Category: Health

  • John Menadue. More problems with the Department of Health and Ageing.

    On 16 March, I drew attention to a Capability Review of the Department of Health and Ageing by the Australian Public Service Commission. It set out a very worrying analysis of the overall performance of DHA.

    We now have a report by the Australian National Audit Office of DHA’s administration of the Fifth Community Pharmacy Agreement (5CPA). The 5CPA is the fifth agreement which the Commonwealth Government has made to provide subsidised medicines to Australians who are eligible through the Pharmaceutical Benefits Scheme (PBS). This agreement is with community pharmacies across Australia.

    The Australian National Audit office points to major concerns about DHA’s administration of this 5CPA.

    It says ‘Six broad principles and objectives were included in the 5CPA. Limited departmental information plus shortcomings in DHA’s performance reporting and 5CPA evaluation framework mean that the department is not well positioned to assess whether the commonwealth is receiving value for money from the agreement overall, or performance against the six principles and objectives.’

    The report adds ‘Administration of 5CPA has been mixed … A number of key government negotiating objectives for the 5CPA were only partially realised and there have been shortcomings in key aspects of DHA’s administration at the development, negotiation and implementation phases. …’

    The report refers to shortcomings in the Department’s estimation methodology and that a number of the government’s strategic negotiating objectives were only partially realised.

    Like the Capability Review by the Australian Public Service Commission, this report by the Australian National Audit Office points again to the extremely worrying performance of the Department of Health and Ageing.

    The performance of the department on co-payments should not be a surprise to anyone.

    The long-time secretary of the Department of Health and Ageing has been promoted to become the Secretary of Finance.  John Menadue.

    See link below for full report.

     

     

    http://www.anao.gov.au/Publications/Audit-Reports/2014-2015/Administration-of-the-Fifth-Community-Pharmacy-Agreement/Audit-summary

  • Patrick Shanahan. Connecting the Mouth to the Body

    Why is dentistry not part of health care? 

    Most people cannot understand why the mouth is not included in medical management, especially since there is mounting evidence that oral and dental infection can cause medical complications that cost many times more to treat medically than prevent dentally.

    How did this happen?

    Dentistry separated from medicine over 500 years ago when the previously allied barber surgeons evolved into two streams, medicine and dentistry, and subsequently established independent schools to train doctors and dentists.   Not only is dentistry independent of medicine it is also privatised, self regulated, outside health care, and Medicare legislation (1973)excludes it, which,  as you will see, was a big mistake.

    Dental infections can cause medical complications  

    The connection between infection from the mouth and medical problems is not new. In the 1930’s, the ‘focal sepsis’ theory was in vogue. It proposed harmful bacteria could be swallowed, inhaled, or travel via the blood stream, to distant sites, and cause infection there. To prevent this there was an epidemic removal of tonsils, teeth, and appendixes. The theory gradually lost favour and was discarded, but has since re-emerged with medical research giving it credence.  Because of this, there is a clear distinction between what is non elective ‘medically necessary dental care’, and belongs in primary care, and what is elective ‘dentally necessary dental care’, which belongs in dentistry.

    Why should we make this distinction?      

    AIHW (2010) reported 1 in 2 Australians have private dental cover, which is a reliable indicator of use of dental services.  Most of the 8 million without dental cover have a chronic disease, a disability, or require care. So they are the highest medical and dental risk groups.  Herein is the problem.  GP’ frequently treat these patients, but dentists don’t.

    Indirect Costs

    Dental infections in these patients go undiagnosed and untreated and cause medical complications, which are treated medically, but not dentally. These INDIRECT costs are many times more than cost of preventing them, and add billions to health care costs.  If these INDIRECT were added to the DIRECT costs the disease that costs the most and affect the most people is dental disease, NOT heart disease. You’ll see why.

    Direct Costs

    The DIRECT costs for those using dental services are known.  In 2008-09, they were $7 billion (AIHW 2010), almost as much as heart disease, $7.7 billion. Individuals pay for 90% of that. These high costs reflect the increasing demand for expensive crowns, bridges, veneers, and implants, which are cosmetic, not health related.

    How much are the Indirect costs? Can they be avoided?  

    No one knows, but there is some useful US data.  The US has 120 million uninsured who do not receive any dental care. Increasingly they are accessing emergency rooms (ER’s) with acute dental problems. Although ER’s do not have any dental services, they can provide temporary relief with pain killers and antibiotics, but most of the uninsured cannot pay.  60% of US bankruptcies are for unpaid medical bills. Florida has a population approaching 20 million. It recently reported 139,000 visited ER’s with acute dental problems that cost $141 million, $1000 each.  They estimated a dental service by a dentist in a dental office would probably cost only $100. Instead of spending $141 million it would cost only $13.9 million. There is the saving, there is the solution.

    Another study by the US Institute of Health, Office of the Actuary (1988), investigated medical complications after surgery caused by untreated dental infections. It cost $100 million (10%) to treat the complications, but if there had been a dental assessment before surgery it would have cost only $16 million to prevent those complications. There is the saving, again the solution.

    The US subsequently introduced a limited Medicare dental scheme in 1998, but US dentists have never embraced it because the fees were inadequate and it did not include any restorative dentistry.

    These two examples clearly show the costs, the savings, and the solution.  The inclusion of an oral and dental assessment in medical practice and prioritising ‘medically necessary dental care’, and referring to a dentist. This immediately costs less, provides better health, saves money, and keeps patients out of expensive emergency departments and hospitals.

    A Japanese study into fatal broncho pneumonia in nursing homes found professional antibacterial l oral care reduced the number of fatalities.  Importantly, they also found the risk of fatal broncho pneumonia was just as high with those who had NO teeth or dentures as it was for those who teeth and dentures. The risk was NOT the condition of the teeth, but the uncontrolled bacteria inside on the mouth that collected at the back of the mouth and entered the lungs.

    The US estimates each hospitalisation for pneumonia cost $25,000. Preventing it might cost only $1 a day.

    What is this costing in Australia?

    There is no data. One can only make estimates.  AIHW estimates range from $10 million- $300 million.

    My estimates are very different as I have spent 25 years experience in aged care, mental health, disability, general practice, and indigenous health. AIHW statistics do not present the real picture.

    GP consults                                                      $10-100 million

    Emergency departments (ED’s)                   $50- 100 million

    Hospitals admissions                                     $400 – 1billion

    Aged care                                                         $1.4 billion

    These cost range from $2 – 2.6 billion. Based on demonstrated savings in the US, there might be potential  savings of $1-2 billion.

    Comments

    AIHW (2010) reported 80% of health expenditure is spent on treating chronic conditions, and 50% of hospital admissions are for treating chronic disease complications that are preventable. It therefore would not be unreasonable to assume many of those medical complications that are treated medically are caused by underlying untreated dental infections that remain untreated.

    Aged care costs are huge because mouth problems (not teeth related) such dry mouth, ulcers, thrush, mucisitis (inflamed soft tissues) affect eating, sleeping, swallowing. speaking,  which then lead to weight loss, digestive disorders, dehydration, constipation, behaviour changes, confusion, etc. The consequences are treated but the cause is not. That’s why it costs so much. This aspect  of health care has been sadly neglected.

    Action Plan

    If the GP is responsible for health care outcomes, they must be made aware of existing oral and dental infections that will affect their medical management.

    An oral and dental assessment therefore should be mandatory in health care, carried out by a dental resource specifically trained for health care (Bachelor of Oral Health), have a dental background, and included in the allied health team.

    Medicare legislation should be amended to include an oral and dental assessment, prevention, and education, facilitating referrals for ‘medically necessary dental care’, which is carried out by participating dentists/therapists (?) all covered by Medicare. This would include inexpensive intermediate dental restorations, extractions, and scaling and cleaning.  These costs, as has been shown, are many times less than what is currently spent and wasted, it would put high risk patients in safe mode preventing future disease and complications.

    As shown in Japan, more effective oral care practices should be adopted and covered by Medicare.  Since the objective is to reduce the bacterial load and prevent disease, the use of antibacterials is mandatory. Toothpastes have no antibacterial effect and often  make sensitive mouths worse.  Health care related oral care needs should be managed and monitored in health care as part of their ongoing medical management, not in dentistry.  The products should be covered as medical items as those who need these can least afford them. The costs of prevention are many times less than treatment.

    Beyond general practice, a lot also needs to be done.  There are NO oral health services in HACC, young disabled, mental health, spinal units, head injured, or homeless. Palliative care is an area that needs urgent attention as does intensive care, cancer patients, and those in neuro science wards in hospitals.

    Priority

    This is not just about health care and costs. What are lacking are compassion and empathy and a focus on personal needs that translate into quality of life, self esteem, dignity, and comfort.

    If this was to happen, Australia could have the best health system in the world and one which would be the global benchmark.

    Dr Patrick Shanahan BDSc(WA)DipPH(Syd) Oral Health Consultant   

    Clinical dentistry 1961-82: Public policy 1983-2015. Aged Care Legislation (1988, 1995) MCDDS (2004) AMA(WA)COGP Ministerial  Submission for Inclusion of Oral Health in Health Care.

     

     

     

     

  • Stephen Duckett. Frequent flyers in health and the way we remunerate doctors.

    Time for policy rethink as frequent GP attenders account for 41% of costs.

    The Commonwealth government’s big idea for primary health care in the past year was to charge everyone who visits the GP a A$7 co-payment. The idea had many problems – it could have led to a blowout in emergency department demand; it was inequitable; and itmay not have worked anyway. It has finally been abandoned.

    The failed policy betrayed a simplistic belief that all patients are basically the same. The government thought all patients should make a co-payment and all would respond to it in the same way. Eventually, the government decided to exempt some people, but even then, patients were only divided into two categories.

    A new report from the National Health Performance Authority, released today, shows that all patients are not equal. It divides GP users into six groups:

    • Very high attenders, who had 20 or more visits to a GP in 2012-13
    • Frequent attenders (12 to 19 visits)
    • Above-average attenders (six to 11 visits)
    • Occasional GP attenders (four to five visits)
    • Low GP attenders (one to three visits)
    • People who did not attend a GP at all in 2012-13.

    The very high attender group comprises just 3.8% of the population but consumed 17.7% of Medicare out-of-hospital expenditure (see the graph below).

    On average, each of these very high GP attenders accounted for A$3,202 of non-hospital Medicare expenditure in 2012-13, compared to an Australian average of A$690.

    By grouping together the very high and frequent attenders, we see that 12.5% of the population were responsible for 41% of Medicare out-of-hospital expenditure.

    Frequent and very high users account for 41% of the costs

    GP visits are non-referred Medicare-funded patient-doctor encounters. Data are for 2012-13. National Health Performance Authority

    As well as being responsible for a large share of total costs, people who visit the GP more often are more likely to live in the most disadvantaged areas, and to report being in poor health.

    A conventional measure of quality is care continuity – that a patient sees the same doctor regularly rather than shopping around. Very high GP-attenders saw an average of 4.8 GPs in 2012-13. More than one-third of them (36%) saw five or more GPs.

    Seeing so many different GPs can lead to duplicated tests and treatments, which might help to explain why the frequent GP visitors got so many tests and referrals to specialists. On average, referrals to specialists, x-rays and pathology tests by these people were almost 50% higher than their spending on GPs. Frequent GP visitors spent A$906 on GPs per head, and A$1356 on other services.

    What does this mean for health policy?

    The National Health Performance Authority report clearly shows why one-size-fits-all thinking in health care policy development isn’t good enough.

    People who see the GP most often tend to have more health problems than low-attenders and a greater level of disadvantage. But the original A$7 co-payment policy applied the same set of incentives to both groups. The A$5 rebate reduction was barely more nuanced.

    The next generation of health policies should respond to complexity and diversity, not pretend it doesn’t exist. Does the system work for all kinds of patients? Which patients are getting costly care that doesn’t benefit them? By asking these questions, we can uncover how to improve the quality of care while also saving money.

    People who see the GP every two weeks probably need better co-ordination of their care. They might also need a different team of health care workers helping them.

    For many frequent GP visitors, the traditional model of paying doctors a fixed fee per visit isprobably wrong. Instead, part of a GP’s payment should be for helping a patient draw on the right mix of appropriate, effective and efficient care. That might include support to manage their own care better, getting regular advice from a pharmacist or nurse at short notice, maybe online, and seeing the GP less often.

    Differentiating among types of patients can lead to better policy. So can distinguishing among types of providers.

    Previous Grattan Institute work has found that some hospitals have extreme, unjustified costs. Despite this, little is done to rein in these costs – hospitals that run a deficit are often treated much the same as those that manage their costs well. The funding and management of hospitals remains fairly one-size-fits all, despite huge variations in efficiency.

    Our upcoming work will show that different hospitals also vary widely in whether or not they provide ineffective treatments. Once again, we can do a lot more to distinguish the best hospitals from those that have serious problems and to manage them differently.

    The National Health Performance Authority report is a reminder that we have more information than ever about patients, just as we do about providers and treatments. We should make the most of it by looking at how these patients, providers and treatments differ and what that means for policy.

    Stephen Duckett is Director, Health Program at Grattan Institute.

    This article appeared in today’s The Conversation.

  • Kerry Goulston. Two health reform issues.

    Instead of tinkering around the edges of Health Reform in Australia,and dodging meaningful revision of the Medical Benefits and Pharmaceutical  Benefits Schemes,  all Federal politicians and leading clinicians could be debating two issues which would have significant effects over the next 20 years.  Currently thousands of clinicians (doctors, nurses, allied health and other healthcare providers) are despairing of meaningful healthcare and workforce reform  by our Federal and State politicians.

    Remuneration

    It appears that, over recent years,  other countries have been looking at widening the choices of remuneration to healthcare providers.  Why is Australia not doing so?

    The US Secretary of Health and Human Services wrote an article earlier this month in the New England Journal of Medicine on “ Setting Value-Based Payment Goals “ .  She was building on  health reform initiatives  suggested by clinicians and health economists.   They stressed that the current US system was too expensive and out of date.  She put forward a plan to have 90% of all Medicare  fee-for service  payments  and  50% of Medicare payments tied to quality or value through alternative payment models by the end of 2018.   Suggested alternative payment models included accountable care organizations and bundled-payment arrangements.  She outlined three strategies. First incentives  to reward hospitals and healthcare providers  for delivering high-quality  patient care with  advanced primary care medical-home models and introducing new models of  bundled pay for episodes of care .    Second, greater integration of practices and greater co-ordination among providers with more attention to population health. Third, a greater adoption of electronic health records (EHR)—although she states that in the US  78% of physicians and 94% of hospitals  now use them.  She also stresses a greater commitment to transparency  of data on costs of healthcare services to enable consumers to make  better informed choices when selecting providers.

    New Zealand has, for some years, moved away from fee-for-service alone to include universal capitated funding, patient co-payments and targeted fee-for-service for specific items.

    The French Minister of Social Affairs and Health writing last year in the Lancet talked of remuneration reform.   She wrote that because of evidence of substantial and increasing health inequalities, the payment system to providers had been reformed, inter-disciplinary team practice fostered  and health information strengthened to help consumer choice. Alternative models to FFS included  capitation and incentives to providers to avoid unnecessary care and higher valued services.

    Who would look at these options in Australia?  Our politicians and health bureaucrats  have singularly failed to do so.  Perhaps we need an independent body?

    Healthcare Reform Commission

    Increasingly there are calls to establish an independent, professional and ongoing body to advise the Australian community  on long- term  issues in healthcare reform.  Such a healthcare reform commission  would need to be completely independent like  the Reserve bank. It could look at  and advise on many major health problems.  John Menadue  suggests a pilot joint Commonwealth/State initiative  to end the dichotomy of funding  between the two administrations which  encourages cost-shifting.

    In Australia  we are blessed with outstanding  public health academics, health economists and leading clinicians. They could lead us  into a sustainable future, gaining the support of clinicians and the public.

    Kerry Goulston is Emeritus Professor of Medicine at Sydney University.

  • Wayne McMillan. Contemplating our Navels and Fiddling while Rome burns

    We have become so self-absorbed that we have little time to think about anything else. We live also in an age of info trivia worship that has become a new art form. Australians have become preoccupied with keeping up with the Jones than helping their next door neighbour. The craving to possess the latest info trinket that promises to give you the latest thrill in techno satisfaction is almost insatiable.

    The irony is that our hip and info savvy generation appears so disconnected from the real world and unhappy. We are connected emotionally and socially only to our   immediate family and friends. The yearning for more on-line games, info gimmicks and toys hasn’t satisfied a deeper need. Depression among our youth and young adults is rampant and private household debt NOT public debt has reached very high levels.

    So where do we go to gain a deeper and meaningful understanding of life, is it sport, the pub or club, music or conventional religion? Perhaps, but more people are turning to pop science/psychology, self-help TV programs, New Age gurus or  become Game of Throne or World of Warcraft junkies. If we are detached and isolated socially, we may even join a dangerous, destructive, cult.  The search for a way out from the madness of modern life can also lead us to an obsession for self-improvement or suicide.

    The individualistic, positive feel good culture and self-obsessed, self-actualisation society has reached epidemic proportions in most Western nations. The gurus of self-improvement from Anthony Robbins to New Age navel gazers are promising life changing experiences if only you follow their prescriptions for a new life. Many New Age gurus have taken out of context, some of the traditional spiritual practices from Western or Eastern religions that eventually don’t deliver lasting satisfaction.

    Therefore life just becomes one big techno-gimmick game or a constant search for a new form of personal self-actualisation. The important public issues in life are trivialised and we become like mice on a treadmill lusting for more and more new forms of entertainment.

    It is true that we need to love and respect ourselves before we can love and respect others, but no society has ever survived that became so self-absorbed that it lost touch with reality. We face climate change, environmental degradation of our natural resources, inequalities of wealth and income, housing crises in major cities like Sydney and Perth, growing poverty in outer suburbs of our capital cities and major challenges about employment creation for the future.

    We can decide that we have a moral and social responsibility beyond the boundaries of family and friends and somehow this helps us to realise that we live in a connected global village, locally and internationally. The level of volunteering in Australia has never been lower and community needs have never been higher. Isolated and lonely people among the young and old are just down the road from us. A smile a good day or even the sharing of a meal can make such a difference in someone’s life. Local councils need volunteers for environmental community programs, youth clubs need volunteers to work with young people. These are the activities that give meaning to lives.

    So we have choices we can amuse ourselves with our info games, or contemplate our navels, or start to relink with our community, in a myriad of ways. If we don’t reconnect, we will be amusing ourselves to death while our children and grandchildren watch Rome burn.

    Wayne McMillan is an ordinary, concerned citizen living in Whalan NSW. He has discovered over 30 long years that any lasting social change only happens when individual change starts first.

     

    (See Beyond the Myth of Self-Esteem: Finding Fulfilment by John Smith with Coral Chamberlain.Acorn Press)

  • John Menadue. Private health insurance and funding a Medicare Dental Scheme.

    In this blog I have written extensively about the damage that private health insurance (PHI) is doing in Australia. We are sleep-walking into a US style health disaster.

    If people want private health insurance, that is their right, but I see no reason why the taxpayer should subsidise a socially divisive and nationally damaging subsidy.

    The damage of PHI is increasing year on year. In my most recent blog on the subject at the time of the last annual increase in PHI premiums, I pointed out that since 1999 when John Howard introduced the subsidy on PHI, overall prices have risen by only 50% but PHI premiums have risen by over 150%.

    PHI has many damaging consequences and risks

    • It threatens our universal health system through seriously weakening the ability of Medicare as a single funder to control costs. We have seen the enormous damage that PHI has wrought in the US. We are steadily going down the same dangerous path. On present trends, we will have a divided healthcare system. One system will be for the wealthy with a safety net system for the indigent.
    • Private health insurance not only weakens Medicare, but in itself it does not have the market power to match the power of health providers who hold all the cards.
    • It favours the wealthy who can jump the public hospital queue by going to private hospitals.
    • It penalises country people who have limited access to private hospitals.
    • It has administrative costs three times higher than Medicare.
    • It has made it extremely difficult for public hospitals to retain specialists who are attracted to remuneration which is often at least three times higher in private practice and private hospitals.
    • There are government-supported trials in Queensland to extend coverage of PHI to general practice.
    • Medibank Private is pressing for PHI holders to get preference in emergency departments.

    I could go on, but I have said much of it before. We are really sleep-walking into an American style health disaster.  The future of Medicare is at stake, but the ALP which was the proud founder of Medibank/Medicare doesn’t seem to care.

    And the cost of the taxpayer subsidy which I had previously estimated at $7 billion p.a. is now approaching $10 billion p.a.  This is middle-class welfare writ large.

    Let me explain how this figure of $10 billion is calculated:

    The cost of PHI.

    Direct outlays on PHI from Budget Paper 1, 2014-15

    2013-14               $5.977 b.
    2014-15               $6.302 b.
    2015-16               $6.565 b.
    2017-18               $7.187 b.

    But there’s more! The rebate is essentially tax-free income for those who get it.  So, under the tax expenditures statement in Budget Paper 1 is the line item:

    “Exemption of the private health insurance rebate, including expense equivalent”:

    2014-15               $1.510 b.
    2015-16               $1.600 b.
    2016-17               $1.650 b.
    2017-18               $1.690 b.

    Adding these together you get:

    2014-15               $7.812 b.
    2015-16               $8.165 b.
    2016-17               $8.523 b.
    2017-18               $8.877 b.

    To this should be added the benefit of exemption from the Medicare Levy Surcharge.  That calculation, based on ATO tax tables takes some time to do and requires some assumptions to be made.  Last time I looked, quite a few years ago, it was more than $1 billion.

    We get up to about $10 billion, and that’s before looking at the inflationary effect of PHI which, if the experience of USA (and other countries) is any guide, dwarfs such budgetary expense.

    A quick back-of-the-envelope calculation using Australian Institute of Health and Welfare (AIHW) figures illustrates the point:

    In 2012-13 Australia’s total health expenditure was $147 billion.
    This was 9.7$ of GDP.
    In the USA (in 2012) it was 16.9% of GDP.
    Add another 7.2% of our GDP ($1.583 trillion in 2013-14), and
    You get an additional $114 billion.

    We are talking big money.

    It’s hard to get health ministers or health department public servants to think this way, however. The former minister, when questioned about total expenditure (government and non-government) on services within his portfolio couldn’t even give a rough answer.  I suspect the same would go for any minister. The concern of ministers is only what passes through their own budgets.  Public attention is directed from the public purpose to fiscal performance – ‘a triumph of finance over economics’.

    A MEDICARE DENTAL HEALTH SCHEME

    I am usually reluctant to propose cuts in one area of government expenditure to finance a new area. But I do believe that the future of Medicare is at stake if the expansion of taxpayer-subsidised PHI continues.

    Abolishing this $10 billion middle-class subsidy would carry risks considering the powerful PHI lobby and the associated private hospitals that are large donors to the Liberal Party, like Ramsay Healthcare. For this reason I propose that the PHI subsidy currently of $10 billion p.a. and growing should be abolished and the savings used to fund a Medicare Dental Scheme.

    Dental Costs

    I have assembled the table below from the latest AIHW data.

    Recurrent expenditure on dental services 2012-13

    Commonwealth
    Department of Veterans Affairs                  $100 m.
    Other                                                                        $843 m.
    PHI premium rebates                                     $606 m.

    Total Commonwealth                                   $1549m

    Total State                                                       $657 m.

    Total government                                                                       $2.206 b.

    Non-government
    PHI net of rebates                                          $1.396 m.
    Individuals                                                          $5.066 m.
    Other                                                                     $73 m.

    Total non-government                                                              $6.499 b.

    TOTAL expenditure                                                                                         $8.705 b.

    Those figures are a couple of years older than budget figures.  But, as a rough estimate, the Commonwealth government’s expenditure on PHI and the individual expenditure on dentistry would about balance.

    Would it result in increased demand – probably, to the extent that there is a price elasticity effect?  I doubt if there would be much by the way of “supplier induced demand” however. Unlike other health services in that regard, dentistry is different but there would need to be some constraints on public expenditure for example on cosmetic dental work.  The introduction of a dental scheme would need to be carefully phased in to take into account the availability od dentists and support facilities.

    Abolition of the $10 billion tax-payer funded subsidy to PHI would clearly be enough to fund a Medicare Dental Scheme.  To me that would make very good policy and perhaps even some political sense.

    I assume that Bill Shorten is keen to preserve the great Labor monument, Medicare. If he also wants to differentiate his health policy from that of the Coalition, the abolition of the PHI taxpayer subsidy to fund a Medicare Dental Scheme could be just what he needs.

  • John Menadue. A capability review of the Commonwealth Department of Health and Ageing (DHA)

    In this blog I have raised many times my concerns about the major shortcomings of DHA and the barrier it presents to improved  health policy and programs… We saw it most recently over the GP co-payment. I  argue that the ministerial/departmental model in health has failed and needs review…

    Since 2011 the Australian Public Service Commission ( APSC) has conducted  a series of capability reviews of Commonwealth agencies. Late last year it  released its capability review of DHA.  It highlighted many problems in the Department. These include

    • The department is ‘hierarchical and siloed’.
    • ‘The department does not have a high level strategic policy framework to support the development of coherent policies and programs …’
    • ‘The department needs to better connect sources of evidence across the organisation to support the development of a high-level whole of health system view to inform and guide the department’s advice … Policy discussions are largely constrained within work siloes.’
    • There is ‘a sense of reluctance from the department to consider new or changed policy direction … It seems likely that the department’s lack of high-level strategic policy direction is hampering policy and program agility.’
    • ‘Decision making within the department has been largely centralised at senior levels’ … ‘The department’s governance arrangements appear disconnected.’
    • ‘External stakeholders, including agencies across the APS reported they have experienced the department as increasingly insular and often outwardly defensive.’
    • ‘Some senior departmental employees noted the need to ensure that junior officers are not captured by stakeholders.’

     

    THE SUMMARY ASSESSMENT of DHA by the APSC follows

    The Commonwealth Department of Health plays an integral role in the development of health policies and the administration and delivery of health programs, to support improved Australian health outcomes.

    Over time the department’s role has changed, with functions such as sport and ageing moving in and out of the organisation through successive Machinery-of-Government changes. Nevertheless, the department’s core purpose of responding to national health trends, risks and emergencies has remained fairly consistent since it was established in 1921.

    Australia’s health delivery responsibilities are distributed between the Commonwealth, state and territory jurisdictions and the private sector. By necessity, the department regularly interacts with its state and territory counterparts, industry and the non-government sector in its pursuit of health outcomes. The significant involvement of the private sector in the health system requires a high level of commercial acumen in the department in order to understand the business drivers and market forces that influence decisions made by the private sector.

    The department operates in a complex and fluid environment, both because of its role in the health system and as an agency within the broader APS. In this context, the review team found that the department needs transformational change to develop the agility and capability required to operate strategically and contemporaneously.

    The department takes pride in its record of delivery, with 94 per cent of key performance indicators reported as met in its annual report. However, in the context of shifting roles and relationships in the federal health system, combined with a policy of smaller government, it is highly feasible in the future that the department will be less engaged in service delivery and more in health-system strategy. This will require a shift in the department’s capability profile and in the way people work together.

    In recognising the department’s capability strengths the review team also identified the following five overarching themes for capability improvement:

    • prioritise focus on organisational culture and people leadership
    • develop a high-level organisational and policy strategic capability
    • address inadequate governance arrangements and delivery frameworks
    • foster a culture that appropriately embraces and manages risks within defined tolerances
    • Lead purposeful engagement and partnership with external stakeholders.

    These themes are consistent with the almost 1500 free-form suggestions for change made by departmental employees in the 2014 APS Employee Census (the Census). These suggestions focused on the need for improved leadership and management, communication, training, skills, change and performance management.

    The following sub-sections provide further explanation of the review’s overarching findings.

    The department’s strengths

    Most employees interviewed during this review expressed deep sense of pride in, and commitment to, helping improve Australian health outcomes. They also expressed strong motivation and alignment with the department’s vision of ‘creating better health and wellbeing for all Australians’. The review team heard that the department’s high level of employee commitment has served it well in its pursuit of what has often been a voluminous policy agenda.

    The department has many highly capable employees, with deep subject matter expertise and a well-educated workforce (67 per cent of employees have university qualifications compared to 60 per cent across the APS). The department employs highly credentialed medical officers and other professionals with relevant health qualifications to help inform internal policy and program decisions. It has access to rich data repositories, is developing an Enterprise Data Warehouse and is working on a broad e-Health program which has the potential to strengthen the department’s platform for evidence-based approaches to policy development.

    Throughout the review, employees consistently noted that a central aspect of the department’s culture is its focus on delivery, especially at the tactical policy and program level. Similarly, the review team heard that employees and business areas across the department have effectively and consistently delivered on urgent work in short timeframes.

    The department is widely recognised for its ability to deliver the initiatives and reforms required of it by Government. Examples include the tobacco plain packaging strategy—an international first to reduce smoking levels—National Health and Hospital Reform, and reforms to mental health and aged care. The department has, over many years, also implemented policy ideas across a broad range of areas to improve health outcomes in Australia and internationally. These include reforms to ensure the sustainability of the Pharmaceutical Benefits Scheme, increasing private health insurance coverage rates, e-Health initiatives such as the Personally-Controlled Electronic Health Record (PCEHR), and enabling more sophisticated debate around health productivity. The department has demonstrated its ability to implement organisational change in response to external pressures such as the 2010 Strategic Review and its more recent internal changes aimed at realising improved financial efficiencies. Employee confidence in the department’s ability to manage change has also improved, up by seven percentage points from 2013, with 2014 Census data reporting that 50 per cent of employees believe senior leaders effectively lead and manage organisational change, compared to 52 per cent in like policy agencies.

    External stakeholders recognised the department’s track record of mobilising and working with public service agencies across jurisdictions and other external stakeholders to help lead the national response to domestic and international health risks and emergencies. Similar to its national efforts, the department is recognised for its positive contributions and leadership role in the international health arena.

    Until recently, the department has been led by Ms Jane Halton PSM, a respected and long-term Secretary who left to take up her appointment as Secretary of the Department of Finance before the start of this Capability Review. The review team heard that the former secretary provided clear task and policy direction for the organisation and was recognised by employees and external stakeholders for her in-depth knowledge of the health sector. Ms Halton also played an important role in her interactions with the World Health Organization, including as the chair of the World Health Assembly in her final year with the department. Ms Halton was instrumental in leading national and international health reforms and provided a strong profile and an identity for the department.

    The department needs an increased focus on organisational culture and people leadership

    The review team found that the department will need to undergo significant cultural change to develop a greater focus on people leadership and capability development.

    Throughout the review, employees described the department as strongly focused on tactical delivery and issues management with limited acknowledgement of the toll its ambitious work program had on employees. Most Senior Executive Service (SES) employees advised the review team that they work excessive hours, with many noting an average of more than 80 hours a week, substantially in excess of the reported APS Employee Census data. Executive Level (EL) 2 employees reported to the review team that they also regularly work long hours, with most volunteering that they have no desire to progress to a senior leadership position due to concerns about a further anticipated diminution of work–life balance. Evidence before the review indicated that much of this workload was attributed to inefficiency of systems and processes, duplication and rework, which all lead to significant resource and capacity waste.

    Employees and external stakeholders regularly noted that the department lacks sufficient focus on the contribution of highly skilled people to its achievements. While some individual leaders were recognised for their focus on people leadership, the review team found that the broader department has not sufficiently invested in the development of its culture, in line with high-performing organisations. Contemporary research is clear: when an organisation’s culture lacks a sufficient focus on people this can lead to a decline in productivity, negative external perceptions and the eventual devaluation of the organisation.1

    Despite the efforts of the former secretary to break down silos, most employees and stakeholders described the department as hierarchical and siloed. The review team heard a strong desire from some employees for consistent communication and greater leadership visibility. This is supported by Census data, which reported that 51 per cent of employees perceive that senior leaders are sufficiently visible, compared to 57 per cent in like policy agencies.

    The review team found strong emphasis on contributions of ‘the individual’ over collective collaboration. Employees commented that there is a lack of a sense of a united leadership ‘team’ and a lack of whole-of-organisation ownership from employees and leaders with a strong corporate versus policy–program–regulatory divide.

    The review team regularly heard evidence from employees and external stakeholders of a culture of ‘inappropriate’ behaviour in some areas, including bullying and harassment. The 2014 Census rate of 19 per cent compares with an average 15 per cent in like policy agencies. The relatively high reported rate of bullying in the Census does not correlate with the data held by the department on formal complaints about inappropriate behaviour. The department has acknowledged that this is an issue and has implemented a targeted communications campaign to encourage employees to report inappropriate behaviour and seek support.

    A number of employees reported a need for greater transparency regarding SES placements and performance pay. Many senior employees commented that they received no input into or rationale regarding their placement to a position, with many in long-term acting positions. Others advised that they had received a telephone call only days before a move with no accompanying explanation.

    APS Census data in 2014 reports on the climate of workplaces by considering the demands placed on employees and the control employees have in relation to these demands. Figure 7 plots the distribution of departments. Those in the lower right-hand quadrant represent employees experiencing the highest demand and lowest control in relation to workload. In relative terms, the department, represented in ‘red’, is a high-strain workplace. Evidence demonstrates that high demand–low control workplaces face an elevated risk of ill health among employees.

    The department needs to develop a high-level organisational and policy strategy

    The department has an ambitious, noble and compelling vision that employees aspire to achieve. But it is not clear how the department’s vision is translated through organisational strategy to inform structures, priorities, resource allocation, workforce planning and performance measurement and reporting. Organisational strategy is also needed to map how the department is going to increase its influence and where it will invest.

    The review team found that the department has a view that the Government does not welcome or value strategic policy, which contradicts the evidence provided. The department does not have a high-level strategic policy framework to support the development of coherent policies and programs that are guided by and support a single strategic intent.

    The department needs to better connect sources of evidence across the organisation to support the development of a high-level whole-of-health-system view to inform and guide the department’s advice in an increasingly contested policy environment. The department has established a Strategic Policy Unit to provide a system-wide and strategic policy capability, however policy discussions are largely constrained within work silos. The review also found limited evidence of horizon-scanning or internal discussion on whole-of-health-system policy.

    The forthcoming White Paper on the Reform of the Federation, the consequences of the Williams II High Court decision, and broader government health and economic policy decisions have the potential to change the department’s role within the Australian health system. While the department is providing input into these processes, the views expressed by external stakeholders, and by some within the department, is that greater internal consultation and connection is needed to leverage expertise and draw on policy ideas from across the department in order to provide the best advice to the Government.

    Internal and external comments to the review team also highlighted a sense of reluctance from the department to consider new or changed policy direction. While there are many examples of the department using evidence to inform policy and decisions, the review team also heard examples where new evidence did not result in a change of policy or program direction. It seems likely that the department’s lack of high-level strategic policy direction is hampering policy and program agility.

    Internal and external stakeholders described the department’s desire to maintain existing work programs, with ‘trimming around the edges’ and a limited appetite for decommissioning work. This has resulted in a lack of agility in resource allocation. The department’s current budget re-basing exercise is, in part, recognition of the need for greater flexibility in resource allocation. The review team found that greater alignment of work programs through strategy, combined with more analysis of the comparative return-on-investment in the health system, could assist the department to prioritise work activities and provide policy options to the Government.

    There is an urgent need to address inadequate governance arrangements and delivery frameworks

    Decision making within the department has been largely centralised at senior levels, with a number of senior leaders being described by employees and stakeholders as exercising a command-and-control leadership style. While this approach may be appropriate in responding to a crisis or national emergency, the review found that its application in day-to-day management has resulted in the disempowerment and poor use of its workforce, reinforced vertical silos, limited corporate ownership and potentially hampered innovation.

    The department’s governance arrangements appear disconnected, which may be a function of their design. The accountability relationship between some committees and the Executive is unclear, with some areas (such as audit and risk) assuming greater prominence on the executive-leadership agenda than others. Minutes of meetings provided to the review team indicated that the department’s People and Capability Committee has met only once in the past 12 months.

    The review team identified a number of people, system and project risks that have not been sufficiently documented through risk frameworks or identified through internal or external audits or management reports. The department needs to review its internal governance and accountability arrangements to ensure decision-making frameworks are fit-for-purpose.

    Throughout the review, employees often commented on significant inefficiencies in the department’s operations due to internal workflows, especially regarding clearance and coordination processes. The review team found that the department would benefit from streamlining internal workflows, further delegating responsibilities and ensuring that people at all levels are appropriately empowered. This shift would also help refocus SES time from detailed management to leadership and strategic matters.

    Additional financial investment is required to modernise and ensure the department’s information and communications technology (ICT) environment is secure and fit for purpose. While the department is acutely aware of the shortcomings and associated risks of its ICT systems, resolving this to an appropriate standard will likely require accelerated, concerted and sustained focus.

    The department needs to foster a culture that appropriately embraces and manages risks within agreed tolerances

    The review team regularly heard examples of risk aversion, tight control of information, micro-management, elevated decision making and an excessive focus on issues management. This approach, coupled with a reluctance from a number of employees to report potential risks or mistakes due to fear of being blamed for failures, has created ‘blind spots’ to risk exposures, disempowered people, increased residual risk and stifled innovation. Employees provided the review team with examples where red traffic lights were not placed on management reports until risks were quite advanced as they felt that bad news would not be welcomed, and they would be better off trying to mitigate risks rather than report them.

    Employees regularly commented to the review team about personal fears of making a mistake, with some commenting that the department ‘does not make mistakes’. The review team found a variable understanding of, and sophistication regarding approaches to, managing risk. This is compounded by risks being elevated or escalated to the Executive to manage.

    The department needs to engage with a broad range of risks on a daily basis. Due to the scale and complexity of its operations, it is inevitable that some risks will eventuate, regardless of mitigation efforts. Significant work is needed to change the department’s cultural appetite towards risk and acclimatise all levels of the department to embrace and engage collectively to manage risk as appropriate.

    The department should lead more purposeful engagement and partnership with external stakeholders

    The department maintains good relations with a number of external stakeholders, particularly when those relations have been managed at the most senior levels. The former secretary was highly respected by the majority of external stakeholders for her knowledge of the health system and her capacity to steer solutions to difficult issues in national and international fora. Many stakeholders also commented on the good relationships maintained with individual departmental officers at lower levels.

    However, a majority of external stakeholders, including agencies across the APS, reported they have experienced the department as increasingly insular and often outwardly defensive. Stakeholders often commented on the difficulty in interacting with the department compared to other APS policy departments which were seen as much more open, though still professional and able to manage competing interests.

    The review team heard from external stakeholders from across the broader APS, and the health portfolio and sector, that they would like to develop stronger, more collaborative relationships with the department. External stakeholders often noted that they understand the department is not always able to be open with them in a timely manner, or to cater to their views. Still, they perceive the department’s approach to consultation as excessively risk averse, narrow and at times perfunctory.

    Some senior departmental employees noted the need to ensure that junior officers are not ‘captured’ by stakeholders who can often be quite influential in their advocacy for a certain policy position. This has led to a rotation of employees or the management of relationships at senior levels in the department.

    In an increasingly contested policy environment, the department needs to ensure it adequately captures the views of stakeholder groups who often hold positions of authority and influence within the community. Incorporating a broad range of external policy perspectives into the department’s advice remains crucial to its continued position as a trusted and key policy adviser to the Government.

     

    Note that the former Secretary of DHA is now the Secretary of the Department of Finance,

     

  • Michael Gracey. Risks of Closing Remote Aboriginal Communities.

    Forced dislocation from traditional homelands in the late 1960s and early 1970s made many Aboriginal families and groups move, for the first time, to small towns in the north and north-west of WA. This drift to strange environments with access to alcohol and living close to people from different backgrounds, languages and alien beliefs and behaviours, had dire and long-lasting social consequences as well as negative impacts on health and well-being and contact with the police. This came with a price to the general community as well as to those who were displaced.

    The controversial proposal by the Federal and WA governments to close or remove essential services from dozens of small Aboriginal communities in WA’s remote north runs a real risk of repeating the mistakes made 40 years ago. Some Indigenous people in such communities have not experienced life beyond their traditional homelands, some of these people have limited English language skills, maintain their ancient customs, beliefs and rituals, and many have never been exposed to alcohol. The inevitable drift to towns or their fringes that would follow this forced, abrupt change to their way of life will bring immense pressures on them. This will expose these internal refugees to the real risks of an alien environment and almost certainly bring harmful impacts to their well-being in social, emotional and health terms. As with the disaster of 40 years before there would be real costs to the governments and a need for public services to manage the mess.

    If the governments’ proposal goes ahead, these risks and their consequential costs must be assessed very carefully beforehand in an open, consultative process. If this does not occur, the harm that follows will undoubtedly bring a savage and long-lasting backlash. It could also further tarnish Australia’s reputation wider afield in its record of handling issues affecting the First Australians.

    Michael Gracey AO is a Paediatrician who has worked with indigenous people, communities and organisations for over 40 years, particularly in the far north of WA. He was Principal Medical Adviser on Aboriginal Health in the Department of Health in WA for more than a decade and was Australia’s first Professor of Aboriginal Health at Curtin University in Perth. He has also been President of the International Paediatric Association.

  • Julia Davison. It takes a nation to raise a child.

    The week after Australia Day each year, around 260,000 five-year old Australians start school. Of those, almost 60,000 children – 23 per cent – will start school developmentally vulnerable in some way. Children who start school behind often stay behind, and are likely to finish school with skills and competencies that have not equipped them for the workforce or future life. The economic and social costs can be profound and long lasting.

    The first five years of a child’s life are when most of their brain development occurs. It is a period when children are most open to learning and when the foundation stones for future learning can be laid. According to Nobel Laureate James Heckman, it is a period when the biggest returns on investment in education can be achieved.

    Around the world, nations are investing more in the early years as a means of improving the ongoing learning capacity of their future workforce. As nations increasingly compete on the quality of their human capital, they recognise the vital national public interest in having an ‘all hands on deck’ economy when facing an ageing population and declining levels of workforce participation. In this global race to build human capital, Australia can no longer afford to leave 23 per cent of its future workers behind at the starting block of school entry.

    Access to quality early learning has been demonstrated in numerous studies to provide the greatest benefit to the most vulnerable children. Yet these children are the least likely group to access quality early learning, often due to cost barriers.

    Quality early learning provides more than mere child minding. Quality early learning involves qualified professionals delivering age-appropriate play-based programs. Quality early learning magnifies children’s development, their social competency and their resilience, and is very much in the public interest. A study of 2000 Australian children found that those who attended a quality preschool with a degree- or diploma-qualified teacher achieved around 30 points higher on their Year 3 NAPLAN tests. A long-running study tracking 3000 English school children, now up to age 16, found that children who had attended more than 2 years of quality preschool finished their GCSE examination (Year 10) with scores on average around 51 points higher than those who did not. This represents the difference between getting 8 GCSE at ‘B’ grades versus 8 GCSE at ‘C’ grades.

    Reflecting the overwhelming case for the importance of quality early learning, the commonwealth and all 8 state and territory governments agreed to a landmark National Quality Framework (NQF) to raise the quality of early learning in Australia just five years ago. It is particularly pleasing to note that this support is bipartisan, with both Coalition and Labor governments championing the importance of the early years. Though Australia is playing serious catch-up with much of the rest of the world, the decade-long reform process in the NQF gives us a pathway to get there.

    However as any informed shopper will tell you, quality comes at a cost. And government assistance to families, to help meet the rising cost of child care has not kept up. The result has been that too many families have been priced out of access to early learning and childcare. This results in a double negative – for the children who miss access to early learning opportunities, and for their parents who are then unable to re-join the workforce. Both sets of lost opportunities carry big costs for Australia that will accumulate over time.

    Price Waterhouse Coopers has produced some modelling of the benefits of investing in quality early learning. They estimated a threefold benefit to the future productivity of the economy over coming decades – $6 billion from increased female workforce participation if childcare costs were made lower, $10 billion in improved productivity from the benefit of raising the quality of early learning, and a whopping $13 billion from increasing the participation of vulnerable children in early learning. Price Waterhouse Coopers’ modelling also found that while there was a short-term fiscal cost to making quality early learning more accessible and affordable, in the medium and long term it more than paid for itself.

    Other research suggests that Price Waterhouse Coopers’ estimates could be understated. The Grattan Institute concluded that if Australia’s female workforce participation rate rose to that of Canada, our economy would be $25 billion better off. This is a figure often quoted by federal Treasurer Joe Hockey in making the case for increasing Australia’s low rate of female workforce participation, which ranks as the fourth lowest in the OECD.

    Public investment should mirror the public interest, and the public interest case for investing in childcare and quality early learning is very strong. The National Commission of Audit, the Henry Tax Review, the OECD Going for Growth report, and the recent Productivity Commission Inquiry into childcare and early learning have all recognised this.

    It is in the public interest for more children to start school ready to learn. This not only gives children the best start, it also saves the public many millions of dollars. It is in the public interest to provide additional support and early intervention for children facing disadvantages, and the first five years provide a crucial short window to redress the development gap. It is in the public interest to remove barriers to women’s workforce participation through the provision of affordable early learning and care for their children. And it is in the public interest to invest now in Australia’s future economic productivity by investing in the learning capacity of our future workforce.  Australia invests far less in making quality early learning accessible and affordable than most industrialised countries. That needs to change. As a nation, we should not leave any of our children behind. We cannot afford to.

     

    Julia Davison is CEO of Goodstart Early Learning, Australia’s largest provider of early learning and care, with 644 centres across Australia caring for 73,000 children from 61,000 families. Goodstart employs over 13,000 staff and has an annual turnover of around $800 million. Goodstart was created by a partnership of four of Australia’s leading charities – Mission Australia, Social Ventures Australia, The Brotherhood of St Laurence and The Benevolent Society – which saw the potential to operate the failed ABC Learning Centres, transforming early childhood education in Australia. Goodstart’s vision is for Australia’s children to have the best possible start in life. As one of the biggest social enterprises in Australia, Goodstart works to create social change by giving children access to affordable, high-quality early learning. Julia has a strong interest in public policy having completed a Masters in Public Administration at the Harvard Kennedy School.

    This article was first published in Australia 21. It was part of a series entitled ‘Who speaks for and protects the public interest in Australia?’  See www.australia21.org.au

     

  • Alex Wodak. Reducing the demand for illicit drugs

    At his Congressional confirmation hearing in January 2001, the then Secretary of Defense-designate Donald Rumsfeld was asked whether US drug problems were best attacked by reducing demand or targeting drug supplies. Rumsfeld said that he believed that illicit drug use was “overwhelmingly a demand problem”. He added, “If demand persists, it’s going to find ways to get what it wants” and “if it isn’t from Colombia, it’s going to be from someplace else.” This might have been an unconventional view 14 years ago but it’s becoming a mainstream perspective these days.

    The conventional view is that young people make bad choices about illicit drugs because of an information deficit. Tell young people how bad illicit drugs are, so Conventional Wisdom asserts, and they won’t touch the stuff. Unfortunately, the experience of evaluating decades of educational mass and school-based campaigns is that, at best, modest and temporary benefits are achieved. But some studies have found that educational interventions often achieve no benefits or even increased drug use and problems. Community and therefore political expectations, are stubbornly unrealistic. In the various National Drug Strategy Household Surveys conducted for the Commonwealth Department of Health and Ageing every three years, the community always notionally allocates the lion’s share of government expenditure to drug education. Drug education is clearly the community panacea for drug problems.

    My personal journey thinking about these issues started after I spent an evening in a shooting gallery in Williamsburg, Brooklyn, New York City, in October 1987 while looking at HIV among people who inject drugs in Europe and North America. ‘Shooting galleries’, common in much of the USA, are derelict houses where people can bring drugs secreted on their person and hire (used) needles and syringes for a few hours to inject with. Shooting galleries helped to spread HIV extensively in the USA. The local police are usually paid to ignore shooting galleries.

    The Williamsburg area, now gentrified, was then clearly extremely dangerous. Abandoned cars rested propped on bricks on the side of the road. Many tenement buildings were derelict and lay empty after a fire. We gathered in a basement room carpeted with filth and broken glass. We had brought candles, as there was no electricity in the building. The front door of the house was missing. I watched aghast as four Hispanic people injected speedballs of heroin and cocaine for several hours.  I could not stop wondering why these two men and two women were so ridiculously indifferent to their health. I wondered why they made so little effort to avoid HIV? I established that they knew some people who had injected drugs and had AIDS, including some who had died of AIDS. But I was then instructed to stop asking further questions. I realized that these four people had lost all hope of decent housing, healthcare, education and employment. Not just for themselves but also for their children and grandchildren. Given the inevitability of a bleak future for them and their families and friends, enjoying a few hours of intense pleasure made some sense after all.

    In 2009, Richard Wilkinson and Kate Pickett published ‘The Spirit Level: Why Equality is Better for Everyone’. This influential book argued that many important public health and social outcomes were worse in countries with high levels of inequality, such as the USA and Australia, and better in countries with lower levels of inequality, such as Japan and Scandinavia. Illicit drug use was one of the issues that they included in their studies. This book has its critics but overall, the reception has been quite positive. My 1987 experience in Williamsburg, Brooklyn seemed to fit their theory like a glove.

    Last October I was invited to give some talks on harm reduction in Japan. I was struck by the fact that after a quarter century of economic stagnation, average unemployment was still only 3.1%  in Japan while after almost a quarter century of uninterrupted growth, average unemployment in Australia was more than double. Youth unemployment in both countries would have been several multiples of average unemployment. Heroin use is almost unknown in Japan but continues to be a significant problem in Australia. Amphetamine use in Japan is also tiny compared to Australia.

    In 2011, I was asked to give a presentation on demand reduction to the Global Commission on Drug Policy in Geneva. I argued that the results of conventional attempts to reduce drug use and problems through education were disappointing. The Chair of the Commission, Fernando Henrique Cardoso, who had been the President of Brazil from 1995- 2003, did not seem impressed by my negative assessment of demand reduction. Cardoso, a hero in Brazil for conquering hyperinflation in the 1990s, asked me what I would do to reduce the demand for drugs. I replied that his slaying of Brazilian hyperinflation had done more to reduce the demand for drugs than all the conventional drug education in the world. Although he did not seem to like that answer either, many clinicians and researchers around the world do accept that higher levels of illicit drugs use and problems are very likely if severe social and economic disadvantage is common.

    The conclusion seems inescapable to me: if we in Australia want lower levels of illicit drugs use and problems, we will have to reduce our high level of inequality. This may seem counter-intuitive to some but there are many examples of dangerous health conditions being conquered as much by improved social conditions as by powerful medical treatments. In the USA, with improved social conditions the prevalence of TB fell by more than two thirds in the early decades of the twentieth century before the advent of antibiotics.

    Dr Alex Wodak AM

    Emeritus Consultant, St Vincent’s Hospital, Darlinghurst, NSW 2010

     

     

     

     

     

     

     

  • Michael Keating. The 2015 Intergenerational Report

    Purpose of the Intergenerational Report

    The Intergenerational Report (IGR) should be an important document.  It purports to tell us what the Australian population, economy and Budget could look like in forty years time.

    Of course no-one really knows what the economy will look like in forty years time. Instead the IGR tells us how fast the economy could grow over the next four years if the drivers of economic growth – population, participation and productivity – continue to have the same future impact as in the past. So despite the declared optimism of the Treasurer about our economic future, and how much better off we will be, as far as the IGR is concerned that future has been established by definition and is certainly not proven.

    But that is to miss the point of this IGR and its three predecessors.  Rather the IGR is a conditional projection designed to help us assess the sustainability of government policies impacting on expenditure and revenue, assuming that the economy continues to grow in much the same way as in the past.  That is a useful exercise, especially as each of the four IGRs so far have signalled a future long run Budget deficit, although the magnitude has varied substantially from one IGR to another (see Table below). This in itself reinforces the need for caution in interpreting the IGR projections as a basis for policy action.

    Projected Fiscal Deficit in Successive Intergenerational Reports

    Per cent of GDP

    Report Projected deficit forty years later
    2002 5.2
    2007 3.5
    2010 3.0
    2015 6.0

     

    Nevertheless the principal message in all the IGRs is that assuming no change in present policies, there are pressures for public expenditure to grow faster over time than the economy and revenue; principally because of:

    • the ageing of the population,
    • the disproportionate impact of more expensive technologies on the cost of health care, and
    • the relatively high demand for more health and education services as incomes rise.

    Accordingly it would seem prudent to start taking action now to bring the budget back onto a more sustainable basis in the long run, especially when the present starting point is itself an unsustainable deficit. But given the inevitable uncertainties associated with these projections, the pace and extent of fiscal tightening should be subject to constant review as events unfold.

    Although this message of the need for ongoing fiscal restraint is common to all of the four IGRs so far produced, this latest 2015 IGR is different in both tone and presentation.  In particular, the three previous IGRs had only one fiscal projection based on a continuation of present policies, whereas this 2015 IGR has three scenarios. In itself this introduction of scenarios might be a good innovation, as they could serve to further illustrate the relative significance of the uncertainties involved in these projections. Unfortunately, however, that does not seem to be the main purpose of the three scenarios in the 2015 IGR; rather their purpose seems mainly to make polemical points about the irresponsibility of the previous Labor Government and those who continue to oppose the Government’s budget measures in the Senate.

    The fiscal scenarios

    The three fiscal scenarios provided in the 2015 IGR are:

    1. A ‘previous policy’ scenario which purports to reflect the situation that the present Government inherited on its assumption of office along with a continuation of what would have allegedly been the previous Labor Government’s policies. Under this scenario an underlying cash deficit for the Budget is projected equivalent to 11.7 per cent of GDP in 2055, and net debt would reach almost 122 per cent of GDP.
    2. A ‘currently legislated’ scenario, which uses the Government’s savings measures that have actually been passed by the Parliament, and for 2055 it projects a Budget cash deficit of almost 6 per cent of GDP and a debt to GDP ratio of almost 60 per cent.
    3. A ‘proposed policy’ scenario, which is based on full implementation of the present Government’s policies as they had been announced – a couple of these policies have been reversed since the scenario was completed (namely the Medicare co-payment, the Defence Forces pay, and possibly additional expenditure on international and domestic security). According to this scenario the underlying cash balance of the Budget will improve to a surplus of 1.4 per cent of GDP in 2040, and then moderate to a surplus of around 0.5 per cent of GDP in 2055, with net debt projected to be fully paid off by 2032.

    The second ‘currently legislated scenario’ has most in common with the way previous IGRs reported, and this projection of the size of the fiscal task is of much the same order as projected in the first IGR. However, in Peter Costello’s first IGR the projected fiscal gap was discussed in a much more measured way as an illustration of the future challenges, whereas in the latest IGR the presentation seems to be intended to scare us into accepting the Government’s ill-fated budget.

    Furthermore, the so-called ‘previous policy’ scenario which the Government wants to hang around Labor’s neck is a pure concoction. The starting position chosen for this scenario is after the Government had been in office for some time and had made a number of decisions, such as abolition of the mining and carbon taxes. That effectively means that at its starting point the Budget deficit for this scenario was already much greater than when Labor left office.  In fact the only true statement of the fiscal situation that the present Government inherited is the Pre-Election Economic and Fiscal Outlook report, which the two Secretaries of Treasury and Finance signed off on just before election day, and that report showed that in the Secretaries’ opinion the Budget would return to surplus as soon as  2016-17. In addition to the extent that the Budget has deteriorated since Labor left office there is every reason to think that Labor would have taken action to restore the fiscal position, as Labor has in the past.

    In short, this ‘previous policy’ scenario is quite disingenuous. Furthermore it is inconsistent with the Government’s professed desire to build the bi-partisan support which will almost certainly be required to restore a sustainable fiscal position.

    Restoring a sustainable fiscal position

    The Government’s ‘proposed policy’ scenario projects a return to a fiscal surplus by 2019-20, and this surplus continues to increase slowly to around 1.4 per cent of GDP in 2039-40. On what we presently know, the projected trajectory for that Budget balance seems reasonably in line with what is required to restore fiscal sustainability.  Again, however, the validity of this scenario depends upon the realism of the underlying assumptions, particularly as regards the policies required to achieve the projected Budget surpluses.

    Indeed a key rationale for each of the four IGRs that have been produced to date has been to examine the fiscal consequences of the projected ageing of the population, and the extent of that projected ageing has increased through successive IGRs as the baby boomer generation continues to age. Thus this latest 2015 IGR projects that in forty years time there will be just 2.7 people working for every aged dependent whereas today there are 4.5 people in the workforce supporting every aged dependent. And by comparison, the first 2002 IGR projected that there would be about 4 people working for each aged dependent in another forty years, compared to a bit more than 5 working people at that time.

    So, as expected, the projected aged dependency rate has increased as the time-period of the projections has been pushed out in successive IGRs, and other things being equal, the fiscal pressures expected from an ageing population should have also increased commensurately. But the preferred ‘proposed policy’ scenario in the latest 2015 Report projects much lower social spending on health, aged care and age pensions, and education than all the previous IGR Reports. Thus the latest IGR 4 projects increases of 3 percentage points for these social expenditures in the ‘preferred policy’ scenario, compared to around a 6 percentage point increase projected in IGRs 1 and 2, and a 4.5 percentage point increase in IGR 3.

    This much lower social spending projected in the latest 2015 IGR essentially reflects the policies of the Government that the Senate has so far refused to pass and which are the key feature of this ‘proposed policy scenario’. But the realism of these proposed policies must surely be open to question.

    First, health costs were projected to rise by 80 per cent over the following forty years to 7.1 per cent of GDP in IGR 3, but in the latest IGR 4 these costs are projected to only increase by 30 per cent to 5.5 per cent of GDP in 2055. The principal reason for this huge turnaround in projected health costs is the government’s plan to reduce the indexing of health payments to the States. Similarly changes to indexation arrangements are expected to bring big savings in education; especially in payments to State schools.

    Even if the Government does succeed in limiting its payments to the States to this extent, it seems most unlikely that the States could then restrain the expenditures commensurately on health and education. Instead this policy is a form of cost shifting to the States, and if the States have to wear it, then they will almost certainly have to raise additional taxation revenue to cover their higher share of health and education expenditures. The most obvious tax for the States to increase would be the GST, but that is a Commonwealth tax and the 2015 IGR is premised on the assumption that the revenue from Commonwealth taxes will not be allowed to rise above a ceiling equivalent to 23.9 per cent of GDP. If that ceiling is adhered to then the Australian Government would then need to find further expenditure savings on its own account if the States were allowed to increase their GST revenue to meet their increased funding share of essential health and education services.

    Second, another major source of savings critical to achieving the outcome of the ‘proposed policy’ scenario is the change in the indexation arrangements for various pensions and other social security payments so that they are indexed to consumer prices rather than to average weekly earnings[1]. Peter Whiteford of the Australian National University has shown that this will result in the single age pension falling from about 28 per cent to just under 24 per cent of average earnings by 2029. While if indexation back to wages were not restored then, by 2055 the single age pension would have fallen to around 16 per cent of average wages, a considerably lower level than any experienced in the last 50 years. The projected increases for many other social security payments, such as family allowances and Newstart, would lead to even more inequality, and this in an economy which already has a tendency to increasing inequality without the government withdrawing assistance to lower income people and their families.

    In short, there must be considerable doubt about the realism of this ‘proposed policy’ scenario.  Wage earners would continue to experience increases in their living standards and no increase in their taxes, but people on welfare and those who are sick would fall behind.  The consequences for our society would seem to make it most unlikely that these policies would be maintained for the next forty years. Instead many would say, as the Senate is presently disposed, that the route back to fiscal sustainability must lie elsewhere.

    Thus, unlike its predecessors, this latest 2015 IGR does not provide a useful basis for further planning and we all will need to consider alternative strategies.  There are other alternative ways of balancing the budget, and in addition the rate of economic growth could be enhanced modestly by further improvements to participation and productivity.

    These alternative proposals for restoring fiscal sustainability over time and further improving living standards will be the posted as part of a series of policy articles being planned for this blog to appear over the next few months. In addition, some previous suggestions for an alternative budget strategy were canvassed in articles I posted on 21-23 July 2014.

    Michael Keating AC was formerly Secretary of the Department of Finance and Secretary, Prime Minister and Cabinet.

     

    [1] The IGR assumes that this policy will only be maintained until 2028-29, although the Government’s legislation has no such sunset clause.

  • Alex Wodak. The current imbalance between public and private interests. 

    The public interest, meaning ‘the welfare or wellbeing of the general public’, has always competed with private interests. Furthermore, public and private interests will always be in competition. What is so unusual about the current tension is the extreme imbalance: these days, private interests almost always get what they want. The policy domination by huge companies and extremely wealthy individuals has severe adverse consequences for the community in areas such as health, social cohesion and the economy. The current extreme imbalance between private and public interests is now not merely an Australian phenomenon but is also international. Examples of this policy imbalance abound in Australia and include mining, alcohol, fast food, transport, taxation and gambling.

    The increasing dominance of private over public interests coincides with an increasing inequality of income and wealth. Inequality in Australia waxed and waned over the years with low levels reached in the 1970s. Inequality then began increasing in Australia, growing under Labor and Coalition governments. Inequality increased to even higher levels in the United States where the imbalance of private and public interests is even more evident and has had striking political repercussions.

    The health of Australians improved dramatically during the 20th century. For example, average life expectancy increased from about 45 years in 1900 to over 75 years in 2000. About 25 of the additional 30 years of life expectancy resulted from improvements in public health while advances in clinical medicine only added five additional years. Yet in Australia, 98 per cent of health expenditure funds clinical services with only 2 per cent allocated to prevention. In the first half of the 20th century, improved sewerage and drains substantially reduced deaths and disease. In the second half, the decline in smoking, improved diet and increased exercise were major factors improving health. Tobacco control has been a rare victory for a public interest David over a corporate Goliath. Yet in 2014, the federal government blocked the implementation of a national agreement to alert consumers to the potential health risks of some foods. Some powerful food producers were the only beneficiaries.

    The fate of the proposed Resource Super Profits Tax (RSPT) is another example of the recent dominance of private over public interests. In 2010, the federal government proposed the RSPT, modelled on the well-regarded Petroleum Resource Rent Tax levied on the off shore petroleum extraction industry, after accepting a recommendation from a review of Australia’s tax system. A distinguished committee chaired by a highly regarded Secretary of Treasury had carried out this review. Vociferous criticism from the mining industry including an effective advertising campaign followed, and after the deposition of the Prime Minister by the Deputy Prime Minister a heavily watered down and ineffective Minerals Resource Rent Tax (MRRT) replaced the RSPT. The then government contributed to its own problems through its political incompetence. Once again, powerful private interests got their way and the community lost.

    One of the common links in these examples is the development of monopoly, or near monopoly, arrangements used to generate vast wealth and thereby political power sufficient to extract huge economic rents.

    Taxation arrangements in Australia in recent decades including the abolition or reduction of inheritance taxes, capital gains taxes, private income and company tax, and generous concessions for superannuation and negative gearing, have benefited the wealthier members of the community and large companies.

    The coming to power of Thatcher in the UK and Reagan in the USA and the fall of communism in the USSR and its satellites increased support for the view that private economic interests are inherently more efficient than publicly owned enterprises.

    The replacement in China of a central command economy by a free market system which lifted hundreds of millions of people from poverty over the following decades seemed to exemplify the benefits of a free market economy with minimal restrictions for large companies and wealthy individuals. In the United States, major economists including Paul Krugman, Joseph Stiglitz and Jeffrey Sachs have warned that the currently high levels of inequality have corrupted the political system and there is increasing concern that with a radically extreme Republican Party often prepared to disregard the national interest the United States may have become ungovernable — surely a warning for Australia.

    What is to be done? The first step for those concerned by the increasing dominance of private and corporate interests over the public good is to articulate their views.

    Could a Public Interest Commission maintain a better balance in the future?  First some difficult questions would have to be answered. How will the public interest be defined and measured? Where will successful examples of a Public Interest Commission be drawn from? How will issues be selected and enquiries be conducted?

    And finally, what sort of Australia do its citizens want — an individualist Australia with marked inequalities, poor public services, choked roads and shrinking taxation on the American model, or a more collective and more equal Australia with less poverty, better public services but more taxation similar to the Scandinavian countries and Japan?

    A political correction to the current imbalance can only occur if Australians start to debate their values and visions. The political class can only do so much. Extensive polling shows that a majority of Australians want improved public services and are prepared to pay higher taxes to fund them. However, if large numbers of Australians want to see a different country emerge, they have to be prepared to work for these changes starting at the community level.

    Dr Alex Wodak AM, a physician, was Director of the Alcohol and Drug Service at St Vincent’s Hospital, Sydney from 1982 until he retired in 2012. His major retirement project is drug law reform.  Together with colleagues, Dr Wodak started Australia’s first needle syringe program and supervised injecting facility when both were pre-legal. He was also involved in establishing the National Drug and Alcohol Research Centre, the Australian Society of HIV Medicine and the NSW Users AIDS Association, an organisation for and by people who use drugs.  He is a Director of Australia21.

    This article is one of a series published by Australia 21 on the subject ‘Who speaks for and protects the public interest in Australia?’  For other articles published, see www.australia21.org.au.

     

  • Graham Freudenberg. Gough Whitlam Commemorative Oration.

     You will see below what I think is a remarkable speech by Graham Freudenberg about Gough Whitlam’s contemporary relevance.  This oration is much longer than I normally post on this blog, but it is an outstanding oration which I am sure you will enjoy.  The Whitlam Institute will also be publicising this oration.  John Menadue

    THE WHITLAM INSTITUTE

    GOUGH WHITLAM COMMEMORATIVE ORATION

    “Contemporary Relevance, comrade”:

    Gough Whitlam in the 21st century

    Graham Freudenberg

    St Kilda Town Hall, Melbourne, 4 March 2015

     

    Let me begin by doing what I did for the best part of my career, and re-cycle a speech by Gough Whitlam.  It was his first major speech in the House of Representatives on international affairs, in days when they actually debated foreign policy in the Australian Parliament – on 12 August 1954.  That was another world.  Yet this speech goes to the heart of my assertions about the contemporary relevance of Edward Gough Whitlam.  In style and substance, in his zest for the cut and thrust of parliamentary debate, for the sweep of its ideas, its challenge to prevailing orthodoxies – and for its optimism – it is quintessential Whitlam.  He made the speech soon after the Geneva Conference in 1954 had given the West a new chance for good sense over China and Vietnam; instead, alas, the lost opportunity of Geneva became a disastrous wrong turn for the United States and Australia. Whitlam had been a member of parliament for less than two years.  His star was just rising in the Labor Party, itself on the threshold of the Great Split.  I’ll quote just a few of his opening lines, to give the flavour:

    In the exciting and rapid movement of events during the last few months, the Minister for External Affairs [Mr Casey] has twice circumnavigated the globe in the steps of his model, Mr Eden, and his master, Mr Dulles [UK Foreign Secretary and US Secretary of State respectively].  Though the Minister saw fit to make statements to the newspapers in the United States of America and in other parts of the world, he did not say anything to the Australian press.  The only Minister who has seen fit to make any statement on international affairs has been, of all people, the Postmaster General (Mr Anthony)  [Doug Anthony’s father, that is], who three weeks ago addressed the annual conference of the Queensland branch of   the Australian Country Party.  In haranguing that rally of rustics, the Postmaster General declared that we Australians cannot live in peaceful co-existence with the Communists in this cold war.  That pronouncement, fortunately, was in direct contradiction of statements that had already been made by President Eisenhower, of the United States of America, and Sir Winston Churchill, the British Prime Minister.  The declaration of the Postmaster General has been emphatically repudiated in this House by the Prime Minister [Mr Menzies] and the Leader of the Opposition [Dr Evatt].  As a consequence of that rash utterance, the Postmaster General, whose health in recent months was deemed to be rapidly qualifying him for a diplomatic post, has rendered himself persona non grata  to every head of State except President Syngman Rhee of the Republic of Korea, and Generalissimo Chiang Kai-shek, the leader of the Chinese Nationalist Government [on Formosa].

    When, more than a decade later, I came to read all Whitlam’s early speeches with a professional eye, time and again I found myself thinking “I wish I could say things like that”.  So I did.

    But what could be the possible relevance of a speech made by a Labor backbencher more than 60 years ago, when Churchill was still Prime Minister of Britain and when Menzies still had more than eleven years to go as Prime Minister of Australia?  Well, this was the speech in which Whitlam first called for recognition of the People’s Republic of China, nineteen years before he achieved it.  In particular, he insisted that China’s sovereignty over Taiwan (Formosa) must never be allowed to become a cause for war with China, inevitably a third world war, inevitably a nuclear war.  Whitlam was daring to assert that the views and interests of Australia might not always be the same as those of the United States.  His propositions will be as relevant to our relations with China and the United States over the next 60 years as they were 60 years ago.  Further, he made an eloquent connection between hopes for democracy in our region, then in the throes of decolonisation, and the preservation and enhancement of parliamentary democracy in Australia – his life-long cause, from which all else flowed.  It was a speech marked by his special capacity to make connections between the wider world, the region around us, and Australia’s own standing and conduct.

    And this speech, not only in its content but in its approach, attitudes and insights, the breadth of vision enhanced by his attention to detail, provides a sub-theme for everything I say tonight:

    Gough Whitlam’s contemporary relevance lies not only, or even so much, in the actual policies and issues he placed on the Australian political and social agenda, but in the educative process, based on reason, relevance, knowledge and foresight, by which he reached them.  And perhaps most relevant of all to these times, for all of us as Australians, his challenge to conventional wisdom, the prejudices and fears of his times.

    And that included emphatically obsolences and obstructionism in Labor thinking.  I don’t pretend to be able to answer the question: “What would Whitlam do if he were the Labor leader today?”  I’m certainly not purporting to tell Bill Shorten and his colleagues: “This is how Gough would do it”.  But perhaps I can shed some light on what I believe would be his approach and attitudes to the very complex questions facing Australia and the Labor Party in today’s “rapid and exciting movement of events”.

    There is no place more fitting to do this than Melbourne.  I take the opportunity to make amends for an omission in my accounts of the life and times of Edward Gough Whitlam.  In my brief eulogy at the Sydney Town Hall on 5 November last year, for instance, I identified the central importance of his relationship with Werriwa, for 25 years his electorate in the outer Western suburbs of Sydney.  And he himself always acknowledged the impact of being a teenager in Canberra, as it struggled to grow into the national capital after the move from Melbourne in 1927.  But it should never be overlooked how much of Melbourne there was in Gough Whitlam.  It is not just the fact that he was born here – on 11 July 1916 – and spent the first five years of his life here.  The greatest single influence of his life was his father, Harry Ernest Frederick Whitlam, later Commonwealth Crown Solicitor; and Fred Whitlam was Melbourne through and through.  His influence on his son was steeped in the old Melbourne liberal/radical tradition.  Its strength, paradoxically, retarded the early growth of the Labor Party in Victoria. There was a remarkable revival of that tradition through the flourishing of the Fabian Society in the late fifties, sixties and beyond; and the Fabian relationship with the rise of Whitlam is an important part of the larger story.  “Among Australian Fabians, I am Fabius Maximus”, he said.  Though I myself believe the title properly belongs to Race Mathews.

    Gough returned to Melbourne, in thought, towards the very end.  When much in that mighty memory was fading, he would recall to his faithful visitors to his William Street, Sydney, office, like John Faulkner and John Menadue, that when he was 17 or 18 he took his grandmother to the new Shrine of Remembrance in St. Kilda Road and read out to her – she was nearly blind – the name of the battlefield in France where her son, his uncle, had died.

    Even at the time of Gough’s death, the comment was still being made that it was strange, with his background, he should have become a Labor leader.  There used to be Tories who regarded him as a class traitor.  The truth is, with his upbringing, with such a father and his values, Gough Whitlam could never have been any other than Labor, in the Australian context.

    In November 1973, in the glow of his first year in office, Whitlam delivered the Robert Garran Memorial Lecture in Canberra.  His father had delivered the inaugural Garran Lecture in 1959, one great public servant honouring another, who had been his Melbourne mentor.  Whitlam quoted his father, who was speaking of Australia’s role in the United Nations:

    The task before Australia is honourable, and its efficient discharge would make for a dynamic peace; to it, all the resources, skills and energy that Australia can command deserve to be committed.  The honourable task, however, could become majestic, and infinitely inspiring, and the peace could become creative, deep and rich, and enduring, if there be added what I have termed Excellence, Excellence in all its fullness.

    That is Gough Whitlam quoting his father.  But he might just as well have been quoting himself.  Perhaps, given the closeness of their relationship, he was.

    I acknowledge my own debt to Melbourne.  Melbourne made me.  I arrived here as a 20-year-old reporter for The Sun, via newspapers in Brisbane, Sydney and Mildura, in 1955 – the year of the Great Labor Split and the beginning of the Bolte era in Victoria.  Anyone who believes that the fifties were dull wasn’t there.  I missed the transformational event of the 1956 Olympic Games because I had taken myself off to London for a year.  It was a watershed year: Khrushchev’s not-so-secret speech in Moscow denouncing Stalin; Nasser’s nationalisation of the Suez Canal and the Suez crisis; the Soviet invasion of Hungary.

    The Suez crisis was my political Road to Damascus.  Returning to Melbourne in 1957, I immediately joined the East Melbourne branch of the Australian Labor Party.  Arthur Calwell, then Deputy Leader of the Opposition under Evatt, was the member for Melbourne.  In 1961, I was given the opportunity of a lifetime when, by a wonderful combination of friends and flukes, I became Press Secretary to Arthur Calwell, by now the Leader of the Opposition,  and in 1967, to his successor Gough Whitlam.  When Whitlam made his famous or notorious “The impotent are pure” speech before the jeering delegates to the Victorian Labor Conference at the Melbourne Trades Hall in June 1967, Calwell watched the performance from the gallery and said to me in the vestibule afterwards: “You won’t be working for your new boss long now”.

    “Throughout my public life”, Whitlam said on the 30th anniversary of the It’s Time election, “I have tried to apply an over-arching principle and a unifying theme to all my work.  It can be stated in two words: contemporary relevance.  It was the fundamental test I applied, in particular to the development of Labor policy in the years before 2 December 1972.  There is a case to be argued that my government faltered whenever we lost sight of the principle or allowed the rush of events to subsume them.”

    Among the many fine and true things said at the Sydney Town Hall, I want to focus on a point made by Tony Whitlam.  He said that his father believed deeply in a strong two-party system.  The whole thrust of Whitlam’s career was to further his determination that the Labor Party should remain one of the two dominant forces within our parliament, either in government or able to form government, in its own right.  He saw strong, effective parties as the mainstay of parliamentary democracy.  The future of the two-party system and Labor’s role within it is now the big political question facing Australia today, not just the Labor Party.

    May I say here how much encouragement we draw throughout Australia from the victory of Daniel Andrews and the Labor Party in Victoria, so soon after Gough Whitlam’s death.  Like Neville Wran’s victory in New South Wales six months after the Dismissal, it had a galvanising effect and renewed our sense of what is possible.  As to the Queensland result, well, it shows that anything is possible.

    In his first statement on becoming Leader of the Federal Parliamentary Labor Party on 8 February 1967, Whitlam said:

    For the Labor Party, what is clearly at stake is its future role within the Australian parliamentary system …. Our actions in the next few years must determine whether it continues to survive as a truly effective parliamentary force capable of governing and actually governing.

    Nearly nine years later, almost on the eve of the Dismissal, in the middle of his tremendous battle against the Senate, the ultimate challenge to the very legitimacy of a reforming Labor Government, Whitlam delivered the Curtin Memorial Lecture at the ANU in Canberra (29 October 1975).  Speaking of his work before 1972, he said:

    I addressed myself to three principal tasks: to develop a coherent program of relevant reform; to convince a majority of Australians that those reforms were relevant to their needs and their lives; and to convince the Labor Movement as a whole that the parliamentary institutions were relevant in achieving worthwhile reform.

    “The great organisational battles between 1967 and 1970, particularly in Victoria”, he said, were essentially about that third task:  “It was the toughest of all”.

    Keeping bright the Whitlam legend does not require manufacturing myths about him.  The stakes in Victoria were high; and while both sides invoked high principles, in the end the resolution of the conflict involved number-crunching of the roughest kind.  Whitlam was not particularly adept at that game, but accepted its necessity.  He largely left it to others – Lance Barnard in his rise to the leadership; Rex Connor in his self-imposed contest for the leadership with Jim Cairns in April 1968; Clyde Cameron in the reconstruction of Victoria in 1970.

    So I want to emphasise that electoral and political calculations figured as largely with Whitlam as any other political leader.  It was not all altruism and crashing through.  To gloss over Whitlam as a practising, party politician, working the system with the best of them, is the surest way to make him irrelevant.

    Whitlam set out, from the first, to combat the defeatism which had settled on much of the Labor Party, particularly in Victoria.  Political necessity drove his defiant speech to the Victorian ALP Conference in June 1967:

    We construct a philosophy of failure which finds in defeat a form of justification and a proof of the purity of our principles.  Certainly, the impotent are pure ….. Let us have none of this nonsense that defeat is in some way more moral than victory ….. I did not seek and do not want the leadership of Australia’s largest pressure group.  I propose to follow the traditions of those of our leaders who have seen the role of our party as striving to achieve, and achieving, the national government of Australia.

    Whitlam was especially infuriated by the self-serving claim that the bosses of the Victorian Central Executive were the principled guardians of Labor’s opposition to Australian involvement in the war in Vietnam.  In his landmark speech of 4 May 1965, Calwell had explicitly acknowledged the unpopularity of Labor’s position, to be met, in what seemed on the day a devastating reply by Menzies, with the sneer “If I might end on a horribly political note, it is a good thing occasionally to be in the majority”.  This was the same speech in which Menzies’ total justification for the war was that it was “part of the downward thrust by China between the Indian and Pacific Oceans”.  By such simplicities did Menzies reign supreme.  After the debacle of the 1966 election, ostensibly because of Vietnam, but more because of the dire state of the Labor Party itself, Melbourne became the heart and soul of the Moratorium Movement under the memorable leadership of Jim Cairns.

    Whitlam, by contrast, antagonised the Labor Left by his dismissive attitude towards the Moratorium Movement.  He told that Victorian Conference in June 1967 that protests “would not save a single Australian life or shorten the war by a single day.  Our consciences should not be so easily salved.  The present government opposes all moves which might bring about negotiations, and is the first to applaud and endorse escalation of the war.  Therefore our aim must be to replace that government.”

    But Vietnam was not really the divisive issue for Labor.  The most potent source of division was far older – over a century old in fact.  It was the issue of State Aid for non-government schools, meaning, in practice, the Catholic parish school system.

    It must be hard for any Australian under 60 to grasp fully the sectarian bitterness and the political explosiveness surrounding this issue.  Even the phrase itself – “State aid” – barely registers today.  The Bishops and the Church, even with so powerful an advocate as Archbishop Mannix, had failed utterly to dent the bipartisan intransigence against State Aid – the Liberal Party still essentially a Protestant  party; the Labor Party, its traditional Catholic support notwithstanding.  The unravelling came after the Split when the breakaway DLP put a pro-State aid plank in its platform.  From then on and for the next decade, the Labor Left made opposition to State Aid the test of Labor orthodoxy.  This was the issue which was to provide Whitlam with a platform to secure representation for the parliamentary leadership on the Labor Party’s Conference and Executive, ending the “36 faceless men” controversy.    It produced Whitlam’s outburst against “the 12 witless men” of the ALP Federal Executive, and his near-expulsion from the party in 1966.  It produced his triumph at the 1969 Federal Conference in Melbourne which adopted his ground-breaking proposal for the Schools Commission, granting aid to all schools – government and non-government alike – on the basis of needs.  It produced the last ditch defiance of the old VCE, sabotaging Labor’s 1970 State campaign, and perversely giving Whitlam unmistakable grounds for Federal intervention; which in turn paved the way for Victoria’s decisive role in electing the Whitlam Government in 1972 and saving it in 1974.

    What were the qualities that rewarded Whitlam with such success after these long years of turmoil and confrontation?  Perseverance, of course.  Stamina, of course.  But there was something else – a characteristic approach to political problems, and his way of arguing them out.  “Only connect”, E. M. Forster wrote, and Whitlam was the master of making connections – from the particular to the general, linking the local with the regional, the regional with the national and the national with the international.  Or reversing the process, as when debating standards for education, health, housing or transport, he would start from the carefully crafted formula: “Countries with which we would choose to compare ourselves”.  Sometimes, this left only Canada.  In the case of State Aid, he comprehensively connected the whole education issue with party reform, policy reform and electoral success – “the party, the policy, the people” in John Menadue’s 1967 formula.

    I see this making of connections as the essence of the Whitlam approach and the key to his contemporary relevance.  Remarkable, too, was his melding of personal experience with public policy.  In her truly great biography, Jenny Hocking describes his learning curve on aborigines when he witnessed their treatment in Queensland and the Northern Territory during his wartime years in the RAAF.  I have already mentioned the connection between Whitlam, the member for Werriwa, and Whitlam’s policies on “Schools, hospitals, cities”, to use his shorthand for his Program, his deep understanding that Australia is a nation of immigrants, and all the opportunities and obligations which flow from that central fact, his passion for electoral reform, one-vote, one-value, and even the national sewerage program.  He himself dated his determination to modernise the Constitution from the failure of the 1944 referendum, broadening and deepening with his service on the Joint Parliamentary Committee on Constitutional Reform.  This seminal experience led him to focus on the connection between the Constitution and the Labor Platform.  He was exasperated by the way the Labor Party had allowed the High Court rejection of bank nationalisation under Section 92 in 1948 to become an excuse for policy stagnation.   He later put his attitude in this way:

    I was concerned by the way in which the Labor Party’s failure to move on, to look ahead, to attempt to find new ways towards reform, was short-changing the Australian people and short-changing the Party itself.  The Party became obsessed with the idea that rather than being about revival for the future, its purpose was to return to a more comfortable past – not renovation but mere restoration.  As a result, both the achievements of the past and the hopes for the future receded equally.  The Party stagnated and the Platform was stultified.

    There, in its most striking form, is Whitlam’s continuing challenge – to modernise the Party, to modernise the Platform, to modernise the Party’s place in a modernised Australia.  He wanted, of course, to modernise the Australian Constitution, and no Australian leader worked harder to achieve change by referendum.  Right to the end, he never gave up on this, despite the overwhelming evidence that change by the direct referendum route is almost always foredoomed in Australia.  Yet despite this, he achieved real change in the spirit of the Australian Constitution, in its interpretation and in the application of the Constitution as it exists to the implementation of Labor policy.  He never succeeded in altering the Constitution by a single line or letter, but he enlarged the Constitution like no other leader.  As in so much else, Whitlam was the Great Enlarger.

    He did it in three ways.

    First, by pointing the Labor Party to the parts of the Constitution which were relevant and achievable.  As he said in 1961, in his first Curtin Memorial Lecture:

    In our obsession with Section 92, which is held up as the      bulwark of private enterprise, we forget Section 96, which is     the charter of public enterprise.

    In that speech, too, he derided the most sacred of Labor’s cows, the socialist objective, as “weak, defensive and apologetic”.  At the same time, he was not apologetic about calling himself a socialist and was, in fact, the last Labor leader to do so.

    Second, in government, he widened the Constitution and its interpretation whenever his legislation was tested in the High Court, starting with the Hamer Government challenge to the Australian Assistance Plan in 1974.  He was justly proud of the fact that no Whitlam Government laws were ever held to be unconstitutional.

    Thirdly, most relevant of all, he enlarged the Australian Constitution by the use of the external power, and by enshrining key laws within covenants of the United Nations and the International Labor Organisation.  The Racial Discrimination Act is an outstanding example.

    And here I make the claim that the connections Whitlam made between what we do here and our standing in the world represents his distinctive expression of Australian patriotism – rational, authentic and deep patriotism.

    Let me give a specific example.  In two visits to Papua New Guinea in 1970 and 1971, as Opposition leader, he proclaimed independence for PNG by 1976.  In Government, he advanced the time-table by a year.  The independence ceremony in Port Moresby in September 1975 was the last time Sir John Kerr and Whitlam appeared in public together.  During the 1970 visit, his meetings with Michael Somare were tracked by ASIO.  After he addressed 10,000 Tolai at Rabaul, Prime Minister Gorton said he would have “blood on his hands” if there were any violence on the Gazelle Peninsula.  The Minister for Territories, CEB Barnes, thought PNG might be ready for independence in 25 to 100 years.  This was probably majority opinion in Australia.  Seven Australian Prime Ministers attended Whitlam’s Memorial on 4 November 2014 – with five Prime Ministers from PNG, including Michael Somare.

    How did Whitlam turn around Australia’s stance so completely, so quickly?  I remember vividly the day in Port Moresby in January 1971 when he dictated the thoughts which we worked up as the definitive statement on PNG independence:

    All Australians must now realize how damaging and    dangerous a reputation Australia’s present policies produce.  What the world sees about Australia is that we have an aboriginal population with the highest infant mortality on earth, that we have eagerly supported the most unpopular war    in modern times on the ground that Asia should be a      battleground for our freedom, that we support the sale of arms to South Africa, that the whole world believes that our immigration policy is based on colour and that we run one of the world’s last colonies.  We may profess our good intentions      and feel that we are victims of special circumstances but the combination of such policies leans heavily indeed on the world’s goodwill and on Australia’s credibility.

    The true patriot therefore will not seek to justify and   prolong these policies but will seek to change them.

    It is upon his determination to protect and advance Australia’s reputation and standing in the world that I stake my strongest claim for Whitlam’s contemporary relevance.  I deeply believe that if the Labor leadership had taken its stand clearly on Australia’s international reputation and international obligations on refugees from the beginning, in 2001, we would not have had fourteen years of this malignancy, eating away at our national self-respect.  Of course, Australians care about “who comes here and the circumstances in which they come”.  But, given leadership, they do care for Australia’s good name in the world.  How else were Whitlam and Don Dunstan, together with quite small public interest groups in the universities, churches and unions, able to persuade the Labor Party in 1965 to abandon its most cherished tradition and Australia’s deepest fears embodied in the White Australia Policy?

    So I stress the importance of making connections in Whitlam’s approach to policy.  But I am bound to acknowledge that there were disconnections when it came to implementing policy in government.  The connections were Whitlam at his most constructive; the disconnections the most damaging.  No appraisal of his contemporary relevance can omit the failures, and the lessons to be learned from them.

    In his book The Whitlam Government, Whitlam himself makes a significant admission.  The matter-of-fact way he puts it masks the pain it cost him to make it.  He wrote (p.195):  “The chief economic failure of my Government resulted from the wage explosion of 1974.  In part, our failure was a failure of communication, our failure to persuade the trade union movement to accept the central concept of Labor’s program.”

    He then spelt his definition of the meaning of equality in modern Australia: “That central concept was this: in modern communities, even the wealthiest family cannot provide its members with the best education, with the best medical treatment, the best environment, unaided by the community.  Increasingly, the basic services and opportunities which determine the real standard of life of a family or an individual can only be provided by the community and only to the extent to which the community is willing to provide them.  Either the community provides them or they will not be provided at all.  In the Australian context, this means that the community, through the national Government, must finance them or they     will not be financed at all.”

    That is the bed-rock of the Whitlam Program, with its over-arching theme of a more equal Australia.  Then comes his painful admission: “I have to acknowledge that this philosophy was never really accepted by the Labor movement of Australia at any time after the election of its own Labor Government.”

    In a generous review in The Age, Sir Paul Hasluck described the book as “the longest trumpet voluntary in political literature”. But it seems to have escaped Sir Paul that there could hardly be a more mortifying admission than that the very core of Labor support had not accepted the relevance of the Whitlam Program to its immediate concerns.  By contrast, the Hawke and Keating Governments succeeded in persuading the unions to accept the concept of a social wage, and, through the Accords, made it the basis of their transformation of the Australian economy.

    Whitlam notoriously said: “I don’t mind how many prima donnas there are in my Cabinet, as long as I’m prima donna assoluta”.  It was a throwaway line that actually highlights both the strengths and weaknesses of the Whitlam style of government: individual brilliance against collegial disarray.  There was a serious gap between the primacy he gave to Parliament, to parliamentary government on one hand, and the operation of its most distinctive feature, the Cabinet, the great engine of parliamentary government.  Cabinet embodies the two principles that make parliamentary democracy work effectively – Cabinet solidarity, and answerability to Parliament.  Cabinet is the grand committee of the nation.  Bob Hawke’s superb chairmanship skills made his Cabinet the most successful in our history.  A properly-run Cabinet would not have enmeshed the Whitlam Government in the toils of the loans affair.

    Nevertheless, while the orchestration was sometimes discordant, the Whitlam Government was not a one-man band, although Gough himself scarcely discouraged the notion.  “What would happen if you were run over by the proverbial bus”, Mike Willesee asked him in 1974.  “In the light of my government’s public transport reforms, that is highly improbable”.  But the free rein Whitlam gave his Ministers did become the basis for its record of achievement.  The one thing he expected was that they would act in the spirit of the Program, especially as set out in the It’s Time Policy Speech.  As Kim Beazley Snr said: “The Platform is the Old Testament; the policy speech is the New Testament”.  He was only half-joking.

    There will never be another Policy Speech like it.  At least I devoutly hope so, because I hope that the conditions which produced it will never be repeated.  That is, I hope fervently for the sake of Australian parliamentary democracy that the Australian Labor Party will never again be out for 23 years, or anything like 23 years.  We cannot fully understand the nature, content and purpose of the It’s Time  Policy Speech, unless we place it firmly in the context of those 23 years.  Nor, for that matter, can we fully understand the conduct and fate of the Whitlam Government without understanding the sense of urgency and expectation those lost 23 years produced.

    There were outstanding Ministers.  Think of Bill Hayden, who built Medibank – with its vital principle of universal access to health care – so strong that it defied seven attempts by the Fraser Government to dismantle it and enabled the Hawke Government to restore it as Medicare.  The attacks on its basic principles by the present Federal government are, of course, part of its current turmoil.  Contemporary relevance indeed!

    Again, Hayden had progressed far towards establishing a national superannuation scheme.  Keating accomplished it, and Labor’s role as the custodian of superannuation, and its true principles, remains, or should be, one of its greatest electoral assets.

    Think of Lionel Murphy, whose transformational law reforms constitute almost a parallel program.  His concerns about the accountability of the national security apparatus remain a question of fundamental relevance to Australian democracy.

    Or think of Al Grassby.  For dismantling White Australia (“Give me a shovel and I will bury it”, he said to a sceptical reporter in Manila); for establishing multicultural Australia, he paid a high political price.  He lost his seat in what Whitlam called Australia’s first overtly racist campaign in 1974.  We may think we have come a long way since 1974.  On the other hand, we may think that the story has deep contemporary relevance, certainly in terms of the need for unremitting vigilance in the work of building a more inclusive and tolerant Australia.

    I think, in particular, of Tom Uren, who breathed life into the most original and wide-ranging of all the Whitlam concepts, really the heart of the Whitlam project – national involvement in cities and regional centres.  The restoration of his Department of Urban Affairs is again urgent and relevant to the Australian people in almost every aspect of their daily lives.

    These examples remind us of a largely neglected, if not forgotten, aspect of the Whitlam project – how much, both in development and implementation, the Whitlam Program was a collective effort, how much he sought and welcomed the ideas and advice of others, inside and beyond the Labor Party.  Many years later, I suggested that he should acknowledge that “the Program did not spring, like Minerva, fully armed from Zeus’ brow”.  He agreed entirely, but insisted that he was not going down to posterity confusing the Greek and Roman gods.  Gough thought Zeus more appropriate than Jupiter, so Minerva had to give way to Athena.

    This aspect of the Whitlam project, as a cooperative and collaborative effort, will, I believe, become increasingly relevant to Labor’s mission, as Australia moves into a more complex era, with its communities more dissociated, its voters more volatile, its competing interests more vocal, its public discourse more discordant, if not debauched, its media ever more pervasive.

    More than a century ago, Alfred Deakin complained about the impossibility of governing “with a reporter at one’s elbow”.  We may speculate how Gough would have coped, in a world of instant response, endless spin, the ten second grab and the cacophony of self-appointed pundits.  I think I know the answer.  Brilliantly.  Three reasons: He was the master of the one-liner before the term was invented.  He would have dominated the mainstream media by open, long and frequent press conferences.  And, above all, he would have refused to relegate Parliament to its present humiliating role as an almost incidental channel of political communication.

    Almost our last collaboration, stretching across more than 40 years, was the Foreword to Troy Bramston’s splendid collection, The Whitlam Legacy.  Gough knew it would be his last serious word on Australian politics:

    May I make one valedictory point: never forget the primacy of Parliament as the great forum for developing, presenting and explaining policy.  This seems to me the best response we can make to the unprecedented demands now made on our leaders and representatives by the relentless news cycle, 24 hours a day, seven days a week.  If we develop, define and defend our policies thoroughly before their implementation, we will be much less likely to be blown off course by the accidents and aberrations inseparable from modern political life.  And Parliament is by far the best place to achieve it.

    This was the precept and practice of a life time.

    Parliament is, or should be, a marvellous resource, and it has been the anchor of our national life longer than almost any country in the world and, by the standard of the suffrage – the right to vote – more democratic longer than any.  But if the Labor Party is to survive as the prime mover in the development and implementation of the public polity – the party of new ideas – its policy makers will need to draw on all the available resources, reaching out beyond its own resources and ranks.  This points to a future role for independent but dedicated resources like the Whitlam Institute itself.  This was Gough’s own deep hope as he watched the Institute grow during his rich and mellow autumnal years.

    Partly because of his long and active public life, there is a timelessness about Gough Whitlam’s legacy, extraordinary for a working politician who reached the heights of his achievement forty years ago and whose Prime Ministership lasted only three years.  But I always emphasise that Gough Whitlam was also very much a man of his time.  His vision of a more equal Australia, a more independent Australia, a more inclusive, generous and tolerant Australia, a more forward-looking and outward looking Australia, belongs to all time.  But the means by which he sought to advance Australia towards that vision reflected his own times, the influences, pre-occupations and demands of his time, the political, constitutional, social and economic opportunities and constraints of his time.  Hence his insistence on contemporary relevance.  Here in St. Kilda Town Hall, closing his great campaign in 1972, he invoked Ben Chifley’s “light on the hill”.  His program was not the light on the hill; but he shone a bright light along the path.

    Far be it from me to presume to put words into Gough Whitlam’s mouth, at least now that he cannot speak for himself.  But I do believe that his first advice to his successors – the Labor leadership, the members, supporters and well-wishers – as they pursue their tasks of shaping and re-shaping Labor policies, Australian policies, for the 21st century, in times and circumstances every bit as daunting and challenging as those he faced in his time – I believe that his watchword would be for them, as his instruction was so often to me:

    “Contemporary relevance, comrade”.

     

  • Stephen Leeder. Telling the story of mental health.

    It is unusual for Foreign Affairs, a magazine published by the United States Council on Foreign Relations in New York, to contain articles on health, but the first issue of 2015 carries an essay (Darkness invisible: the hidden global costs of mental illness) by three distinguished scientists from the National Institute of Mental Health about the hidden costs of mental health.1 Based on evidence from a 2010 Harvard University study on the current and future burden of disease,2 they state that “the direct economic effects of mental illness (such as spending on care) and the indirect effects (such as lost productivity) already cost the global economy around $2.5 trillion a year”, an amount projected to rise by 2030 “to around $6 trillion, in constant dollars — more than heart disease and more than cancer, diabetes, and respiratory diseases combined”.1

    The World Health Organization estimated in 2012 that about a quarter of all time lost to disability is due to mental illness, putting it at the top of the league chart.3 Unlike many other chronic illnesses, mental illness frequently strikes the young. Further, of the 800 000 people who commit suicide each year, 75% are in low-income and middle-income countries.4

    Extraordinary failure

    Yet, the authors of “Darkness invisible” say, the 2010 Harvard report had no impact. In wealthy countries, mental illness is still perceived as an individual or family problem rather than “as a policy challenge with significant economic and political implications”. In many low-income and middle-income countries mental care for the mentally ill is seen as an unaffordable luxury.1 The authors also point to breakthroughs in therapy, especially new medications and the capacity to communicate using mobile phones, that are now more affordable, yet are frequently overlooked.1

    So what are we doing? Globally we are spending around $2 a year per individual on mental health, averaging about 25 cents per person in low-income countries. In Australia in 2004–2005 the average national per capita expenditure on mental health services was $117.5 As we have seen in Australia, the advantages of dismantling mental hospitals that “once oversaw care for the mentally ill”,1 especially those with long-standing severe illness, are accompanied by failures to provide community care for these people. The criminal justice system comes into play by default, in both the acute and long-term management of people with mental illness. In the United States, “30 percent of the country’s chronically homeless and more than 20 percent of the people incarcerated … suffer from a mental disorder”.1 The scene is dismal in Australia as well.

    Darkness invisible explores new technologies including using the Internet and mobile devices to provide psychotherapeutic interventions supported by inexpensive generic medications that could be administered by health workers in the vast tracts of the earth where there are very few medical practitioners and no psychiatrists. The authors may well have wondered about the lethargy among the medical profession worldwide in creating opportunities for the training and deployment of more psychiatrists. We don’t look good as we pass this mirror. There is no substance to our defence when wealthy communities are well supplied with psychiatrists and psychologists.

    A call for better advocacy

    Darkness invisible concludes with a call for mental health advocates to multiply their efforts and “do a better job of explaining to officials and the public the true costs of mental illness”, and “win more allies within the medical profession by drawing attention to the fact that improved mental health leads to better overall health”.1

    This call will resonate with those who perceive the lamentable consequences of unexplained political propositions and proposals: bankrupt policy replaced by sound bites and slogans. There’s a powerful story to be told about mental health, with chapters on the consequences of inadequate care on individual wellbeing and the national economy.

    As a senior business executive put it to me recently, “To succeed, first you must have a convincing story, then good leadership, then the metrics”. More light, more storytelling please.

    Stephen Leeder is Editor in Chief of the Medical Journal of Australia. This article appears in the current issue of the journal.

  • John Menadue. Health Insurance – here we go again!

    The Health Minister, Sussan Ley has just announced a 6.2% increase in private health insurance premiums.  Increases of this order happen almost every year.

    Since the Howard government introduced the rebate on private health insurance in 1999, the cost of private health insurance has increased over 150%. Overall prices have increased by less than 50% in this period.

    Because private health insurance has not got the will or ability to control prices, it is a ‘price taker’ as economists say, it underwrites large increases in health costs particularly by private specialists. That is why we are all paying more in out-of-pocket expenses. But it is even much worse than that. Private health insurance makes it more difficult for Medicare to control fees.

    The private health insurance industry receives a $7 billion p.a. subsidy from taxpayers. This subsidy is far more than the car industry ever received. This is real corporate and middle class welfare. Abolition of the subsidy and at the same time funding a Medicare dental scheme would greatly improve equity and quality of care at no extra cost to the budget.

    Abolition of the subsidy would also remove the Damocles sword that hangs over Medicare. Private health insurance has proven disastrous in the US. We must stop sleep-walking down a similar path in Australia.

    Private Healthcare Australia runs a quite dishonest campaign. Private health insurance has not taken pressure off public hospitals. By funding excessive private specialist fees, private health insurance has attracted many specialists away from public hospitals. Comparing like with like, private and public hospital costs are about the same. The administrative costs of private health insurance are three times those of Medicare.

    But subsidised private health insurance has one particular attraction. It enables wealthy people to avoid the queue for public hospital beds.

    A major beneficiary of private health insurance has been private hospitals and one hospital group in particular. That group is Ramsay Healthcare which operates 120 odd hospital and day-care surgeries in Australia and offshore. Like other supporters of private health insurance, Ramsay Healthcare seldom argues its case publicly. It knows that its case will not stand up to public scrutiny.

    Instead, Ramsay Healthcare relies on lobbying and political influence like so many other wealthy companies and people in Australia. In the last 14 years, Ramsay Healthcare and Paul Ramsay Holdings gave more than $1.8 million to the Liberal Party. Not a cent was given to the Labor Party. Paul Ramsay left an estate of over $3.4 billion recently. Before his death, he was Australia’s eleventh richest person.

    The private health insurance industry relies on lobbying and political influence and not on a publicly defensible case.

    The interests of Australian taxpayers and the Australian community would be better served if the $7 billion taxpayer subsidy was abolished and the money transferred to a Medicare dental scheme.

    The response of the ALP to the latest round of PHI premium increases shows that it has little idea of what is at stake…. Medicare

    See earlier post that I have made on this subject below:

    Two days before Christmas and to avoid scrutiny, the hard-to-notice Federal Minister for Health, Peter Dutton, announced a 6.2% increase in health insurance premiums for next year.

    We have seen the same pattern year after year with health insurance premiums increasing at well ahead of the CPI.

    The Howard Government introduced the Private Health Insurance (PHI) rebate in 1999. Since then the average health insurance premium has risen by 130% while overall prices have risen by less than 50%.

    The Chief Executive of NIB put the reason for the latest increase very bluntly. He said ‘the rise was necessary to meet the rising cost of providing health care’. But PHI is a key part of the problem of rising health care costs because PHI funds have little or no power in the market to contain costs. They are price-takers. The power to set prices in the health market is with the providers – doctors and hospitals – and only a single payer or national insurer, as in the UK or Scandinavian countries with national insurers, can and do exercise market power.

    Medicare would have more market power to control prices if it was the only single payer. But its power is eroded by the PHI companies. A clear example of this is gap insurance which the PHI funds offer. This gap insurance has underwritten the largest increase in specialist fees in Australia in the last quarter of a century.

    If Australians want to waste their money on expensive PHI that is their choice. But I see no reason for taxpayers providing an annual subsidy of $7 billion for PHI that enables the wealthy to jump the hospital queue.

    In February 10, 2013 year, I wrote about the rising cost of PHI. See repost below. I have also reposted ‘Health care and the budget deficit in the US’ which shows the enormous damage that PHI has wrought in the US.

    Repost (from February 10, 2013)

    Last week Health Minister Plibersek approved an average increase of 5.6% in private health insurance premiums from April this year. It is the same story year after year with health insurance premiums increasing at 2% to 3% ahead of the rate of inflation.

    There are two main reasons for these increases.

    The first and least important reason is that the administrative costs of private health insurance companies run at about 15% to 16% of premiums. Medicare, including the cost of tax collection, costs about 6% per year. Broadly speaking private health insurance administrative costs, including profit margin, run at about three times the administration costs of Medicare.

    The second and most important reason for the steady increases in premiums is that private health insurance funds are largely unable to control the price, quality and utilisation of services provided by doctors and hospitals. This is a problem for all insurers, both private and public, when services are provided free at the point of delivery. There is little incentive or opportunity for consumers to exercise power either over  the cost of the service or whether the service is  necessary. The power is with the provider, not the consumer. Economists call this ‘moral hazard’.

    But when a country has a single payer or a single national insurer, as in the UK or Scandinavian countries, the national insurers can and do exercise market power. That is why health services in those countries is invariably delivered efficiently and at low cost. . Private health insurance has practically no power to control prices and demand for health services. What is worse, private health insurance in Australia undermines the ability of Medicare to exercise market power.

    Evidence on the failure of private health insurance is clear. First, the standard example of private health insurance failure is the high cost and inequity of the US health service. That service provides the worst value for money of any health ‘system’ in the world. Secondly, The Economist, in an article on February 18, 2010, said ‘The biggest factor behind the cost conundrum is that insurers lack market power. Health care providers hold all the cards.’  Thirdly, our Productivity Commission said in 2005 ‘increased levels of private health insurance membership have been associated with a marked increase in the number of services performed and reimbursement for those services”.  Fourthly, in a review in 2003 of private health insurance in Australia, the OECD commented ‘Private (insurance) funds have not effectively engaged in cost controls. They seem to have limited tools and few incentives to promote cost efficient care … Private health insurance appears to have led to an overall increase in health utilisation in Australia …’

    Increases in private health insurance premiums ahead of the inflation rate are not surprising. Private health insurance is badly serving Australians and undermines the power of Medicare as a single payer.

    This is not to say that Medicare should not be improved. It is a very efficient payments vehicle. But it is much too passive. It was launched and still carries in its name, the ‘Health Insurance Commission’. If it were a proactive public health insurer, it could significantly reduce the malign influence of private health insurance in Australia.

    See also article by John Menadue and Ian McAuley ‘Private Health Insurance: high in cost and low in equity’ – reposted today below.

     

  • John Menadue. How vested interests are subverting the public interest.

    There are many key public issues that we must address. They include climate change, growing inequality, tax avoidance, budget repair, an ageing population, lifting our productivity and our treatment of asylum seekers.

    But our capacity to address these hard issues is becoming very difficult because of the ability of vested interests with their lobbying power to influence governments in a quite dis- proportionate way.

    Lobbying has grown dramatically in recent years, particularly in Canberra. It now represents a growing and serious corruption of good governance and the development of sound public policy. In referring to the so called ‘public debate’ on climate change, Professor Ross Garnaut highlighted the ‘diabolical problem’ that vested interests brought to bear on public discussion on climate change.

    These problems include:

    • There are over 900 full time independent lobbyists working in Canberra, more than 30 lobbyists for every Cabinet minister. On top of these ‘third party’ lobbyists, there are the special interests who conduct their own lobbying, such as the Australian Pharmacy Guild.
    • These lobbyists encompass a range of interests including mining, clubs, hospitals, private health funds, business and hotels that have all successfully challenged government policy and the public interest. Just think what the Minerals Council of Australia did to subvert public discussion on the Super Profits Tax and the activities of Clubs Australia to thwart gambling reform, or the polluters over an Emissions Trading Scheme and the Carbon Tax. With its lobbying power over the major parties, the hotel lobby at the State level effectively determines hotel operating hours. Violence and crime are a result.
    • With journalism under-resourced, the media depends increasingly on the propaganda and promotion put into the public arena by these vested interests The Australian Centre for Independent Journalism at UTS found in a survey of major metropolitan newspapers published in Australia in 2010 that 55 per cent of content was driven by public relations handouts from lobbyists and their associated public relations arms, and 24 per cent of the content of those metropolitan newspapers had no significant journalistic input whatsoever., relying heavily on public relations handouts.
    • The Media Council of Australia has drawn attention to how media independence is increasingly compromised by ‘advertorials’, a deliberate confusing of advertising and editorial content. The Council also drew attention to trips financed by large corporations and organisations that were not disclosed. It’s not just travel companies that do this.
    • With over 60 per cent of metropolitan newspaper circulations in Australia, News Ltd is a major obstacle to informed debate on key public issues like climate change.
    • The health ‘debate’ is really between the Minister and the Australian Medical Association, the Australian Pharmacy Guild, Medicines Australia and the Private Health Insurance companies. The debate is not with the public about health policy and strategy, it is about how the Minister and the department manage the vested interests.
    • The wealthy private schools are obstacles to needs based funding which is necessary for both equity and efficiency reasons
    • Much of the policy skills in Canberra departments has been downgraded and much of the policy work is now in the hands of young staff in ministers’ offices that are much more inclined to listen to vested interests.
    • Policy work within the government is now undertaken more in specialist organisations such as the Productivity Commission rather than in the departments. Departmental policy capability has been seriously denuded.

    What can be done?

    • Federal lobbyists have to be registered with the Department of Prime Minister and Cabinet, but this is inadequate. They should also be obliged to promptly, publicly and accurately disclose the discussions and meetings they have had with ministers, shadow ministers and senior public servants.
    • All proposals by special interest groups should be accompanied by a public interest impact statement prepared by an independent and professional body. This public impact statement would be attached to representations from the vested interest group. Many of the major private consulting firms should be excluded from this process as many of them have shown themselves to be compromised in the interests of their clients.
    • Refuse tax benefits for ‘think tanks’ like Institute of Public Affairs which are secretly funded and act as fronts for vested interests.
    • Departments such as Health which are so influenced by special interests should have different governance arrangements. The traditional minister/departmental model in Health is a happy hunting ground for vested interests that significantly influence outcomes in health. The Reserve Bank, composed of independent and professional persons, has shown the benefit of such governance arrangements in keeping vested interests at bay and promoting an informed public debate. We need such an arrangement in the health field particularly.
    • No minister or senior official should work with a vested interest group that they have been associated with for at least five years after retirement or resignation.
    • There should be increased funding to the Parliament to provide alternate public advice in key policy areas. The Parliamentary Budget Office is a good start. The current policy vacuum must be filled by independent and professional advisers. At the moment the policy vacuum is filled by special interests assisted in many cases by a compliant and under-resourced media.
    • Adequate funding of the Australian Broadcasting Commission to assert the public interest and develop good public policy is now more important than ever.
    • Major reform of election funding to stop powerful groups buying political favours.
    • A federal Independent Commission Against Corruption and in each State to examine allegations of corruption.
    • Citizen Assemblies of randomly selected people who are fully informed on key public issues to advise governments.

    Action to assert the public interest in the face of powerful vested interests is necessary on many fronts. The problem is urgent.

    This article is part of a series ‘Who speaks for and protects the public interest in Australia? published by Australia 21. Other articles in this series can be accessed by clicking on my website at the top of this page.

  • John Menadue. Cover-up in the health system.

    There is an unacceptable refusal by many in the health sector to publish data and information about how services are delivered. There is a cover-up by powerful providers who don’t want transparency and exposure about the way they work.

    At the Bundaberg Hospital some years ago it was clear that surgeons had little confidence in surgeon, Jayant Patel. But they sat on their hands and did little to protect the public. It was left to nurses to blow the whistle and risk their careers.

    Judge Geoffrey Davies AO spoke of this problem in an address last October to 1,200 orthopaedic surgeons in Brisbane. The speech was reported earlier in this blog (7/12/15). It is very blunt about the performance of many orthopaedic surgeons.

    Extracts from the transcript of his speech follow:

     

    Why won’t you do something about incompetent surgeons?

    The Hon Geoffrey Davies AO

    You all know that, in your midst, there are incompetent surgeons; surgeons whom you would never recommend to your friends or family. They may have varying degrees of incompetence and for different reasons. But all are a danger. All can cause injury.

    Together you know who many of them are. But for various reasons you have done little individually and nothing collectively, to expose them or even to identify them confidentially for the purpose of retraining or limitation of practice.

    Patients are entitled to know, before they choose you for their surgery, rather than one of your competitors, not only how your fees compare with those of your competitors, but also how your success rate compares with that of your competitors; and that that latter information, in the case of much orthopaedic surgery, is recorded in your National Joint Replacement Registry.

    Why would surgeons who are otherwise honest and decent men and women and who are themselves competent, fail to speak out against what was plainly gross incompetence causing harm? The author of the Bristol Inquiry report described it as an “old boys’ culture”. But that is simply a euphemism. The true reason must surely be either a view that the reputation of your profession is more important than the health and safety of patients; or a view that the incompetence of your colleagues is none of your business. It can’t surely be a misplaced loyalty to your incompetent colleagues. It wasn’t in Bundaberg because none of the other doctors there really liked Dr Patel.

    If, individually, you don’t speak out, patients may be injured, possibly seriously.

    As you are aware, following my Inquiry, there is now a mandatory requirement that you notify the Health Ombudsman if you have a reasonable belief that another health professional has behaved in a way which constitutes a significant departure from accepted professional standards; and that such behaviour has placed the public at risk of harm. You do not appear to have responded to this obligation notwithstanding the freedom which it confers from any legal or administrative action. And the legislation invites you to notify in respect of less serious incompetence and, if you do, also offers you full protection against legal or administrative action provided your notification is made honestly.

    If, in those circumstances, you as individual surgeons will not act to protect the public from your incompetent colleagues, I have come to wonder how likely it is that your association or any other specialist association is ever likely to do so. However, as I shall point out, there are a number of ways in which it can and should do so.

    Surgeons who are the subject of multiple complaints Studies in 2006 in New Zealand and the United Kingdom both show a close correlation between complaints and preventable adverse events :

    -Two thirds of complainants had experienced adverse events; and
    -75% of those adverse events were preventable.

    And a study in 2012 of nearly 19,000 formal health care complaints against doctors, including surgeons, in Australia between 2000 and 2011 showed that two prior complaints over eleven years was a strong predictor of short term further complaints. It found that:

    – compared with doctors with one prior complaint over that period, those with two complaints had nearly double the risk of recurrence;
    – that risk increased substantially with each additional complaint.
    – and these, in turn, showed that complaint prone doctors could be identified early in their complaints trajectory.

    Together these studies show, in my view, a strong likelihood that those surgeons who have had, for example, two or more complaints within an eleven year period are incompetent.

    Evidence (also) show that incompetent surgeons are much more likely to be found among older surgeons than among surgeons in early or mid-career.

    There are three conclusions that can be reached from this evidence. The first is that the proportion of incompetent surgeons is likely to be greater in the older age group than in the mid-career group. The second is that this conclusion is not generally recognised or, at least, admitted within your profession. And the third is that there needs to be much greater scrutiny, than there is at present, of the performance of older surgeons, partly for these reasons, but partly also because there is likely to be much greater resistance, in your profession, to complaining about a once competent surgeon who is no longer so than there is about a younger incompetent surgeon.

    Individual notifications under the Legislation, like complaints by patients, can never uncover more than a small percentage of the total number of incompetent surgeons. That is why the primary responsibility for uncovering and dealing with incompetent surgeons must be upon those who can establish a system for such objective assessment.

    The view that the best way of determining competence is by assessment of actual operations appears to be rejected by you in a number of ways.

    First, you appear to ignore the fact that multiple complaints against a surgeon probably prove a pattern of incompetence.

    Secondly, you will not make participation in morbidity audits compulsory notwithstanding the overwhelming evidence of the benefit of such participation.

    Thirdly, you will not permit audits of either kind to identify and record the name of a surgeon the subject of adverse events notwithstanding the evidence that this would enable determination of a pattern of incompetence.

    And fourthly, you will not permit the NJRR to be used for this purpose notwithstanding that, as I believe, it can do so. If I am correct in that belief, I think that you have been acting improperly in failing to use it for that purpose. In saying that I appreciate that surgeons have been contributing data to the NJRR on the promise of anonymity. But that could and should have been changed before now.

    I cannot see how the imposition of a fine or suspension from practice for a period can, alone, be an appropriate remedy for incompetence. The surgeon should be retrained if that is possible. But in many cases, especially those of older surgeons, that will not be possible. In that case he must have his practice limited to exclude operations of the kind which he cannot safely perform or he must be prevented from practising. Suspension from practice, in whole or in part, is appropriate only while decisions are pending about retraining or limitation or ceasing practice.

    Why you won’t do something about incompetent surgeons?

    I regret to say that my answer to this question is not one which you will like. Yet all of the evidence that I have seen convinces me that I am right.

    What then is the answer to my question? I think that there are two.

    The first involves how you think and act individually.

    Many of you are concerned that disclosure of your own success rate or, more accurately, your failure rate might increase your risk of being sued. But realistically that is a risk for only a small minority whom you should want to see dealt with, for the health and safety of future patients.

    Many of you are also concerned that reporting another surgeon whom you believe is incompetent may rebound on you. I have said that I understand that. But that concern does not excuse you, particularly given the protection which the law now gives you.

    The second involves how you think and act collectively, as the AOA.

    Collectively you are, it seems to me, still primarily a trade union having the primary purpose of looking after the wellbeing of orthopaedic surgeons. And sadly you appear, so far, to have put that before the health and safety of patients.

    To change that you must make participation in morbidity audits compulsory for your members. You must require the recording of the names of surgeons involved in adverse events. You must use the results of these, and the results of complaints records to identify incompetent surgeons.

    And you must use the NJRR for this purpose.

    When I spoke at your annual conference in Adelaide four years ago I was still optimistic that you might, individually and collectively, do something about this serious problem. Despite your inaction since then, I remain optimistic. But time and public confidence are running out.

     

    Geoffrey Davies was a judge of the Queensland Supreme Court of Appeal for 14 years. He headed the 2005 inquiry into the Bundaberg surgeon Jayant Patel. 

    This speech was reported in The Australian on October 17, 2015.

     

     

     

  • Michael Gracey. Why is closing the aboriginal health gap failing so badly?

    The disparity between the health of Aboriginal people and other Australians first drew wide public attention In the 1960s; it became known as “The Aboriginal Health Problem”. This awareness came from reports of widespread and severe malnutrition in Aboriginal infants and young children, high rates of infections and gut parasites, high infant mortality, and reduced life expectancy.

    This wasn’t good enough for a wealthy nation like Australia, the “Lucky Country” if you like, where the luck seemed to not extend to the First Australians. There was a public outcry at the time, followed by almost predictable political reactions aimed at correcting the inequity.

    Strategies were devised, programs planned, health professionals were employed, and huge sums of taxpayers’ dollars were allocated and spent over the next half century. So we are entitled to ask “what happened?”

    There were some gains. Aboriginal infant mortality rates fell, their average birth weights increased, rates of malnutrition dropped, vaccine-preventable infections receded, rates of severe child infections declined and deaths from childhood gastroenteritis plummeted. These encouraging improvements were mostly due to conventional public health measures including childhood vaccination, better hygiene, and earlier referral for treatment of illnesses, greatly improved treatment for childhood diarrhoea and dehydration, and employment of skilled clinical personnel. But over the past thirty or so years many aspects of the health of Indigenous people have deteriorated. Why?

    Since the 1970s there have been substantial changes in the living patterns of Aboriginal Australians, particularly in rural and remote areas. Political, legal and administrative changes occurred from the late 1960s that had profound effects on Aboriginal people and communities. Examples include the introduction of equal pay for equal work, the granting of drinking rights to Indigenous persons, various systems of welfare support and payments, increased reliance on the welfare system, and a rapid shift from traditional lifestyles to that of a typical Westernised contemporary society. This all occurred on an entrenched system where Indigenous people were disadvantaged in almost all aspects of their lives from the rest of the wider Australian society.

    Indigenous people went through a swift lifestyle shift and became less physically active, more sedentary, and consumed modern foods and drinks that were more calorie-dense, contained much more fat and salt and less fibre than in previous times. The stage was being prepared for a tidal wave of chronic so-called “lifestyle” diseases which threatened their survival. The Tsunami of obesity, diabetes, high blood pressure, heart disease, stroke, chronic kidney disease and renal failure descended on them with a vengeance. Not only that, the stresses associated with maladjustment to these changes, socio-political disadvantage, under-education, unemployment and racial prejudice combined to make them a sub-group that was vulnerable to a heavy burden of disease, disability and excessively high mortality.

    However, increasing numbers of Indigenous Australians are not trapped in this unfavourable vortex of negative factors. Many are being well-educated, achieving high levels of competence and success in their daily lives, in business, the professions, and academia, and are becoming leaders in Australian society. These people provide encouragement towards future successes and recognition of Indigenous people as exemplars.

    But the negative impacts of various factors on the health statistics of Indigenous people over the past 30 years are a cause for serious concern.

    The persisting, yawning divide between the health statistics of Aboriginal people and other Australians has become known as “The Aboriginal Health Gap” which is one of this country’s worst embarrassments. In 2008 the then Labor government committed to “close the gap”, a phrase which in my view has been overstated. That commitment was to make the health, disease and death statistics, as well as other markers of Aboriginal well-being, match those of other Australians by the year 2030. This is not achievable. Apart from the vast discrepancies that are so entrenched in the lives of most Indigenous Australians, such as poor educational standards, high unemployment, lower per capita incomes, and unsatisfactory housing and access to services, there are many biological factors that contribute to ill-health that have strong components that persist for more than one generation. This means that issues that affect future generations, such as the health and nutrition of pregnant Aboriginal women and breast-feeding mothers, must be corrected before improvements can occur for the following generation or more. This simply cannot be done within 20 or 30 years. Similarly, the heavy chronic disease burden of, for example, diabetes and its long-term complications, chronic kidney disease and kidney failure that are so prevalent in young Aboriginal people, cannot be fully eliminated within one generation.

    Reviewing the official annual reports about progress over the past seven years is a disheartening exercise. Many of the stated targets have not been reached and, in some areas, things have deteriorated despite the immense amounts of public funds which have been used in “close the gap” programs. This was admitted in February 2015 by the Prime Minister when commenting on the seventh annual report; senior Indigenous spokespersons agreed that the findings were very disappointing. What’s gone wrong?

    Looking objectively at the situation it must be admitted that the federal government commitment in 2008 was: (a) well-intentioned; (b) ill-informed; (c) not adequately thought through; (d) bureaucratically top-heavy and clumsy; (e) naïvely optimistic; (f) culturally insensitive; (g) rhetorical rather than realistic; and (h) ignored the biological restrictions imposed by previous generations on altering health outcomes in subsequent generations of children.

    Why shouldn’t the government admit that the commitment made in 2008 was not feasible and start again? A serious problem with a failing program is that many people feel let down, disheartened and frustrated because the expectations are not being realised. This is particularly so for those who have the most to gain or lose – the Indigenous people. This won’t change until a more realistic strategy and timetable are devised, perhaps with a new name.

    Government must accept that approaches used over the past 30 years or so have, with few exceptions, like those already mentioned, not worked. This applies to different levels of service delivery; government, the private sector, and Aboriginal-controlled medical services.

    A fresh approach is needed. To date governments have given little encouragement to Indigenous people to become agents of change for their own health. Community engagement, commitment, and acceptance of responsibility must occur at the local level if real change is to be achieved. This will provide opportunities, previously denied to Indigenous communities and their members, to learn at first-hand: (1) the determinants of health; (2) what causes illness; (3) how diseases can be prevented; and (4) how health service systems operate and can be modified as required. Community involvement in these matters will provide, perhaps for the first time, a new deal with local people being real partners in programs to improve their own health. This will require collaborative teams with long experience in health and health services, community development, cross-cultural knowledge, empathy, patience, and inter-personal skills to work in small groups around Australia. This strategy uses a previously untapped resource, local Indigenous people and communities, to help “close the gap”. Governments will have to commit to radical changes in order to achieve this.

    Meanwhile, all the other social, economic and environmental factors that affect health outcomes will need to be addressed vigorously. Without such changes, for example in education and employment opportunities, the failures of the past will continue.

    Michael Gracey AO MD PhD FRACP FAAP

    Professor Gracey is a paediatrician who has worked with Aboriginal people, families, communities and organisations for more than 40 years. He was Principal Medical Adviser on Aboriginal Health in the West Australian Department of Health and was Australia’s first Professor of Aboriginal Health. He has also served as President of the International Paediatric Association.

  • Mary Chiarella. Luke Foley – Nurse-led clinics and primary health care.

    In 2011 I gave the last Oration for what was originally the NSW College of Nursing in the Great Hall of Sydney University. In it I advocated for nurses to be able to work to full scope of practice, particularly in the area of primary and preventive health care, in order to alleviate demands on our overstretched hospital systems. Given we currently have a significant oversupply of nurses in this country, especially in our new graduate population, this seems like an excellent time to deploy nurses into some of these roles, long overdue in Australia but commonplace in other parts of the world. . The first ever NSW College of Nursing Oration was given on the 15th September 1953 by M.I. Lambie, who was not only the first Orator for the College, but the first woman to give an Oration in the Great Hall of Australia’s oldest university. Miss Lambie was the New Zealand Nursing Adviser to the World Health Organisation (WHO) and Chair of the Expert Nursing Committee of WHO. Let me read to you her introductory words as she talks of the problems in health care in the developed world:

    These facts have caused increasing demands on hospitals; the rapid turnover in surgical beds together with the larger numbers of elderly and chronic patients has forced consideration to be given to the whole problem of hospitalisation by many authorities. The increased use of hospitals means automatically more staff or the better use of existing staff”[1]. 

    Plus ca change, plus la meme chose. She goes on to advocate for the growth in primary health care that is occurring in developing countries “putting more emphasis on the preventive aspect, which in turn will set an example to many of the older countries”. Well sadly not much yet, Miss Lambie, not much yet. I’m afraid the people you were advising didn’t take your excellent advice. Lots of us have been there.

    She goes on to say

    These are examples whereby preventive means, home education and treatment have reduced the demands for hospital beds. In fact it would not have been possible to treat in this mass way in an institution. The education of the home for this kind of treatment means, however, the preparation of a worker to carry out the program. Funnily we speak of this NEW approach to medicine, and yet in her Notes on Nursing, Florence Nightingale speaks of “the need to nurse the home as well as the family[2]. 

    So we come full circle in what is needed for health care in Australia, advocated by Florence Nightingale in the 19th century, advocated by the first NSW College of Nursing Orator, Miss Lambie in the 20th century, and advocated in the 21st century by the (then) Australian Nursing Federation[3]. Let us hope, in the promises of Luke Foley to introduce four nurse-led clinics in NSW should Labor win the next election, that the wise words of our nursing forebears do not have to wait another 62 years before somebody decides to act on them. This is so obvious a solution that one wonders why it is not commonplace, rather than tentative.

    Mary Chiarella is Professor of Nursing, Sydney Nursing School, University of Sydney.

    [1] Lambie IM (1953) First Annual Oration The changing scene in health work throughout the world in The 50th Anniversary Annual Orations Vol I NSW College of Nursing: Sydney, p.9

    [2]  Ibid, p.10

    [3] Australian Nursing Federation (2009) Primary health care in Australia: a nursing and midwifery consensus view ANF: Canberra

  • Jill White. Nurse Led Clinics for NSW.

    Luke Foley – great!

    Congratulations on committing to nurse led clinics as part of to a primary health care strategy to increase access to community based health care. The four nurse led clinics promised last week are a welcome adjunct to the current but often overstretched GP services.

    The ACT has led the way in nurse led clinics with the first, based in an emergency department, being evaluated as providing high quality safe and appropriate care; however where there was also easy access to medical care there was the risk of over-servicing lessening the cost effectiveness.  So with lesson learned the two new ACT services are in underserviced areas and are providing high quality care to a population which otherwise would have had difficulty in quick and affordable access to health care. Information on these services is available through ACT Health. It is a success story, ask the people of Belconnen and Tuggeranong.

    Our current NSW Minister for Health, Jillian Skinner, also has a public track record of commitment to improving community based services. So come on Jillian, match this promise and let’s not let party politics and election posturing get in the way of a really good idea for the health of the public.

    The past few weeks has clearly demonstrated that we are heartily sick of party based oppositional politics and if NSW does not want to risk going down the same path as Queensland or suffering the public disenchantment experienced by the Prime Minister this is the moment and this is the issue to demonstrate that the health of the public is a genuine bipartisan concern and that this is an excellent strategy. Let’s make these clinics a reality irrespective of any election and have a public commitment from both sides of politics NOW.

    I can’t let this topic go however without addressing Saxon Smith’s comment on behalf of the AMA in the SMH yesterday. He is quoted as saying “There is actually evidence suggesting nurse-led clinics can make the quality of the care worse”. What research? Conducted how and where and published in what peer reviewed journal? It is a glib and easy thing to say but where is the evidence? How does it stack up against the 20 years of rigorous, published, Australian based research which clearly demonstrates the safety and quality of the work of Nurse Practitioners?

    It’s always worth reminding ourselves  that the AMA is not only a professional body but it is also the doctor’s union and protecting income and turf is its job. We have 25 years of documented AMA opposition and scare tactics about nurses being able to work to their full scope of practice and making a broader contribution to community health.

    The vast majority of doctors in practice with whom I speak fully support an extension of the role of nurses in primary health care/ community care. They particularly understand the need to provide better access to underserved communities. This is work nurses want to do, are educated to do, and have the skills to do. Luke and Jillian please bring it on, make the commitment and don’t let better healthcare become a political football.

    Jill White was formerly the Dean of the Faculty of Nursing and Midwifery at Sydney University. 

  • John Menadue. Fairness, Opportunity and Security – Filling the policy vacuum

    I sense that there is great public concern that both the government and opposition keep playing the political and personal game at the expense of informed public discussion of important policy issues.

    We have become concerned about the trustworthiness of our political, business and media elite. Insiders and vested interests are undermining the public interest. Money is unduly influencing political decisions. There is gridlock on important issues like climate change and taxation.

    After a near death experience Tony Abbott has said the he is open to new thinking and ways of governing. ‘Good government begins today’  Time will tell. Bill Shorten has said that 2015 will be the year of ideas. I hope so.

    In this blog over the next few months I will be posting a series of articles on important policy issues. I posted a three parter on health policy on January 27, 28 and 29.

    There will be range of contributors.Some  have contributed in the past to this blog

    Each of the policy articles will be about 2000 words. They will not be “pie in the sky’ but realistic, given our political and financial constraints.

    It is planned that these policy articles will be published in a book by ATF Press in October/November this year

    Policy areas to be canvassed

    Economic policy

    Fixing the budget

    Taxation

    Federalism

    Productivity

    Job creation and participation

    Foreign policy

    Security, both military and soft power.

    Health

     Development of our human capital in the fields of education, science, research and development and innovation.

    Transport and infrastructure

    Population/migration/refugees

    Welfare priorities

    Retirement incomes

    Indigenous affairs

    Communications and the Arts

    Environment and climate change

    Inequality

    Role of government including tackling corruption and bad behaviour

    Democratic renewal – the lack of trust in government and the hollowing out of our political parties.

    Terrorism and internal security whilst protecting of our freedoms

     

  • John Attia, John Duggan. Why the government would have us pay more for poorer health.

    The Coalition government has been claiming that Australia’s public health system is unsustainable since the 2014 budget. But its plans for the health system actually reflect the underlying belief that user-pays health systems are better – despite evidence to the contrary.

    Less than a year and a half into the Abbott government’s first term, we’re on our second health minister and the third iteration of some kind of plan to introduce a co-payment for seeing a doctor. Despite widespread and vocal opposition to its plans, the government remains committed to introducing this price signal into the public health system.

    Underpinning this move is the government’s commitment to a user-pays health system. But there’s now a large body of evidence showing such systems not necessarily great for the nation’s health. Here are four common ideas about market-based health systems and why they are not true.

    Myth one: market forces increase efficiency

    The administrative costs of Australia’s public health system are considerably lower than that of the private health insurance sector. So while this cost for Medicare is around 6% per year, the 2012-13 private health insurers’ annual report estimates that 15% to 18% of private health insurance premiums go towards administration.

    Both these figures are similar to those in the United States, the country with the most expensive health-care system in the world. Figures from the OECD estimate that, in 2011, the per capita health cost in the US was US$8,508 (A$10,912) per head or 17.7% of GDP, compared to Australia, where the figure was US$3,800 (A$4,875) per head or 8.9% of GDP.

    But the US figure quoted above is effectively still an underestimate. The premiums for about half the Americans who have health insurance are paid by their employer; they are essentially a business deduction underwritten by the taxpayer.

    The inefficiencies of the market-based system are also apparent when comparing costs for similar conditions. Health insurance industry figures from a 2013 report show the average total reimbursement for a private hospital appendectomy in the United States is A$17,770 (US$13,851), while the cost for the same procedure in Australia is A$5,467.

    Both the former and current Coalition health ministers – Peter Dutton and Sussan Ley – have insisted on introducing a price signal for GP visits. Gary Schafer/Alan Porritt

    Myth two: market forces increase quality

    There’s no lack of evidence showing the market forces operating par excellence in the United States offer inferior health care when compared with public health systems. OECD data comparing mortality rates in member countries between 1980 and 2005, for instance, show only Portugal has had a smaller fall in adult mortality rates than the United States.

    And although it spends the highest proportion of GDP on health internationally, the United States ranks 19th in infant mortality, 43rd in female mortality and 36th for life expectancy.

    This is not to say that US health care cannot be outstanding; it just comes at a price rendering it grossly inequitable. Consider this 2008 study of 121,092 Americans admitted to hospital with bleeding from liver cirrhosis. It found likelihood of death was significantly higher for certain groups.

    By contrast, a 2011 English study of gastric bleeding in 245,438 patients found that, once hospitalised, the risk of bleeding and mortality was independent of social class. So in England, an unemployed street sweeper with gastric bleeding faces a similar risk of death in hospital as a stockbroker. But the stockbroker would have a much better outcome in the United States.

    It’s also important to remember that more care does not necessarily equate to better quality care. The Institute of Medicine recently estimated the excessive annual cost of systemic waste in the US health-care system at US$765 billion. This is almost 30% of total health expenditures.

    Over-servicing is a big problem in private health-care systems, where profits can create a perverse incentive to treat. Indeed, they potentially create a conflict with purely medical reasons for treatment.

    A landmark 1970 analysis (not available online) comparing surgery and surgeons in the United States and in England and Wales showed that the former, with its fee-for-service system, had twice as many surgical procedures as the latter places, both of which have public health systems. A 1973 analysis found a similar doubling of discretionary surgical rates in fee-for-service Canada compared to the United Kingdom.

    Myth three: public health care is unaffordable

    A number of studies indicate that it is actually private health care that’s unaffordable. It’s estimated that almost two million people in the United States declared bankruptcy due to medical bills or conditions in 2013.

    Despite widespread and vocal opposition to its plans, the government remains committed to a price signal for GP visits.NEWZULU/PETER BOYLE

    That makes health care one of the biggest issues affecting bankruptcy in that country. Worse still, the majority of these bankruptcies were expected to affect people in the prime of their working lives, between the ages of 35 and 55.

    Worse still, the problem may be snowballing: a 2009 study found medical reasons for bankruptcies had increased from 46.2% in 2001 to 69.1% in 2007. Most medical debtors were well educated, owned homes and had middle-class occupations, and 75% had health insurance.

    Despite the Coalition government’s warnings to the contrary, health-care costs are not spiralling out of control. According to an Australian Institute of Health and Welfare report on health spending for 2012-13, growth in health expenditure was the lowest since the mid-1980s.

    In fact, the average health expenditure per person fell from A$6,447 in 2011-12 to A$6,430 in 2012-13. This puts Australia’s health spending as a proportion of gross domestic product at 9.4% in 2012, just above the OECD average of 9.2% – and much lower than the cost of the US market-based system.

    Myth four: price signals work

    Indeed, the government’s commitment to price signals is itself rather problematic. Price signals temper consumption by making people consider whether what they are about to buy is worth the cost. This makes them ill-fitted to the health-care sector, which is not an optional commodity subject to the same thinking that influences decisions to buy a television or a pizza.

    The latest evidence about co-payments comes from the introduction of the 2005 Deficit Reduction Act in the United States, which allowed states to introduce emergency department co-payments for non-urgent visits. A very recently published analysis of figures from eight states that charged a co-payment and ten states that didn’t showed no difference in annual number of emergency department admissions, visits, or inpatient days.

    Evidence to date is overwhelmingly against the privatisation of medicine. By pulling together in a public system, citizens get better value and the government gets better outcomes.

    Along with education, health is a basic pillar of a just society. It represents government investment in the country’s social capital – its people. Failing to provide these adequately and equitably will reduce Australia’s productivity, competitiveness and, in the end, the sense of social cohesion that comes from equal access and equal opportunity.

    John Attia is Professor of Medicine and Clinical Epidemiology at University of Newcastle.  John Duggan is Conjoint Professor at University of Newcastle. This article first appeared in The Conversation, 5 February 2015.

  • John Dwyer. Health Policy Reform Commentary – Part 2

    In the first part of my commentary on John Menadue’s Health Policy Reform in his blog, I discussed  the barriers frustrating any reform agenda. In this second part I will comment on John Menadue’s suggestions for “overcoming these obstacles to health reform” and provide my own thoughts on what a reformed health system might look like.

     

    In his blog he commented that “seldom do we stand back and ask the central issue: what do we need and expect from a health system”? For some years now I have presented the following answer to that question to professional and community audiences. We need, deserve and can afford a health system that—-

    Is focused on the needs of the individual, is resourced to maximise opportunities for avoiding illness (prevention), is demonstrably equitable, sustainable and provides evidence based quality care in a timely manner available on the basis of need not personal financial wellbeing”.

    A few years ago, thanks to an initiative of the Division of Primary Care at the University of Queensland, I had the opportunity to take part in a series of town meetings around Australia where we discussed what citizens wanted from their Health Care system. We dissected the elements of the above definition and each of the elements therein was readily appreciated and endorsed. The concept of a “medical home”, (recently discussed in Pearls and Irritations) as provided by an Integrated Primary Care model was often greeted with a “Why didn’t we introduce that ten years ago” question. I was interested in the acceptance by audiences that we may need to pay more for a better health system and the willingness to do so.

    I discussed the above definition and its ramification at a national meeting of the Australian Health Care Reform Alliance to which we had invited Tony Abbott, health minister at the time. He told us that he did not like to hear talk of “reform” when we already had the best health system in the world that only needed “a little tinkering at the margins”. I was reminded of this when reading John Menadue’s comment that reform “will be hard without political leadership and political will”. There are none so “non-reformist” as those who insist there is nothing to reform.

    What reforms would provide us with the health system we need and how do we overcome the political inertia? A single funder of our national health scheme remains the “Holy Grail” for most reform commentators. As John Menadue highlights the jurisdictional division of health care such that hospitals are the responsibility of the States while our Federal government funds Primary Care(GP’s and others) is the single largest barrier to both integrated and cost effective (sustainable) care. We are the only OECD country so burdened. Perhaps Federal and State governments think that the cost shifting and “blame game” that follows is politically attractive as the public may be unsure who is responsible for problems. No one is asking the Commonwealth to be the sole provider of health care. Rather we are suggesting that the Federal government fund providers that will, implement the health care model Australians and their government have agreed upon. However while we must not abandon the goal, the current reality is that neither major political party is interested in the single funder model.

    Looking at our needed reforms and learning from the experience of other countries that have modernised their health systems it is not difficult to provide a map for a reform journey.  As is true for any journey one must have a definite destination in mind. The journey may have its trials and tribulations but the destination is set. Our destination (the Health Care system we need and can afford) must be determined by in depth discussions with Australians about the need for change. Readily understood models must be put forward for analysis of their benefits as well as the associated ramifications. This is particularly important if more public expenditure is required to fund the new model.

    Apart from the old-fashioned “Town Hall” style meeting referred to earlier, there are numerous opportunities for providing information to and receiving feedback from the community.  I was most impressed with the quality of the discussions provided by “citizens juries” moderated by the much-missed Gavin Mooney.  All media outlets including social media would be utilised. I agree with John Menadue that the process of consultation and the formulation of the desired model and the elements it contains (our destination) should be overseen by a Health Reform Commission populated by independent professionals and community representatives so that it is demonstrably apolitical. The model must be “efficient and equitable”, efficient in that it provides the clinical outcomes desired in a cost effective manner and equitable in that its benefits are available to all Australians.

    While the longest journey starts with the first step, in this case it is the very first step that is likely to be most difficult. That first step requires us to break through the barrier of political intransigence.  International experience and a study of what I believe we need to do in Australia suggest that our journey will take about a decade to achieve the desired transformation. As John Menadue suggests it cannot be rushed. And there immediately is a political problem as increasingly short-term governments are disinterested in projects without imminent political kudos.

    However if we are ever to achieve political support for reforms we must be able to present a clear vision of what we want. Perhaps the most frustrating part of the present Government’s attacks on primary are is that it is devoid of any vision for improving outcomes and cost effectiveness.

    What follows is a summary of the initiatives and organisation we might see if the community and government were to want our health system to have the characteristics I described above.

    The Health Reform Commission would hand over reform implementation to a new statutory body; say the Australian Health Authority (AHA) and certainly not the Department of Health and Aging. This organisation must take us to our destination. It holds all the health care funds expended by the Commonwealth and States. It replaces nine departments of health. It mangers a series of necessarily central bureaucratic processes, such as the PBS, public health policy and interactions with numerous agencies in order to support the social determinants needed for a healthy community. It establishes a series of Regional Health Authorities (RHAs) dividing Australia into logical and manageable demographic clusters and provides each with funds based on a resource distribution formula that is responsive to local need and not just population numbers.  In this way the current problems created by State boundaries being artificial health boundaries are overcome.

    RHAs would seek providers for Hospital, Community and Primary Care services. The States may well seek funds to continue to manage their hospitals but the role delineation for such hospitals would be negotiated with the RHA. A number of Primary Health Care organisations will be funded in a region. (The current model of having a small number of PHOs replacing Medicare locals and responsible for improving care over huge areas but not actually offering direct care is fatally flawed}.

    Within RHAs Primary Health Organisations would act as hubs in a hub and spoke model directly offering primary and secondary services (In New Zealand they may run 23 hour wards and treat minor emergencies). PHO’s would offer a range of supportive services to affiliated primary care practices. These would include help via bulk purchasing, continue professional development, drug education, and IT management and, crucially, help with required data collection to document health outcomes.

    The preferred model of primary care supported by RHAs would feature the “medical home” model of Integrated Primary Care wherein funding is available to support teams of health professionals (including dentists and dental hygienists) working in the one practice to help enrolled patients with prevention strategies and early diagnosis and management of health problems that could result in chronic illness. In house teams would manage chronic and complex disease and care in the community for many currently sent to hospitals.

    In this model “Fee for Service” (FFS) payments would only be applied to “drop ins’ with short term self-limited problems. (John Menadue  accurately pointed out the perverse incentives attached with FFS payments and certainly young doctors contemplating a career as a GP are turned off by the thought of practicing “turnstile” medicine. (Some movement within the AMA to support a move away from FFS heartens me). Chronic disease management is covered by capitation funding with a bonus system for better health outcomes. A consumer controlled electronic health record facilitates integration of the care offered by all providers and hospitals.

    Best practice management in community and hospital settings is facilitated by the availability of standardised evidence based clinical pathways for a given problem These would be generated by “craft groups”, specialist doctors, nurses and allied health professionals working in a given field who “think globally for action locally”. Professors Kerry Goulston, Graeme Stewart and I set up such a process with excellent outcomes in NSW. The methodology is now applied more broadly by the Agency for Clinical Innovation. This provides a major weapon in the effort to reduce expensive investigations and procedures of little clinical value described in the first part of my commentary.

    In the light of these new directions medical education has to change and inter-professional learning curricula are necessary to prepare the next generation of health professionals for “Team Medicine”. Rural based medical schools with postgraduate specialist training available in rural settings is  necessary to solve the shortage of medical practitioners in rural Australia.

    John Menadue’s forecast that 15 billion dollars could be saved by health system reform is too modest. The above “imaginario” if implemented would save much more. Overseas experience suggests that we could expect a 30-40% reduction in hospital admissions over 10 years. Just before Christmas the UK government received a commissioned report indicating that by spending an extra 72 million pounds on improving primary care the health system would save 1.9 billion pounds by 2020.  By spending more on Medicare (now a specific health care program not a doctor’s bill payer) to implement these changes we could save many billions, as hospital care is so expensive. It is quite possible that the elimination of inefficient health spending as outlined in part one of this commentary could fund the changes.

    Lessons learnt from change management strategies in other health systems tell us that reform must be community supported and feature “bottom up” modelling. Clinicians would not be forced to adopt change with early implementation of the desired model involving a “coalition of the willing”. The latter should participate in establishing government funded “proof of concept” primary care services as described. How one laments that fact that the Super GP clinic money provided by the previous government could have readily funded a series of “medical homes”.

    For two decades John Menadue has championed the idea of a “proof of concept” demonstration of the value of whole of health care integration by creating a State/Commonwealth Health Commission in Tasmania to begin with,  wherein pooled funding would allow many of the above concepts to be trialled. Of course I would strongly support such an initiative for although, if successful, its importation to the mainland would leave us with many problems that could be solved by the re-alignment of health boundaries, patient focused integration and cost effectiveness would certainly be improved.

    I suspect that the Abbott government wants to reduce, as much as possible, its health footprint and would be happy to see health care handed over to the private sector. In every country where this has happened health expenditure has increased but not satisfactory health outcomes. The government’s initiation of a review of the benefits or otherwise of federalism may lead to a discussion of the possible assumption by States of all the public health care offered to their citizens. Any discussion that moves us away from the “status quo” is welcome. John Menadue’s three health policy reform blogs are informed and provocative and I hope will revitalise the reform debate.

    Medibank/Medicare was launched 40 years ago. It was designed to fund the health delivery system at that time.  We need now to address the basic issues concerning the way health services are delivered.

    I am grateful for the opportunity to add my comments.

    John Dwyer is Emeritus Professor of Medicine at UNSW.

     

     

     

     

     

     

     

  • John Dwyer. Commentary on John Menadue’s blogs on the barriers to health policy reform in Australia.  (Part 1)

    As I suspected  would be the case with many readers who enjoy “Pearls and Irritations”, I experienced in equal measure, satisfaction and frustration as I absorbed John  Menadue’s informed and insightful analysis of the problems that beset our health system and prevent urgently needed structural reforms. His three essays accurately explore the major issues. He has experienced political power and politician’s motivations from the inside. Fortunately, his passion for good government has, for two decades or more, been particularly interested in improving our health system. Here too, importantly, he has had first hand experience of how the system works (and doesn’t work). His recent survey provides us with a very valuable document, as it is, in fact, a template on which we must build a reform agenda.

    What about my feeling of frustration engendered by these essays?  While comprehensively exposed and explained, few of John Menadue’s conclusions are controversial among would be health system reformers who have first hand knowledge of the issues and who are studying the results of health system reforms in other countries. As he highlights, we have benefitted from political leadership willing to embrace major reforms to our financial systems but both sides of politics in Australia have failed us leaving health reform in the “too hard basket”. I remember a conversation with health minister Roxon on the need to introduce Integrated Primary Care into Australia.  She appreciated the benefits but as such a reform would increase Medicare expenditure she told me, “like many good ideas this will just have to lie on the table till the time is right”. The time was right 15 years ago.

    The comments that follow presume that readers will have read John Menadue’s important analysis. In this first part I will address some of the issues he presented and in a second part expand on the strategies need to progress reforms and what those reforms should embrace.

     

    As highlighted, the power of vested interests to urge lay politicians, who don’t understand our complex health system anyway, to hold to the “status quo” is frustrating. Recently “Australian Doctor” asked doctors (mainly GP readership) who was the least competent of the last ten health ministers. Peter Dutton won in a landslide but I feel this was a measure of current frustration rather than an historical analysis of the question.  I would have voted for Kay Patterson. As the new century started health reform advocates were active and the then minister for health in NSW, Craig Knowles, listened and accepted our argument that the next round of negotiations re commonwealth funding of state public hospitals should include a reform agenda not just a dollar agenda. The States and Commonwealth agreed and 13 sub committees were established to prepare structural reform agendas on everything from indigenous health to the funding of prevention strategies. After months of work and legitimate expectations that we were entering a new era for health reform, Minister Patterson pulled the plug on the reform agendas and reduced the COAG negotiations back to dollars. Had those reforms and the methodology for creating those reforms been accepted we would have a far better health system today. As John Menadue has highlighted here was another example of vested interests derailing a most important initiative.

    John Menadue emphasised the importance of every Australian having access to Medicare funded Primary Care with ability to pay being irrelevant to the quality of the service received.  Rightly, he warns us of the possibility of Primary Care becoming a two-tiered service with better access and facilities being available to those with private insurance. Such an arrangement has destroyed equity in the US system and dramatically pushed up costs. The Abbott government does not seem to understand that inequity is not only “unaustralian” it’s also very expensive. In 1900 the average Australian died aged 56. Many deaths were attributable to unavoidable and untreatable conditions particularly those caused by infectious organisms. The great flu pandemics did not discriminate between rich and poor. Today we can avoid most of those causes of early death and we live remarkably longer. Disease patterns today focus on dangerous life-style choices that lead to the development of Chronic and Complex problems which kill us slowly and for too many rob their extended years of life of quality. With the exception of poor health caused by excessive alcohol consumption all the risk factors for chronic disease are more prevalent among socio-economically disadvantaged Australians. We only spend 2% of our health budget on trying to help people avoid lifestyle induced illness and so we all end up paying much for the care of our fellow Australians with advanced disease.

    We need new money to fund important structural reforms so it’s appropriate that John Menadue looks at dollars we use poorly in our current system. He correctly targets the lack of leadership that has us paying far more for drugs than other similar countries. The duplication of health bureaucracies (nine departments of health for 23 million people) cost us 3-4 billion dollars annually, while the estimated 600,000 admissions to public hospitals that could have been avoided if the infrastructure for management in the community was available would save us at least 15 billion dollars. Over servicing by my profession when performing non-evidence based investigations and procedures of low value is estimated to cost 20 billion dollars a year. And then there is the Private Health Insurance Rebate that John Menadue discusses in detail.

    With some means testing now the rebate probably will cost taxpayers this year closer to 5 billion dollars rather than 7 billion but there is no doubt that the amount of health available from this initiative is not worth the price. While the Insurance industry and government disagree two facts are indisputable. The first is that the rebate has not been responsible for a significant number of Australians taking up private health insurance. After the introduction of the rebate, health insurance rose by no more than2%. The stick that did increase coverage was the whole of life rating system and tax accountants telling clients they would pay more tax if they did not sign up. The second fact is that the rebate and indeed the increased uptake of PHI did not reduce pressure on public hospitals. As John Menadue rightly points out increased activity in Private Hospitals where 75% of the patients have surgical problems, has seen a loss of surgical capacity in public hospitals greatly increasing the ability of surgeons to charge more while public hospitals are swamped with chronically ill medical patients and not able to offer as much timely surgery as they would wish.

    An obvious but important point emphasised by John Menadue reminded us that the PHI rebate and the pressure to hold PHI is vey unfair to many rural based Australians for there are no private hospitals available in the majority of rural communities. In truth many health inequities are entrenched in rural Australia. The 35% of Australians who live in the country and supply 66% of the nations wealth have far poorer health outcomes than their city cousins. White Australians living in rural communities are likely to live 4 years less than average city dwellers. From depression to heart disease to infant mortality to cancer, outcomes are inferior in rural Australia. This gross inequity is not being addressed despite numerous enquiries highlighting the changes needed to reverse the situation.  (e.g. reducing dependence on overseas trained doctors by training more rural based students in medical schools established in a rural setting and (as John Menadue emphasised) far better use of the existing non medical workforce, and numerous other evidence based strategies.) How frustrating for country citizens that the National party promised major rural reforms if the coalition won the last election when, in reality, they have had no power to influence rural health initiatives.

    Talking of the better use of the non-medical workforce brings me to one point where I would place a caveat beside one of John Menadue’s recommendations. Pharmacists are men and women trained at university to understand scientific methods and appreciate the importance of evidence based Medicine. Indeed their professional charter demands they only offer medicines know to be clinically effective to their clients. Certainly they should be integrated into our Primary Care system. However there is a professional (commercial) cancer eating away at their integrity as they offer so many products that have no real value to customers. Their prescription services are usually assigned to the back of a shop in which 80% of the space is provided to offering health products that are no doubt lucrative but of little value. Recently calls for Pharmacists to rid their shelves of Homeopathic products following the NH&MRC report emphasising they can have no more than a placebo effect, have been rejected. Pharmacists should be telling clients that the 2 billion dollars spent each year on supplements and vitamins is largely a waste of money and that you can’t neutralise an unhealthy lifestyle with something from a bottle.

    In many countries any clinical observations made and the drugs supplied to an individual are entered into the persons electronic health record in real time. John Menadue criticises the Department of Health for failing to roll out an electronic health record for Australians, an initiative he describes as a minor reform.  In fact an electronic health record is a much-desired major reform and can be the lynchpin for much needed integration of patient focused care. Many countries are now reporting on a decade of experience with an electronic health record and the improvement in care made possible by this initiative and clinician and patient satisfaction with the system are most impressive. Kaiser-Permanente in the US is reporting that in the last decade it has turned two million face to face consultations into email consults. The organisation’s initiatives, which include major prevention strategies delivered via an Integrated Primary Care system, have seen it have the best health outcome results nationally in 10 of the 12 major indicators used to measure success in treating chronic diseases.

    So summarising John Menadue’s concerns, we have a health system that by international standards is not meeting our contemporary needs, is provider, disease, and hospital centric, held hostage by vested interested that dissuade governments from embracing structural reform, is very cost ineffective, does not focus on efficiency and equity while Medicare, which though in need of reform remains invaluable to Australians, is at risk.  In the second section of this commentary I will comment and expand on John Menadue’s suggestions for breaking the impasse and providing a structure on which we might be able implement needed change.

     

    John Dwyer is Emeritus Professor of Medicine at UNSW.

     

  • John Menadue – 30th anniversary of Medicare

    John Menadue – 30th anniversary of Medicare

    This article was initially posted on 1st February last year, the 30th anniversary of Medicare. (more…)

  • John Menadue. Health Part 2 – what can we learn from overseas health services?

    Part 2 in this series was originally posted in August last year.

    In my blog of 6th October on what we can learn from overseas health systems, I drew attention and warned against government subsidised private health insurance. Any growth in this industry spells trouble for a good health service.

    Another thing that we could learn from overseas experience is that our fee for service (FFS) for GP consultation results in higher costs and inferior treatment. There are many disadvantages in FFS.

    • It drives up costs
    • It encourages ‘turnstile medicine’ whereby the GP earns more money the more patients he or she treats. It is sometimes called ‘ten minute medicine’. Follow up appointments are encouraged.
    • FFS leads to overprovision of care through over servicing. In Australia for example we see our doctor much more than patients in the UK or NZ where FFS is not practised at all or is being wound back.
    • For many patients with chronic or multiple health problems, FFS is inappropriate.
    • FFS is paid to the general practitioner in such a way that it discourages ‘team medicine’ and the use of other health professionals, particularly practice nurses, nurse practitioners and many other allied health persons, such as dieticians and physiotherapists.

    Many countries have moved away from FFS in favour of paying GPs, at least in part, on a capitation basis. Patients are enrolled in a practice and the GP is paid for ‘looking after them’. FFS may be appropriate for occasional care but it is not appropriate for long-term care of chronic patients.

    Capitation arrangements are widespread in NZ particularly for those with chronic healthcare problems. For 100 years capitation has been the principal means of paying GPs in the UK. In ‘managed care’ in the US capitation is widely used.

    A capitation scheme in Australia could not be introduced overnight but we need to scale back FFS to improve the quality of care and to discourage over-servicing and over prescribing. FFS is a perverse incentive. It rewards doctors when patients are sick. Doctors should be paid to keep people healthy.

    Another matter that we could learn from overseas is that we must find ways to overcome the split between commonwealth and state responsibilities in health. Broadly, the commonwealth funds general practice in the community and the states run public hospitals.

    This division of responsibility between hospital and non-hospital care is a major barrier to integrated and effective health care. Successful countries in health care, again like the Nordics and the UK, don’t have this split responsibility. They all have unitary systems with delegated health delivered  to local levels within a defined national policy.

    A major objective of any health service should be to keep people out of hospital. Hospital care is intrinsically more expensive and much more traumatic for patients. In his blog on August 20      Professor John Dwyer pointed out that if we had had a more effective integration of hospital and non-hospital care, we could have avoided 600,000 hospital admissions if there had been appropriate general practice care in the three weeks before hospital admission. That would be a very large saving.

    A good health service must have a strong grounding in primary care and general practice. This is one reason why the UK system is so good. In the UK they understand better than we do that hospitals should be the last and not the first resort.  Unfortunately government ministers put priority into iconic hospitals rather than primary care. We spent for too much in hospitals and not enough in primary care

    Primary and GP care provides the cheapest and best quality care and it can keep hundreds and thousands of people out of hospital. And when we have a good linkage between hospital and non hospital care, patients discharged from hospital can be effectively supported again by their local doctor.

    But because of our federal system the integration of hospital and non-hospital care is difficult. In my blog of June 3, 2014 I outlined a way to address this issue through a single funder in each state. This is fundamentally a political problem which causes difficulties in the health sector. Unfortunately commonwealth and state health ministers and their health bureaucracies seem more concerned about health territory rather than a health system that best serves our needs. The ‘blame game’  in health is unresolved.

     

  • John Menadue. Health Part 1 – what can we learn from overseas health systems?

    This article was initially posted in June last year.

    There has recently been quite a number of articles, including in The Conversation, about what we can learn from overseas health systems.

    Before looking at these international comparisons, it is worth reminding ourselves that we do have a pretty good health service in Australia. It is not as good as it should be, but Medicare has stood the test of time since 1974. It costs less than the average of all OECD countries, as a percentage of GDP. Nevertheless there are some things that we can learn from overseas experience that should guide us.

    In my view the most important thing we can learn from overseas experience is to be extremely wary of corporate welfare to the private health insurance industry. If it is allowed to grow in Australia through government subsidies it will represent a major challenge to an efficient and universal system of health care. The taxpayer subsidy to the private health insurance industry in Australia is about $5b billion per annum. That subsidy is about three times the annual subsidy which we used to pay to our automobile industry. Private health insurance is an expensive financial intermediary that does not deliver any health services.

    The evidence around the world is clear that private health insurance is both extremely costly and very unfair. At one end of the spectrum is the US which has one of the worst health systems in the world in terms of equity and value for money. It is horrendously expensive. That is due largely to the fact that the funding of so much of health care in the US depends on private health insurance.

    Americans pay about 8% of their GDP in private health insurance premiums. These premiums are really private taxes. If these premiums could be transferred to the federal government, the US would have a better health service through a single funder and it would also eliminate in one swoop the US federal deficit. See my joint blog with Ian McAuley of December 26, 2013.  The scale of these private health premiums in the US gives some idea of the cost and the political power that private health insurance brings to bear. Experience in the US shows that a multitude of private health insurers cannot control costs and they weaken the power of the public funder to do so as well.  President Obama may have expanded coverage of health care but reliance on private health insurance instead of a strong public payer, or price control, means that he will not be able to control costs.

    At the other extreme in private health insurance is the UK and the Nordics who all have strong public funders and health service and with little or no reliance on private health insurance. The result is that these countries have amongst the best health services in the world.

    The growth of private health insurance in Australia is the greatest risk we face in health… This threat should not be underestimated. The $5 billion p.a. subsidy should be abolished and transferred to a Medicare Dental scheme. This would shore up Medicare as a strong public funder for the future and expand the coverage of Medicare.

    But the signs are that the Coalition Government wants to go in the opposite direction and extend private health insurance. We know from experience in this country that the administrative cost of private health insurance are three times higher than Medicare, that private health insurance favours the wealth and , that private health insurance particularly through gap insurance  makes it more difficult for Medicare to control costs because of such policies as gap insurance. Furthermore private health insurance has not taken pressure off private hospitals.

    Private health insurance enables the wealthy to jump the hospital queue ahead of other people. The private health insurance industry is now trialling in Queensland, and is lobbying to extend its role into general practice. An inevitable outcome of that would be that privately insured patients would be able to jump the queue in seeing their general practitioner.  But there is more from these destructive private health insurers. Despite the denial by the CEO of Medibank Pte, George Savvides, the AMA insists that Savvides told an AMA dinner in March this year that he would like to see private health insurance policy holders receiving priority in admission and treatment in emergency departments of public hospitals.

    International warnings are clear. Private health insurance is a real threat to an efficient and equitable health service. Maintaining Medicare as a single funder of health services in a critical issue.

    Whether health services are delivered by the private sector or the public sector is a secondary issue. For example in Australia at the moment private medical services are overwhelmingly delivered by private doctors even though Medicare is a public funder. Health services should be delivered by people and organisations that can ensure quality and best value for money. But a single public funder is essential in my view.

    The private health insurance lobby in Australia is unremitting. It never convincingly argues its case. It relies heavily on secret lobbying. Before the 2007 election the industry made a secret deal with Kevin Rudd that a Labor Government would maintain the government subsidy for private health insurance.

    If people want to waste their money on private health insurance that is their choice. But it is extremely bad public policy for taxpayers to subsidise this pernicious industry. Warren Buffet described private health insurance as the tapeworm in the American health service.

    It is the same problem in Australia and we must resist any growth in taxpayer subsidised private health insurance that would take us closer to an American style disaster.  The corporate privileges for the inefficient and dangerous private health insurance sector must be rolled back.

    That is the most important lesson to learn from looking at overseas health services.

  • US Government unveils goal to move Medicare away from fee-for-service.

    On 27/28 and 29 January 2015 I posted three articles on Health Policy Reform. One issue I discussed was the major problem of fee-for-service (FFS) as a means of remunerating doctors. Such a scheme remunerates quantity rather than quality of service.

    On 26 January, the US Health and Human Services (HHS) Secretary, Sylvia M. Burwell, outlined a major change in the way that doctors and hospitals will be remunerated in future. She said ‘HHS has set a goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternate payment models.  … Today’s announcement would continue the shift towards paying providers for what works, whether it is something as complex as preventing or treating disease, or something as straight-forward as making sure a patient has time to ask questions’.

    See statement by Sylvia M. Burwell below. Australia is increasingly out of touch as we cling to fee-for-service style payments. We are lagging behind most developed countries with FFS and even the US which has the most expensive and inefficient health services in the world.

    Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value

    In a meeting with nearly two dozen leaders representing consumers, insurers, providers, and business leaders, Health and Human Services Secretary Sylvia M. Burwell today announced measurable goals and a timeline to move the Medicare program, and the health care system at large, toward paying providers based on the quality, rather than the quantity of care they give patients.

    HHS has set a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018.  HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.  This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments.

    To make these goals scalable beyond Medicare, Secretary Burwell also announced the creation of a Health Care Payment Learning and Action Network.  Through the Learning and Action Network, HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs.  HHS will intensify its work with states and private payers to support adoption of alternative payments models through their own aligned work, sometimes even exceeding the goals set for Medicare.  The Network will hold its first meeting in March 2015, and more details will be announced in the near future.

    “Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a health care system that delivers better care, spends health care dollars more wisely and results in healthier people.  Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely,” Secretary Burwell said. “We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.”

    “We’re all partners in this effort focused on a shared goal. Ultimately, this is about improving the health of each person by making the best use of our resources for patient good. We’re on board, and we’re committed to changing how we pay for and deliver care to achieve better health,” Douglas E. Henley, M.D., executive vice president and chief executive officer of the American Academy of Family Physicians said.

    “Advancing a patient-centered health system requires a fundamental transformation in how we pay for and deliver care. Today’s announcement by Secretary Burwell is a major step forward in achieving that goal,” AHIP President and CEO Karen Ignagni said. “Health plans have been on the forefront of implementing payment reforms in Medicare Advantage, Medicaid Managed Care, and in the commercial marketplace. We are excited to bring these experiences and innovations to this new collaboration.”

    “Employers are increasingly taking steps to support the transition from payment based on volume to models of delivery and payment that promote value,” said Janet Marchibroda, Health Innovation Director and Executive Director of the CEO Council on Health and Innovation at the Bipartisan Policy Center. “There is considerable bipartisan support for moving away from fee for service toward alternative payment models that reward value, improve outcomes, and reduce costs. This transition requires action not only by the private sector, but also the public sector, which is why today’s announcement is significant.”

    “Today’s announcement will be remembered as a pivotal and transformative moment in making our health care system more patient- and family-centered,” said Debra L. Ness, president of the National Partnership for Women & Families. “This kind of payment reform will drive fundamental changes in how care is delivered, making the health care system more responsive to those it serves and improving care coordination and communication among patients, families and providers. It will give patients and families the information, tools and supports they need to make better decisions, use their health care dollars wisely, and improve health outcomes.”

    The Affordable Care Act created a number of new payment models that move the needle even further toward rewarding quality.  These models include ACOs, primary care medical homes, and new models of bundling payments for episodes of care.  In these alternative payment models, health care providers are accountable for the quality and cost of the care they deliver to patients. Providers have a financial incentive to coordinate care for their patients – who are therefore less likely to have duplicative or unnecessary x-rays, screenings and tests.  An ACO, for example, is a group of doctors, hospitals and health care providers that work together to provide higher-quality coordinated care to their patients, while helping to slow health care cost growth. In addition, through the widespread use of health information technology, the health care data needed to track these efforts is now available.

    Many health care providers today receive a payment for each individual service, such as a physician visit, surgery, or blood test, and it does not matter whether these services help – or harm – the patient. In other words, providers are paid based on the volume of care, rather than the value of care provided to patients. Today’s announcement would continue the shift toward paying providers for what works – whether it is something as complex as preventing or treating disease, or something as straightforward as making sure a patient has time to ask questions.

    In 2011, Medicare made almost no payments to providers through alternative payment models, but today such payments represent approximately 20 percent of Medicare payments. The goals announced today represent a 50 percent increase by 2016. To put this in perspective, in 2014, Medicare fee-for-service payments were $362 billion.

    HHS has already seen promising results on cost savings with alternative payment models, with combined total program savings of $417 million to Medicare due to existing ACO programs – HHS expects these models to continue the unprecedented slowdown in health care spending.  Moreover, initiatives like the Partnership for Patients, ACOs, Quality Improvement Organizations, and others have helped reduce hospital readmissions in Medicare by nearly eight percent– translating into 150,000 fewer readmissions between January 2012 and December 2013 – and quality improvements have resulted in saving 50,000 lives and $12 billion in health spending from 2010 to 2013, according to preliminary estimates.

    To read a new Perspectives piece in the New England Journal of Medicine from Secretary Burwell:http://www.nejm.org/doi/full/10.1056/NEJMp1500445

    To read more about why this matters: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-2.html

    To read a fact sheet about the goals and Learning and Action Network:http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html

    To learn more about Better Care, Smarter Spending, and Healthier People:http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26.html

    Participants in today’s meeting include:

    • Kevin Cammarata, Executive Director, Benefits, Verizon
    • Christine Cassel, President and Chief Executive Officer, National Quality Forum
    • Tony Clapsis, Vice President, Caesars Entertainment Corporation
    • Jack Cochran, Executive Director, The Permanente Federation
    • Justine Handelman, Vice President Legislative and Regulatory Policy, Blue Cross Blue Shield Association
    • Pamela French, Vice President, Compensation and Benefits, The Boeing Company
    • Richard J. Gilfillan, President and CEO, Trinity Health
    • Douglas E. Henley, Executive Vice President and Chief Executive Officer, American Academy of Family Physicians
    • Karen Ignagni, President and Chief Executive Officer, America’s Health Insurance Plans
    • Jo Ann Jenkins, Chief Executive Officer, AARP
    • Mary  Langowski, Executive Vice President for Strategy, Policy, & Market Development, CVS Health
    • Stephen J. LeBlanc, Executive Vice President, Strategy and Network Relations, Dartmouth-Hitchcock
    • Janet M. Marchibroda, Executive Director, CEO Council on Health and Innovation, Bipartisan Policy Center
    • Patricia A. Maryland, President, Healthcare Operations and Chief Operating Officer, Ascension Health
    • Richard Migliori, Executive Vice President, Medical Affairs and Chief Medical Officer, UnitedHealth Group
    • Elizabeth Mitchell, President and Chief Executive Officer, Network for Regional Healthcare Improvement
    • Debra L. Ness, President, National Partnership for Women & Families
    • Samuel R. Nussbaum, Executive Vice President, Clinical Health Policy and Chief Medical Officer, Anthem, Inc.
    • Stephen Ondra, Senior Vice President and Chief Medical Officer, Health Care Service Corporation
    • Andrew D. Racine, Senior Vice President and Chief Medical Officer, Montefiore Medical Center
    • Jaewon Ryu, Segment Vice President and President of Integrated Care Delivery, Humana Inc.
    • Fran S. Soistman, Executive Vice President, Government Services, Aetna Inc.
    • Maureen Swick, Representative, American Hospital Association
    • Robert M. Wah, President, American Medical Association
  • John Menadue. Health Policy Reform: Part 3 – Principles for reform

    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.

  • John Menadue. Health Policy Reform: Part 2 – Why reform is difficult. Health ministers are in office but not in power.

    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.