up all aspects of health care more to the private sector, particularly pathology and radiology.

Where possible, financial incentives should encourage practitioners to keep people healthy, rather than to deliver services to the sick. The perverse incentives in FFS come to play particularly strongly when health care takes on a corporate structure, where business objectives such as return on shareholders’ funds displace professional service objectives traditionally associated with medical practices. Businesses operate on the basis of expanding their markets, not on the basis of telling customers they may be over-using their services. The AMA, however, is turning a blind eye to the growing corporate takeover of general practise and the associated vertical integration into radiology and pathology.

The Pharmacy Guild strongly defends the privileged position pharmacists have gained through political influence. On the one hand the Guild strongly defends the many restrictions on competition enjoyed by pharmacists – prohibition on pharmacies in supermarkets, prohibition on price advertising, restrictions on location and ownership of pharmacies and exclusive rights to sell many non-prescription medications. On the other hand it does little to encourage integration of pharmacy with general practice.

It is not only in retail pharmacy that Australians are overpaying. Governments are also generous with taxpayers’ money for the mainly foreign pharmaceutical firms who are able to exploit their power in patents. Medicines Australia, the body representing manufacturers and distributors of drugs, has successfully lobbied the Commonwealth to pay high prices for prescription pharmaceuticals. Australia pays top prices: for pharmaceuticals. We pay $2 billion per annum more than New Zealanders pay for equivalent drugs. The last budget failed to properly address this overcharging.

The private health insurance companies are expensive financial intermediaries, receiving a $10b annual taxpayer subsidy through the rebate, and additional support in the form of the Medicare Levy Surcharge, which subsidises those with high incomes to hold PHI. Not even at the height of manufacturing industry protection were people actually given cash subsidies to buy Holdens and Falcons.

Private insurers don’t deliver any health services; they are simply high-cost financial intermediaries taking commissions. As I outlined in Part 1, PHI benefits the wealthy and most importantly weakens the power of Medicare to control prices. Now the private insurers are edging their way into general practice. The Managing Director of Medibank Private also reportedly told doctors that private health insurance policy holders should have priority in public emergency departments.

Government subsidized private insurance is a major threat to health care in Australia. At first sight it may appear to relieve public budgets and to take pressure off public hospitals, but that’s not the way it plays out. It actually sucks resources out of the public hospitals. The remuneration of most specialists in private hospitals is multiples of the remuneration of specialists in public hospitals. And as PHI pushes up costs, governments, still left with funding a large part of health services, find that they become passive players, accepting prices set by private service providers and insurers.

Yet in spite of this economic danger, and the example of the clearly dysfunctional American system, governments in this country – Coalition and Labor – have been reluctant to take on the PHI industry. Before the 2007 election Kevin Rudd wrote to the industry assuring it that their taxpayer subsidies would continue. The industry never publicly defends its $10 b pa subsidy. It is too ashamed. Instead it lobbies in private.

In an economy where many traditional industries, from manufacturing through to print media, are facing huge competitive pressure and disruption, health care is seen as one last remaining growth sector, offering easy picking for business.

Those are the private vested interests. We also have eight state and territory health department bureaucracies supported by their ministers. In a nation where state governments feel that more and more financial and political power is accruing to the Commonwealth, it is natural that they defend their shrinking turf. Such considerations override any concern to see an integrated national system. In response, the Commonwealth is reluctant to stare down the parochialism of the states.

Reform is possible

Australian governments have a strong record in economic reform. In the 1980s the Hawke-Keating Government took on vested interests, and negotiated a wide-ranging set of reforms in the manufacturing, transport and financial services industries. Earlier, in the mid-1970s, the Whitlam Government, when it introduced Medibank, successfully stared down the AMA and the health insurers. Although the Fraser Government unwound many of these reforms, the Hawke Government successfully resurrected universal public insurance in the form of Medicare.

But there has been no significant reform of the health sector since then. In 1997 the Productivity Commission recommended a comprehensive inquiry into health financing, but no government has initiated such an inquiry. Corporate interests have become more involved in health care, and PHI has become embedded once again.

Governments generally over-estimate the power of lobby groups. They can make a lot of noise – particularly when, as a result of successful rent-seeking in the past, they have accumulated large funds to spend on scare campaigns .But the capacity to make noise does not equate to a capacity to influence voters. Opinion polls consistently show that the public believe Coalition governments are too much influenced by big business, which means reforming governments should be able to gain electoral advantage from standing up to rent-seekers.

The problem is not just about financial self-interest, however. It is also about the inertia of established practices, and an incapacity of those on the “inside” to imagine any significant variation on current arrangements. Practices such as the separation of pharmacies from medical services, fee-for-service funding, the dependence of private hospitals on private insurance, the separation of medical from hospital services in private hospitals, and so on, have become entrenched in the thinking of policymakers, politicians and many journalists. There is a deficit of imagination, an incapacity to think beyond the present.

A part of the problem lies in the Commonwealth bureaucracy. Commonwealth Ministers for Health are very dependent on the Department of Health and Ageing, particularly, as is often the case, when ministers are not across the issues and don’t have a clear policy program themselves. Aneurin Bevan showed how important political leadership is.

DHA is ill-equipped for policy reform. Rather, its objective seems to be to keep the peace with provider lobbies, and to keep the minister out of any public brawl or argument.

The Department is structured in ways that reflects the interests of providers such as doctors and pharmacists, rather than on the basis of community interests, such as acute care, chronic care or demography. It has expertise in administering existing programs but it has little economic expertise. Fiscal concerns tend to crowd out any consideration of economics.

In fact the Department doesn’t even effectively integrate the Commonwealth’s own major programs, let alone make any real progress in bridging the Commonwealth and state divide.

Late last year in its Capability Review of DHA, the Australian Public Service Commission said that the Department ‘is hierarchical and siloed, … the Department does not have a high level strategic policy framework … policy discussions are largely constrained within work silos … there is reluctance from the Department to consider new and changed policy directions’.

The Australian National Audit Office has also just reviewed the Fifth Community Pharmacy Agreement. It reported ‘Six broad principles and objectives were included in [this agreement] … The Department is not well positioned to assess whether the Commonwealth is receiving value for money from the agreement overall “               

The Ministerial/Departmental model in health has failed. It is incapable of contesting the power of the rent seekers. The community is effectively excluded.

Unless the health debate is taken to “outsiders”, away from the insiders – the rent seekers and vested interests– we are unlikely to see significant progress in health reform. The vested interests invariably win out over the public interest.

Political struggles between the public and rent-seekers are not uncommon, but there are reasons why in health care the public interest has a hard time securing a voice. Most of the public most of the time have little contact with health services. The intense users tend to be the chronically ill (who are reasonably active but do not constitute a majority) and those who are nearing the end of their lives and are not in a position to exert political influence. It is unlike services we all experience such as education or transport, where strong public lobby groups naturally arise. Also, health lobby groups are able to exploit the public’s trust in health care provider’s services – a trust which is well-justified on the grounds of professional competence, but which should not logically extend to trust on financial or political matters.

With a few exceptions the media does not really understand health issues. Press releases from pharmaceutical firms, pathologists and health insurers and other rent-seekers provide easy material for under-resourced journalists. It is easy for governments and so-called “business interests” to rise scare campaigns about the affordability and performance of government health services.

The power of vested interests in health must be strongly contested.

In Part 3 I will address governance and issues of process which are necessary to break through the inertia and counter the power of the vested interests that batten on the health system.

John Menadue chaired the NSW Health Council 2000 and chaired the SA Generational Health Review 2003. 

Policy Series

I will be posting three articles on health policy.

This article outlines the priority areas where reform is necessary.

Part 2 will explain why reform is so difficult but not impossible.

Part 3 will be about processes and governance issues that are necessary to move us beyond the present inertia, incrementalism and tinkering, with suggestions for policy directions. I will not be proposing specific policies.

The Rudd-Gillard Government – lost opportunities

Traditionally, in Australia and elsewhere, Labor and similar governments have been the initiators of health reform. Conservative governments, in general, have opposed or wound back health reform.

In Australia the Labor Party, guided by principles of universalism, equity and economic efficiency, gave us publicly-funded health insurance – initially through Medibank and then through Medicare.

In spite of high expectations in health reform, however, in its 2007-2013 period in government Labor really did little more than muddle through. The Rudd Government established a National Hospital and Health Reform Commission (NHHRC), but it was composed largely of health insiders who seemed to be incapable of seeing health policy from a broad perspective and who failed to grasp the basic economics of health care.

To its credit the Rudd and Gillard Governments had one major policy achievement – plain-packaging of cigarettes, and before it lost office was making progress on other aspects of prevention and public health.

Indigenous, mental and rural health all remain in a parlous state. Health programs operate in isolation from one another. The funding of health care through multiple public, corporate and private channels results in serious inequities. And, in general, there are administrative inefficiencies and a poor allocation of scarce resources.

Since 2013 the situation has worsened. The Abbott Government has abolished the Australian National Preventive Health Agency and Medicare Locals, has foreshadowed deep cuts in funding for state hospitals, and put up ill-considered proposals for GP co-payments. The new Minister for Health fiddles around the edges.

Getting the most from what we have

In considering health reform, we need to start with an appreciation that we have one of the best health services in the world in both efficiency and equity, thanks to Medicare. But Medicare was established over 40 years ago. There is little coherence or consistency in what we have at the moment. Our health care arrangements could not be called a ‘system’. They have no clear and underlying principles or philosophy.

As a result of that lack of coherence and fragmentation there is waste in our health care arrangements. When we discuss health care we discuss parts of it, medical services, pharmaceuticals, hospital and mental health. But seldom do we discuss the ‘system’.

Nurses, doctors, paramedics and others are all working hard and professionally, but they work in silos. I have estimated that reforms would result in a saving of at least ten per cent of our health bill or about $15b to $20b in today’s costs. Abolition of the taxpayer subsidy of over $10b per annum to private health insurance would represent about half of these savings. See my blog of 17 March 2015 on PHI and funding a Medicare dental scheme.    

But a big waste is in misallocation of scarce resources-a $10b Private Health Insurance subsidy and serious underfunding of mental and indigenous funding. Governments seek savings in public health and primary care – savings which are more than offset by higher needs for hospitalisation and high cost specialist care.

Seldom do we stand back and ask the central issue: what do we need and expect from a health system? That question should be a starting point for reform.

The concerns of health policy – a system approach

Reform needs to cut across programs, and concerned with the following six issues.

1. Primary care. Primary care has been largely ignored in health reform. It should be the starting point. Early interventions and health check-ups can head off costly and debilitating illnesses. But unfortunately the financial incentives are against primary care and in favour of expensive specialists.

We have an obsession with hospitals. But hospitals should be the last resort rather than the first. Countries such as the United Kingdom and New Zealand have high quality care, in part because of the philosophy underlying their systems, but also because those systems are grounded in primary care, which is the most efficient and equitable way to deliver health services for all regardless of income. It is where care is best integrated.

Fee for service (FFS) remuneration in primary care has encouraged “turnstile medicine”, excessive treatment and increasingly the corporatisation of general practice. FFS is a major barrier to reform in primary care. FFS may be appropriate for episodic or occasional care for walk-in patients but it is not appropriate for chronic and long term care, particularly mental and indigenous health care. Our governments have failed in this key area. Increasingly physicians in Europe and elsewhere are taking salaried positions where they are supported in practice medicine in a collegiate environment where the time for team review of patient management is a routine part of care, not something that is seen as an irritating waste of time with poor remuneration. FFS encourages over-investigation and over-treatment. Doctors respond to financial incentives just as other people do and this is not always in the interests of patients.

A major barrier of course to improved health services through primary care is that the Commonwealth funds GPs and other medical services, other than those in public hospitals, while the states operate public hospitals. There are substantial savings in keeping patients out of hospitals but with different funding steams there are few incentives to do so. In fact, when the Commonwealth is more concerned with its fiscal balance than with sound economics, it has every temptation to skimp on primary care, essentially imposing higher costs on the states and poorer health outcomes on the community. The Commonwealth’s fiscal obsession has outweighed any sense of economic responsibility.

The trends in General Practise are disturbing. In 1999 45 % of doctors were GP’s it is now less than 38%.The earnings of GP’s are substantially less than specialists. It is more attractive financially for medical graduate to become specialists

In this blog, John Dwyer (See ‘Commentary Part 1‘ and ‘Health Policy Reform Part 2‘) argued persuasively for an integrated primary care system in Australia. It would provide a ‘medical home’ for a wide range of patients with diverse health problems.

2.  Workforce. Health is the largest and fastest growing sector of the Australian economy. Its structure and workforce are riddled with 19th Century demarcations and restrictive work practices. For example there are several hundred nurse practitioners in Australia when there should be thousands. About 10 per cent of normal births in Australia are delivered by midwives: in New Zealand that figure is over 90 per cent.

We don’t have a shortage of doctors so much as a misallocation of doctors. Nurses, allied health workers and ambulance staff are denied opportunities to upgrade and realise their professional potential and improve services.

Pharmacies should be providing more basic health services for the community and should be active partners with doctors in primary care.

As Minister for Health, Nicola Roxon enabled some nurse practitioners and midwives to access the Medical Benefit Scheme but the access was quite minor. The MBS can be the lever for major workforce renewal.

It is quite remarkable that we have endless talk about the need for workforce reform everywhere but in the health sector. The restrictive work practices and demarcations in the health sector are a disgrace. Jim McGinty will be writing further on health workforce reform in this policy series.

3. Program structures. If we go to a garage to service our car we expect the garage to take responsibility for the whole car. But not in health. We have to go to different professions for different services, suppliers and interest groups all with their separate billing and regulations. Health services are structured and funded around providers – medical services by doctors, pharmaceuticals through big Pharma and the Pharmacy Guild, and hospitals through state governments and private agencies. The Department of Health and Ageing reflects this provider focus rather than a focus on consumers.

Such a provider-based structure, rather than a user- or customer-based structure, is reminiscent of corporate structures abandoned in the private sector a half-century ago, and is inconsistent with the “outcomes” focus of public sector reforms of the 1980s. Yet it survives in the health sector with the only institutional recognition of consumers is through the Health Consumers Forum of Australia, a body funded by the Commonwealth and which seems more like a marketing arm of DHA than a group representative of consumer interests. Patients are invariably last in the queue.

We need to progressively change the focus of health programs to serve the community rather than providers. One possible structure would be around types of users – acute, chronic and occasional. It would help reduce the competition between different provider areas for limited resources. DHA shows little interest in consumers but together with the Minister always seems to have an open door for the rent seekers such as the Pharmacy Guild and the AMA.

4. Funding. Funding of health services is a mess, resulting in serious inequities, high administrative costs, and misallocation of scarce resources. Some services, financed either through private health insurance or Medicare, are free at the point of delivery, while others can leave consumers with massive out-of-pocket expenses.

We have some of the highest co-payments in the developed world. They also lack rhyme or reason. ” with the level of government subsidies varying enormously. Some co-payment arrangements work on a safety-net basis, while others, such as for psychologists, leave the consumer bearing open-ended risks. The Abbott Government’s “reforms”, if implemented, would make the situation worse. Medical and pharmaceutical co-payments have little in common, and dental services are much more poorly funded than medical services. The safety nets are unfair and lead to abuse.

Persons on high incomes should pay more for health services through efficient and defensible co-payments. A “universal” service does not necessarily mean it should be free. Subject to a means test, there needs to be more discipline by consumers in their use of health services. There is no sign that the Commonwealth is concerned about the problem however, even though most other countries have better models to emulate. The Nordic countries, for example, insist on a single public funder and universality but with efficient and equitable co-payments. Jennifer Doggett will be writing further about co-payments in this policy series.

The other great funding distortion in Australian health care arrangements is private health insurance (PHI) – essentially a high-cost mechanism which allows some, particularly those with high incomes, to jump the queue for hospital services, thus worsening waiting times in public hospitals by diverting resources to private hospitals, contrary to the claim that it takes pressure off public hospitals. PHI penalises country people because there are few private hospitals in the bush. Australia’s arrangements also mean that private and public hospitals operate on different funding streams and with little integration of services.

The government, through means testing rebates for PHI, has removed some inequities, but PHI remains a costly and inequitable way to do what the tax system and Medicare do much better. Also, PHI is administratively inefficient with bureaucratic costs including profits about three times higher than Medicare.

Private gap insurance promoted by PHI has facilitated enormous increases in specialist fees. Most importantly, the expansion of PHI progressively weakens the ability of Medicare to control costs. The evidence world-wide is clear that countries with significant PHI have high costs without any better health outcomes.

The stand-out example of PHI causing high costs and poor outcomes is the United States. President Obama may have substantially achieved universal coverage, but PHI with its lack of cost control will ultimately cripple and finally destroy his reforms. Warren Buffett has described PHI companies as the “tape worm” in the US health sector.

The Commonwealth already has a sound model of a single payer operated through the Department of Veterans Affairs – a model which retains the strong control of a single payer accountable to the community whilst allowing private practise involvement in service delivery.

The Commonwealth has failed to understand the damage that PHI is already doing in Australia. PHI is a Damocles sword hanging over Medicare. We must assert the key importance of a single public funder.

The $10b plus per annum taxpayer subsidy to PHI is more than would be required to fund a Medicare dental/oral health scheme and significantly improve the funding of mental, indigenous and rural health

This subsidy of $10b is the most critical issue in health care. The nettle must be grasped!

5. Defining Medicare. This great Labor monument needs a review. Medicare has become a passive but efficient funding mechanism, providing a partial subsidy for certain health expenses, rather than the public insurer it was intended to be. After all, it is still called the “health insurance commission”, but it is nothing of the sort, and it is not even within the health portfolio.

Medicare has a remarkable database which should be used to highlight and inform policy concerning over and underutilisation of services across the country. Why for example do rates of caesarean section vary enormously across the country and why are Australian rates very high in world rankings? There are many other large variations in clinical procedures that must be made public and explained. Medical services should be subject to the same rigorous cost-benefit examination as pharmaceutical services. Medicare is not doing it.

Even more potential lies in the use of that database for research into efficacy of treatments. This was an intention of Medicare’s designers, who envisioned the day when computing power could extract clinical information from that database. That day has arrived, but the government, although willing to invest billions in some areas of medical research, shows no interest in using this valuable resource, or in the integration of MBS and PBS data which would provide rigorous pharmaceutical evaluation at a tiny fraction of the cost of clinical trials.

6. Cost and blame shifting. Governments, more concerned with their fiscal balances than with economic efficiency, try to shift costs on to other governments, Commonwealth to state and vice versa, on to individuals, or on to future generations for example in neglect of public health. Attempts to resolve the Commonwealth/state blame and cost shifting have been largely unsuccessful and certainly expensive with the Commonwealth succumbing to state political pressure without fixing the lack of integration.

In Part 2 I will be looking at the major obstacles to health reform, including the influence of the vested interests who are concerned to protect their own territory rather than serve the public interest.

John Menadue chaired the Report of the NSW Health Council 2000 and the SA Generational Health Review in 2003. 

Fairness, Opportunity and Security
Policy series edited by Michael Keating and John Menadue.

Good government must be based on some broadly shared values that inspire and enthuse us.

We can accept that our leaders must make some compromises from time to time, but we need to know ‘what they stand for’. We look for leaders who have conviction.

For example, we need to discuss tax reform but so often it becomes a technical discussion when what is really at stake is the sort of society we want and how tax can help us in the goals we seek. Tax is a means to an end. It is not an end in itself. Oliver Wendell Holmes put it succinctly that taxes are what we pay for a civilised society. That is where the discussion about tax should start.

We also need good managers but management also is a secondary issue. The important issues are the values and principles that should guide policy and programs which in turn must be managed well.

Unfortunately values, principles and ideas have given way to ‘small target’ electioneering and the marketing of products. Money has replaced membership as the driving force of election campaigns.

Principles as the basis for policy.

We need leaders and political parties to express themselves in a clear set of principles which accord with the best of Australians’ values. Otherwise the political contest is reduced to satisfying short-term materialist ‘aspirations’, appeasing vested interests and managing the media cycle.

From community values a set of principles of public policy can be developed. Those principles can underpin a coherent set of policies and programs which implement those policies.

Values > principles > policies > programs.

Compromising on issues such as refugee policy simply legitimises those who exploit people’s fear and is likely to drive out sensible and reasonable political debate and confuse supporters.

Many of us take an optimistic view of human nature and recognition of the importance of the public sphere where people realise their full capabilities. These ideas can be expressed in consistent and coherent principles such as fairness, opportunity, stewardship, the common wealth, including enhancement of social environmental and institutional capital and protection of natural resources.

Today, Australia faces great challenges – climate change, population ageing, commodity based exports, deficits in human capital and a weak base for public revenue. The politics of ‘what’s in it for me’ discourages us from facing these challenges, for there will have to be trade-offs. Some will have to pay more than others and some will have to forego benefits now for the sake of longer term benefits. Such transitions can be painful, but are more likely to gain support when people understand the principles underpinning public policy.

When a political party is unified around a set of principles it can still have a robust debate about how to give effect to those principles. But it would be in control of its message because its parliamentary representatives can engage with the electorate in a consistent and sincere voice, with less reliance on ‘talking points’ and spin and with less concern with the immediate reaction of focus groups. Party supporters would be much more prepared to accept political compromise if they know that there is strong leadership and there is broad agreement on key values and principles. Leadership has to be patient and consistent around these values and principles – and never go backwards. Authenticity and sincerity are then easily recognised. 

From values to principles

Values such as fairness, freedom, citizenship, stewardship and ethical responsibility, would be generally accepted by most people. As the values are translated into practise they can be further defined as principles that then lead to policies, e.g. the value of fairness can be expressed in the principle of a stronger link between contribution and reward- a link which has become severed by hugely disproportionate executive pay, high returns to rent seekers and financial speculators and the long head-start of inherited wealth.

The following is indicative of a set of values and their expressions in principles.

Fairness/equity

A ‘fair go’ is primarily about economic opportunity.

People should be provided with a good education and those who put it to socially useful ends should be rewarded. Governor Lachlan Macquarie was no socialist but his ‘tickets of leave’ gave the outcasts and underprivileged of this country another chance. We built a nation this way. We must give a chance for newcomers and all people to have another opportunity.

Fairness promotes social mobility and limits division and resentment.

Fairness should not be restricted to education.

The path to prosperity with fairness is through productivity and well-paid employment rather than government handouts. The Nordics have demonstrated that education and incentives for participation do produce fairness and economic prosperity.

Fairness implies that we are tough towards ‘bludgers’, whether they be tax-dodgers, the vulgarity and indulgence of  those with inherited wealth, protection from competition, government hand-outs and favouritism or cheating on social services.

Fairness implies full employment as a macro-economic goal to ensure human capabilities are not wasted.

Areas where we fall short in fairness include

• Unfairness in taxation,
• Neglect of early childhood education,
• Treatment of the needs of indigenous people and refugees,
• Diversion of education funding to wealthy schools,
• Inadequate ODA.

Freedom

We all have rights to the extent that they do not lessen the rights of others.

Except where the rights of the vulnerable are at stake, the government should not intrude into the private realm.

Denial of freedom does not happen overnight; it is eroded step by step.

We must be vigorous in promoting our freedoms – freedom of speech, freedom of religion, the rule of law and free and fair elections.

The potential abuse of power should be minimised by the separation of powers and the separation of church and state.

Areas where we fall short in freedom include

• The growing power of cabinet and executive which is not adequately balanced by parliament.
• We have no Human Rights Act.
• We have reduced freedom as a result of counter-terrorism legislation.
• The media increasingly fails to protect our freedoms and often facilitates abuse of power by lobbyists.

Citizenship

We are more than individuals linked by market transactions.

Our life in the public sphere is no less necessary than our private lives. As citizens we enjoy and contribute to the public good. It is where we show and learn respect for others, particularly people who are different. It is where we abide by shared rules of civic conduct. It is where we build social capital – networks of trust. We need to behave in ways that make each of us trusted members of the community. ‘Do no harm’ is not sufficient.

Citizenship brings responsibilities – political participation, vigilance against abuse of power and paying taxes.

Areas where we fall short in citizenship include

• Our withdrawal into the private realm; there are growing gated communities, private entertainment,
• Private rather than public transport and resulting reluctance of influential people to support investment in public transport.
• Disregard of neighbours.
• Government subsidies, private health insurance and private schools that discourage the coalescence of socially mixed communities around shared public schools and public hospitals
• NGOs have increasingly become part of government.
• Tax avoidance by large corporations. 

Stewardship

We have inherited a stock of assets or capital; environmental (forests/water), public and private physical capital (roads/ports), human capital (education), family capital (family and friendship bonds), social capital (trust), cultural capital and institutional capital (government and non-government institutions). That stock of assets must be retained and where possible enhanced.

We must use our resources as efficiently and productively as possible.

Areas where we fall short in stewardship include

• We are amongst the highest per capital carbon polluters in the world.
• We are placing a heavy strain on the planet which prejudices our grand children’s future.
• We waste water and degrade the land.
• We continue to log old growth forests.
• We are degrading the Great Barrier Reef.

Ethical responsibility

Those in prominent office should promote those qualities which draw on the best of our traditions and the noblest of our instincts.

The duty of those with public influence is to encourage hope and redemption rather than despair and condemnation, confidence rather than fear. It is to promote the common good – to encourage us to use our talents. It is to respect truth and strengthen learning to withstand the powers of populism and vested or sectional interests. This would set a tone of public discourse which nurtures public institutions

Areas where we fall short in ethical responsibility include

• Leaders, who appeal to our worst instincts, e.g. dog whistling on refugees.
• Executive salaries,
• Undue influence of vested interests and corporate lobbyists.
• Those in public office should help the community to deal with difficult problems which may require painful adaptive change, such as climate change, rather than provide the false comfort of ignoring or downplaying them.
• Tax avoidance by large companies.

We need leaders and institutions that make clear what they stand for on key values and principles which are then translated into policies and programs.