Category: Health

  • John Menadue. Cutting waste and costs in health.

    Last night on lateline, the Minister for Health Peter Dutton called for a public debate on health reform. I therefore have taken the liberty of reposting a blog of February 3 on ‘Cutting waste and costs in health’.

    The Minister for Health, Peter Dutton, has said that we must reduce waste and reduce costs in health. I agree. In 2011/12 total health expenditure in Australia was $140b up from $83b in 2001/2. Costs are rising rapidly, partly due to population increase.

    In a paper in July 2007 I estimated that there was at least $10 billion in possible savings and productivity improvements in health. That represented about 10% of our total health costs in that year. I have spoken and written extensively on the matter. See my web site.

    It is important however that as we work to reduce waste and costs we do it in a way that is fair to all and does not prejudice quality care.

    But to reduce waste and costs requires political will to stare down the powerful interests and rent seekers that are determined to protect their territory and their high costs –e.g.  the AMA, the Private Health Insurance firms, the Pharmacy Guild of Australia and Medicines Australia. In the past no governments has been game to tackle these vested interests.

    The lack of accountability in health

    Despite the rapid increases in costs and escalating demand in the healthcare industry, there is no accountability in any meaningful way for what the health industry produces. Doctors are accountable for malpractice but not for their overall performance particularly in general practise. This is despite the fact that taxpayers pay 80% of doctors’ incomes. Taxpayers have a legitimate reason to ask – ‘Are we getting value for money?’  In a survey a couple of years ago by the Health Council of Canada, 97% of over 1,800 senior respondents said that healthcare providers should be required by law to reach certain service benchmarks in such areas as patient outcomes , the use of preventive strategies like screening and waiting times.

    The Council also asked the group ‘Do you believe healthcare in Canada will improve if the government spends more money on healthcare?’  58% said ‘no’. There is the same lack of accountability in Australia.

    Managing the demand for health services

    The demand for health services is increasing rapidly across all age groups and not just among the old. We are over-diagnosed and over-treated. In 1984-85, medical services per head were 7.1 per annum. In 2007-08 they were 13.1 per annum – about double. The trend continues. We need to address this over servicing particularly by GPs and specialists such as pathologists and radiologists.

    • We must accept that we cannot have all that we want in health and that governments, in consultation with the community, have to set priorities. Can we afford continuing existing levels of funding for IVF and end-of-life treatments at the expense of funding for mental health and indigenous health?
    • We need to rationalise our co-payments to make them efficient and equitable. We all should take more responsibility for the way we use health services, particularly as we are now much wealthier than we were 30 years ago when Medicare was introduced. A universal health scheme does not have to be free. But it must be fair and efficient. But co-payments are a dog’s breakfast! We pay about 18% of health costs out of our own pockets, but there is very little rhyme or reason in how this is done. The $6 GP levy would make the confused situation worse.
    • We need to change the perverse incentives, such as fee-for-service, which is associated with bulk-billing. Clinicians are rewarded by the number of transactions rather than health outcomes. FFS is particularly inappropriate for chronic care like mental health and services with high fixed costs and low variable costs, such as imaging. The government should move away from fee for service and set budgets for general practitioners when they prescribe drugs, order pathology tests or imaging services. We need more doctors on salaries and capitation payments for caring for patients-not on a service by service basis.
    • We need to tackle the wide variations in the incidence of clinical practice across the country, e.g. caesarean sections and cataracts. Medicare should be much more proactive in exposing and limiting very expensive and inexplicable variations in clinical practice.

    Getting costs down

    •  The government should abolish the subsidy for private health insurance which costs all up about $6-7 billion p.a. This subsidy favours the wealthy, is inefficient, has underwritten rising specialist fees through gap insurance, has not taken the pressure off public hospitals and has weakened Medicare’s ability to control costs. The immediate abolition of this subsidy would do more to improve our health system than almost anything else. This is corporate welfare big time-more even the welfare to the motor industry.
    • We need a more productive workforce. Health is the largest and fastest growing sector in the Australian economy. Despite all the talk of improving productivity in Australia no-one has been game to take on the entrenched privileges in the health workforce.Where is the honesty and consistency here? The blue collar workforce is fair game but not doctors and lawyers. We need expanded roles across the board particularly for nurses, pharmacists, allied health workers and ambulance officers. The Productivity Commission in its February 2007 report estimated that a 5% improvement in the productivity of health services would deliver savings of about $3 billion p.a. This is a very conservative estimate. The health sector in Australia is rife with demarcations and restrictive work practices. eg 5 % of normal births in Australia are delivered by mid wives. In the Netherlands it is 70%, in the UK 50% and in NZ 95%. We have a few hundred nurse practitioners when there should be thousands. The work practices at Holden, Toyota and Ardmona are light years ahead of the work practices in the health sector.
    • We could save about $2 billion p.a. in drug costs if we paid drug suppliers the same prices that are paid in NZ. See my blog of January 17.We also pay a high price for the protection of  pharmacists through the 5000 limit on the number of community pharmacies and the restrictions on where new pharmacies can be located. Pharmacies cannot be established in supermarkets.
    • We need to raise productivity in our hospitals. The Productivity Commission suggests that the productivity gap from best practice in public hospitals ranges from 3% to 89%. In private hospitals the range is 22% to 37%.  There is major governance problems in many hospitals with a dis- connect between management and clinical functions. Running hospitals is very difficult with clinicians coming and going from private practise like the cottage industries of old.
    • The Commonwealth/State fragmentation in healthcare results in blame-shifting, the evasion of responsibility and higher costs. If for example the Commonwealth Government or a joint Commonwealth/State body had responsibility for all health care in a state, there would be a clear incentive for focus on treatment in the community and in homes to ensure that the high cost hospitals are really a last resort. They are now often a first resort.
    • The real elephant in the room in health care cost reduction is avoidable mistakes, including deaths. They are euphemistically called “adverse events”. But Ministers, clinicians and managers do their best to avoid the issue. Based on earlier surveys in NSW and SA I estimated, very conservatively the cost of avoidable mistakes in our health sector at $5b pa (see my blog of June14, 2013). Despite a great deal of money and effort there is no sign of improvement. Insiders won’t solve the problem Good people are caught in a bad system

    We need to address waste and cost-cutting in a measured way. We should not panic, but we should get it done.  Australian healthcare costs are 9-10% of GDP. This is not high by world standards. It is below the OECD average. A major reason why we have been able to do better than others is that we have Medicare as a public insurer. One lesson is clear all around the world. The countries that have high levels of private health insurance, like the US, have high costs.

     

  • John Menadue. Cutting back government spending – does it include middle-class and corporate welfare?

    Tony Abbott told his listeners recently at Davos that small government was the best form of government.

    The Minister for Health, Peter Dutton, has said that waste must be reduced in our health sector.

    The Minister for Social Services, Kevin Andrews, has told us that our welfare system is unsustainable and has appointed Patrick McClure to review welfare in Australia.

    And the Treasurer, Joe Hockey, has established a Commission of Audit to look at ways to reduce ‘big government’ with priority to reducing government outlays. He said that the age of entitlement had to end. But for whom! He said ‘it is .. essential that the Commonwealth government lives within its means and begins to pay down its debt’. We know of course that by any international measure we do not have a debt problem but let us pass on that for the moment.

    Before we look at fair and efficient ways to improve our public finances, there are a few broad issues to be considered.

    First, we do have a long term ‘structural deficit’ of about $60 billion p.a. The IMF has told us that the most recent culprits were the Howard/Costello governments that reduced tax rates year after year when we were flush with revenue from the mining boom. The Gillard and Rudd governments did face the GFC and sensibly increased government spending. They made some attempt to reduce middle class welfare, but they failed to grasp the major recommendations of the Henry Review to reform our tax system.

    Second, Australia does not have a growing public sector. As Ian McAuley, Jennifer Doggett and I have set out in our submission to the Senate Select Committee on the Commission of Audit, there is no evidence of any sustained increase in government spending (see my website by clicking on at top left of this blog). In fact, outlays have been trending downwards since the mid-1980s. Andrew Podger, who is Professor of Public Policy at the ANU and former Secretary of the Department of Health and Ageing, said on January 22 in the AFR, ‘The claim that Australia’s welfare system is unsustainable would surprise observers in most other OECD nations which spend a much higher percentage of their GDP on social security payments. Our emphasis on flat rate, means-tested payments rather than earnings-related social insurance has limited the burden on Australian taxpayers.”

    Third, our tax as a percentage of GDP has fallen steadily since 2002 from 30% to 28%, well below the OECD average of 34%.

    Fourth, our health expenditure runs at about 9% to 10% of GDP which is much the same as the OECD average, mainly because of the efficiency of our public insurer, Medicare. We could save substantial amounts in the health sector however if the government would confront the vested interests in health that force up government spending – the AMA, the Private Health Insurance firms, Medicines Australia and the Pharmacy Guild of Australia.

    The issue that stands out is that we need to improve our revenue base. This is where middle class and business welfare is a major problem – the tax-deductions or ‘tax expenditures’ that reduce the effective level of tax and provides disproportionate benefits to the well-off in the community. FlagPost, published by the Australian Parliamentary Library noted on January 29 2014 that Australia has the highest level of tax deductions in the OECD

    • Treasury estimate that the concessions for super contributions and tax-free payments of superannuation to persons over 60 years of age, like me, costs about $32 billion p.a. A phase-in of a 15% tax on superannuation draw-downs would quickly raise $5 billion p.a.
    • The Grattan Institute estimates that property investors get a benefit of about $7 billion p.a. through negative gearing and the capital gains tax discount. These concessions help inflate property prices and push home ownership out of the reach of young people.
    • The Grattan Institute also estimate that the government provides about $36 billion p.a. in benefits to home owners through exempting the principal house of residence from capital gains tax and aged pension entitlements. The aged pension is asset-tested, but that test excludes the principal residence. The Minister for Social Services is not prepared to address this issue. The aged pension is excluded from his review. Yet the aged pension costs $36 billion p.a. and accounts for roughly half of the welfare budget. If the government was serious about winding back welfare it would not exclude the aged pension from any review.
    • The government has also excluded from the McClure Review Tony Abbott’s $5.5 billion pa parental leave scheme in which the baby’s primary carer would receive six months leave on full pay up to a maximum of $75,000 p.a. This is middle class welfare in neon lights.

    There are also large hand-outs to the corporate sector, particularly the finance sector

    • There is a subsidy of $6 billion to $7 billion p.a to the high cost Private Health Insurance companies who keep pushing up their premiums which are really private taxes.
    • If we had blinked just before Christmas, we would have missed the largesse that Assistant Treasurer Sinodinos handed out to the financial services industry. The previous government took action to stop superannuation advisers automatically collecting commissions year after year – trailing commissions. It was estimated by the Industry Super Network that this reform by the previous government in stopping these commissions would add $144 billion to private savings by 2027. But Arthur Sinodinos has announced that the Abbott Government will roll back this reform and give financial advisers a chance to plunder our superannuation savings again. The government has given the all clear to the financial advising industry to re impose a private tax on superannuation contributors. There is also no sign that the government is acting to stop the super funds owned by the big banks funnelling their cash exclusively into their parent banks for relatively low returns. It is a private tax on super contributors. That is surely abuse of power or worse but neither ACCC nor APRA seems concerned!
    • The Abbott Government has announced that it will retain the fringe benefits salary packaging for expensive, mainly foreign cars at a cost of almost $2 over four years.
    • The government shows no interest in saving $2 billion pa in drug costs by being as rigorous as New Zealand in negotiating drug prices with suppliers in Australia.
    • Large polluters will be subsidised by removing the market discipline of a price on the carbon that they emit.

    There are also other ways that the Commonwealth Government could address the structural deficit. It should expand the GST to include food, education, health and financial products. Most countries do not have the exclusions that we have. The extension of the GST would raise about $16 billion this year and $70 billion by 2016-17.

    In short, we need to lift taxation. Taxes in Australia are too low. It is the truth we refuse to name.

    In global terms we don’t have a government expenditure problem, although a great deal of middle class and business welfare should be rolled back.

    We also need to look urgently at areas of real need, particularly the disabled, those in need of special help in social housing, those who receive meagre benefits in Newstart (the dole) and refugees.

    We should all share the pain in getting our budget into shape, even though the problem is nowhere as severe as we were told in the election. My concern is that so-called “dole-bludgers “of talk back fame will be the target and the wealthy and politically powerful will be largely exempt. The government has already cut aid to the poor in developing countries.

    I live in hope but I am not expecting an end to the age of entitlement for the rich and powerful. Just think executive salaries, transfer pricing and tax havens! But maybe Joe Hockey has something up his sleeve!.

    Given the present weakness in the Australian economy it is also  important that the reduction in our structural budget deficit is done carefully and not in the drastic way that brought so many problems in Europe.

  • Jennifer Doggett. Cutting waste and costs in health.

    ​Cut expensive and low-value services: Health funding is not allocated to areas which deliver maximum output. We spend too much on expensive low-value services and not enough on preventive, high –value care.  Recent research shows that a number of routine tests performed in the Australian health system do not improve clinical outcomes. These include x-rays for lower back pain, liver function tests for people on statin therapy and routine glucose tolerance tests for pregnant women.

    Structural reform: There is significant duplication of functions, gaps and poor coordination across areas of Commonwealth and State/Territory responsibility.  There needs to be a single funder and/or single point of accountability for all health care (as recommended by the NHHRC)

    Reform the funding system:  Funding arrangements for health services often do not reflect their value. We need a funding system which ties subsidies to value and which steers consumers towards the more cost-effective treatment option. For example, where physiotherapy is a more efficient treatment for a soft tissue sporting injury than conventional medical treatment it should be subsidised at a higher rate.

    Remove interest groups: Powerful vested industry groups, such as the pharmaceutical industry and the medical profession, influence policy and funding decisions resulting in anti-competitive and rent seeking practices that disadvantage consumers.

    Move away from fee-for-service: A (largely) fee-for-service payment system does not support doctors to provide comprehensive, preventive and multi-disciplinary care for people with complex and chronic health problems.  At least for these people we should investigate alternative payment systems, such as a capitation model.

    Workforce reform: Doctors in Australia undertake many tasks which in other countries are safely and efficiently done by nurses.  Breaking down professional barriers should allow for the lowest cost person to provide the care, where they can do so safely and effectively.

     

  • Ian Webster. Cutting waste and costs in health

    Waste in health care conjures up several pictures.

    One picture is of community nurses, psychologists and Aboriginal health workers in the community centre I visit anchored to their computer screens, endlessly it seems, trying to fulfil the demands of data entry. They are obviously frustrated by the lack of relevance this has for solving the problems of their patients. It takes time away and it is disempowering. About one third of each day is lost in this way.

    While not so apparent, there is a certain cynicism amongst the local hospital’s specialists about ‘gaming’ to preserve the local hospital’s funding and the administrative demands made on their time. The Garling Special Commission of Inquiry into Acute Care Services in NSW Public Hospitals in 2008 highlighted how non-clinical workload takes time away from clinicians who should be able to dedicate this time to clinical tasks. And the Greater Metropolitan Clinical Taskforce in 2004 reported on the conflicts between the information needed for clinical decisions and the data used by the administrators and funders. John Menadue, in his speeches on health care reform, has described the mismatch between vertical bureaucratic accountability and reporting and the horizontal and shared communication and working relationships of health professionals.

    There is much disillusionment in the current health care system where there should be enthusiasm and pride. Not only is time wasted in an atmosphere of excessive checking, rechecking and codification – to protect the Minister and the system – but good people and good-will are being wasted. Despite the demands and impediments on their time and commitment there are still front-line heroes who “go well beyond the call of duty” to pick up the pieces left undone by others. These people are the pivots around which the services revolve and they should be celebrated and encouraged.

    To prevent waste, data collection and information technology must be ‘practice-worthy’; they must help solve clinical problems and assess the progress of patients if they are to contribute to effective and efficient patient care.

    The second picture is of the waste of misdirected efforts.

    In the National Report Card on Mental Health and Suicide Prevention of 2012 the National Mental Health Commission, on behalf of the mental health community, expressed disquiet about the Activity Based Funding (ABF) being developed for the National Hospital Pricing Authority. The Commission said, “The new ABF system should be designed to meet the needs of people with mental health difficulties regardless of whether services are provided in hospitals, in the community or elsewhere. Alternatives to hospitals must be a priority.” The fear is that ABF will inevitably suck funding for mental health back to hospital activities rather than support and care in the community. If any part of ‘health’ demands a community-based approach, mental health does.

    The Commission’s view is that people should be supported to have contributing lives where they live and work and not be dependent on hospital-based services, necessary as this may be at critical times. Exactly the same can be said in the prevention and management of physical health generally – especially in the management of chronic disease and the intractable complexities of the increasingly prevalent multiple conditions. For people with these conditions hospital admissions are but punctuated interludes along pathways lived out in the community.

    Waste will mount inexorably so long as we neglect to invest in primary health care and community health.

    Professor Ian Webster is Emeritus Professor of Community Health at the University of New South Wales.

     

  • John Dwyer. Cutting waste and costs in health.

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    Tactics and strategies for a six year journey to sustainable, equitable excellence

    (1) Move to a single funder for our national health scheme (The Commonwealth). The funder would contract with States and other potential providers to deliver integrated patient focused care. The health bureaucracy would be reduced by 80% with greater efficiency, better outcomes and less duplication saving at least $ 4 billion per year.
    (2) Remove Tax-payer support for Private Health insurance. Health Insurers are making large profits. Australians will retain their PHI as other sticks make that a certainty. The introduction of the subsidy saw PHI increase by only 2%.
    (3) Introduce peer and craft approved critical pathways to see more evidence based decision making re tests and procedures . Savings $20 billion per year.
    (4) Focus on reducing avoidable expensive hospital admissions ( more than 600,000 per year) through cheaper and better timely community interventions. Requires the introduction of Integrated Primary Care teams. Will need to broaden Medicare funding to cover health professionals other than doctors but net savings anticipated at least $7 billon per year.(5) Introduce slowly but steadily capitated funding for the management of”chronic and complex”diseases with mandatory reporting of health outcomes.

    Professor John Dwyer is Emeritus Professor of Medicine at the University of New South Wales.

  • Ian McAuley. Cutting waste and costs in health.

    There are three areas of saving to be made in health care – real savings rather than movement of costs from public budgets to consumers.

    There can be savings in technical efficiency — savings any engineer or cost-conscious manager seeks in a workplace. A strong example is making better use of information technology.

    There can be savings in purchasing.  Australia used to negotiate some of the world’s lowest pharmaceutical prices.  We now pay high prices.

    My concern is the third area – improvements in allocative efficiency.  That is, ensuring scarce resources are allocated where they will result in greatest benefit.

    The priority should be to remove private health insurance as a source of funding.  Administratively, it does at high cost what the Australian Tax Office and Medicare do much better.

    Its big costs are in terms of allocative inefficiency, for it simply re-shuffles queues, allocating resources to those with subsidized insurance, pushing others to the back of the line.

    Getting rid of private health insurance would save around $1.5 billion a year in administrative costs alone. The Grattan Institute estimates net savings of $3.5 billion a year.

    Other savings in allocative efficiency can be found in making better use of nurses, more careful prescribing of pharmaceuticals, and rationalization of co-payments so that people are not directed to “free” services in preference to more effective and lower-cost services involving upfront fees.  And, of course, there are big savings in all-of-government initiatives to encourage good health.

    Ian McAuley is a teacher and researcher in the fields of  public sector management and public policy.

  • John Menadue. Alcohol and violence on the streets — the tip of the iceberg.

    In recent weeks public attention has been focused on alcohol fuelled violence in Sydney streets and the very slow response of the NSW government. But the response when it did come really only addressed the ugly tip of the iceberg. the violence on the streets. The government response was superficial – minimum mandatory sentencing, greater powers for the police, special licence conditions and lockouts and closures.

    Very little attention was given to prevention and remedial action – the widespread social and economic cost of alcohol misuse across Australia as revealed in our workplaces, roads, and criminal justice and health systems.

    We focus on cannabis, but compared with alcohol, it is a much less potent and dangerous drug. Only a week or so ago, President Obama said ‘I don’t think that cannabis is more dangerous than alcohol’. He was right.

    The long-term effects of alcohol are well-known as outlined by the University of NSW Drug and Alcohol Research Centre– cancer of the mouth, brain injury, high blood pressure, weakness and loss of muscle tissue, inflamed stomach lining, increased risk of lung infections, severe swelling of the liver, inflamed pancreas, and other dangerous consequences. Street violence in Kings Cross is really only a small part of a much larger problem.

    The Australian Institute of Criminology, in April 2013, set out the cost of alcohol misuse in 2010.  The costs were estimated at $14.4 billion which is about double the revenue the Commonwealth government receives from alcohol taxes. That estimated $14.4 billion cost four years ago was made up as follows:

    • Criminal justice system- $3 billion, police, courts, prisons, child-protection, etc.
    • Health system – $1.7 billion in hospital, nursing home, ambulance and other areas.
    • Productivity – $6 billion, mainly losses of production through impaired work and imprisonment of large numbers of people.
    • Traffic accidents – $3.7 billion.

    This study commented that its finding of about $14.4 billion of alcohol costs in 2010 was conservative. Furthermore the figure does not include the negative effects of alcohol on others, estimated to be $6.8 billion in 2010.

    There is clearly an enormous problem just below the surface of street violence. We are concentrating our attention on the streets when there are other major problems below the surface.

    The study of the Australian Institute of Criminology points to the need for prevention and diversion strategies. That really means breaking the booze culture.

    I suggest a major diversion strategy should be the review alcohol advertising in association with sport. It is surely an obvious contradiction to be promoting a healthy life style through sport and promoting alcohol at the same time. In my blog of January 4 ‘Cricket – junk food and alcohol’, I drew attention to the saturation advertising of alcohol during the Ashes Tests. It now continues in the One Day Series. It is unremitting. The alcohol advertising is on the scoreboard, the ground, the shirt fronts, the sleeves the caps, boundary fences, stumps and sight-boards. So far the ‘baggy green’ cap does not carry alcohol advertising but surely it won’t be long before it is carrying a beer logo!. With almost all points covered with alcohol advertising how about Carlton Mid tattoos!  The victorious Australian team poured Victorian Bitter all over each other in the dressing room after the series win. The Australian coach and captain, with one arm around each other and holding beers aloft meandered around the Sydney Cricket Ground. It was tacky. It sent a poor message to young people.

    To protect children, the advertising of alcohol on television is banned before 8.30 pm. But because of the power of the alcohol lobby, advertising is on full display almost all day at most of our major sporting events.  To start winding back the enormous cost of alcohol abuse, we should start by prohibiting alcohol advertising on television and radio at all sporting events, just as we did years ago with tobacco advertising. For the sake of young sports fans our major sporting bodies need to break free from the grip of the alcohol lobby.  Our sporting heroes, the role models for the young should also think carefully about filling their pockets with money from the promotion of alcohol. Who will be the first to make a stand? Australian young people would be particularly well served by such leadership.

    Violence in Kings Cross after midnight is just the tip of the iceberg.

  • Andrew Podger – Health reform, co-payments, fee for service and doctor contracts.

    The recent suggestion of a modest user charge on patients of bulk-billing doctors, and the immediate reaction in the media, suggests the need for a more careful study of the appropriate role of co-payments in our health insurance system, and of other measures to contain costs while delivering an effective insurance product.

    Ensuring everyone has affordable access to effective health services, while keeping total costs manageable, is the central challenge for any health insurance system. The very existence of an insurer raises the risk of moral hazard whereby consumers and service providers take advantage of the third party payer. This is exacerbated in the health system by the reliance patients have on the expertise of doctors and the extent to which doctors, understandably, wish to draw on the latest technologies to help their patients.

    A fee-for-service system, as we have in Australia, adds to these problems, as doctors (and other health service providers) are rewarded financially by the number of services they provide, a variable they can influence particularly if the insurer meets all of the costs.

    There are several ways of addressing this issue, all of which involve insurers acting more as purchasers of services on behalf of their members, rather than simply reimbursing costs. A number are already used in the Australian health system.

    • Copayments send a message to consumers that services are not entirely free. They currently apply to pharmaceuticals up to a cap, even for concessional groups, and to non bulkbilling doctors particularly specialists. Private insurers typically leave substantial copayments for private hospital and related specialist services.
    • Gate-keeping may constrain the use of high cost services. This applies to specialist services which require GP referrals, and to elective surgery which requires specialist referral as well.
    • Hard or soft budget caps can constrain over-servicing. Hard caps used to be applied by the Commonwealth to its funding of public hospital services through the Commonwealth Health Services Agreement, and the States then applied as best they could soft caps. Soft caps also apply through Commonwealth agreements on MBS costs for pathology and radiology and, on occasion, to newly listed medicines through price-volume deals with pharmaceutical companies.
    • ‘Blended payments’, where fee-for-service is complemented by some ‘capitation’ funding based on patient populations, is a variant of the soft budget cap approach. This has become part of the regime for primary care through the provision of practice grants and rewards for certain preventive health outcomes such as high child immunisation rates, cancer screening levels and coordinated care plans for chronically ill patients.

    What is obvious is that our current approach is messy and not focussed on a system-wide strategy relevant to today’s challenges affected so much by chronic illnesses and the needs of the frail aged. There is the likelihood of continued over-servicing by bulk-billing GPs in particular, but also under-protection (and hence obstacles to access) for those unable to find a bulk-billing GP and for those referred frequently to specialists. The limited role of blended payments also means insufficient reward for preventive health services and high quality continuing care. There are also distortions such as people turning to (free) emergency departments for primary care services. Some international studies also suggest Australia relies too heavily on co-payments on pharmaceuticals (though Australians also pay large amounts voluntarily for ‘complementary medicines’ of dubious effectiveness).

    The suggestion of a modest charge on non-concessional patients of bulk-billing GPs would not go very far to address these problems. A better approach with the potential to achieve greater long-term savings to taxpayers would be:

    • To impose higher user charges on non-concessional patients of bulk-billing doctors, with a modest charge also for concessional patients (possibly akin to the current PBS co-payments);
    • To allow the States to apply similar charges for emergency department patients (and perhaps outpatients);
    • To tie these to firm caps on total eligible health service charges in any one year, thus ensuring a genuine and effective overall health insurance product;
    • To negotiate with GPs and specialists (or their corporate organisations) the mix of MBS fees and capitation funds required to ensure compliance with the standard fee regime and to promote improved preventive services and continuing support for at risk patient groups. These agreements, or contracts, could vary by region reflecting variations in the supply of doctors and the costs of service delivery.

    Private health insurers similarly should be encouraged to set total annual co-payment caps for their members’ hospital-related services.

    An early dialogue with the AMA and other doctor associations (including the Colleges which focus on professional standards rather than just doctors’ financial interests) could develop a manageable reform agenda. Regional variations would need to be negotiated, with the new Regional Primary Healthcare Organisations perhaps playing a role so long as conflicts of interest can be managed.

    This approach could be complemented by a more transparent system-wide budgetary control arrangement which helps to promote the optimal allocation of resources across programs to address health risks in the community. In the short to medium term, some notional health budget for the population in each region, with a soft cap, would assist allowing regions to negotiate agreements/contracts with doctors and other service providers within their notional budget cap to supplement or vary national fee-for-service prices, focusing in particular on the most appropriate support for the chronically ill and those at risk of chronic illness. (In time, private health insurers might play a greater role for their members including for Medicare services, by being offered their members’ Medicare ‘premiums’ otherwise managed through the regions’ budgets along the lines of the Bennett Report’s Medicare Select option).

    The Abbott Government will not want to ignite public doubts about its commitment to Medicare and so is likely to move cautiously. A balanced strategy that clearly improves Medicare’s overall insurance product while introducing a more coherent system-wide approach to co-payments might be attractive politically as well as economically.

    Andrew Podger was former Director General of the Department of Health and Ageing. He is currently Professor of Public Policy, College of Arts and Social Sciences, Australian National University.

  • The power of vested interests and why drugs cost so much in Australia. John Menadue

    Why does the widely used cholesterol reducing drug Atorvastatin cost $A19 in Australia and $A2 for the same package in NZ? Why does the widely used cancer drug Anastrozole cost $A92 in Australia when the equivalent drug in the UK costs $A3.30. The answer is the political power of Medicines Australia and how it twists the arm of governments.

    In a blog on January 7, I drew attention to the political power of vested interests to undermine the public interest and good policy development in Australia. I referred  particularly to the miners and their role in destroying the super profits tax, the polluters’ opposition to the carbon tax, the hotel and liquor industry which is responsible for violence on our streets and poor health in the community, and the gambling industry particularly Clubs Australia, that successfully opposed proposals to shield problem gamblers. Just consider how James Packer has been able, so easily, to use his political power to avoid any public process in obtaining a licence for his “high-rollers” casino in Sydney.

    What makes these vested interests so dangerous is their power to persuade or threaten politicians. The media is ill-equipped to contest their power. In some cases, The Australian and the Australian Financial Review newspapers become outlets for these vested interests.

    Medicines Australia (MA) is a classic case. It represents the pharmaceutical industry in Australia. Its members supply 86% of the medicines that are available in Australia under the Pharmaceuticals Benefits Scheme. (PBS)

    The Grattan Institute has pointed out how, with the cooperation of pliant governments, MA has been able to exploit Australian consumers and taxpayers. The facts are quite clear. For March last year, the Grattan Institute reported as follows:

    • For Atorvastatin, the cholesterol reducing drug, the PBS in Australia paid more than $51 for a box of 30 tablets. NZ paid $A5.80 for a box of 90 tablets.
    • Grattan also looked at the ‘top 73 doses that are prescribed most often in Australia’. It found that Australian wholesale prices were eight times higher than NZ’s. For identical drugs, NZ prices were six times cheaper than in Australia.
    • Grattan also compared prices in some public hospitals in Australia who buy drugs outside the PBS. It found that on average these hospitals obtained drugs eight times lower than the prices under the PBS.

    Those comparisons where for March last year. In December last year, under what is called ‘price disclosure’ arrangements, prices were reduced.  However, the Grattan Institute found that even with these reductions, Australia was still paying sixteen times more than the UK and NZ for seven key drugs. For example the cost of Atorvastatin dropped from $A30 to $A19 for a pack in Australia. The same pack sold for the equivalent of $A2.84 in UK and $A2.01 in NZ. For Anastrozole, the cancer drug, the wholesale price in Australia is $A92 and in the UK $A3.30.

    How can these outrageous differences occur?

    Before a drug can be registered on the PBS it has to be cleared by the Therapeutic Goods Administration for safety and efficacy. Then it is assessed by the Pharmaceutical Benefits Advisory Committee for cost effectiveness and clinical benefit. The Pharmaceutical Benefits Pricing Authority (the Pricing Authority) then determines the maximum price that can be charged and how much the Government will pay manufactures or importers under the PBS.

    The Pricing Authority, a non statutory body is set up by the Minister and is within the Department of Health and Aging. The Authority includes, amongst its six members, two representatives of drug companies. That is extraordinary-building vested interests into the price setting process. They should be excluded completely.  The whole process is opaque, and political. It is ready made for manipulation by vested interests.

    In NZ, politicians decide how much is spent by the government on drugs and an independent and professional expert panel sets prices. In Australia we have the process the other way round. Our politicians should determine the budget for drugs at the beginning of the process and then get out of the way and let market competition work and leave final price decisions to independent experts.

    The vested interests get their fingers all over the price of drugs on the PBS. In NZ they are excluded from the process.

    Grattan Institute estimates that Australia’s wholesale prices for identical drugs are now six times the prices paid in NZ. In some cases they are as much as twenty times higher. Grattan Institute estimates a saving of almost $A2 billion p.a. if we paid the same price as in other relevant jurisdictions.

    The Chief Executive of MA is Brendan Shaw. He was formerly a staffer for Dr Craig Emmerson. It is typical of the pedigree of vested-interests and their political lobby that they choose persons well-known and influential in the political corridors of power in Canberra. .

    In response to Grattan’s findings, Brendan Shaw in the Australian Financial Review made an irrelevant point that because of budget restraints in NZ, fewer new medicines were available in that country. He avoided completely the issue of price comparisons. I would rather rely on the professional advice of independent experts on what drugs should be on the PBS and the prices we pay.

    When will we seriously tackle the exploitation of the public that Medicines Australia inflicts upon us?

    The Department of Health and Ageing should be spending its time developing and implementing improved health policies. Instead it spends its energy and time placating the powerful rent-seeking vested interests in our health services – Medicines Australia, the AMA, the Pharmaceutical Guild of Australia and the Private Health Insurance companies.

    The Rudd and Gillard Governments did little to curb the abuse of political power by these groups in the health field. In fact they made the situation worse. The Rudd Government appointed a senior executive of BUPA, the second largest private health insurance firm in Australia, to head the National Health and Hospital Reform Commission enquiry.

    Ross Garnaut described the power of vested interests in Australia as a ‘diabolical problem’.  He is right. If the Commission of Audit wants to save some real money and curb rent seeking it could start with vested interests like Medicines Australia.

    Governments and particularly conservative ones extol the virtues of markets. But all too often this is a diversion, designed to advantage corporations, like the members of Medicines Australia, rather than letting markets work and promote competition and lower prices.

  • Health workforce reform. Prof Peter Brooks

    As we draw to the end of the holiday period and contemplate the challenges for us in 2014 we might take a moment to think about the big questions in health. We are continually reminded by politicians,  media and other  (self)  interested groups  about the cost of health care, the need for more doctors and  nurses, more  beds, more money -all of which will blow out the health budget even more . We are told that patients will have to pay more (the proposed $6 fee for GP visits) but rarely do we look at what are the real ‘drivers‘ in the costs of health care. Doctors have a very privileged position in society but we are responsible for generating the bulk of costs of healthcare – every time we order a test, prescribe a medication, recommend a procedure, and admit a patient to hospital costs are generated, so surely we need to look at this side of the equation.  This is particularly so in the context of the Australian health system which is based on fee for service – every time there is an interaction with the medical profession the cash register tinkles!

    So overall doctor numbers are important – because we –the doctors – generate the bulk of these costs. The ‘system’ is set up so that many things that doctors do which could be done by someone else at less cost – pharmacist/nurse practitioners writing repeat prescriptions, doing vaccinations  and other minor procedures are not well  supported. The most recent data from Health Workforce Australia present a number of scenarios on doctor numbers from having 2,700 too few in 2025 if we make no change in how we deliver health services (we couldn’t be that silly) to having 2,800 too many if we make a modest improvement in doctor ‘productivity’. This could be  easily achieved  by transferring some tasks to other members of the health care team and  better utilising  telehealth and other communication technologies. If we really got serious about health promotion and disease prevention (now that is a novel thought) and reduced demand by just 2% (which is really not very much) we would have a surplus of over 18,000 doctors in 2025- what a waste of talent.

    Now proponents for having more doctors say – “but it is so hard to see a GP when I need one” and rural general practice is still undersupplied – true – but there may be other ways of incentivising doctors to work in rural areas or using different models of care – linking local nurse practitioners or physician assistants with GPs /Specialists in regional centres to provide appropriate geographical coverage across this wide brown land.   Health care is very complex – we don’t think about it till we need care and then it is often too late to even think about choice. With the ageing population all of whom will have chronic disease we have a great opportunity to plan better than we have up until now – to think about a health system that is fair and  equable not just for those who can afford it but for all.

    We also (and the medical profession needs to be at the for front of this particular issue ) need to clearly evaluate what should  be provided for an individual patient – not just because the procedure or intervention is available – but ask if it will really improve that patients health – and ensure that the patient can be involved in that decision.

    But fundamental to the future of the health system in Australia is how we pay for health services – fee for service needs to be reviewed since it is not sustainable in the medium to long term. There are many other systems we might consider – salaried (and interestingly America now has more salaried doctors than non-salaried), a variety of insurance schemes including health savings accounts, capping fees in some form – so why don’t we talk about this in a serious way?

    Tinkering around the edges in the form of a $6 payment for GP visits which is estimated to save around $700 million over a 4 year period out of a $130 million annual health budget and creating real pain for many less well-off Australians is a bad idea – but it does provide an opportunity to start a real community debate on what the other alternatives are – and there are many. This should be about real change in the health system – to ensure one of the better health systems in the world remains accessible to ALL Australians and that patients are fully informed of their health options and are engaged in those individual health decisions.

    Peter Brooks MD FRACP – Professorial Fellow, School of Population and Global Health University of Melbourne

     

  • The mooted $6 fee for GP visits trivialises the problem. Guest blogger: John Dwyer

    There is a lot that is disturbing about the federal government’s flirtation with a $6 co-payment for a service from a GP. Most commentators have rejected this approach as poor public policy as it will act as a deterrent for poorer Australians to seek the care they need to provide paltry savings in a 120 billion dollar a year health system. This policy will cost all of us dearly as avoidable chronic illness among those less economically secure already absorbs so many of our tax dollars. With the exception of illness caused by excessive alcohol consumption, all risk factors for serious disease are more prevalent in less advantaged Australians. Studies show that already too many patients delay seeking help and fail to take prescribed medications because of the costs involved. Health care in our wealthy country is distressingly and increasingly inequitable.

    However the major frustration with the current debate is associated with the lack of political understanding of the changes we do need to make to provide better health outcomes from a system that is financially sustainable. Cost effectiveness can only be tackled with a whole of system analysis not just a focus on the federally funded Medicare program that supports our delivery of primary care.

    The compartmentalisation represented by Minister Dutton’s focus on the cost of Medicare is the price we pay for the wretched jurisdictional separation of funding arrangements for Hospital and Primary Care services in Australia, the only OECD country so burdened.  Hospital expenditure dwarfs primary care expenditure so looking at the cost of funding Medicare divorced from a system wide analysis of health care costs is nonsensical.  In the actual health care delivery world the success or otherwise of our Medicare funded primary care system has a major influence on how much we need to spend on hospital care. Indeed the pertinent truth is that hospital funding into the future will only be manageable if a modernised and remodelled primary care system can reduce the demand for hospital admissions.

    We need and want a national health care system characterised by its resourcing of evidence based strategies that prevent avoidable illness and the provision, in a timely manner to those who are ill, cost effective quality care available on the basis of need and not personal financial wellbeing. These are not Utopian goals but their delivery will require additional spending in a number of areas. However there are major savings that can be made in our current system that would fund a remodelled health system.  For example, nine departments of health to service 23 million people are not only cost ineffective ($4 billion a year in duplication costs) but also makes proper integration of services impossible. 30 years of working closely with State and Federal health bureaucrats has taught me that the system sees good people more concerned about saving dollars in their patch and maintaining their power base than providing patient focussed integrated care. We need the Commonwealth to be the single funder for our public health system contracting with providers to deliver the integrated system describe above.

    Remodelled Primary Care with the infrastructure for the support of prevention programs is the most important initiative we need to implement in Australia. Around the world the trend is to establish primary care systems that encourage citizens to enrol in a wellness maintenance program and benefit from the delivery of health care by teams of health professionals working as “first among equals” in the one practice (Integrated Primary Care” (IPC). The psychology associated with voluntary enrolment is important .The philosophy involves acceptance of the concept that we need to take more responsibility for our own health but with personalised and ongoing assistance, when necessary, from appropriate health professionals. 85% of our New Zealand cousins are voluntarily enrolled in a “Primary Healthcare Organisation”.

    The Productivity Commission reports that between 600,000 and 750,000 public hospital admissions could be avoided annually with an effective community intervention in the three weeks prior to hospitalisation. An average hospital admission costs at least $5000 while a community intervention to prevent that admission would cost about $300. Primary Care infrastructure in Australia needs to resource the needed community interventions. The savings would more than cover the expense of introducing Integrated Primary Care into Australia.

    The introduction of IPC in Australia is likely to attract more medical graduates into a career as a GP.  Research tells us that only 13% of medical graduates in Australia plan a career in Primary Care. Remuneration is poor compared to other specialities.The need to bulk bill puts time constraints on episodes of care resulting all too often in “turnstile medicine “which is unsatisfactory for both doctor and patient. A young graduate will not be impressed with the Abbott government’s decision to cap Medicare payments to doctors for four years. Many younger doctors considering general practice would prefer to move away from the traditional “fee for service” payment system to salaried or contractual payments. Watching the journey that is leading to IPC in other countries can teach us a lot. In New Zealand over 85% of GPs have voluntarily forsaken “fee for service” payments in favour of guaranteed remuneration in a capitation model.

    The Abbott Government should commit to taking us on a health reform journey that embraces the above changes and the introduction of a single funder for our health system. To be talking about $6 is to trivialise a major policy challenge.

    Professor John Dwyer is the Emeritus Profess of Medicine at the University of NSW.

     

  • More on pink batts. Guest blogger: Dr Michael Keating

    I would like to add a further comment to your post on 3 January on the Pink Batts.

    First, I would further contest the evidence that this scheme was poorly conceived and badly implemented. On this point it should be noted that the Auditor General’s finding that 29 per cent of 13808 completed jobs had minor or serious problems was based on a departmental survey, which suggests that the government was following up. Furthermore the survey was not wholly random and as the Auditor General noted this particular finding constituted only weak evidence. Later evidence showed that of  44,300 inspections, again not randomly chosen, only 3215 led to rectifications being required – a rate of around 7 per cent, which does not seem to me to be particularly high for the building industry.

    The other major concern arose out of the death of four installers. Leaving aside the fact that regulation of health and safety is a responsibility of the States and employers it should be noted that one fatality was caused by a pre-existing electrical fault; another electrocuted installer was employed by an electrician; and a third death occurred when a contractor elected to work in oppressive heat. In addition, the Commonwealth required more of contractors than most States as it required installers to agree to employees holding a nationally recognised occupational health and safety certificate demonstrating that “the holder is competent to work safely in the construction industry”.  To the extent that there was a failure of health and safety it would seem to reflect a general failure of health and safety regulation in the building industry and not a failure of this particular program.

    Second, the other important aspect that I would like to raise is why did the Rudd and Gillard Governments decide to throw in the towel and not defend the program? I suggest that it was their decision to stay silent and not respond to the criticisms that has now given the HIS program such a bad reputation, and has come at a considerable cost to their own reputations. I think that it was this decision to stay silent, when a substantial defence was possible, that is deserving of further exploration by those who are interested in how our political system is working these days.

    Dr Michael Keating AC was formerly Secretary of the Department of Prime Minister and Cabinet 1991-96. 

     

  • Cricket – junk food and alcohol. John Menadue

    Over the holidays I have very much enjoyed watching on television Australia winning at last. The visual TV coverage is outstanding. The camera crews do a great job. I enhance my enjoyment by minimising the audio content. Except for the opening and closing of each session, and at the fall of each wicket, I keep my TV console on mute.

    But that is the good news. Unfortunately I can’t get away from the almost saturation picture coverage of junk food (KFC) and alcohol (Victorian Bitter and Bear-Wine-and-Spirits or BWS).

    Last year, the Australian National Preventive Health Agency (ANPHA) identified curbing alcohol use, tobacco use and obesity as the top three priority areas in preventive health. ANPHA considered that these three health risks accounted for 40% of potentially preventable hospitalisations.

    In addition to saturated fats, KFC gives saturated television advertising – KFC classic catches; Australian burgers vs English burgers; KFC trivia; Bucket-heads and a lot more. Yet only this week the National Health Reporting Authority for the Council of Australian Governments reported that our obesity rate had ballooned to 28% – with almost 11 million Australians classified as overweight or obese. Obesity is growing at an alarming rate and fast-food is one of the contributing factors.

    It is also hard to miss the seeming unending coverage of alcohol advertisements or promotion – on the sight-screens and on the scoreboards. We had BWS lunch and tea breaks. Yet only about a kilometre away from the Sydney Cricket Ground innocent people, police and hospital workers are battling alcohol-fuelled violence. The alcohol and hotel industry has enormous political clout and not just among politicians. Australian Cricket willingly plays their game.

    The Commercial Television Industry Code of Practice does not allow alcohol advertising before 8.30pm in order to protect children. But by some sleight of hand the alcohol industry is able to advertise any time of the day provided it is part of a live sporting event.

    In the 1980s the tobacco industry through Rothmans, Winfield and others fought a rear-guard action to continue advertising in association with sporting events. They used the hoary argument that if a product was legal it should also be possible to advertise it. In the end they had to withdraw from all advertising associated with sporting events. The same should happen to the junk food and alcohol industries. But who will challenge their enormous political and business power.

    In the meantime, Channel 9, Cricket Australia and players fill their pockets with the revenue derived from the advertising and promotion of dangerous products. That sounds to me like living off immoral earnings.

  • Repost: We all see our doctor too much; and it’s not just the aged. John Menadue

    The media have been discussing a proposal to impose a $5 or $6 levy for GP visits. There has been a dramatic increase in the number of times we each see our GP. It needs addressing, but not with a simplistic GP levy. See also piece below by Ian McAuley.

    Following the Grattan Institute’s recent work on budget deficits there was a focus by the media on rising health costs. The media commentators didn’t seriously examine the Grattan work about ageing but hopped onto an old and overworked hobbyhorse – that rising health costs are largely due to the ageing on the Australian population. The Business Council is also a repeat offender on this fiction about ageing.

    Increases in health services have been across all age groups, particularly in the band 25 to 54 year olds. The following figures compare Medicare services per head and by age 1984/85-2011/12. They are extracted from the Department of Health and Ageing website, although the figures are not easy to find.  Below I have combined male and female figures, assumed a 50/50 gender split. It should also be noted that some Medicare services and items were not around in 1984/85 when Medicare was established by the Hawke Government. This would not detract from the thrust of the figures.

    Medicare services per head and by age 1984/85 to 2011/12

    Age group

    1984-85

    2011-12

    % Change

    0-4

    6.97

    8.87

    27

    5-9

    4.25

    5.04

    18

    10-14

    3.49

    5.06

    45

    15-19

    4.68

    7.59

    62

    20-24

    6.43

    8.58

    34

    25-34

    7.05

    10.78

    53

    35-44

    6.54

    12.15

    86

    45-54

    7.99

    14.75

    85

    55-64

    9.47

    20.32

    115%

    65-74

    11.80

    28.61

    142%

    75-84

    15.22

    39.08

    157%

     

    It is noteworthy that the rate of increase in Medicare services levelled off in the over 65s but grew very strongly in the 35-54 band. Age is only a part of the problem.

    The Productivity Commission confirmed this in its report in 2005 on Medical Technology “to date population ageing does not appear to have been a major driver of increased demand for health services’.

    Professor Jeff Richardson of Monash University’s Centre for Health Economics, in his paper on the ‘Lamentable state of Australian health reform’ in March 2009 put it ‘Ageing per se in the absence of technological change would have minimal effects on expenditure… the link between ageing and health expenditure as a percentage of GDP is simply disinformation’.

    The Grattan report referred to  said ‘Contrary to widespread belief, it is not just the ageing of the population that is driving health spending but the fact that people of all ages are seeing doctors more often, having more tests and operations and taking more prescribed drugs”

    The Health Council of Canada in a survey a couple of years ago of more elderly users of health services concluded ‘the largest controlling factor in this rise [in health costs] is neither ageing nor population growth … it is increased use’.

    In future blogs I will look at some of the major drivers of increased demand and increased costs in health care that should be addressed. It is not just the ageing of our population.

    But we should keep a sense of perspective. At 9% of GDP committed to healthcare in Australia, we are in the middle range of comparable countries and slightly below the OECD median. Medicare has served us well. We spend about a half of what the US spends on health as a proportion of GDP.

    The US is a standout example that we should not entertain any idea of increased government support for private health insurance companies that are no match for powerful providers…doctors and private hospitals including “charitable” hospitals.

    John Menadue

  • Repost: Co-payments: no rhyme or reason. Guest blogger Jennifer Doggett

     

    This earlier post is reposted as it is relevant to the question of co-payments which a paper submitted to the Commission of Audit has proposed. 

    Australians are often justifiably proud of Medicare and its role in making health care accessible to all in the community. However, a largely unrecognised threat to Medicare is the increasingly large component of health funding which comes directly out of people’s pockets in the form of out-of-pocket costs or co-payments.

    Co-payments are the second largest source of health funding in Australia, second only to governments. They currently contribute 18 per cent of total health funding or just over $21 billion per year,[1] more than double that contributed by private health insurance.

    Co-payments are currently implemented in our health system without any overarching policy framework or assessment of their overall impact on consumers. The end result of this that many Australians find themselves unable to access care because of the co-payments they face. This has been shown by two Commonwealth Fund surveys[2]  and a 2012 survey by the Australian Bureau of Statistics[3] which found that one in 15 sick Australians has put off seeing a doctor because it cost too much.

    These problems are often not obvious to policy makers because, when averaged out across the entire population, the total co-payment contribution by consumers is not excessive (the AIHW estimates it is $900 per person per year).[4]  However, in health care few consumers are ever ‘average’.  Demand for health care varies widely with a small group of consumers requiring large amounts of health care and the rest of the population very little.

    The level of consumer co-payments also differs significantly across the health system, as demonstrated by the following table[5]. This creates inconsistency across different forms of health care and results in inefficient and inequitable impacts on consumers.

     

    Type of service Total co-payment amount ($m) Co-payments as a proportion of total funding
    Medical services 2 641 12.4%
    PBS/RPBS medicines 1 500 16%
    Other health practitioners 1 700 45%
    Dental services 4 600 61%
    Aids and appliances 3 560 70.2%
    Non-PBS medicines 4 036 94%

     

    Addressing this problem requires a ‘ground-up’ building of a co-payments system that reflects the values and priorities of the community.  This should include a joint Commonwealth and State/Territory policy on consumer co-payments for health care, which clearly articulates the aim of co-payments and outlines effective safety-net and other arrangements to ensure co-payments do not create barriers to accessing care.

    Within this overarching structure, options such as standardising co-payments across sectors, allowing structured payments over time and other arrangements can be explored. Unfortunately, none of these issues are addressed in the current health reform. This is a mistake from both a practical and policy perspective and if not addressed could ultimately undermine the goals of the health reform agenda and compromise the ability of our public health system to deliver accessible and effective care to all in the community.

     


    [1] AIHW 2012. Australia’s health 2012. Australia’s health no. 13. Cat. no. AUS 156. Canberra: AIHW

     

    [2] C. Schoen, R. Osborn, D. Squires, M. M. Doty, R. Pierson, and S. Applebaum, New 2011 Survey of Patients with Complex Care Needs in 11 Countries Finds That Care Is Often Poorly Coordinated, Health Affairs Web First, Nov. 9, 2011 and C. Schoen, R. Osborn, S. K. H. How, M. M. Doty, and J. Peugh, “In Chronic Condition: Experiences of Patients with Complex Health Care Needs, in Eight Countries, 2008,” Health Affairs Web Exclusive, Nov. 13, 2008, w1–w16.

    [3] Australian Bureau of Statistics Patient Experiences in Australia: Summary of Findings, 2011-12

    [4] AIHW 2012.

    [5] Australian Institute of Health and Welfare 2011. Health expenditure Australia 2009-10. Health and welfare expenditure series no. 46. Cat. no. HWE 55. Canberra: AIHW

  • Repost: Health care and the budget deficit in the US. Joint blog John Menadue and Ian McAuley

    Repost for holiday reading.

    The political obstacles to these two major problems for President Obama are real and confusing. But the arithmetic is quite clear.

    If the US had a health service like those in countries without heavy reliance on private insurance, such as Australia, it could solve its budget deficit problem.

    Let us explain the arithmetic. US health care expenditure is already 18% of GDP – and on present trends will reach over 20% of GDP by 2020.  It is by far the highest in the world: most developed countries contain their health care expenditure at around 10% of GDP.  (Australia’s health care expenditure is 9% of GDP, of which about 6% is spent by our governments.)

    Of that 18% of GDP in the US, half is spent by government, while almost all of the other half is through private insurance. In rough figures, the USA is now committing as much public expenditure on health care as those countries – UK and the Nordic countries – which for the same public expenditure have comprehensive government-funded single payer systems and with only a marginal role for private insurance.

    The contrast between the experience of America and those countries with single government payers demonstrates clearly how private health insurance causes health care costs to run out of control, and eventually forces up public expenditure as the government is forced to pay prices set in a distorted market where private insurers pass through costs set by powerful providers, called by some the “health care complex” – a reference to the similarly insatiable “military-industrial complex”.

    Imagine if Obama, who has often referred to the “public option”, could convince Congress to put good fiscal management and the provision of affordable health care ahead of the interests of private health insurers and health care corporations.

    The government could simply take over all health insurance and use its strong purchasing power to control prices and usage, as in those countries with single payer systems. That would bring the total cost of health care down 9% of GDP, in line with those countries, and would cost no more in public expenditure.

    The other 9%, presently passing through private health insurance, would be collected as public revenue – in other words a tax increase. Americans would be trading health insurance outlays for a tax increase. They would be substituting an official tax for what is essentially a privatized tax, for most Americans, who are fortunate enough to have good jobs, have little personal choice about health insurance, that choice being made by their employers who essentially deduct it from their pay just as they deduct official tax payments to the Internal Revenue Service.

    With another 9% of GDP in taxation revenue there would be a turnaround in the federal budget, which is presently running a deficit of 7% of GDP. The 2% surplus could be directed to paying down debt or investing in much-needed public investment.

    Are there flaws in our argument?  We have ignored the political hurdles, the difficulty of rolling back entrenched corporate privilege, and the irrational way in which people have become blind to the cost of private health insurance, which trades on the notion that because it is “private” it has some intrinsic virtue.

    It’s a lesson for those in Australia who naively believe that shifting health care expenditure off-budget will save public expenditure.  Beware any in Australia who suggest we go down the route of expanded private health insurance. In the short term there may be some budgetary savings and possibly some tax reductions, but those tax reductions would be more than cancelled by health insurance premiums – we would be paying “taxes” to Bupa, Medibank Private and the other private insurers. In the long term, as is happening in the USA, even public expenditures would rise – we would be paying more taxes to the ATO and to the private insurers. The US disaster in health care is a warning of what not to do.

    John Menadue and guest blogger, Ian McAuley.

     

     

     

  • Does Tony Abbott believe in markets? John Menadue

    We are already seeing a division opening up in the Abbott Government between ‘wets’ and ‘dries’ and a lot of confusion.

    The Liberal Party and conservatives generally espouse the value of markets – that governments should not interfere unless there is clear market failure or overwhelming reasons of public interest. This belief in markets is at the core of conservative philosophy The Liberal Party platform speaks expansively of “enterprise” and “consumer choice”. Ministers such as Joe Hockey, Andrew Robb and Malcolm Turnbull seem to hold to that belief.  But Tony Abbott, along with Barnaby Joyce and the National Party, seem opposed to markets when key decisions have to be made. Industry Minister Ian Macfarlane seems to be having an arm wrestle with Cabinet over support for Holdens. Then what about support for Qantas?

    This division clearly showed itself over the government decision to refuse foreign investment in Graincorp. Tony Abbott apparently sided against Joe Hockey and those in the Liberal party who espouse markets. As I mentioned in an earlier blog, Peter Reith, a leading Liberal party member and former Howard defence minister said that the Graincorp decision “had Tony Abbott’s fingerprints all over it”. Barnaby Joyce and the National party successfully carried out a covert campaign against foreign investment in Graincorp. Interestingly, after being criticised for his protection of Graincorp, Tony Abbott now wants to be seen as hairy chested” on both Qantas and Holden

    Peter Costello has also criticised the government for its Graincorp decision. Several years ago he reportedly told Michael Kroger that in the Howard Government, Tony Abbott had no interest in economics and that he was ‘economically illiterate’. Tony Abbott shows the same distributionist approach as one of his earlier heroes B.A. Santamaria.

    But the most striking example of Tony Abbott’s scepticism about markets is his policy of Direct Action on carbon pollution rather than a market mechanism like a carbon tax or an Emissions Trading Scheme. Tony Abbott’s denial of a market approach has clearly paid political dividends with his attack on the carbon tax. But good policy is sacrificed.

    In the latter days of the Howard Government, John Howard proposed a market mechanism to address carbon pollution. He proposed an Emissions Trading Scheme. He believed in a market approach. When the new Liberal party leader, Malcolm Turnbull supported an ETS, Tony Abbott and the climate sceptics in the Liberal party tore him down.

    The result is a highly bureaucratic and interventionist approach in Direct Action to combat carbon pollution. Direct Action with its subsidies and interventions is the very antithesis of a market mechanism. Malcolm Turnbull has described Direct Action as a fig leaf when you don’t have an effective and efficient mechanism to reduce carbon pollution.

    Almost every respectable economist in the world will side with the IMF and OECD that a market-based approach to carbon pollution reduction – such as a carbon tax or ETS – is the most efficient and effective mechanism. But Tony Abbott has sided with the ‘wets’ to give us Direct Action.

    Another important test of Tony Abbott’s attitude to markets is likely to be his response to the States and particularly the retailers who want more protection from on- line imports.

    I can understand the concern of the States about their loss of GST revenue but do the likes of Harvey Norman need protection The retailers keep bleating about unfair competition but an increase of 10% on imports is not likely to make much difference, given that the price on many imports is substantially below Australian retail prices.

    The Productivity Commission reported in 2011 that the “intensified competition from imports is good for consumers but is challenging for the retail industry which as a whole does not compare favourably in terms of productivity with many overseas countries” The Productivity Report   further found  high occupancy costs of retailers in payments to landlords as a major problem for retailers.. The report also found that out of 17 industry sectors only the mining sector was more profitable than retailing in Australia. That does not suggest the need for more protection.

    A survey by Choice said that the attraction of on line shopping was convenience rather than price. Yet retailers have been slow to develop on line shopping.

    The Abbott Government has shown its screpticism about markets in both the environment and foreign investment. Will it now protect the retail sector at the expense of consumers?

    The division between wets and dries will continue to play out in the Abbott Government. Tony Abbott is more at home with the vested interests that the Nationals and Barnaby Joyce side with. On the two critical issues to date, he has sided against the “dries”. What will its attitude be to on line shopping? Or Qantas? Or Holden?

    Tony Abbott’s scepticism about markets could be the same impediment to economic reform that the Fraser Government experienced…a continuous disagreement between “wet” and “dries”.

    In short the Abbott Government is showing that it lacks an ideological  and policy framework. Confusion is inevitable.

     

    PS A remarkable feature about subsidies to industry is that there is no mention at all in the media about the $7.5b annual subsidy which the Australian taxpayer provides to the high cost private health insurance industry. No wonder BUPA can waste public money in television advertising at the cricket.

  • The cost of healthcare in Australia and remuneration of doctors. Guest blogger: Professor Kerry Goulston

    The cost of healthcare is unsustainable here and in many other countries.  In Australia it is 9.5% of GDP, estimated to rise to 16-25% by 2025.  There are obvious reasons for this—population ageing, end of life heroics, increased technology and increased use of procedures.  A rapidly increasing contributor to the cost of healthcare in Australia comes from “out-of-pocket expenses”-estimated by Yusef and Leeder in a seminal paper –Oct 2013-in the Medical Journal of Australia to be $28 billion per annum.  For older households this represents an annual cost of $3,585.  Yusef and Leeder point out that the decline in adequacy of coverage of Medicare rebates for medical services has increased the need for co-payments .  This means that some people in lower socio-economic groups are not seeking medical care and are not getting their prescriptions filled. This needs review.

    Whilst there is considerable distress and indeed anger expressed anecdotally by patients at the increasing ‘gap’, it is remarkable that the Australian media has barely featured this.  Out-of pocket expenses now account for almost a quarter of the total healthcare costs in Australia.

    An excellent book Making Medicare: the politics of universal health care in Australia (2003) pointed out that the Medicare system was not designed to support integrated care and management; that fee-for-service fragmented patient care and increased doctors’ incomes.  The authors, Anne-Marie Boxall and James Gillespie from the University of Sydney called for genuine policy innovation.  This is echoed by The Commonwealth Funds “International Profiles of Health Care Systems “released in Nov 2013 which shows that 75% of Australians said they wanted fundamental change or a complete rebuilding of the health system—more than any other country surveyed.

    In the USA the Society of General Internal Medicine published a report on their national Commission on Physician Payment Reform in May 2013 with 12 recommendations.  These were aimed at containing costs, improving patient care and reducing expenditures on unnecessary care.  They suggested a “blended” system over a 5 year transition period with some payments based on the fee-for-service model and other payments based on capitation or salary.

    In October 2013 two US senators (a Democrat and a Republican) proposed a gradual change to a new system with incentives for doctors to forgo fee-for-service billing.  However a 2013 survey by the AMA of US doctors showed that while 85% agreed that trying to contain costs is the responsibility of every doctor, 70% were not enthusiastic about eliminating fee-for-service re-imbursement.

    In New Zealand, a blended system (universal capitated funding, patient co-payments and targeted fee-for-service) has an emphasis on an inter-disciplinary approach particularly for patients with chronic and complex problems.  From this side of the Tasman it appears to be working well.  It shows that remuneration change can be achieved over time.  We should learn from our New Zealand colleagues.

    Fee-for-service does not provide encouragement for preventive health and wellness care. It is not appropriate in addressing new or undiagnosed problems or managing chronic illness.  In fact there are dis-incentives embedded in fee-for-service which is skewed to episodic patient care and does not encourage doctors to spend time with patients who have chronic and complex conditions.

    A significant minority of recent medical graduates want a better work–life balance and many, not only women, are opting for non-fee-for-service employment.

    A move away from fee-for-service will improve the quality of care and reduce our steadily rising total healthcare costs, including the increasing out of pocket costs.  Such a change would need to be gradual, made optional-and introduced over a number of years.  It would require the support of leaders of all healthcare professionals, politicians and the community.  As yet Australian political parties lack any real vision for meaningful health reform and a serious commitment to reduce the rising costs without compromising quality.

    Professor Kerry Goulston, Emeritus Professor of Medicine, University of Sydney

     

  • Funding withdrawal forces the Alcohol and Other Drugs Council of Australia into Administration. Guest blogger: Ian Webster AO

    The Alcohol and other Drugs Council of Australia (ADCA) has served Australia for 50 years. It has worked collaboratively – but honestly – with all governments from Menzies to Rudd. But last week the Abbott government cut off funding.

    Compared with the costs of alcohol and drugs, alcohol alone costing $36 billion per year (Foundation for Alcohol Research and Evaluation commissioned study), the annual costs of $1.5 million to run ADCA is peanuts. Despite this it has a nation-wide constituency of 350 organisational, association and individual members – almost all being front-line agencies.

    When questioned about his daughter’s drug problem on TV Prime Minister, Bob Hawke was very distressed. The drug problem of the 80s had truly struck home in a most dramatic way. He then called the Premiers and Chief Ministers to the Drug Summit. It was the first time a social crisis, other than war-time, had galvanised such action.

    The Commonwealth Minister responsible, Dr Neal Blewett, turned to ADCA to organise a week-long national meeting to set the directions for the Summit. Thus was born Australia’s multi-sector campaign to reduce the harms of all drugs – alcohol, tobacco, prescribed and illicit drugs. It set the stage for pharmacotherapy treatment, clean needle and needle-exchange programs and other measures which shaped our response to the HIV/AIDS epidemic.

    ADCA started in 1967 when parents, clergy, judges, health professionals, researchers, journalists, union leaders and those directly affected by substance abuse came together to create a national voice, to promote research, education and training on alcohol problems and the emerging illicit drug problem. Around the planning table were people such as – “Weary Dunlop” of POW fame, Sir William Refshauge – Director General of Health and formerly of Army Medical Services, Dr Nan Waddy a community psychiatrist, (later Justice) Michael Kirby and others. The current president of the Board is former Liberal MP Mal Washer.

    When the Howard Government took the hardline stance, “Tough on Drugs”, it was ADCA which led that Government into new directions: programs to divert young people from courts and prison to education and treatment; persuaded the Government to have an alternative pathway of advice in the PM’s office through the Australian National Council on Drugs; and, pushed for grants to NGOs for diversion and treatment of illicit drug users.

    When no-one took up the devastating impact of alcohol and other drug use on Aboriginal and Torres Strait Islander communities, ADCA was there. It is still there. From the very beginning Aboriginal leaders have been integral to the leadership of ADCA and to the research, education, training and resource provision for Aboriginal communities.

    As the peak body, ADCA has advised governments on policy and directions, run programs for government and done what governments have not been prepared to do – confront the commercial interests of tobacco, alcohol, pharmaceutical and illicit drug industries. ADCA’s stand has always been based on rigorous analysis, feedback from its member front-line agencies, the research it has sponsored, the data collated in its world-class resource centre and on input from professional bodies.

    Its training programs and resources have led to a viable drug and alcohol workforce. It has stimulated research from when there was none at all to now with Australia being recognised at the top end of international league tables for drug and alcohol research. ADCA’s Drug Information Service is accessed from around the world and is integrated into the research centres of excellence in addiction and drugs and alcohol in the major Australian universities. No other country has such a network of information sharing.

    More significantly ADCA is a broad church encompassing and reconciling competing views about the nature of alcohol and drug problems and how they should be dealt with.

    I am proud of its achievements and contribution to our society and I am especially proud of the ADCA Board which said to me, “We are NGO people, we know how to survive, and we can change the world!” I am sure they can with the active support and engagement of all in civil society.

     

    Emeritus Professor Ian W Webster AO

    Patron of the Alcohol and other Drug Council of Australia and Emeritus Professor of Public Health and Community Medicine at the University of NSW

     

     

     

  • A mega industry subsidy to private health insurance companies. John Menadue

     

    Many business economists continue to criticise the previous government and possibly the current one over the government subsidy of $10 billion over seven years for the auto industry. But that subsidy is small beer.

    The government subsidy to the private health insurance industry (PHI) has been $30 billion plus, over seven years. This year the government will provide $7 billion for the private health insurance industry. $5.6 billion will be in a direct subsidy to the industry. There will be another $1.4 billion in income tax foregone by the Commonwealth Government.

    That $30 billion is a mega-subsidy which the rent-seekers in the PHI industry defend against all comers. Unlike the auto industry PHI does not provide any product at all. PHI is made up of financial intermediaries that shuffle money from one place to another.

    Australia is paying an enormous price for these high cost financial intermediaries whose major attraction is to help provide wealthier people an opportunity to jump the hospital queue.

    PHI is inefficient with administrative costs about three times higher than Medicare. The subsidy has not taken pressure off public hospitals. Private gap insurance has facilitated enormous increases in specialist fees. Most importantly, the expansion of PHI progressively weakens the ability of Medicare to control costs. The evidence world-wide is clear that countries with significant PHI have high costs. The stand-out example is the US.  President Obama may have substantially achieved universal coverage, but private health insurance in the US with its lack of cost control will ultimately cripple and finally destroy his reforms. Warren Buffett has described private health insurance companies as the “tape worm” in the US health sector. Yet the Australian Government generously subsidises this industry in Australia.

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

    These enormous subsidies to PHI escape real examination. If the Australian Government wants to subsidise private hospitals it would be much more efficient to provide money directly to private hospitals as occurred in the past rather than churning the money through these high-cost financial intermediaries.

    At least the auto industry does provide broad benefits to the general manufacturing sector and the community. That could not be said of the subsidy to PHI in the health field. Worse still this subsidy undermines Medicare in the same graphic way that Warren Buffett describes.

    The subsidy to the private health insurance companies also has the same pernicious effects as government subsidies to wealthy private schools. Middle-class and articulate professional people opt out of the public school system and as a result we lose key supporters of a comprehensive public education system of high quality and available to all. The mega-subsidy to PHI not only distorts the health system but it is the wedge to divide the public from the private health systems.

    But this mega subsidy to PHI is largely ignored. Our business economists reveal their true agenda by attacking the much smaller subsidies to the auto industry.

  • When “… language itself becomes a weapon” Guest blogger: Professor Ian Webster.

    When “..language itself becomes a weapon.”[1]

    “I know they’re rorting the system; I’ve seen it in the source countries; and I’ve seen it in my own electorate.” It was a party stopper from a Member of Parliament speaking informally with a group attending a meeting about preventing suicide.

    The two words “refugee” and “asylum seeker” provoke private and public dissonance. The criminalisation, the “otherness”, in the way we speak about refugees and asylum seekers stands in stark contrast to our attempts to prevent discrimination against ‘others’ in Australia – people with disabilities, those with mental disorders, suicides and attempted suicides, and others outside the mainstream, and their families. Governments legislate to prevent discrimination and they aim to reduce the stigma of mental illness.

    But refugees and asylum seekers are another matter; they’re fair game. The contrast in these public stances – one of kindness and the other of rejection could not be more extreme.

    To suffer is to be harmed or to fear harm. The health and social systems are expected to assess a person’s risks and harms and to respond to their needs; actions endorsed overwhelmingly by society. Refugees and asylum seekers fear harm and seek protection.

    In the emergency departments of our public hospitals, in our public health services and at the front-line of primary care, treatment is provided according to a person’s needs without moral judgement. It is expected. It is a proud tradition which can’t be reconciled with the way Australia responds to the suffering of those who seek sanctuary.

    Imagine arriving at an emergency department with distressing chest pain and having to demonstrate that you were in genuine need of help, being sent elsewhere to check your credentials and to wait.

    It is an irreconcilable paradox. We expect humane and moral responses from human services and our professions, but we adopt an inhumane and immoral stance to the frightened people who arrive from distant lands on our shores.

    The misguided focus on criminalisation, mandatory detention and the tricks of excising parts of Australia to circumvent our international obligations are a subterfuge for long-term strategies.

    The language and rhetoric of the ‘war on drugs’ has become the driving idiom of the ‘war on people smugglers’.

    The former Secretary of the Departments of Defence and Primary Industries and Energy, Paul Barratt, said on Radio National’s Outsiders on 21st July, “It is a failure to reframe the political discussion, to look more broadly at the refugee issue. It is the same as we have seen in the failed war on drugs – instead of dealing with that as a social and medical problem we focus on the people who are smuggling illicit drugs and say that this is a criminal …a game politicians of both parties are assiduously trying to focus on. The problem is that there are people in desperate need who need to be resettled and there are millions of them around the world.”

    The same point was made in 1959 by William S Burroughs in the Naked Lunch, “If you want to alter or annihilate a pyramid of numbers in a serial relation, you alter or remove the bottom number. If we wish to annihilate the junk pyramid, we must start at the bottom of the pyramid: the addict in the street, and stop tilting quixotically for the higher-ups so-called, all of whom are immediately replaceable. The addict in the street who must have junk to live is the one irreplaceable factor in the junk equation. When there are no more addicts to buy junk there will be no junk traffic. As long as junk need exists, someone will service at.”

    Fiddling with the idea of criminality and imprisoning people smugglers is doomed to failure. Just as the war on ‘drug smugglers’ has failed because it does not deal with the people problems which drive the demand for substances.

    It is an unchallengeable fact that problems of population have to be dealt with at source, at the root causes. In public health it is the fence at the top of cliff compared with the ambulance at the bottom

    Put simply, the problem of refugees and asylum seekers is not the making of people smugglers but of the oppression and violence against already marginalised people in their countries of origin.

    As John Menadue and others have argued, Australia should engage with countries in our region to establish pathways which have predictable outcomes and protection rather than  policies which will escalate even more desperate attempts for asylum.

     

    Professor Ian Webster, Physician and Emeritus Professor Public Health and Community Medicine, University of NSW.

     

     


    [1] Anderson Scott, Lawrence in Arabia: War, Deceit, Imperial Folly and the Making of the Modern Middle East, Doubleday, Random House, New York, 2013, p xi.

  • Facing the future. Guest blogger: Prof. Stephen Leeder

    Facing the future in a world where black swan events change everything.

    When considering what we may be facing with a new federal government in Australia, a wise starting point would be a conversation with Nassim Nicholas Taleb, he of the Black Swan theory.

    Taleb has written extensively, using the discovery of black swans in a world that did not believe they existed as his metaphor, about the impact of unpredictable game-changing events. Such events (9/11, the tsunami that led to the Fukushima catastrophe, the internet) change the course of history but we do not see them coming.

    According to Wikipedia, Black Swan events have the following characteristics:

    1. The event is a surprise (to the observer).
    2. The event has a major effect.
    3. After the first recorded instance of the event, it is rationalized by hindsight, as if it could have been expected; that is, the relevant data were available but [not processed in a way that enabled us to prevent it].

    So perhaps the best that we can do in thinking about what we are facing is to acknowledge that the big things that will shape our history over the next 3-6 years are not predictable.  An epidemic, an earthquake, a nuclear war, a tipping point in climate change that kills all the fish, a crazy person on a rampage with a gun, the discovery of a cure for cancer or dementia – no-one can say.

    In the meantime of course there is a high measure of predictability about our daily lives.  Tony Abbott will continue to conduct his business with intelligence, discipline, an ascetic athleticism, a trenchant debater’s criticism of opponents and a demand for loyalty in his ranks.  He may well manifest a religious concern for the plight of the poor. Think three years in a seminary and then think three years as prime minister.  The differences are unlikely to be profound.  None of us really change much over time.

    Tony Abbott is on record as having little sympathy for those with mental illness, questioning whether what is commonly called mental illness is not a cute name for weakness of character.  He may have moved beyond this caricature: we shall see.

    Stopping the boats and abolishing the carbon tax are core promises.  The first will only be achieved by a more sophisticated and nuanced approach than having the Australian navy intervene.  Settling the xenophobic paranoia whipped up over this matter will take time.  Carbon has a bad history in Australia.  Maybe a Black Swan event is necessary for our nation to address climate change seriously.

    In relation to health care, little has been said to indicate what the new national policies will be.  The challenges – older people, more chronic disease, more technology, more need for national prevention programs, and more resources for general practice – are mainly managerial and only secondarily political, though of course the capacity for faulty politics to stuff things up in health care is substantial.

    The previous government embarked upon a program of change to the health care system as described recently in a blog by John Dwyer.  As he argued, however, much remains to be done to better align the provision of care with the health needs of Australians.  This is especially so in relation to the care of those who have serious and continuing illness who require care from hospitals, general practitioners, community health staff, specialists in the community and home care.  The joining up of these care modalities is best done from a community base and while progress has been made, we lag far behind international best practice.

    The preventive agenda, never enthusiastically endorsed by the conservative side of politics, has much work to do with the disastrous epidemic of obesity, diabetes and cardiovascular disease.  To address this effectively will require the engagement of the food industry, curbs on our alcohol consumption, revised plans for urban design and much more.  A retreat into assigning responsibility entirely to the individual for lifestyle behaviour and food and beverage choices is unacceptable and silly.  We have done well with a long struggle over tobacco, especially during the past six years, and much more needs to be done across portfolios to address the huge health problems associated with over- and inappropriate consumption of processed foods. Tony, are you listening please?

    We can only wait and see what Mr. Abbott et al. have in mind.  Black Swan events can change everything in a trice.

    In summary, the predictable aspects of the future can be discerned in the character of the principal players and the political context in which they are operating.  But it is the big, unpredictable events that will shape our history. Let’s hope they are good ones that create new opportunities!

     

  • No vision for the health system we need. Guest blogger Prof. John Dwyer

    In this election the Coalition has provided dollar promises for worthy projects but no new health policy initiatives while only two of note have been forthcoming from the government; a long-term investment in stem cell research and the threat to remove family tax benefits from parents who put their children and the community at risk by not immunising them. Both are laudable but of greater interest to Australians would be our politician’s plans for solving the many problems that compromise the delivery of sustainable quality health care in our country. In a   recent survey “Research Australia” found that funding for health and medical research is a higher priority for Australians than immigration policy and border control.

    The current government has not focused on health system reform but rather reform of hospital financial arrangements with the States reinforcing the inappropriate hospital centric priorities of our health system. In reality financially sustainable quality hospital services are dependent on policies that will reduce the demand for those services. This will require real system reform. The National Press Club debate with Tanya Plibersek and Peter Dutton found them in furious agreement on most issues such as hospital funding, the importance of medical research and the need to emphasise prevention.  One was left with the impression that whoever wins the election it will be “business as usual” for our health system. That’s disappointing.

    Healthcare in Australia is beset with structural inefficiencies, inappropriate models of care for our times and cost increases that are producing major inequities that deny many the care they need and are promised by Medicare. This is particularly obvious in rural communities. Their problems did not get a mention in the debate. The major barriers to real change remain the opposition from those with vested interests in maintaining the status quo and the lack of political leadership to take us on a necessarily long (ten years or more) reform journey that doesn’t sit comfortably within current short election cycles.  If we take that journey its important to have a clear vision of what an appropriately reformed healthcare system should look like?

    Australia 2023. The Commonwealth has become the single funder of our public health system. An independent statutory authority has been established to fund a number of “Regional Health Authorities” (RHAs) charged with delivering the model of care the Commonwealth (Australian people) have embraced. It is described thus; Our health care system should be characterised by its resourcing of strategies to prevent avoidable illness and provide in a timely manner to those who are ill, cost effective quality care based on an individuals need not personal financial well being.

    These RHAs are funded on a per capita and local needs basis. No longer are state boarders a barrier to efficient health care. RHAs contract with a series of providers in their region to supply patient focused integrated hospital, community and primary care services. Quality and safety data are collected and published.

    A new model of primary care has been established with a strong focus on disease prevention. Australians are encouraged to enrol in a primary health care practice. Enrolment is significant in that it signals the creation of a partnership and shared responsibilities between patient and the practice’s health professionals.

    In the new model, primary care practices work under the umbrella of Primary Health Care Organisations (PHO). These support local GP led services wherein teams of RHA funded health professionals from a variety of disciplines work collaboratively to deliver a range of services to enrolled patients. (“Integrated Primary Care”) No longer do people only visit a medical practice when they are ill, they attend to work with appropriate health professionals to help themselves and their families stay well.  There is no more efficient use of health care dollars that ensuring that children get a healthy start to life. An obese 4-year-old child is very likely to be an obese adult. Continuity of care provides us with the best chance to detect early signs of mental illness when serious problems can still be avoided. Such team-based practices are not doctor centric. Nurses and allied health professionals deliver much of the prevention program. Most doctors dissatisfied with the “turnstile medicine” approach fostered by “fee for service” payments have accepted the opportunity for payment by contract with an RHA. GPs who, after all, are highly trained specialists but were not previously paid as such, are financially much better rewarded in this system. This, plus the attractiveness of working in the team environment, is attracting more medical graduates to primary care, in 2013 very few medical graduates were interested in such careers.

    Unlike the “old fashioned” Medicare Locals of 2013, PHO’s act as central service providers for linked, local and clinically autonomous practices. They themselves offer clinical services including acute services that do not require the facilities of a hospital sparing local emergency departments from inappropriate attendances and provide associated practices with business skills, bulk purchasing, continuing education, the collection of outcome data (now a mandatory requirement), and IT services including help with the further development of now popular patient controlled electronic health records. Primary, community and hospital care provided to an individual is seamlessly integrated.

    Also important has been the major revision of clinical training in the nation’s universities. “Inter-professional learning” wherein students of Medicine, Nursing, Dentistry and the Allied Health professions spend time learning together has produced a mutual appreciation of the specific skills of each group and how combining these skills in the “Team Medicine” approach can be so much more satisfying for professionals and patients alike. How different from the professional “silo” mentality of a decade ago. Medical schools in rural based universities with programs focussed on educating students with a strong rural affiliation and a desire for a rural based career are seeing significant numbers of graduates helping rural Australians. We are, at last, becoming less dependent on overseas trained doctors, many of whom are badly needed “back home”. Medical education has been shortened without any damage to required learning and is much less focussed on hospital-based rotations with more student time spent in community settings. The old mandatory Internship program has been abandoned in favour of immediate post graduation entry into vocational training programs.

    State governments are no longer receiving Commonwealth funds to run their hospitals but they do continue to own and operate them.  Funding required is supplied through a contract with a Regional Health Authority. The services to be offered by a particular hospital will be negotiated with emphasis on the quality rather than the number of services on offer. “Role delineation” for all hospitals within a given region will avoid duplication and avoid the old system where individual hospitals tended to be islands in an ocean of health care doing there own thing. Many private hospitals offer services to RHAs

    Back to August 2013.

    Given health care is one of the top three issues of concern for Australian voters, it’s disappointing that health system reform has so far received so little attention in the election campaign.

    We could reasonably expect our politicians in the last week of the election campaign to be seriously challenged to provide a detailed and clear vision of the health reforms they would pursue to create a more equitable and cost-effective health system that will met our future needs.

    But we will almost certainly not get this. And perhaps that says as much about the demise of decent journalism as it does about our politicians.

    This article was first published in The Conversation on August 30, 2013.

     

  • Government failure in health care. John Menadue and guest blogger Ian McAuley

    We have little to see for six years of “reform” under the Rudd/Gillard Governments. What was that about ending the blame game in health? It has been mainly muddling through with hopes dashed for significant reform in many key areas

    Health costs are rising rapidly, through lack of coordination and waste. Doctors provide too many services. Vested interests are rampant Mental and Indigenous health are in a serious position. Services are being delivered less equitably. Progress has been made in prevention. However, the high expectation raised by the first Rudd Government has not been realised.

    In our view the key failures have been as follows.

    1. Primary care Australia has an obsession with hospitals. They should be the last resort rather than the first. Countries such as the UK and NZ have high quality care in part because of the philosophy underlying their healthcare arrangements, but also because they are grounded in primary care which is the most efficient and equitable way to deliver health services. It is where care is best integrated. Fee for service has encouraged ‘turnstile medicine’, excessive treatment and increasingly the corporatisation of general practice. FFS is a major barrier to reform in primary care.  FFS may be appropriate for episodic or occasional care for walk-in patients but it is not appropriate for chronic and long term care. The government should pursue contractual arrangements with general practice as an alternative to fee-for-service.  NZ pays episodic care by doctors on a FFS basis but chronic care is paid on an annualized basis. The Australian Government has failed in this key area. It is frightened of the AMA. The misnamed Medicare Locals offer considerable reform opportunity, but we are not clear if this will be realised. Are they really only re-named Divisions of General Practice? The Super Clinics also offer considerable potential, but again we are not sure about how they are performing.
    2. Workforce reform. Health is the largest and fastest growing sector of the Australian economy. Its structure and workforce are riddled with 19th Century demarcations and restrictive work practices, e.g. there are several hundred nurse practitioners in Australia when there should be thousands. We must also train assistant physicians. About 10% of normal births in Australia are delivered by midwives. In NZ it is over 90%. We don’t have a shortage of doctors so much as a misallocation of doctors. Nurses, allied health workers and ambulance staff are denied opportunities to upgrade and realise their professional potential.  Pharmacies, rather than being primarily retail enterprises, should be better integrated with primary care.  Our historical demarcation between GPs and pharmacies is seeing valuable skills going to waste. There will never be adequate delivery of service to people, particularly the aged, without radical workforce reform, mainly within primary care.
    3. Structure of health services. Health services are structured and funded around providers – medical services by doctors, pharmaceuticals through big Pharma and the Pharmacy Guild, and hospitals through State governments and private agencies. The structure of the Department of Health and Ageing reflects this provider focus rather than a focus on consumers. The Consumers Health Forum of Australia funded by the Commonwealth seems more like a marketing arm of the Department of Health and Ageing. We need to progressively change the focus to serve the community rather than providers. One possible structure would be around types of users – acute, chronic and occasional. It would help reduce the competition between different provider areas for limited resources. DOHA shows no serious interest in consumers but together with the Minister always seems to have an open door for the rent seekers like the Pharmacy Guild.
    4. Governance. The current traditional Minister/departmental model allows vested interests to dominate the debate and the allocation of resources. The public ‘conversation’ is not about health policy, but rather is about how the minister and the department respond to vested interests that set the agenda. The public is excluded. The media is heavily dependent on special interests for stories. The Reserve Bank provides a useful model of the direction in which we need to move – an independent and professional commission with economic expertise that funds and directs health services subject to government policies and guidelines. The Reserve Bank has proven to be immune from special interests and their pleading. It is respected for being professional and serving the public interest. It effectively informs the public on key issues. This does not happen in the health field. The government shows little interest in combatting the special interests.
    5. Private health insurance. The Commonwealth Government subsidy of about $7 b p.a. ($5.6b in direct subsidies and $i.4b in in income tax foregone) should be progressively eliminated and the funds used to directly fund other health services, e.g. private hospitals and dental care.  While the government, through means testing the rebates  has removed some inequities, its decision to increase the Medicare Levy Surcharge and to strengthen the “lifetime rating” incentives are weakening social inclusion, as those who are well off are corralled into their own facilities, leaving public hospitals  at risk of becoming residual services for the “indigent”. It penalises country people because there are few private hospitals in the bush. PHI is inefficient with administrative costs about three times higher than Medicare. The subsidy has not taken pressure off public hospitals. Private gap insurance has facilitated enormous increases in specialist fees. Most importantly, the expansion of PHI progressively weakens the ability of Medicare to control costs. The evidence world-wide is clear that countries with significant PHI have high costs. The stand-out example is the US.  President Obama may have substantially achieved universal coverage, but private health insurance in the US with its lack of cost control will ultimately cripple and finally destroy his reforms. Warren Buffett has described private health insurance companies as the “tape worm” in the US health sector. The Commonwealth already has a sound model of a single payer operated through the Department of Veterans Affairs – a model which retains the strong control of a single payer accountable to the community whilst allowing private practise involvement in service delivery. The Commonwealth has failed to understand the damage that PHI is already doing in Australia.
    6.  Medicare. This great ALP monument needs a review. Medicare has become a passive but efficient funding mechanism rather than the public insurer it was intended to be. After all, it is called the ‘health insurance commission’. It is now nothing of the sort. It is not even within the health portfolio. Why can’t Medicare offer policy options beyond a default available to all? Medicare has a remarkable database which should be used to highlight and inform policy concerning over and underutilisation of services across the country. Medical services should be subject to the same rigorous cost-benefit examination as pharmaceutical services. Medicare is not doing it. And the Government shows little interest
    7. Co-payments. They are a mess, with the level of government subsidies varying enormously. Medical and pharmaceutical co-payments have little in common. The safety nets are unfair and lead to abuse. We believe that people with high incomes should pay more for health services through efficient and defensible co-payments. A ‘universal service’ does not necessarily mean it should be free. Subject to a means test, there needs to be more discipline by consumers in their use of health services. Jennifer Doggett at CPD has proposed workable means-tested reforms in this area. There is no sign the Commonwealth is concerned about the problem.
    8. The Blame Game. Attempts to resolve the Commonwealth/State blame game have been largely unsuccessful and certainly expensive. We believe that the Commonwealth should offer to set up a Joint Commonwealth/State Health Commission in any state that will agree.  That Commission would be jointly funded by the Commonwealth and the State; it would also plan the delivery of health services in the State and so provide more cohesive hospital and non-hospital health services. It would be a small planning and funding commission with little or no net increase in bureaucratic overheads. Delivery of health services would continue through existing health agencies, Commonwealth, State and local government. The new Commission would be jointly appointed by the two governments and with agreed dispute resolution arrangements. In the event of a disagreement, the Commonwealth position should prevail as it would be the chief funder. Tasmania should be an obvious starter given its precarious financial position. Hopefully success in one State would then encourage other states to swallow their pride and improve their health services by cooperating with the Commonwealth. The Commonwealth dolls out more and more money to the states without fixing the blame game as Kevin Rudd said he would.
    9. The Productivity Commission should be commissioned to report on the need for long-term and meaningful reform. That was the main recommendation in the 1997 Industry Commission Report on Private Health Insurance. Enquires by ‘insiders’ such as the National Health and Hospital Reform Commission tend to be timid and designed to appease sectional interests. Just think of the audacity of that Commission proposing Medicare Select to a Labor Government We need an enquiry by professional and impartial ‘outsiders’ who are detached from present systems and structures.  The Department of Health and Ageing is incapable of doing it.

    Apart from plain packaging and increased excise on tobacco products is there any really memorable heath reform from six years of Labor governments What a disappointing story this all is for the party which created Medicare!

    This article was published in Croakey on 19 August 2013.

    Ian McAuley

    John Menadue

  • Taiwan shows the way in health insurance. John Menadue

    I have spoken and written many times about the inefficiency and inequity of the taxpayer subsidy of $3.5 billion annually to the private health insurance funds in Australia. These funds favour the wealthy; enable some people to jump to the top of the hospital queue; they have administrative costs  three times those of Medicare; they weaken Medicare’s ability to control costs and through gap insurance they have facilitated the largest increase in specialists’ fees in a quarter of a century in Australia.

    They have not taken the pressure of public hospitals .In fact they have made it worse by helping private hospitals pay vastly higher salaries to bid specialists away from public hospitals.

    Yet the vested interests and private sector ideologues want to extend PHI and take us down the disastrous US path.

    Taiwan however has shown the best way to go. It is so confident and proud of what it has achieved that it has taken advertisements in the latest edition of Foreign Affairs. Taiwan is about the same size as Australia with a developed capitalist economy.

    The Taiwan Government has consolidated all health insurance into a single payer. The plan has improved the quality of health care with rising life expectancies and falling infant mortality rates. The public rates the success of the Taiwan Health Service at 80%.

    Like all health systems, Taiwan has faced rising costs with new technology, new drugs and ageing, but it has contained costs effectively. Total health expenditure in Taiwan is only 6.5% of GDP, much lower than the median for OECD countries and Australia at 9% of GDP.

    Based on the core principles of equity, quality and efficiency, Taiwan is showing that a single payer is the key to a top-class health service and is the best means to control costs. The worst course for Australia to take would be to encourage the proliferation of taxpayer subsidised PHI funds that fail on both efficiency and equity grounds. But if the PHI industry has its way Medicare will be under threat and we will start journeying down the US path of multiple private health insurance funds that are unable to control costs and ensure equity.

    John Menadue

  • The personal, public and social costs of mistakes in health. John Menadue

    After examining more than 14,000 hospital admissions in NSW and SA, the national cost of harm from avoidable  adverse events (mistakes) in our hospitals was estimated at  just over$2 b pa in 1995/96. This study was undertaken by the Task Force on Quality of Australian Health Care which reported to Health Minister Carmen Lawrence.  51% of all  mistakes were estimated to be avoidable and would represent nearly 500,000 preventable hospital bed days per year. The task force commented that these mistakes “are a problem that overshadows all others in the health sector”

    Professor Richardson and Dr McKie from the Centre for Health Economics at Monash University in 2008 commented ‘preventable deaths … occur at a rate equivalent to a Bali bombing every three days’. Deaths, losses and costs are staggering.

    In 2011 Professor Richardson told the Melbourne Age that the issue of adverse events in the Australian health system should dominate all others. However it would be closer to the truth to describe it as Australia’s best kept secret”

    Ministers, clinicians and administrators all prefer to brush it under the carpet.

    If we take the $2 billion cost in 1995/96, project it forward, include non-hospital mistakes as well as the cost to families and individuals denied an income earner, or the effects of disability, the cost is close to $5 billion p.a. I think this is a very conservative estimate

    Despite tens of millions of dollars spent on inquiries and committees; no discernible progress has been made in improving quality and enhancing safety. COAG established the Australian Commission on Safety and Quality in Health Care in 2006 but improvements are hard to find. “Insiders “are still in charge. Asking “insiders “to keep reviewing our health sector is a major reason for the lack of success in health reform. To paraphrase Rudyard Kipling “What do they know of health who only health know”? A lot could be learned about safety from other industries e.g. aviation.

    Professor Jeffrey Braithwaite, Faculty of Medicine, University of New South Wales  recently commented to me …”No one thinks that we are reducing the levels in rates  or absolute numbers of adverse events much at all despite much effort” Regular newspaper stories confirm the continuing problem. But there is little analysis of the system problems that are at the heart of the malaise. Some hospitals are not safe and should be closed. Others require role delineation to ensure a sufficient scale for efficient and safe operation. The lack of effective action by the Commonwealth and State Governments is scandalous.

    In many of our hospitals managerial governance and clinical governance run in parallel but not together. It is an absurd way to run often quite large enterprises. Some hospitals are run more like a cottage enterprise, with clinicians coming and going from their private practises. Mandatory disclosures and compulsory hospital accreditation, as well as transparency, are urgent requirements.

    Good people are caught up in a bad system. The aviation industry has shown that culture is a very important determinant of safety. In aviation, the question is asked ‘what went wrong and how do we find a systemic solution?’ Unfortunately in health, the question often is ‘what went wrong and who can we blame?’

    John Menadue

     

     

  • Doctors scared Maggie Thatcher. John Menadue

    Excuse me for dropping names but at a round table discussion with Maggie Thatcher in the late 1980s that I attended in Sydney she was asked “Now that you have fixed the work practices of the miners and the printers in the United Kingdom what are you going to do about the restrictive work practices of the doctors?” She replied. “I will leave that to the last session in my last term as Prime Minister” She never got around to it. And neither have we in Australia.

    The politically partisan Business Council of Australia has been campaigning for increased productivity through labour market reform. But it does not mention the health sector which has the most archaic work practices in the country.  They are a major economic burden and cost.  Based on Productivity Commission figures six years ago I estimated that workforce reform could save $3b per annum. I think that is a very conservative estimate.

    The Health sector is rife with demarcations and restrictive work practices. The waterfront 20 years ago was a model of efficiency compared with the work practices today in the health sector. Health is our largest industry, with about 600,000 employees or 7% of our civilian workforce. About two thirds of health expenditure is labour cost. More efficient workforce practices are essential. The problems arise not because of individual failure, but because of unwillingness to address the structural inefficiencies. Archaic work practices deny career opportunities, particularly for nurses and allied health workers.

    We need role-renewal and the creation of new types of health workers. We need up-skilling, multi-skilling, broad-banding and teamwork. Blue-collar workers have been fair game for workforce reform, but not professionals in health and the law. By comparison with countries like New Zealand, Canada, USA and the UK, we don’t have so much a shortage of doctors but a refusal of doctors to allow other qualified people to share their territory. The specialist colleges protect their territory in the name of quality of care. Only about 10% of normal births in Australia are delivered by midwives and 90% by obstetricians. In the UK midwives deliver 50% and in New Zealand it is 90%. We have only a few hundred nurse practitioners when we should have thousands. Many specialists treat public hospitals like a cottage industry in 19th Century England, coming and going at their convenience.

    Former Health Minister Nicola Roxon has shown that the Medical Benefit Schedule can be a lever to promote workforce changes. She commendably pushed the door slightly open for midwives and nurse practitioners. But the opportunities for much wider reform are enormous, There is a whole range of necessary changes e.g. nurses undertaking greater responsibility for prescribing, diagnosis and triage in hospitals, nurse anaesthetist complementing and  substituting for medically qualified anaesthetists, assistants in almost all specialist disciplines, enrolled nurses taking on some of the tasks presently performed by registered nurses, midwives substituting for obstetricians, practise nurses undertaking some of the work currently performed by GP’s. Pharmacies should provide basic health care as well as being shop keepers dolling out drugs. What about a nurse practioners in many of our 5000 community pharmacies? What about assistant physicians?  The highly skilled and experienced ambulance officers should be fully integrated into health services and expand their role. Why can’t they make home visits as they do in France?

    Many doctors but not all will resist in order protecting their territory. That resistance will be all in the name of patient safety

    There have been numerous enquiries on workforce reform including by the Productivity Commission and COAG but little progress has been made.

    There are enormous dividends in patient care and reduced costs in a thorough overhaul and change in work practices in health in Australia. The opposition will come from powerful providers as Maggie Thatcher knew very well.

    John Menadue

     

  • Catholic Health still leaves the impression that it wants to destroy Medicare. Joint Blog: John Menadue and Ian McAuley

    On Mar 14 John Menadue wrote, on this blog site “Does Catholic really want to destroy Medicare”.  Martin Laverty responded on 29 May.

    This is a further response by Ian McAuley and John Menadue. Together we have written many joint articles on health policy. See publish.pearlsandirritations.com.

    Catholic Health’s response through Martin Laverty identifies two problems with our present health care funding – inequities in health delivery and outcomes, and fragmentation of funding and care between Commonwealth and State Governments.

    Catholics Health’s proposed solutions to the two problems  are well off the mark, however, and their response – tailored health plans for the most disadvantaged and adoption of “Medicare Select” does not address the core issue identified in the original article “Does Catholic Health really want destroy Medicare?”  The core issue is avoided in the Catholic Health response. That issue is that if the 50% of Australians who have private health insurance took up the option under Medicare Select to transfer their $30 billion  plus entitlements  per annum in Medicare to their private health insurance it would be goodnight Medicare There is no doubt about it. Even a withdrawal of a lesser amount would still be crippling.

    It is understandable that Catholic Health should be concerned with the most disadvantaged. Martin Laverty must be well aware of what has happened in the USA, where hospitals under the umbrella of the Catholic Church, such as those nominally operated by the Sisters of Mercy, have become big profit-making enterprises with little if any connection to their original mission. http://livingwithmcl.com/BitterPill.pdf

    But turning over Catholic hospitals and other facilities to provide care for the “most disadvantaged” www.theage.com.au/national/catholic-health-plan-for-disadvantaged-20090818-ep4u.html is fraught with the curse of unintended consequences.

    There is an obvious appeal in directing such services to those most in need, but a system  reserved for the poor, or the “indigent” to use the US term, degenerates into a charity ward system. Catholic hospitals would become the hospitals for “losers”, for those without voice, and without the political influence to pressure governments to provide public facilities and public funding for all. The poorly funded US “Medicaid” provides a strong lesson we should heed.

    Whatever our means, we can all retain our dignity when we come through the same door to the same hospital or clinic.  There is merit, also if we pay for those facilities according to our means. Means-tested co-payments are a far more dignified way of achieving equity than provision of separate facilities. Perhaps Catholic Health can take guidance from Pope Benedict’s encyclical letter Caritas in Veritae  http://www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate_en.html  which stresses the virtue of civic solidarity, rather than segregation of society along a division between a supposedly self-reliant class and an indigent underclass.

    We have examined Medicare Select each way and every way and are still at a loss to understand Catholic Health’s enthusiasm for it – a proposal which has far more to do with entrenching high-cost financial intermediaries in the health system than with providing care or meaningful choice.  As stressed in  the original article of May14, it involves churning funds once through the tax system and then again through private insurers, offering “choice” when we have hardly any idea what our future health care needs will be.

    There is a strange contradiction in Catholic Health’s argument. It puts the case for a single funder – a strong case in our opinion – and then in an unexplained twist uses it to support a proposal where funding would pass through a plethora of financial intermediaries.

    The problem with Medicare Select is not that it’s “too radical” as suggested by Martin Laverty. Rather, it builds on a method of health-care funding, private insurance, that has demonstrably failed to contain costs and is inequitable. Just look at the disaster in the US.

    In defence of Medicare Select, Catholic Health refers to the Netherlands system, which, it is claimed, is operating successfully. The “success” of the Netherlands system has become an article of faith among those who see every retreat from public funding a success, regardless of the outcome.

    In fact, since the Netherlands compulsory private insurance system was introduced in 2006, health care expenditure has risen sharply – from 9.7 per cent of GDP in 2006 to 12.0 per cent of GDP in 2010 (the Netherlands Government is yet to provide later figures to the OECD). http://www.oecd-ilibrary.org/social-issues-migration-health/total-expenditure-on-health_20758480-table1.  That’s the second-highest in the OECD – only the USA, where private insurance has had a longer period to wreak its damage, is expenditure higher, at 17.6 per cent of GDP.  To put Netherlands’ rise into perspective, if our health expenditure were to rise by 2.3 per cent of GDP we would be outlaying another $35 billion a year. That would be a high price to pay for expanded overheads and a dubious “choice”.

    Evaluations of Netherlands post “reform” health care arrangements point to anything but success. An evaluation published in the Journal of Health Politics and Law found opposition from both the public and health care providers, a failure by insurers to negotiate with providers (a common problem when providers can play off insurers against one another), and poor profitability among insurers, even though their premiums were rising steeply.  Another evaluation in the same journal found that while the new private insurance model offered more choice of insurers, the former Bismarkian system, to which 60 per cent of Dutch had belonged, offered more choice of providers. Kieke Okma of Leuven Catholic University says of the “reforms”:

    Originally presented as a means to help contain costs, the government now seems to see competition in health care as a goal by itself. While earlier reform documents emphasize goals like improved quality of care, innovation, efficiency, cost-effectiveness, and patient satisfaction, those elements receive less attention as competition has taken the front seat.

    If Catholic Health is seeking a European model of health care, it may turn its attention to Sweden, a country with strong traditions of Christianity and social solidarity, where the right-leaning Government has now wisely maintained the government as the single health insurer, but has introduced compulsory (and uninsurable) patient co-payments, and has encouraged the private sector to expand into service provision, including operation of private hospitals.

    It’s not hard to see our Catholic hospitals fitting into such a model – a model which would secure their strong role in the community, and allow them to provide their distinctive services – not just to those who can afford private insurance, as is the case now, and not just to the poor, as is their other vision, but to all Australians

    But Martin Laverty proposes something fundamentally different. Does the Stewardship Board of Catholic Health really want to go down the path he proposes?

    John Menadue and Ian McAuley

    References (not available on line)

    Pauline Vaillancourt Rosenau, University of Texas, Houston and Christiaan J. Lako, Radboud University Nijmegen, the Netherlands “An Experiment with Regulated Competition and Individual Mandates for Universal Health Care: The New Dutch Health Insurance System” Journal of Health Politics and Law  Vol. 33, No. 6, December 2008

     

    Kieke G. H. Okma, Catholic University, Leuven, and New York University “Learning and Mislearning across Borders: What Can We (Not) Learn from the 2006 Health Care Reform in the Netherlands?” Commentary on Rosenau and Lako Journal of Health Politics and Law Vol. 33, No. 6, December 2008

     

    The Economist (Schumpeter column) “A hospital case: Sweden is leading the world in allowing private companies to run public institutions” The Economist 18 May 2013

  • Does Catholic Health really want to destroy Medicare? A Catholic Health response by CEO Martin Laverty

    On May 14, I wrote a blog ‘Does Catholic Health really want to destroy Medicare? Martin Laverty, CEO of Catholic Health, responds as a guest blogger.

    Catholic Health Australia (CHA) commissioned the National Centre for Social and Economic Modelling (NATSEM) in 2010 to provide a contemporary assessment of the link between a person’s health and their personal wealth.  NATSEM found 65 per cent of Australians in the lowest income group lived with a long-term health problem, compared with just 15 per cent of those in the highest income group.

    In 2012, CHA again tasked NATSEM to calculate the cost of this divide in health outcomes between the wealthy and wealth-less. NATSEM found 60,000 hospital separations costing $2.3 billion, 5.5 million Medicare transactions costing $273 million, and 5.3 million Pharmaceutical Benefit Scheme scripts costing $184.5 million annually could be avoided if Australians had more equal health outcomes.

    These NATSEM cost calculations are assumption-based models. The reality would likely stray from the projections of health economists. The point of the exercise was to provoke a debate about the need for action on health inequity, not just for reasons of social justice, but also to promote efficient use of constrained health funding.  The findings of the exercise also raised some doubts about Medicare’s current ability to best meet the health care needs of the poorest within our community.

    CHA’s interest in health equity and more efficient use of health funding is rooted in the Church’s reason for being in health care. The Church is in health care to provide healing to the sick but with a specific focus to address the needs of the poor, and to advocate for health system improvement to that end.

    When the Bennett report of the Kevin Rudd-established Health and Hospitals Reform Commission was released, it floated the idea of Medicare Select. The report suggested health care plans could be developed to better coordinate interaction of individuals with health care services. The term the commission’s report used for this proposal was Medicare Select.

    In pursuit of better access to health care services for the most socioeconomically disadvantaged within our community, CHA flagged interest in being involved in designing specific health care plans built around the needs of the most underserved Australians. We suggested if Government proceeded in this direction, we’d consider ourselves setting up a health care plan designed specifically for low-income Australians to get better access to health care than Medicare currently affords.

    With the Health and Hospitals Reform Commission report now fading in people’s memories, CHA has taken regular opportunities over recent years to re-float this idea of tailored health care plans for the most disadvantaged Australians. We’ve done so because we see low-income Australians often missing out on health and dental care access, and living with the adverse consequences that entails.

    The most recent re-floating of our interest in Medicare Select came when CHA appeared before the Senate Inquiry into the $1.6 billion cut in Commonwealth funding to public hospitals.

    In pointing out to the Inquiry what the cuts would mean for the 2,700 public beds operated by Catholic hospitals nationally, CHA reminded the Senate committee of the need for further health reform. CHA promoted the role of a single funder of health services to end cost-shifting between governments. CHA also pointed to the potential for Medicare Select health care plans to again be considered for the new discipline they would bring to health expenditure management.

    In response to the promotion of further policy reform, CHA copped a bit of flak (including Does Catholic Health really want to destroy Medicare?). The flak was not unexpected, as many have lined up to reject Medicare Select as too radical a departure, without fully exploring its good and bad points.

    Rather than having multiple layers of government competing to offload responsibility for funding a patient’s treatment to another tier of government, Australia would benefit from adopting a single funding system.

    In our 2013 Health Policy Blueprint , CHA proposed two possible mechanisms to achieve single national responsibility for funding of health services.

    The first option is regional health authorities, publicly funded on a population basis and responsible for purchasing care for people in their regions and for reducing health inequalities. The second possible option would be to further develop Medicare Select, which has many similarities to the system currently operating successfully in the Netherlands.

    Both models were briefly considered in the Bennett report of the National Health and Hospitals Reform Commission. They’ve since disappeared from public discourse.

    While Australia continues to have unacceptable gaps in health outcomes and with the blame-game between Commonwealth and state governments on hospital funding raging once more, the next steps of health reform need to find the way back into national debate. Health policy experts should in fact be welcoming debate about what comes next in health reform, rather than seeking to shut it down.

    Martin Laverty is the CEO of Catholic Health Australia. This blog is his response to “Does Catholic Health really want to destroy Medicare?” published on May 14.

  • Does Catholic Health really want to destroy Medicare? John Menadue

    In his submission to the Senate Standing Committee on Finance and Public Administration on February 15, 2013 Martin Laverty, the CEO of Catholic Health wrote.” Another option (to achieve a single funder in health) would be to embrace the Medicare Select proposal put forward by the National Health and Hospital Reform Commission. Medicare Select would enable Australians to choose a health and hospital plan best suited to their needs. They would be able to be insured by Medicare or instead opt out to be insured by a private health insurer or one operated by a non-profit organization…”

    Medicare Select envisages all Australians being enrolled in a Government funded plan, but with the opportunity of opting out and moving to a selected plan to which Government funding would be directed on a capitation basis, and which could involve extra services funded by private insurers.  The ‘plans’ would be managed by private corporations or not-for-profits.

    In effect this would be a 100% PHI rebate – not 30%, not 40% that we have at present, but 100%.

    Forty seven percent of Australians have private hospital insurance coverage and 55% have private general treatment coverage.If those who presently hold private health insurance(about 50%) opted for Medicare Select, over $30b presently spent by governments would be channelled through the high cost financial intermediaries, the Private Health Insurance funds. It would be goodnight Medicare.  Make no mistake about it, Medicare Select is designed to cripple and displace Medicare and give a widened role for PHI.

    A colleague of mine Ian McAuley has highlighted major problems with Medicare Select.  He notes that it appears first to have been designed to secure a privileged place for private insurers who would impose a bureaucratic overhead on healthcare without adding value.’ Second, it is based on a misunderstanding of “choice” for we cannot know what our future healthcare needs will be. Third it is likely to result in cost escalation to the benefit of providers; this is an inevitable outcome of the intrinsic “moral hazard” associated with all insurance. And fourth, it makes it easy for a Government to redefine Medicare, the Government program, as a bare bones program for the poor or indigent, thus establishing a two-tier health system”

    Medicare Select is not an “option” being floated only by Martin Laverty .It is being insinuated as a firm proposal of the NHHRC which was chaired by a senior executive of BUPA. The PHI lobby is continually extolling the virtues of Medicare Select which would greatly expand their business and cripple Medicare. It would take us further down the path of private health insurance which is destroying equitable and efficient health care in the US. Warren Buffett has described private health insurance as the “tape worm “in the US health system.

    But that seems to be the path that Martin Laverty wants to take Catholic Health and destroy Medicare in the process

    Is that what the Stewardship Board of Catholic Health want in “advancing the healing ministry of Christ” as set out in its Charter? , This not an academic issue particularly as Catholic Health is the largest provider of non-government health care in the country with 19 000 aged care beds, 9,500 beds in 75 health care facilities, 8 dedicated hospitals and palliatives care facilities and 35,000 employees

    The Medicare Select option is a long way from the “option for the poor” which the Catholic Church espouses. It is an option to advantage the rich.

    (See a speech I gave on this and particularly the damage PHI is doing and will continue to do. ..:” Now is the time for all good people to come to the aid of Medicare”… October 2009 on my web) publish.pearlsandirritations.com/health/html_files/VHA.html