John Menadue

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 no mistake: it will be hard without political leadership and political will.

 

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 calculations of 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.

Those pursuing reform need to go over the heads of the vested interests and find out what the community really wants, rather than paternalistically assuming that they know what’s best. In recent years the paternalistic assumption has been that the community prefers tax cuts to improved health services, even though evidence tends to point in the opposite direction.

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 important.

In order to lift the process beyond immediate concerns, those pursuing reforms can set out a basic set of principles, and, in a well-managed consultation process, can 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 $1.10 of $1.50 for the same or inferior services in private markets through PHI.

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.  A related principle should be one of solidarity or social inclusion. This means that all should have access to the same high-quality services, rather than a segregated system with special services for the poor or “indigent”, to use the derogatory American term. In Australia 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 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, and health ministers, state and federal, should have the same standing as treasurers.

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. 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.

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.

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 $7b plus per annum subsidy to PHI should be steadily phased out. If people wand 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. Public policies should recognize that commercial incentives which are about expanding markets and good public policy which is often about encouraging personal responsibility and reducing dependence on health services do not always align.

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 doctors perform in private practise. We hear about occasional mal practise but very little about general performance and competence.

The related issue of Commonwealth-state relations needs resolution. There are many possible paths to reform. One possibility for consideration 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.  See link to ‘The Blame Game in Health’ that I posted on 3 June last year  https://publish.pearlsandirritations.com/blog/?p=1756/.

The role of institutions

Health reform is too important to be left to health departments particularly the Commonwealth Department of Health and Ageing 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. It gives all a forum to voice their concerns, to tease out likely unintended consequences of policy proposals, and to direct corporate interests to contribute to problem-solving and policy design rather than to defending their vested 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 more inclusive 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 basic 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 not the AMA or any 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.

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; how co-payments should be reformed; how to overcome the commonwealth state blame game; how the workforce 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 a 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, a 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 in the hands of the public or governments. That is the key issue. We need leadership, institutions and processes to focus on how we overcome this central issue.

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.

There is a major barrier to health reform. It is the power of providers or at least their assumed power. When I was asked by the National Hospital and Health Reform Commission to describe in a sentence or even one word the obstacles to health reform I said ‘power’, the power of providers. I don’t the Commission got what I was driving at!

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 previous Australian health minister said we needed a conversation on health. The new minister says she will consult widely after the fiasco on co-payments. But if past practise repeats itself the conversation and consultation will be limited to the AMA and the Pharmacy Guild.

The difficulties of sensible reform are obvious in the health field but they are a generic problem in public policy today. It has been most obvious in climate change policy where Ross Gaunaut has described the power of vested interests as a ‘diabolical problem’.

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 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.

“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 1975. 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 Australian Medical Association (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.

The AMA in its role as a medico- political organisation opposes reform of the fee for service (FFS) system of remuneration. FFS is an administratively convenient means of remuneration, but it carries perverse incentives because it rewards over-servicing, over-referring and over-prescribing. It is particularly inappropriate for care of the chronically ill.

Even among the most dedicated professionals, financial incentives influence behaviour, and tend to reinforce professionals’ desire to apply their skills to problems – rather than encouraging people to become less dependent on health services.

Where possible, financial incentives should encourage practitioners to keep people healthy, rather than to deliver services to the sick. There is no “one-size-fits-all” method of remuneration – FFS has its place, but it should stand alongside other systems, such as capitation and salaried payments.

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.

Excuse me for dropping names but in a round table I attended with Margaret Thatcher in the late 1980s she was asked, “Now that you have fixed the restrictive work practices of the miners and the printers, what are you going to do about the restrictive work practices of the doctors? She replied that she would leave it to her last term. She never got around to it.” And so far neither have we.

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 of pharmacies and exclusive rights to sell many non-prescription medications. On the other hand it does nothing to encourage integration of pharmacy with general practice. Thus there persists the anachronistic practice of a separation of pharmaceutical from medical services.

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. Twenty years ago Australia stood out as a world leader in using government purchasing power to keep pharmaceutical prices under control. Now Australia pays top prices: for example, Australians pay $2 billion per annum more than New Zealanders pay for equivalent drugs.

The private health insurance companies are expensive financial intermediaries, receiving a $7b 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. Gap insurance through PHI has underwritten an enormous increase in specialist fees. 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. What an outrageous proposal.

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 remeration of most specialists in private hospitals are 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. As a result, In the United States the government’s partial programs – Medicare and Medicaid – now cost more as a proportion of GDP than do completely publicly-funded insurance systems in the United Kingdom and many other European countries. The cause of this problem in the US is PHI.

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.

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 – if only the government would get out of the way.

Those are the private 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 on 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 1977 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 established 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 at the public’s expense, 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 large 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.

The Department is ill-equipped to cope with 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.  One very senior Commonwealth official said to me that the Department does not have any strategic sense in health policy.

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. During the difficult negotiations with the states on health reform during the Rudd Government period, the Department of Prime Minister and Cabinet effectively had to step in because DHA was not up to the job. Even the task or rolling out e-health, a minor but important reform, proved to be a difficult one for the Department. DHA sees Medicare as a funding vehicle and not a policy instrument. Medicare is, in fact, is not even within DHA. Health policy is an after-thought and health reform is right off the agenda.

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, time and time again.

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.

The media stories tend to be about failures – often in public hospitals because they handle the most difficult cases – and about corporate activities. Press releases from pharmaceutical firms, health insurers and other rent-seekers provide easy material for under-resourced journalists. It is easy for governments and so-called “business interests” to raise scare campaigns about the affordability of government health services. They don’t mention that when those services are privatized they are generally more expensive), but it is very hard to engender a debate about health policy. The superficial slanging match about the Commonwealth’s GP co-payments is illustrative of the paucity of the public “debate”.

 

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.

 

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. The key issue is power and how it is exercised

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. Kevin Rudd promised to take over state hospitals if the states continued to stonewall, and polling suggested that the public agreed with his approach. But in the end he gave way: fragmentation of services between the Commonwealth and the states continued, as did the practices of cost and responsibility shifting between those two tiers of government. He focussed on hospitals and not on primary care.

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. The process achieved very little and chewed up a great deal of time and money. It was a wasted opportunity.

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 public health. The success of these public health reforms, in contrast with the minor achievements of health care programs, is consistent with the possibility that reform of these programs is impeded by institutional inertia and the power of rent-seekers, a point taken up in Part 2. The tobacco industry is well-heeled, but it does not have friends in health departments.

Case mix funding to improve hospital efficiency was also a useful reform

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 has put up ill-considered proposals for GP co-payments.

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. It is now a bits and pieces operation – some parts added in good times and with cut-backs in difficult times. Some additions have been made by Labor governments and some by anti-Labor governments. 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. Nurses, doctors, paramedics and others are all working hard and professionally, but there are managerial inefficiencies and high bureaucratic costs in both the private and public sectors: I have estimated that reforms would result in a saving of at least ten per cent of our health bill or about $15b in today’s costs. Abolition of the taxpayer subsidy of over $7b per annum to private health insurance would represent about half of these savings.

But a big waste is in misallocation of scarce resources. Capacity to pay often overrides consideration of therapeutic needs. Governments seek savings in public health and primary care – savings which are more than offset by higher needs for hospitalization and high cost specialist care. Demarcation rigidities result in overwork for some and under-utilisation of skills for others such as nurses. In all, the whole is far less than the sum of its parts.

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

Incremental reforms addressing real or perceived shortcomings in particular programs, even if they achieve some economies, are going to do no more than to perpetuate existing problems. 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 for any consideration however of preventive health and chronic care. Early interventions and health check-ups can head off costly and debilitating illnesses.

Specialist care has become very expensive. 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.

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

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, performing routine functions such as administering regular vaccinations. 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 the front line. Pharmacists are the most underutilised and highly-qualified professionals in our health sector. They need to be integrated into primary health care.

There will never be adequate delivery of service to people, particularly the aged, without radical workforce reform, mainly within 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. Surely governments could not be frightened of the AMA! In our modern economy the restrictive work practices and demarcations in the health sector are a disgrace.

 

3. Program structures. 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 structure of 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 the Department of Health and Ageing than a group representative of consumer interests.

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. The Department of Health and Ageing shows no serious interest in consumers but together with the Minister always seems to have an open door for the rent seekers such as the Pharmacy Guild.

 

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 but they lack rhyme or reason. They are a “dog’s breakfast” 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. Jennifer Doggett at the Centre for Policy Development has proposed workable means-tested reforms in this area with a Health Credit Card. See http://cpd.org.au/2009/07/out-of-pocket-rethinking-health-copayments/ There is no sign 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.

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 health services, thus worsening waiting times in public hospitals and diverting resources to private hospitals, contrary to the claim that it takes pressure off public hospitals.  It 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 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.

It is interesting to note that the $7b plus per annum taxpayer subsidy to PHI is more than would be required to fund a Medicare dental scheme!

 

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.

This is part 2 of a series on health prevention. It was initially posted in October last year.  John Menadue.

Yesterday, in part 1, I began the task of analysing the cuts to the Commonwealth’s health budget and to the promised payments to the States and Territories in the area of prevention. Are the cuts well justified by the statistics?

Obesity – Nutrition and Physical Inactivity

Other than tobacco and excess alcohol consumption, the rising rates of obesity are the most concerning statistics in the area of preventable diseases. People’s diets and their levels of physical activity both contribute to obesity and overweight. By mid 2012, almost two thirds of Australians over 18 years were either overweight or obese according to the Australian Bureau of Statistics, a significant increase from a decade ago. The current combined level for obesity and overweight is 63% for adults (70% of men and 56% of women). Of children between the ages of 5 – 17, about 18% are overweight and 8% are obese; this is very bad news, but at least it isn’t worse news – these numbers for children are largely unchanged since 2007-08. Unsurprisingly, a clear pattern of socio-economic disadvantage is visible: the prevalence of obese children, for example, is four times higher in disadvantaged areas.

Australia is now in the top league tables in the obesity stakes, still lower than the United States but we’ve been catching up fast.

On specific metrics for exercise and nutrition, the AIHW (Australian Institute of Health and Welfare is also being abolished as a standalone statutory body by decision of the 2014 Budget with the functions to be amalgamated in a mega ‘productivity and performance’ entity) reported this year that: 92% of Australians did not eat 5 serves of vegetables per day and 52% did not eat 2 serves of fruit; and only 43% of adults were active enough to meet recommended guidelines of 150 minutes per week of walking or other moderate or vigorous activity.^[1]  

The nation has a long way to go on the obesity problem. Dutton often cites the alarming obesity statistics – but mainly as a precursor to argue for his plans to charge people more for primary care from their GP – which is of course where a lot of prevention advice is given and where lower-income people are most likely to go. Given the current minister is well aware of the problem, presumably there are major initiatives to tackle obesity. However, there is no evidence in the federal budget of anything much being done. Perhaps the government is making good on its comment that this is a matter for people’s personal responsibility.

Other Risk Factors

There are of course other risk factors both behavioural and biomedical – eg. high blood pressure, high cholesterol, high salt intakes – but it is in particular the key risk factors described above which drive the major increases in chronic disease.   So while not unimportant, the Commonwealth, States and Territories chose to focus their efforts and funds on the SNAP behavioural risks that could potentially be influenced in a better direction.

Where to now?

So, with the data under our belts, does the picture suggest less attention or a reduction in funding for prevention activity?  The answer is self-evident.  More emphasis on prevention is clearly in order.  And that is what most countries are doing – increasing considerably their attention to the difficult area of lifestyle risk factors in order to counter the significantly increasing burden of preventable chronic diseases. The head of the World Health Organization, Margaret Chan, has noted that chronic noncommunicable diseases have overtaken infectious diseases as the leading global cause of morbidity, disability, and mortality and stated that “prevention must be the cornerstone of the global response.” So what’s going on in Australia? Why this attack on lifestyle-related prevention activity.

There are perhaps two interrelated answers.

That the Abbott Government is proving to be highly ideological – not a feature of their campaigning before the election – is hardly a matter for debate any longer.  The extent of the ideological thrust is however a surprise to many as is the extent of the influence of the far right think tanks like the Institute of Public Affairs. The IPA had waged a highly visible campaign against nanny state prevention activities in the election lead up. During the Budget, the ideological tenor of the government was especially on display when increasing spending. More money for medical research! Terrific idea? In principle, you’d think so. But the funds are for Medical – big M – research; Dutton made clear that it’s a Medical Research Future Fund – not a Health Research Fund – which is far more likely to rule out research into, for example, factors influencing behavioural elements like fast food or alcohol consumption. Particularly ironic (depressing) – but sending the clear ideological message – the savings from killing off the COAG Preventative Health Partnership and abolishing the national Prevention Health Agency are being directed into the Medical Research Future Fund according to Budget Paper #2.

Just as worrying, and well documented by others, is the influence of the alcohol and food industries on the government (see for example Big Food with a regional flavour – how Australia’s food lobby works). The embarrassing Fiona Nash’s behaviour in hiring a junk food lobbyist as her chief of staff was probably just the visible tip of a very large iceberg. Her hamfisted attempt to delay the website and possibly wipe out the food star labelling system – and this is a voluntary system for the industry! – created the first scandal for the then new government. Given the level of control over ministerial staff appointments out of the PM’s office, one could suppose the PM thought there was no problem with having a junk food voice so intimately involved in the food minister’s work — a supposition largely confirmed in his refusal to have his non-performing junior minister resign over the matter. (As an aside, however, his reluctance could well be compounded by that fact that there are rather few women in the ministerial club and losing one – and a Nat at that – might have been rather problematical). At least they don’t let Nash out in public very often – although her launching of the most recent phase of the national tobacco campaign from a party base that still accepts Big Tobacco funding had a number of us seriously exceeding the NHMRC alcohol guidelines for single occasion risk!!

Where the industry influence and the ideology will take us eventually is probably not to better health outcomes. Cuts to areas like prevention, just like undermining investment in newer green technologies, do not have outcomes that are immediately visible – the negative results take some time to manifest.   Eventually, our performance or rather lack of it, in prevention will become evident in the burden of disease measures and in comparison with other countries who are diligently tackling the tough lifestyle issues. The actions of an ideological government, out-of-touch with international evidence and action on these matters, is not likely to serve Australia’s longer term interests.

^[1] Australia’s health 2014, AIHW