Category: Health

  • Stephen Leeder. Electronic medical records for patients!

    Australia embarked on an ambitious journey when it committed to developing a medical record that would go with each patient to whatever health care provider they consulted.  “The eHealth record system — launched in June 2012 — is an electronic record for a patient that contains a summary of their health information.” http://www.nehta.gov.au/our-work/pcehr

    This personally-controlled version, known as PCEHR, was rather akin to establishing a colony on Mars – maybe best to get to the moon first. The enterprise was reviewed in depth last year after faltering.

    The new federal government maintains a modest investment in the project.  According to ITNews : http://www.itnews.com.au/News/385351,budget-2014-what-is-funded-and-what-is-cut.aspx#ixzz33B822dHE  “$140.6 million in 2014-15 has been allocated in the federal budget for the continued operation of the PCEHR system [now to be known as MyHR], while the Government finalises its response to the review of the system.”

    As Sally Glass, a leading health and IT expert describes in eHealthSpace, a Website devoted to health-related IT, http://ehealthspace.org/news/pcehr-review-recommends-opt-out the review contains 38 recommendations.  These proposals illustrate the complexity of the personal electronic record initiative. There is no low-hanging fruit.  The previous governing agency for the personal record is to be replaced by the Australian Commission for Electronic Health (ACeH) that would answer directly to the Standing Council on Health (SCoH).

    In describing Minister Dutton’s comments about IT and health at a recent conference, Glass writes that “The Minister referred to … strengthened governance of eHealth including “crystal clear” accountabilities; [an] opt-out model (which the Minister personally supports); improving clinical usability of the record to increase clinician acceptance and adoption; and how the [MyHR] is structured to hold personal, sensitive information.”

    That is all good but the impeding complexities remain daunting.  Consider, for example, the need for MyHR to use a nationally-uniform set of names for medications. That may sound easy, but given the vast array of prescription and non-prescription drugs, it isn’t.  And then there is the question of incentives to use MyHealth.  How much will doctors be paid to use it and what happens if they don’t?

    No-one should ever have imagined that introducing a personally-controlled electronic medical record would be simple.  So many jurisdictions have an interest in being part of the action. So many different health service providers – hospital doctors, allied health professionals, community based practitioners to name several – would reasonably expect to have access to such a record and to be able to add to it details of their care.  The IT environment of each provider at present is different and MyHealth must interface with each.  The ‘personally-controlled’ aspect means that concerns about privacy and confidentiality – what a person may wish to have in his or her record and what differential access the or she may wish to extend to different providers – are all legitimate and must be built into the functionality of the record.

    The personally-controlled record could even be a health hazard.  Trisha Greenhalgh, a professor of primary health care interested in the sociology of health system changes and who works at Barts and the London School of Medicine and Dentistry, comments:

    “Failed” electronic personal record programs are common and even “successful” initiatives are typically plagued by delays, escalation of costs, scope creep, and technical glitches, including catastrophic system crashes. [By] distracting staff into data entry and standardized protocols, computerized records jeopardize the human side of medicine and nursing and distributed record systems bring unanticipated hazards, including (but not limited to) the insidious growth of the surveillance society.”

    There are simpler models of electronic records that we might turn to first,  the equivalent of putting a man on the moon rather than a family on Mars.  The personally-controlled version contrasts with much simpler electronic records that are held by, say, a hospital or a general practitioner, for patients who consult them.  In both places there will be an institutional IT system into which the record is automatically integrated.  The patient does not control or own that record and does not determine which health professional ads what or sees what is in it.  The safety of confidentiality, long practised for paper-based institutional paper records, can be readily extended to electronic records.

    The logic of starting not with the entire population but inside systems of health of a much smaller size, where managerial control is feasible and electronic records are part of an institutional IT system, such as in the Kaiser Permanente managed care system in California,  suggests an alternate pathway.  These have not proved easy or cheap to establish, but now, in the case of Kaiser, all six million enrolled members have a record that enables coordinated care, from general practice through the hospital and back into the community, includes drugs and tests and enables prevention.  Enhanced communications using secure messaging allow community members rapid and effective access to carers.  The medical centres are paperless.  We are about 20 years behind such achievements.

    In pursuing the highly desirable goal of everyone having an electronic medical record we may need to proceed bit by bit (or byte by byte).  If investment in IT systems for hospitals progressed effectively, that would be an excellent beginning.  Much is happening there, as in general practice, and efforts to bring these different systems together may well be rewarded with the achievement of personal medical records almost as a spin-off.  That may be the best investment proposition.

    Stephen Leeder is a professor of public health and community medicine at the University of Sydney.

     

  • Michael Keating. Part 5. Federalism

    The Government’s Commission of Audit, which preceded this Budget, recommended that policy and service delivery should as far as practicable be the responsibility of the level of government closest to the people receiving those services, and that each level of government should be sovereign in its own sphere, with minimal duplication between the Commonwealth and the States. The Government for its part has insisted that it does not run schools or hospitals and that the States are ultimately responsible for them and what happens to them.

    This conception of the Australian Federation with its emphasis on States’ rights and separate roles and responsibilities is of course not new. Malcolm Fraser enunciated it before he became Prime Minister, and its supporters insist that it was what the framers of our Constitution intended.

    Furthermore, there is considerable intellectual attraction in separate roles and responsibilities for each sovereign government. It should enhance democratic accountability and help improve efficiency if the buck can no longer be passed backwards and forwards between the two levels of government. But why then has our Federation evolved in favour of greater national involvement in the provision of services that were originally the sole responsibilities of the States? The Commission of Audit seems to believe that centralism can and should be reversed, but I will argue below that there are good reasons why the national government has become more engaged in what were originally the prerogatives of the States.  Consequently, although there is probably some modest scope for redefining governments’ respective roles and responsibilities and reducing duplication, we will be best served by preserving the core features of our national system.

    In my view there are three key reasons for the pre-eminence of the national government. First, a fundamental reason why the States agreed to federate was to remove tariffs as a first step towards the creation of a national market. But now that we have a national market and indeed are facing global competition, businesses want common standards and licensing across a wide variety of fields; for example, everything from rail gauges, regulation of heavy road transport, company law and national competition, to food standards and the recognition of qualifications.

    Second, the responsibilities of government have grown. At the time of Federation pensions did not exist, but the Australian government now has constitutional responsibility for income support, including subsidising critical needs such as medical services, pharmaceuticals, and rental housing. Equally since World War II the Australian government has been expected to manage the macro-economy to ensure full employment and reasonable price stability.  Allied to this the Australian government also has responsibility for population policy, especially through migration, and for the growth in productivity and workforce participation which together determine the overall growth of the economy.

    However, these various national functions and responsibilities are not self contained. Today the various functions of government are heavily inter-related in a way that was much less true one hundred years ago, when we were all much less closely connected. For example, productivity is heavily dependent on the skills of the workforce, but these skills are in turn dependent on the quality of the education and training systems of the States. It is simply not possible for the Australian government to meet its responsibilities while being unconcerned about the effectiveness of various State government services.

    The third and final reason for national government pre-eminence is of course the national government’s domination of taxation, widely described as ‘vertical fiscal imbalance’ or VFI. Paul Keating called VFI the glue that holds our nation together, but for the States and the champions of States’ Rights, VFI is regularly trotted out as the root cause of centraliam. In the past the national government has passed payroll tax back to the States, and more recently they receive all the proceeds of the GST, but it seems unlikely that either of these taxes will ever be changed by so much as to make the States financially self-sufficient.

    In that case the removal of VFI would require that the States have access to the income tax. Legally there is nothing to stop them doing that now, but they have never taken up the opportunity, and indeed there are very important efficiency gains in only one government being responsible for administering any particular tax.  So the alternative is for the Australian government to raise the income tax and then to share the proceeds with the States. But why would sharing a tax result in clearer lines of responsibility than sharing responsibility for other functions of government which require expenditures? There would still be the same arguments about who should get how much and whether the States have adequate revenue. Alternatively if the States were allowed to add a surcharge to the Commonwealth tax, then there is the risk that the Commonwealth’s independent use of taxation policy for macro-economic policy would be compromised.

    In short it is not surprising that proposals to return to the past and increase State rights have got nowhere over a very long time. The truth is that a form of power sharing which we call ‘cooperative federalism’ is the only realistic way of managing inter-governmental relations. In Australia, for good or for ill, we have these two levels of government (plus local government), and power will inevitably need to be shared for a variety of functions where both have a legitimate interest. By contrast one cannot help being suspicious about the Commission of Audit proposals and whether their real intention is to provide a fig-leaf for the Commission’s smaller government agenda, with little or no concern for the impact on the availability and quality of publicly funded services.

    Instead a more productive discussion, than endless repetition of State’s Rights, would be to formulate better arrangements to guide the necessary future power sharing between the Australian Government and the States. To their credit that was what the Hawke, Keating and Rudd Governments were attempting to do with some success through COAG.

     

  • Michael Keating. Part 3. An Alternative and Better Budget Structure

    In two previous blogs I have argued that the Government’s Budget broadly got the economics right, but it failed the test of fairness and it attacks our traditional values. In that case, however, what would the alternative Budget structure look like?

    Fundamentally the Budget should have relied much more on taxation and less on expenditure cutting. As I have already shown it is low revenue that created our fiscal problem and not excessive expenditure.  However, increasing taxation will be easier if it can be shown that expenditure has been properly reviewed and screwed down tightly, and so I will first consider the opportunities for expenditure reduction using a different approach to the Government’s Budget and its Commission of Audit.

    Expenditure reduction choices

    There are three broad strategies for expenditure reduction:

    • Tightening eligibility for payments or services
    • More user pays
    • Improving the cost efficiency and effectiveness of services

    In my view the Budget relies too heavily on the first two strategies and not enough on the third. The difficulty is that the Hawke/Keating governments relied heavily on tighter targeting of welfare payments and increased use of user pays, and that cupboard is now bare or nearly bare.

    Indeed Australia now has by far the most efficient income support system in the world. Along with Denmark, Australia redistributes more than any other country to the poorest 20 per cent of the population, but because the Danish tax-transfer system is much less tightly targeted than ours, Denmark taxes and spends 80 per cent more relative to average household pre-tax income than Australia does to achieve the same amount of redistribution. It is ironic that further tightening in Australia now risks increasing the already very high effective marginal tax payments for those people receiving income support, but this is what is advocated by people who argue for greater targeting and then want to use the savings to further reduce the already much lower marginal tax rates for high income people.

    A similar situation applies for user charging. The present level of university fees supported by the delayed payment arrangements under HECS were carefully calibrated to ensure that there was not much impact on student enrolments. The overall rate of return on a university degree prior to this budget was sufficient to make it worth having. By comparison a recent study of universities across the US found that the life-time return on an Arts/Humanities degree from about  a third of the US universities was insufficient to justify the cost of studying. The students would have been better off if they had started working at age 18 and invested in Treasury Bills. In another instance the salary for a Science graduate teaching in a public high school in the US was similarly insufficient for him to repay his student loan from the bank several years after graduating.

    In the case of health, consumer co-payments already account for 12 per cent of the cost of medical services, 16 per cent of PBS medicines, 56 per cent for dental services, and 69 per cent for aids and appliances. Recent OECD data show that among the rich countries the only countries where consumer co-payments are higher are Switzerland and the US. So given our already high level of co-payments, it might be doubted that the further increases proposed by the Budget will achieve any reduction in unnecessary visits to the doctor; rather the risk is of Australia deteriorating towards a US style standard of access to health care.

    On the other hand, and notwithstanding the familiar bleating from the State Premiers, I consider that there are still opportunities for improving the cost effectiveness of publicly funded services, such as school education, health care, and infrastructure, and achieving significant savings. First, according to the latest available data, the real public funding per student in primary government schools increased by 31 per cent between 1999 and 2011, while there was a 20 per cent increase for government high schools. There is no evidence that this increase in funding (and the further increase since 2011) has led to improved student results. Instead the key objectives of the Gonski reforms should be capable of being realised by redeployment of funding within the education system. Indeed the priority should be to transfer funding from schools to vocational education and training (VET) which experienced a 25 per cent reduction in real funding per annual hour between 1999 and 2011, and has now had its funding further cut in this Budget. It is VET which gives people a second chance, often after the school system has failed them, and despite all the additional funds lavished on schools.

    Second, in the case of the health system there are huge differences between hospitals and even within hospitals in the cost of providing the same forms of care and treatment. The introduction of case-mix funding so that funding is based on the average efficient cost of each service is meant to enable hospitals to realise savings. Beyond hospitals more investment in prevention through better public health measures would help lower the costs in the long run, and new approaches to funding and coordinating the care of chronically ill people would improve their quality of life and help keep them out of hospital and lower costs. The Rudd Labor Government had started these types of reforms, but their future is now most uncertain.

    Third, Australia has a long history of over-investment in infrastructure with the costs exceeding the benefits, and under-charging the beneficiaries so that they demand more and more. It is therefore most reprehensible that this Budget prides itself that new spending decisions will add $58 billion to total infrastructure investment, when none of the projects announced have been ticked off by Infrastructure Australia as having completed proper cost-benefit appraisals; probably because a great deal of this investment never could pass any proper evaluation. And this from a Government that was properly critical of the former government and its approach to the NBN.  Clearly this improper use of the nation’s savings is not an acceptable reason for the other Budget cuts, and the increase in petrol excise should not be tied to an increase in uneconomic road funding.

    Clearly the opportunities for savings in major spending areas such as these should be pursued by the States before they all line up to increase the GST. But in the long run a sustainable fiscal strategy for Australia is bound to require an increase in taxation if we want to preserve those aspects of our society and social system that we value. The scope for increasing taxation is discussed in the next blog.

  • Jennifer Doggett. Budget 2014 – Primary Health Care

    While some commentators are calling this Budget ‘The end of universal health care’ others are seeing some opportunities to improve health system performance, in particular through better collaborations with state-funded health services and programs.

    The most high profile Budget measures in the primary health care sector are the introduction of new co-payments for bulk billed GP services and increased charges for related tests and medicines.  There will be caps for high level users and some support provided for people on low incomes but overall these changes will result in higher out-of-pocket costs for consumers.

    These payments have been widely criticised by consumer groups, health economists, service providers and other stakeholders.

    These criticisms have focused on the hardship the increased costs will cause to disadvantaged patients on low incomes as well as their impact on the quality and cost-effectiveness of primary health care.  Many experts have warned that there could be an increase in demand for (much more expensive) hospital emergency department services as consumers try to avoid the co-payment.  The Government’s answer to this is to allow the States, for the first time since the introduction of Medicare, to charge a payment for emergency department presentations. However, State Governments thus far appear reluctant to introduce these charges.

    Another concern about the impact of the co-payments is that it will undermine efforts to improve preventive health services and continuity of care for people with (or at risk of) chronic conditions.   This is partly because the payments will create a disincentive for consumers to access care early and also because of the likely shift of some patients to public hospitals. This will complicate already complex care pathways with an increase in the number of patients receiving care across the community/hospital interface.  It is also likely to result in care that is much less efficient, both from a ‘health system’ and consumer standpoint.

    In relation to Medicare Locals (MLs), the Government is responding to the findings of the Horvath Review which recommended consolidation of existing MLs into larger Primary Care Networks.  While the Review was broadly positive about the need for some coordination primary health care infrastructure bodies, the Government (in rhetoric at least) has moved to clearly differentiate itself from the previous Labor regime, describing MLs as “a new layer of primary health bureaucracy”. However, there is little substance about the roles and functions of the proposed new Networks and Dutton’s description of their aims “to join up patient care in the community to keep people out of hospital” appear very similar to those articulated by Labor when establishing MLs.  The key factors in determining the outcome of these changes will be if the focus on an evidence-based, population health approach to primary health care is retained.   In flagging an increased role for GPs, the Government is responding to pressure from the AMA which has been concerned about sharing control of the primary health care sector with other health professionals. However, the inclusion of GPs (which have always been integral to MLs) should not occur at the expense of input from other stakeholders, including consumers, allied health professionals, pharmacists, nurses and practice managers.

    Dutton also reiterated the Government’s interest in a greater involvement from private health insurance in primary health care saying “We will also be looking over the next few years at new and innovative ways in which we might fund and deliver primary health care, including through partnerships with private insurers.” Given the evidence that private health insurance pushes up costs for health care, without delivering improved outcomes, this proposal is not sensible policy even for a conservative government.  Its political attraction, however, is that it may offer further opportunities to shift health costs from the public to the private sector.

    Budget primary health care workforce measures included an increase in GP training places by 300, to a total of 1500, in 2015 and a doubling of the teaching payment to GPs for training medical students from $100 to $200 per three hour session.  There are also 175 infrastructure grants for GPs in rural and remote settings to build training facilities in their practices and an increase in the funding available for incentive payments under the GP Rural Incentives Program for GPs to work in rural and remote areas.  Also announced were 500 more scholarships for nursing and allied health workers (over three years).  These measures are welcome, however, the lack of any significant workforce reform within the health sector means that the inherent inefficiency of the workforce will persist and the potential benefits of new health professionals will not be realised.

    The challenge now facing the Government will be to get these measures through the Senate. With the Opposition, Greens and Palmer United parties all indicating their reluctance to pass the co-payment legislation, the Government may find that its agenda for primary health care is thwarted before it gets off the ground.

     

  • Fran Baum and Sara Javanparast. Demise of Medicare Locals.

    Demise of Medicare Locals: impact on community health, partnership and PHC research

    Fran Baum and Sara Javanparast  
    Southgate Institute for Health, Society and Equity, Flinders University, Adelaide

    Tuesday’s budget announced the abolition of the 61 Medicare Locals and that they will be replaced with an unknown but smaller number of Primary Health Networks. Regional primary health care organisations are widely acknowledged to be vital to effective   coordination of PHC activities, reducing service fragmentation, making the health system easier to navigate for users, and reducing health care cost. Primary Health Care Trusts in England, New Zealand Primary Health Care Organisations, Canada/Ontario Local Health Integration Networks, and Scotland Community Health Partnerships are examples of overseas regional PHC organisations which support GPs and other PHC providers and plan for population health initiatives. The World Health Organization  recommends that PHC should be comprehensive and not just concentrate on clinical issues but also emphasise population-based approach, including disease prevention and health promotion, equity of access, responsiveness to community needs and community engagement.

    In Australia, various models of PHC have been established including Medicare-funded General Practice, State-funded multi-disciplinary community health centres and Aboriginal community controlled services. In 2009, the National Health and Hospital Health Reform Commission recommended that ‘service coordination and population health planning priorities should be enhanced at the local level through the establishment of Primary Health Care Organisations’. This has resulted in the establishment of Medicare Locals to fulfil the role of co-ordinating PHC services at the local level, improving access and preventing hospital admissions.

    The establishment of MLs, introduced by the Gillard Labor government, commenced in July 2011, with a total of 61 MLs operational from July 2012. Since then, the MLs have been conducting community needs assessment, identifying and building partnership with key health, community and social organisations in their region, and developing population health plans that are based on and responsive to local needs. A range of local programs and services have been designed. These include mental health, after hours care plan, Aboriginal health, E-health, aged care, and migrant health. Many resources have been spent building positive relationship with key stakeholders and community members within each ML with some good examples of collaborative work, joint planning and community engagement strategies. Taking the Pulse program in a number of ML including the Gold Coast ML, ACT ML, and Metro North Brisbane ML enabled consultation about health and wellbeing with people from all walks of life. The priorities that emerged from these consultations have been used in the formulation of needs assessment and informed the development of their strategic plans to ensure they respond to local need. The Tasmania ML is addressing social connection and other social determinants of health using strategies including community capacity building. Our local research suggests the MLs are co-ordinating with local health authorities on issues of joint concern. They have begun to fill identify and fill service gaps.

    All these programs and initiatives have taken staff and local PHC health providers’ (including many GPs) time, and cost a lot of taxpayers’ money to develop and establish.  Now is the time when Australians should be able to capitalise on this investment and see better co-ordinated local health services, community alternatives to hospital services (which will save money), Aboriginal health programs, and local mental health programs. It takes time to establish the trust and connections needed to develop and co-ordinate PHC services and this social capital that the MLs have established will be squandered by the decision to abolish them in the budget. Of course, the ML model and its programs need to be scrutinised and evaluated, but its demolition while it is still in its infancy will have many negative impacts on the community’s health and represents a failure to capitalise on investment.

    The short term life of such large national initiatives also makes it difficult for primary health care researchers to produce rigorous evidence on the effectiveness of existing models and to evaluate the programs in terms of population health and cost benefits that need to be followed through for a longer period of time. “Lack of evidence on program effectiveness” is one the key justifications for budget cuts was evident in the Review of Medicare Locals by John Horvarth (http://www.health.gov.au/internet/main/publishing.nsf/Content/review-medicare-locals-final-report) . Such evidence can hardly be produced in the current rapid changing policy environment which makes rigorous evaluation impossible.

    Undoubtedly, replacement of MLs with Primary Health Networks that are more clinically focused will move our primary health care system away from its broader mandate of disease prevention, health promotion, equity and social determinants of health. Of course, communities particularly those most in need are the ones who will suffer the most from these continuing political battles and health system changes.

    We now face an uncertain period when the work of the existing ML is undone and new Primary Health Networks are established. The budget papers say this process will be open to tender and that the new organisations will be able to “partner with private health insurance” presumably opening the ways for the privatisation of the Networks and a further move away from equitable and efficient health care. We could see big providers such as BUPA winning tenders to run these PHNs!

    As a postscript we note that had the budget taken the fiscally responsible step and abolished the private health insurance subsidies this would have released around $5.5 billion dollars for investment in PHC services and the existing MLs which would have represented a far better investment in our health.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • John Menadue. Seven dollar GP co-payment – and an unintended consequence

    If the co-payment takes effect, it is likely to result in an increase in doctor’s fees. As Ian McAuley has pointed out, the attraction of bulk-billing for the doctor is that it removes the cost of handling and accounting for transactions. The invoice is sent directly to Medicare.

    Once the doctor is obliged to handle the $7 co-payment, another transaction occurs; either by cash or probably credit card. This inevitable patient/doctor money transaction will provide the doctor with an opportunity to charge above the bulk billing rate.

    As soon as doctors stop bulk-billing we can expect a rapid rise in doctor’s fees on top of the $7 co-payment. And the $7 co-payment may be just the beginning!

  • John Menadue. Health Co-payments and $7 for a GP visit!

    We do need to take action to curb our visits to the doctor. In 1984-85 we averaged about 7 Medicare services per head. By 2012-13 it had doubled to over 15 Medicare services per head. The increase was across all age groups and not just for the elderly. Bulk billing, fee for service, and the ability of doctors to generate demand for more and more visits, tests and referrals contributed to this dramatic doubling of Medicare services. It must be addressed for both fairness and efficiency reasons.

    The media seems convinced that the budget will include a co-payment of $7 to $8 for visits to GPs.

    If this fee is part of a general reform of co-payments as I set out in my blog of May 1 ‘The dog’s breakfast’ and reposted below, it should in principle be supported. But I suspect that it will not be part of a broader reform of co-payments that I suggested. I said that on its own, a $6 co-payment (or maybe $7 to $8) was a silly suggestion. On its own it would be inequitable and discourage many people from going to their GP.

    There is also no sign that the government is likely to address more glaring examples of budget problems which aid the rich, e.g. the superannuation concessions that Michael Pascoe, a business commentator on the SMH who has described these superannuation concessions as ‘on-shore tax havens for the rich’. The other benefits for the wealthy which will presumably not be altered include negative gearing, capital gains concessions, fossil fuel subsidies and the funding of rich private schools.

    I have also reposted below an article by Ian McAuley ‘Pay for a GP visit’.

    Repost: John Menadue. Health Co-payments. The dog’s breakfast will continue.

    There has been a lot of superficial comment following the thought bubble of a proposed $6 co-payment for GP visits.

    What we should be addressing is first, the chaotic nature of our co-payments and second, whether individuals and families should be making a greater direct contribution to their health expenses. The last Nielson Poll suggests that Australians are open to making a greater direct contribution.

    We already have a high level of co-payments in Australia. This has been pointed out repeatedly by Jennifer Doggett.  In this post I draw on the background which she has presented over several years .

    In Australia co-payments contribute over $A24 billion p.a. to our health sector. These co-payments are the third highest as a source of health funding – after Federal and State funding.

    This amount of $24 billion p.a. or 17% of our total health funding is high by world standards. Australians pay a higher proportion of their healthcare costs through co-payments than citizens of most other OECD countries. The Commonwealth Fund has found that when healthcare spending is adjusted for the cost of living in Australia, we pay more in direct co-payments than all other counties surveyed apart from Switzerland and the US. Our annual health co-payments per capital are about $US750 compared with Germany $US600, New Zealand $US330 and the UK $US 310.

    The problem with our co-payments is not that they are low. It is that this whole area of co-payments lacks any rhyme or reason. It is a dog’s breakfast.

    Consider how the percentage of total funding from consumer co-payments varies.

    • Public hospitals 2.5%
    • Private hospitals 11%
    • Medical services 12%
    • PBS medicines 16%
    • Dental services 56%
    • Aids and appliances 69%
    • Non-PBS medicines 92%

    In an unpublished paper Jennifer Doggett has pointed out that there is a wide variation in the impact of co-payments on people with different illnesses and disabilities. She says for example that people with conditions that can be largely treated by GPs or within the public hospital system, generally incur lower co-payments than those with conditions that require allied healthcare and over-the-counter medicines. This is the case independently of the length or severity of the illness/disability and its impact on both individuals and society. In fact, people with ongoing chronic conditions often end up receiving lower levels of subsidy for their healthcare than those with one-off or self-limiting conditions. Another result of this ad hoc and uncoordinated approach to co-payments is that some people receive almost all their healthcare free at the point of service, and others, with conditions which may be more serious or longer term, face crippling costs for their treatment. For example, someone receiving emergency surgery for, say, the removal of an appendix in a public hospital, can incur no out-of-pocket costs for their treatment, whereas someone with a long-term genetic condition such as Cystic Fibrosis can incur high ongoing costs. The result is a very inequitable allocation of healthcare resources which has a particularly negative impact on people with chronic conditions.

    The National Centre for Social and Economic Modelling has found that ‘more and more families are finding it difficult to stretch the family budget to meet the costs of healthcare’.

    This chaotic mess in co-payments is not surprising. Ian McAuley and I referred to this problem many years ago. In a paper by the Centre for Policy Development in 2007 we said ‘These co-payments have been introduced without any coherence and therefore inequities and perverse incentives abound. Some services such as public hospital services are free. Some such as pharmaceutical benefits are capped by the government. Some, such as the co-payment for medical services below the safety net thresholds are open-ended; the public subsidy is fixed, leaving the user to bear an open-ended risk. Some such as the medical safety net provisions are proportional to the price of the service. Some safety nets are set on a family basis, others on an individual basis. Some are on a calendar year basis and others on a financial year basis.

    In light of the chaotic nature of co-payments we need to restructure our co-payments.  How should these co-payments be restructured? Several years ago at CPD, Ian McAuley and I set out some criteria which should be adopted in the design of future co-payments. We suggested

    • That co-payments be controlled by the government rather than left open-ended to be set by service providers.
    • That there be only one channel of collecting co-payments, with one set of criteria rather than the separate channels operating at present.
    • That the level of co-payments relate to means, including people’s access to liquidity.
    • That means-tested compensation be separated from service delivery, rather than having service providers check the income or welfare status of users.
    • That co-payments be structured in a way not to distort resource allocation on the basis of needs.
    • That gap insurance, which is designed to evade co-payments, be prohibited.

    In summary,

    1. We already have high levels of co-payments.
    2. These co-payments lack rhyme or reason.
    3. Most Australians have much higher incomes than when Medicare was introduced. Subject to means-testing we should contribute more to our health costs. Co-payments, if well-structured, can help people make better choices with what economists call “price signals” They can provide also some relief to public budgets. A universal health service like Medicare does not have to be free. But it must be a high quality service available to all regardless of means.

    The $6 thought bubble on co-payments for visits to GPs must be considered in a much wider context.  On its own it is a silly suggestion.

  • Ian McAuley. Pay for a GP visit.

    The Commission of Audit’s proposal to charge a $5 or $6 fee for “bulk-billed” GP services has little to commend it. But that doesn’t justify knee-jerk outrage from medical and consumer groups, or from the Labor Opposition, for there is no reason why Medicare should not incorporate fixed and limited co-payments.

    As it stands the proposal is poor public policy. It bears resemblance to the ideas in a discussion paper prepared by the Australian Centre for Health Research in October, proposing a $6 charge in order to bring price discipline into service use, but which contradicted itself by suggesting those co-payments could be funded through private health insurance (PHI).

    There is no explanation of principles, no system-wide view, and no consideration of the costs of handling 140 million small transactions each year.

    It’s simply a proposal to save $750 million in Commonwealth outlays over four years. Why four years? Because that’s the “forward estimates” period. Why Medicare services and not all health expenditure? Because that’s the budgetary line item. Why only fiscal outlays and not total health care costs? Because fiscal considerations have taken over from economic considerations, and if the cost falls on state governments through a move to outpatient services, that’s none of the Commonwealth’s responsibility. We have a fiscal system, not a health care system, and a political imperative around the budget bottom line.

    If we had a completely free health care system, the indignation of lobby groups and the Opposition would be understandable, because it would indeed be a wedge into our system.  But we already pay 19 percent of our health care outlays from our own pockets (about the OECD average of 20 percent).  We may have the luck to find a “bulk billing” GP, but if we have to fill a pharmaceutical prescription scrip we have to pay up to $36.10, or $5.90 if we hold a concession card, and if the suggested medication is not on the Pharmaceutical Benefits Scheme, it’s whatever the pharmacist charges. If we cannot find a bulk-billing GP (only 81 percent of GP services are bulk-billed, and they would be disproportionately for card holders), then we are paying on average $29 from our own pockets.

    We don’t know the rationale behind the proposal – this Government is not given to policy openness – but it’s probably driven by the tremendous growth in use of medical services over the years. In 1984-85 we used about 7 Medicare services per head, in 2002-03 we used 11, and in 2012-13 we used 15. Ageing explains some of this, but there has been growth in utilization across all age groups. While half the population uses 7 or fewer services a year, 10 percent of the population uses 31 or more services – more than one a fortnight – accounting for 44 percent of services.  (These figures relate to 2007-08, so they would understate the skew to heavy users. The Department no longer publishes this data.)

    Penny Wong portrayed the proposal as a disaster of Thatcheresque proportions, claiming that a $6 fee would be a barrier to access, ignoring the barriers imposed by long waits at bulk-bill clinics (many people would be spending more than $6 in parking fees), and the closed books at GP surgeries whose capacity has been absorbed by heavy users.

    Oppositions criticize – that’s their job. But they shouldn’t close off avenues for possible reform.  An opposition with a little nous could complain about the process issues mentioned above.  “Yes, we have a problem, and we need some rationalization of co-payments, but this is an inept and counterproductive way to go about it ……”.

    The political reaction is similar to what happened in 1991, when the Hawke Government proposed fixed co-payments.  The squeals from groups supposedly on the “left” forced the Government to a hasty retreat.  “Medicare” became implanted in the political and public mind as a “free” primary care service.  (Earlier, in 1987, the Coalition had abandoned their plans for people to spend $250 before receiving Medicare support, because of similar protests.)  In 1991 the most common protest was that Medicare would become a “safety net” rather than a universal free service.

    The gaping flaw in that protest is that we have never had a universal free health care service.

    In those campaigns of last century the “left” exhausted its political energy defending free Medicare services.  But what has developed, a resurgence of private health insurance (PHI), is far worse by any reasonable criteria of equity or allocative efficiency.  As for the protests about a safety net, a safety net would be far better than our inconsistent arrangements which leave people, particularly those with chronic illnesses, bearing open-ended liability for uncapped expenses.

    There are three ways to fund health care – direct consumer payments, a single national insurer, and competing private insurers. Two of these mechanisms, one a market mechanism, one a countervailing power mechanism, can keep health care costs in check and assure there is universal access to affordable services. The third mechanism, private health insurance, fails to achieve these outcomes and leads to price inflation and inequity. Its elimination should be the focus of consumer and Opposition energies.

    Why should any consumer group or a party aspiring to government rule out one of the two mechanisms that actually have a chance of working?

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

    For other posts on this subject, see ‘health’ category on right side of home page.

     

  • John Menadue. Taxes – public or private

    The Commission of Audit has recommended that a Medicare levy surcharge be applied to individuals earning more than $88,000 a year and $176,000 for families. This is designed to force high income earners to take out private health insurance. This is one of the most economically stupid and dangerous proposals that I have seen for a long time. The Commission of Audit foolishly thinks that this would reduce public taxes, but it would result in increased private taxes (premiums). Higher premiums are the inevitable result of increased reliance on private health insurance. This is what has brought disaster for healthcare in the US. Private healthcare premiums have gone through the roof and the US now has one of the worst and most expensive healthcare services in the world. 

    Furthermore, the Commission of Audit’s proposal would move us a long way towards a two-tier health system, with a high quality and very expensive healthcare service for the rich and a welfare type health service for the poor. It strikes at the heart of social solidarity and social cohesion which is essential in a good society. It would end Medicare as we know it, a high quality service available to all regardless of income.

    Below I have reposted an article of 1 February about the fallacy of assuming that public taxes are bad but private taxes (premiums) are good.

     

    It has become commonplace for opponents of government and the public sector to suggest that functions like health care and broadcasting should be moved from the public sector to the private sector in order to reduce taxes. They usually add in that the private sector is also much more efficient in performing such functions.

    There are good social and economic reasons why certain functions should remain in the public sector – defence, education and health. But there is also a great fallacy that somehow public taxes are bad and private taxes/premiums are fine.

    Let me give you two examples.

    The private health insurance industry claims that Medicare is unsustainable and that more people should take up private health insurance to reduce the demands on the public health system. The suggestion is that by doing so, governments will not have to keep increasing taxes to fund public health. But there is a fundamental error in this argument. Private health insurance (PHI) has been raising its premiums at an alarming rate and much faster than Medicare through taxation. The PHI premiums are really the same as taxes that finance Medicare, except that one is public and the other is private.

    Since 1999, when rebates for PHI were introduced, the average PHI premium (private tax) has increased 130% whilst overall prices have increased by less than 50%. These private taxes or premiums are rising dramatically for a whole range of reasons that I set out in my blog of December 26 – ‘Health insurance – here we go again’.

    The other important reason for these high private taxes/premiums by PHI is that their administrative costs, including profits, run at about 15% to 16% of total costs. For Medicare, including the cost of tax collection, administrative costs are about 6% of total costs. So with the administrative costs of PHI about three times those of Medicare it is not unreasonable to conclude that the public gets far better value for money in its taxes paid to finance Medicare than paying premiums/private taxes to PHI. Expanding the role of PHI would greatly increase the level of these private taxes. The fact that they are private taxes misses the point. They are taxes on the consumer just the same as public taxes.

    The experience of the US should also warn us about private health insurance premiums/taxes. In the US, healthcare expenditure is over 18% of GDP. It is the highest in the world. In Australia it is about 9% to 10% of GDP, as is the case for most comparable countries that have a single public insurer like Medicare. Of the 18% costs in the US( as a proportion of GDP), about 9% is due to private insurance. Private health insurance in the US has been unable to control price demands by private doctors and private hospitals. If in theory the US had a single public insurer and followed the example of other single public insurer countries like Australia, the US could reduce its health expenditure by 9% of GDP. In such a situation the 9% of GDP paid to private health insurance funds would be unnecessary. If those premiums to private insurance were then redirected into public revenue, the US budget deficit of 7% of GDP would be eliminated. I said this was theoretical and there are clearly enormous political difficulties for President Obama to wind back the mess that private health insurance has wrought. But the figures do illustrate that the US would be better off with a robust public insurer funded by taxes rather than by the grossly unfair and inefficient privatised taxes that private health insurance imposes on the community. The US experience shows quite conclusively that shifting insurance out of the government and into private health insurance would be a disaster for everyone. To finance health care through the private taxes or premiums of PHI would result in much higher imposts on the public, than paying for health care through public taxes.

    The other example of privatised taxes is illustrated in the case that is often made against the ABC and other public broadcasters that are funded by taxes or special licence fees. Yet the critics of public broadcasting like Murdoch impose their own taxes – what is in effect a sales tax on products that are advertised in the commercial media. In my blog of December 19 ‘Murdoch and Abbott and the ABC’, I drew attention to the argument by Ian McAuley about the high cost of these privatised taxes. He said ‘We are paying about $1,500 per year per household for advertising, of which $500 is for commercial TV and radio… By contrast we are paying about $120 per year for the ABC’. Commercial media collects “taxes”, but it is called ‘advertising revenue’. This revenue is a cost to the advertiser and is loaded into the costs of the products when we purchase a car or holiday travel.

    The private sector has its own forms of taxation. Just by shifting functions from the public to the private sector, does not necessarily reduce what we have to pay out of our own pockets. In many cases public taxes are much more efficient and serve a much more desirable social objective than privatized taxes

  • John Menadue. Do our governments spend too much or do they raise too little in taxation?

    This a repost and provides a summary of the submission that Ian McAuley, Jennifer Doggett and I made to the Commission of Audit.  John Menadue

    The Minister for Health, Peter Dutton, has said that we must reduce waste and cut costs in health. (I responded to this in my blog on 3 February “Cutting waste and costs in health”).

    The Minister for Social Services, Kevin Andrews, has said that our welfare system is ‘not sustainable’ and that we are headed down the high cost welfare path of European countries. (The ABC examined this assertion and found that it was incorrect. It found that ‘There is nothing to indicate that as the population ages, Australia is headed towards the big welfare spending of some European countries. Treasury projections to 2050 show welfare spending as a proportion of our GDP will remain steady over the next three decades. www.abc.net.au/news/2014-02-03/kevin-andrews–makes-unfounded-welfare-claims.)

    The Treasurer, Joe Hockey has said that ‘The days of entitlement are over and the age of personal responsibility has begun’. This has been interpreted by some as suggesting that government welfare and other entitlements should be reduced.

    In a submission to the Senate Select Committee into the Abbott Government’s Commission of Audit, Jennifer Doggett, Ian McAuley and I contend that the problem is not that government expenditures or that the public sector is large in Australia compared with other countries. We contend that the problem is a short-fall of revenue and that on international comparison, our tax revenues are low.

    In our summary to the Committee we say …

    The Commission of Audit’s brief is based on assumptions that Australia is burdened with “big government” and that taxes are an impediment to business investment and workforce participation.

    There is no evidence for either assumption. The trend in Commonwealth expenditure has been downwards since the mid 1980s, falling from a peak of around 28 percent of GDP to a range of 24 to 26 percent of GDP in recent years. In comparison with similar prosperous countries Australia has one of the smallest public sectors.

    The problem a body such as the Commission should address is our inadequate tax base, which is the main reason the Commonwealth has had a structural deficit for most of this century. We aren’t collecting enough revenue to fund the public services needed if the economy is to thrive.

    We should not shy away from raising taxes. Evidence from international comparisons and from surveys on competitiveness suggests that reasonable levels of tax do not impede countries’ economic performance. In fact, countries which compete on the basis of low taxes do so to compensate for competitive weaknesses, such as inadequate infrastructure and poor standards of education – in other words impoverished public sectors.

    Such evidence, however, seems hard to convey to those gripped by a zeal to cut spending and taxes. Even in a “small government”/low-tax country like Australia it is possible to find areas where private funding and provision of services can displace public funding and provision.

    But such displacement is usually at high economic cost, simply to achieve an arbitrary fiscal objective. There is no point in reducing taxes if the private costs are greater than the saving in taxes, with no improvement (and in many cases a deterioration) in the services provided. We illustrate this in the case of health care funding. This is an area of significant public outlay and where, because of ongoing growth in demand, there are voices – often the voices of self-interest – calling for a shift from public to private insurance. Such a shift would be costly on all economic criteria – technical efficiency, allocative efficiency and equity.

    The rushed and secretive processes of the Commission are not the path to good public policy. There may be areas where a change in the public/private mix is justified on economic grounds, but these are not one-way towards the private sector as implied in the Commission’s brief. Because we already have a small public sector it is likely that a proper process, with research and consultation, would find a need for a net expansion of Australia’s public sector. By shutting off that possibility those who drafted the Commission’s brief are imposing a constraint which may be contrary to the community’s wishes and sound economics.

    The full submission to the Senate Select Committee can be found by going to my website. Click on ‘John Menadue Web Site’ top left of this blog page.

  • This is about more than a bottle of wine

    To mix my metaphors, the bottle of red wine that Barry O’Farrell received is only the tip of an iceberg – a sleezy world of lobbying, influence-peddling and corruption.

    (more…)

  • John Menadue. Citizenship and shared experience.

    The recent decision by the NSW Government to evict pensioners and low-income tenants from the Rocks in Sydney highlighted for me the importance of mixed communities and shared experiences.

    We all benefit in society when we have shared experiences. We can then get to know other people’s aspirations and their problems. We invariably find that we have much more in common than we think. We benefit both as individuals and as a society.

    Why should only one part of society, the wealthy, enjoy harbour views? Why should a mixed community that has lived for so long in one area be destroyed with low-income tenants forced out whilst the wealthy join other wealthy to enjoy harbour views and the attractive lifestyle that goes with the Rocks.

    In shared experiences we are drawn in two ways. One inclination is to live in pleasant and attractive areas that are often composed of people like ourselves with the same incomes and even the same ethnic backgrounds. But we also know that we benefit from shared experiences with people who are different. Our most important shared and common experiences are in times of natural disaster – bushfires and floods which tear away social class. We are in the emergency together and we find great satisfaction in banding together. Many older Australians recall the common hardship of the Depression, the War and rationing. For Britishers, the bombings and air raid shelters brought people to a ‘common experience’. Despite the hardships and the danger, there was satisfaction in those common experiences. The fabric of society and trust in each other was strengthened.

    As Ian McAuley in ‘Dissent’, November 2012, has pointed out, the British sociologist Thomas Humphrey Marshall wrote in 1949 about ‘common experience’ as an essential ingredient for good citizenship. This common experience is a richer notion than social inclusion. Unfortunately social exclusion by the wealthy is becoming as serious a problem as social exclusion of the poor.

    It is not just the Sydney Rocks that is being pulled apart. Our health and education institutions discourage the mixing of social groups and denying common experience.

    Ian McAuley points out that government subsidies to private health insurance discourages the well-off in the use of public hospitals. Because PHI, particularly for people on the high tables, is used almost entirely to fund treatment in private hospitals, government policy subsidises a form of social exclusion and discourages common experience. It also encourages many articulate people to opt out of support for public hospitals knowing that when they need hospitalisation, they can turn to private hospitals.

    The trend in the denial of common experience is even more obvious in education. In the 1950s, 75% of Australian children attended public schools. Most of the other 25% went to Catholic schools which had a similar social, if not religious, mix as public schools. Now only 65% of students attend public schools. This trend is even more pronounced in secondary schools where just over 60% of secondary school students are in public schools. This proportion is even lower in early grades of secondary school. And this trend away from common experience in public schools is accelerating despite the fact that there is no evidence that private education secures better outcomes. It will take many decades of Gonski to reverse the unfortunate and divisive trends that are occurring. Common experience in schools is being eroded.

    As more and more middle class and articulate parents opt out of public education, a tipping point will arise where it will be hard to ensure public support for public schools. That tipping point is approaching

    Just as the government subsidies to PHI has driven social exclusion in hospital use, so in education government funding is being skewed in favour of the privileged in private schools. The concept of common experience is being steadily eroded.

    We are also seeing this denial of common experience in our built environment. In my blog of November 28, 2013 “there goes the neighbourhood” I drew attention to the way that some communities are being sundered by the wealthy excluding themselves from common experience. They have private pools within minutes of superb public beaches, private entertainment systems, high walls,roller doors and CCT to keep themselves from a common experience with neighbours. Even when public transport is reasonably available, children get driven to school in private cars.

    It is claimed that these developments in our health and educational institutions and in our built environment is justified on the grounds of choice. But choice is often a one-way street available only to those with high incomes. What choice do the low income tenants in the Rocks have about where they are going to live?

    We all know that common experience in national disasters and volunteering brings a sense of togetherness, community and shared humanity. We must nurture institutions that promote sharing and common experience. The most critical is shared experience in schools and education.

    We need institutions and a built environment that cut through social class. That is the path to shared experiences.

    The more we turn our back on common experiences the more our citizenship and society is impoverished.

  • John Dwyer. Primary healthcare in Australia reaches the crossroads.

     When I graduated some 50 years ago more than 50% of my class pursued careers as General Practitioners. In the last available survey of the career intentions of graduating medical students only 13% said they were interested in Primary Care and only 13% of those who would consider a career in rural Australia. Currently more than 45% of the General Practitioners available to rural based Australians are overseas trained doctors most of whom are working there as provider numbers were not available for metropolitan practice. The average age of working General Practitioners is 55 years.

    Young doctors considering vocational training cite positive and negative reasons for their disinterest in Primary Care. Many other career opportunities seem more attractive as they provide much higher average incomes and part time employment provides funds sufficient for many. General Practice training is equally as vigorous as that required for other specialities but “GPs” are not paid as specialists and often feel their vital and increasingly unique skills are underappreciated. Tales from GP land tell young graduates of practice subjected to stifling bureaucracy, the need to “bulk bill” and thus to practice “turnstile medicine” with short consultation times being unsatisfactory to both patient and physician. These and many other impediments place us in real danger of having far too few GPs to provide us with quality Primary Care in the near future.

    All this reality is addressed by rhetoric from government reassuring GPs that they are the “heart and soul” of the nation’s health care system. The fact that the Federal government is freezing cost of living adjustments to Medicare rebates for four years and considering strategies to reduce our 18 billion dollar annual Medicare expenditure should not be taken personally. As I have commented here previously, we should be spending more not less on Primary Care but Primary Care that is restructured to better meet contemporary needs. This would include reducing the seven million bed days utilised in public hospitals by avoidable admissions. Hospital expenditure dwarfs Medicare spending.

    Is it possible that the introduction of a new model of Primary Care could produce better, more cost effective health outcomes for Australians and at the same time attract a new generation of doctors to Primary Care? International experience would say the answer to both questions is a definite yes. We know what that new model should provide; infrastructure to support preventative strategies, early diagnosis of problems that, left untreated, could become chronic, team management of established chronic and complex diseases and care in the community for many who are currently being sent to hospital. The model described is usually referred to as “Integrated Primary Care”  (IPC) which, to use American parlance, provides individuals with a “Medical Home”.

    IPC is structured around teams of health professionals working in the one practice. It is not doctor centric and provides individuals who enrolled in the IPC program with access to doctors, nurses and a range of allied health professionals including dental hygienists. Doctors cannot provide all the services described above but here can concentrate on those things only doctors can do. Well run IPC programs in the UK, the US, New Zealand and many other countries have demonstrated their cost effectiveness, better health outcomes and fewer admissions to hospitals for the patients of such medical homes. Perhaps most importantly in our context, they attract and hold GPs who enjoy better job satisfaction in this form of practice. An international trend has IPC practices offering their doctors flexible arrangements for remuneration. Rapidly payments based on a “fee for service” (FFS) are giving way to “blended payment” options. What is this all about?

    Many Australian GPs want to move away from the FFS model with very significant numbers joining large corporation owned practices where they are salaried or paid on contract. FFS at bulk billing rates does not work well for patients with chronic diseases and complex needs. A number of countries are offering their GPs fixed annual payments for their care of complex patients while those seeking a “one off” service are still charged a fee. In New Zealand more than 85% of the GPs work in such a system with about 80% of their income fixed with the remaining 20% coming from traditional FFS payments. Such arrangements are in the medical news here in Australia as Minister Dutton has publically expressed cautious interest in seeing how this could work in Oz. In the US 60%of GPs are paid in this way and this is increasingly so in the UK. There is an abundance of data showing that blended payments within the IPC model produces better health outcomes with fewer hospital admissions.

    Overseas experience with this radical reform tells us that its implementation must be a “bottom up” one available to willing participants and never forced on the medical profession. Space doesn’t permit detailed discussion of the mechanisms involved in establishing this system but if we were to follow say the NZ model it would look something like this. Our Medical Locals would become Primary Health Care organisations and holders and distributors of a primary care budget provided after careful analysis of local needs. GPs or IPC practices would negotiate for a fixed payment for their care of their patients with chronic diseases and in return would provide quality/outcome data associated with the use of that money. Financial incentives are built into the contract to encourage “best practice” management.

    Our medical profession, government and citizenry, should not be concerned by the exploration of these changes. The evidence is strong that, done properly, the results are very positive and the model attractive to clinicians and patients alike.

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

  • Ian McAuley, Jennifer Doggett and John Menadue. The case for government funding of healthcare.

    In our joint submission to the Senate Inquiry into the Abbott Government’s Commission of Audit, we drew attention to the fact that by international comparison, Australia is a low-taxed country. Furthermore, the trend in Commonwealth expenditures has been downwards since the mid-1980s. Our full submission can be found on my website (click above).

    In that submission we made the case for government funding of healthcare as a superior option. Extracts from this submission on healthcare follow.

    The flaw in the “unaffordable” argument (made by the Abbott Government in respect of health care) is that even if the government withdraws from funding, we still have to pay for health care, and all the evidence from other countries’ experience shows that if the government abandons responsibility for funding health care, we will end up spending a greater amount for the same or a lower quality of care.

    In all probability Australians want to share the bulk of our health costs with one another. Across all OECD countries people pay only about 20 percent of health costs from their own pockets – that is through payments at time of service delivery and in amounts not covered by insurance. In Australia, at 19 percent, we are just below that average. In developed countries most health care costs are paid through insurance – either a government insurer or competing private insurers.

    Even if, as is likely, we accept a need to pay more from our own pockets, we will continue to seek insurance cover for large outlays. We may be willing to take our chances in many aspects of life, but when it comes to health care we have little to guide us about our future needs.

    Policies which shift funding responsibility from government programs, such as Australia’s Medicare, on to private health insurance (PHI) have a short-term attraction to a government concerned with containing fiscal outlays. But even the best designed policies to entice or force people into PHI are costly and inequitable.

    For a start PHI involves high administrative costs. In Australia only 84 cents in every dollar paid to PHI is returned in terms of payment for services. The rest goes to administrative costs and corporate profits. By contrast, Medicare has administrative costs of about 5 percent, and another 1 percent in Tax Office collection costs. That means that Medicare returns 94 cents in the dollar as health services – a ten cent difference in comparison with PHI.35 The USA, highly dependent on PHI, provides the standout example of administrative overheads. Only 69 cents in every dollar Americans spend on health care comes back in terms of services.36

    Second, and more important, when there are competing private health insurers they have little ability to control the prices demanded by service providers. If one insurer tries to bargain hard with hospitals to keep prices down, the hospitals will simply choose to do business with another insurer. The insurers have about the same power in the market as consumers do when they are dealing with powerful oligopolies such as banks. By contrast a single national insurer, usually a government agency, has the market power to put some discipline into prices and utilization.

    Evidence from international experience bears out these points. When countries rely on PHI to fund health care they pay more for it, without necessarily getting any better health outcomes. To quote at length from the OECD:

    Private health insurance markets have resulted in increased overall health costs in several OECD countries. First, by bringing more financial resources into the health care system, it raises total health expenditure. Second, cost-control measures – such as global budgets, price regulation and capacity controls – have been applied to the public sector in virtually all OECD countries. Conversely, the private financing sector in virtually all OECD countries, except the Netherlands, has not been subject to such centralised, governmental cost controls. This has resulted in less tight control over activities and prices in the private sector. Third, private insurers in most OECD countries do not have the same bargaining powers over the price and quantity of care provided to insurees as public systems do, although within concentrated PHI markets insurers can exert stronger pressure, as in the case of Ireland. Payment options such as global budgets that have helped public systems to contain costs in several countries are hard for private insurers to negotiate – or may not be options at all. PHI carriers have generally exerted little leverage over costs – as they might if they engaged in more selective contracting.

    In the United States, private insurance has been less effective than the public Medicare programme in controlling costs. Growth in per enrolee payments for a comparable set of services in private health insurance outweighed Medicare over the period 1970-2000, reflecting the higher payment rates to providers paid by private insurers. While “managed care” delivered some cost control in the 1990s, PHI premiums have resumed double-digit growth since 2001.

    Cost control is also more problematic to achieve in systems with multiple competing payers, including most PHI markets. Not only their purchasing position relative to providers is weaker, but also shifting cost onto other purchasers, whether public systems or other private insurers, is a more attractive strategy for insurers than restraining cost.

    PHI also risks increasing public expenditure on health. This is because, while PHI may serve as an independent source of health funding, its effects are rarely entirely disconnected from the publicly funded system.

    Subsidies to private health cover, as in Ireland, Australia and the United States, increase public sector expenditure and have an opportunity cost, sometimes increasing overall utilisation levels as well. Even in the absence of direct or indirect subsidies, PHI has given rise to higher public cost in several countries with a significant PHI market because of the way it interacts with the public system.37

    This is borne out empirically by data from the OECD….. The message is clear: the more governments rely on PHI to fund health care the more is the total cost of health care….

    As with administrative costs, the stand-out case is the USA, where health care costs are now almost 18 percent of GDP. (Even when the USA is excluded there is a positive relationship, and it is too big to be considered a statistical aberration.) As a consequence of America’s longstanding dependence on PHI – a dependence which could intensify with Obamacare – its government programs, Medicare and Medicaid, now cost around 8.5 percent of GDP. This is more than the governments of Sweden, Norway and Iceland pay for their comprehensive public insurance programs, and more than the governments of UK and Canada pay for their near-universal public programs.

    In an attempt to avoid universal public funding, the USA has developed a system which now incurs higher fiscal costs than they would have incurred had they pursued a single insurer option. That is because the government Medicare and Medicaid programs have become passive price-takers in a market where prices are set by powerful service providers. Even here in Australia, because of the generous way we subsidize PHI, those subsidies are costing more than they are saving government outlays. Reducing subsidies for PHI would result in some reduction in membership and therefore more government expenditure on health care, but there would be significant net public savings.38 The Grattan Institute, for example, estimates that even with offsetting compensation to public hospitals removing the PHI rebate could save public budgets $3.5 billion a year.39 …

    Simply ending subsidies for PHI is only part of necessary funding reform. The whole way health care is funded needs to be reviewed – a task well beyond a body such as the Commission of Audit. As a case in point, there needs to be rationalization of co-payments, so that they can serve to bring the benefits of market discipline into health care, rather than encouraging patients to seek “free” services to avoid co-payments. Our present division between “free” services, covered by Medicare or PHI, and paid service, is haphazard.40 Examples abound: public hospitals are “free” while pharmaceuticals incur co-payments; it can be cheaper for a consumer to leave tooth decay until it needs treatment in hospital than to seek paid preventative dental care early on; PHI and Medicare often cap the number of paid services in areas such as physiotherapy, leaving the patient with open-ended risk. Besides savings from scrapping the PHI rebate, the Grattan Institute estimates there are additional savings of around $6 billion a year to be found without comprising the quality of care.41

    The national insurer, of course, needs to use its purchasing power to contain costs. In this regard the Commonwealth, once highly effective in negotiating low pharmaceutical prices, as a result of a series of concessions to pharmaceutical firms is now paying more than many other countries for pharmaceuticals. Government purchasing and price negotiation are areas with potential savings.

    Replacing PHI with a strong, single national insurer removes incentives for over-servicing and over-pricing, but there are savings in private and public costs if there is less need for health care in the first place, through investing in preventive services.42 Preventive health measures, such as anti-smoking initiatives, deliver high returns, in terms of long-term health outcomes. However, Australia currently allocates less than two percent of the total health budget to preventive health.43 Investing in early childhood health and education is also a proven and cost-effective strategy to prevent the development of a range of lifelong social and health problems, but Australia also falls short in this area:  almost one-quarter of children are developmentally vulnerable at school entry with Aboriginal and Torres Strait Islander children and children in socioeconomic disadvantaged areas most likely to fare worse across a broad range of health and social indicators.44 Failure to fund preventive, public health and early childhood programs adequately represents a wasted opportunity to direct resources to achieve maximum benefit. These are functions which, if abandoned by government, will not be performed by the private sector.

    (Our basic case is that by shifting health expenditures from the public to the private sector will cost more. It will increase total costs)

     


    35.          Figures taken from John Menadue and Ian McAuley Private Health Insurance: High in cost and low in equity. Centre for Policy Development 2012.

    36.          Henry Minzberg “Managing the myths of health care” World Hospitals and Health Services Vol 48 # 3, 2012.

    37.          Francesca Colombo and Nicole Tapay “Private health insurance in OECD countries: the benefits and costs for Individuals and health systems” OECD Health Working Papers No. 15, 2006.

    38.          Terence Cheng Does reducing rebates for private health insurance generate cost savings  Institute of Applied Economic and Social Research, The University of Melbourne, July 2013.

    39.          John Daley Balancing Budgets: Tough choices we need Grattan Institute 2013.

    40.          See, for example Jennifer Doggett “Out of Pocket: rethinking health copayments” Centre for Policy Development Occasional Paper 2009.

    41.          John Daley, Grattan Institute op. cit.

    42.          World Health Organisation. Key components of a well-functioning health system. May 2010.

    43.          Australian Institute of Health and Welfare Health Expenditure Australia 2011-2012.

    44.          Australian Institute of Health and Welfare A picture of Australia’s Children 2012.

  • Martin Laverty. Poverty and poor health go together.

    In 2008, the World Health Organisation provided an action plan to Australia and other countries to tackle the health disparity between rich and poor which sees an Australian in the lowest group of wealth-holders live with up to three times the amount of chronic illness of a person in the highest wealth-holding group.

    One year ago last week, Catholic Health Australia and the members of the Social Determinants of Health Alliance applauded a co-authored report of a Coalition, Labor and Greens Senate Inquiry that recommended the Parliament endorse the 2008 World Health Organisation’s recommendations on how to address health equity – that we had argued must be the first important step towards meaningful action on social determinants.

    But last week, on the one-year anniversary of the release of this rare tri-partisan report, there was nothing to celebrate. There was nothing to welcome. There was just a moment to bemoan the fact that yet another year had passed since the Senate Inquiry reported and the Federal Parliament has not pushed ahead with the Inquiry’s recommendations or any plan to address unacceptable disparities in the health of Australians.

    Reports seem to emerge every couple of weeks pointing to those unacceptable variances based on people’s socioeconomic status or their ethnicity or where they live or their education level. These reports – like last year’s Senate report – are not prompting action from federal politicians.

    While we have been advocating for change at the political level and in the public domain, CHA has also been presenting compelling evidence as to why action on the social determinants is crucial. One of those contributions is The Cost of Inaction on the Social Determinants of Health; a report commissioned by CHA and prepared by the National Centre for Social and Economic Modelling (NATSEM).

    That report found that $2.3 billion in savings could be found annually through avoidable hospital admissions if Australian Governments were to implement the findings of the World Health Organisation’s Closing the Gap in a Generation report. Those are the same recommendations that the Senate Committee said the Parliament should endorse.

    The NATSEM report also found implementing the WHO recommendations could see:

    • 500,000 Australians avoid suffering a chronic illness;
    • 170,000 extra Australians enter the workforce, generating $8 billion in extra earnings;
    • $4 billion in welfare support payments saved each year;
    • 5.5 million fewer Medicare services utilised each year, resulting in annual savings of $273 million;
    • 5.3 million fewer Pharmaceutical Benefit Scheme scripts being filled each year, resulting in annual savings of $184.5 million.

    These staggering opportunities are what new approaches to health policy could achieve, yet counter-intuitively they do not require change to the way our health system operates.

     

    The opportunity to reduce chronic illness and save on hospital and pharmaceutical expenditure requires action outside of the formal health system. Doing so would improve the lives of half a million Australians. It would also help the Federal Government achieve savings it is very keen to find.

     

    Australia suffers the effects of a major differential in the prevalence of long-term health conditions. Those who are most socio-economically disadvantaged are twice as likely to have a long-term health condition as those who are the least disadvantaged.

     

    Put another way, the poorest are twice as likely to suffer chronic illness and will die on average three years earlier than the most affluent. Poor health of low-income Australians can be avoided, allowing Government to spend less money on treating health conditions that should never have occurred in the first place.

    Drug-, alcohol-, tobacco- and crisis-free pregnancies are understood to be fundamental to a child’s lifelong development. So, too, is early learning that occurs in a child’s first three years of life.

     

    School completion, successful transition to work, secure housing and access to resources necessary for effective social interaction are all determinants of a person’s lifelong health. These are factors mostly dealt with outside of the health system, yet they are so important to the health of the nation.

    We can’t afford – in dollar terms, but more importantly in human terms – for this to be a political can that is kicked down the road. Action on social determinants will save lives, and deliver both government and community an extraordinary financial and social surplus.

    A resolution passed in the House of Representatives in 2010 compelled the sitting Government to respond to a Senate committee’s report with six months.

    Labor can point to the federal election – held within six months of the report being tabled – and the Coalition can point to the fact the report was tabled during the last Parliament, but we are becoming increasingly impatient with politicians who aren’t addressing the causes of poor health.

    Isn’t 12 months of increasing inequity more than enough? It’s time for action.

    Martin Laverty is the CEO of Catholic Health Australia. CHA represents the largest single grouping of non-government health, aged and community care services in Australia.

  • John Menadue. Privatising Medibank Pte – who cares?

     

    This is a repost from 28 November 2013. My own view is that all the private health insurance companies, including Medibank Pte are parasitical and undermine Medicare. The only important political issue in my mind is whether the policy holders who have contributed over decades to Medibank Pte should receive appropriate recompense rather than the government taking the money for itself.  John Menadue

    I won’t lose any sleep if the Abbott Government proceeds to privatise Medibank Pte. It is anticipated that the sale could realise $4 billion. That will go almost half way towards the $8.8 billion that Treasurer Joe Hockey is providing as a reserve fund for the Reserve Bank, even if the Bank didn’t ask for it.

    Whether all of that $4 billion should go to the Treasury from the sale of Medibank Pte is a moot point. Don’t the policy-holders, some with as many as 37 years membership, have an entitlement to some of that accumulated value? I declare a personal interest as I became a contributor to Medibank Pte when it was established by the Fraser Government in 1976.

    Medibank Pte was established then because of the Fraser Government’s hope that it could be an alternative to the universal health insurance scheme which the Whitlam Government introduced and which later became known as Medicare under the Hawke Government.

    I am quite indifferent to whether Medibank Pte is publicly or privately owned. As Ian McAuley and I set out in an article for the Centre for Policy Development in January 2012, private health insurance is ‘high in cost and low in equity’.  See this article on my web by clicking on ‘website’ at top left hand of home page, then ‘health’ and then article of January 2012.

    Whilst Medibank Pte. Is publicly owned, it acts just like all the other health insurance firms that are privately owned.  I t serves no special social role. It is the largest health insurance fund out of the total of 40 funds. It has a market share of about 30% followed by BUPA with about 27%.

    I won’t repeat all of my objections to government subsidies for health insurance firms which cost about $7 billion p.a. for the taxpayer. But my objections remain strong.

    • The administrative costs, including profit, of health insurance funds including Medibank Pte are three times those of Medicare. Just look at the money they waste on television advertising.
    • With government approval, health insurance premiums have increased every year at well ahead of the CPI. The increase in Medibank Pte premiums are close to the industry average.
    • Private health insurance benefits high income earners at the expense of low income earners.  The more wealthy Australians use health insurance to jump the hospital queue
    • Gap insurance by health insurance funds has underwritten the largest increase in specialist fees in 25 years.
    • These health insurance firms limit the ability of Medicare to put a cap on cost increases, particularly by private hospitals and private specialists who are paid multiples of the salaries paid to equally competent specialists in public hospitals.
    • The US is the stand-out example of the havoc which high cost private health insurance (PHI) can cause. As I pointed out in my blog of March 4, 2013, ‘If the US had a health service like those in countries without heavy reliance on PHI, such as Australia, it could solve its budget deficit problem.’ Health services in the US scream out ‘Beware of private health insurance’.

    I have been a member of Medibank Pte for 37 years. It has been a waste of money. All it provided was some irrational ‘peace of mind’. I have found it hard to admit to myself that all those tens of thousands of dollars in premiums I paid over 37 years have been largely wasted. In the same way health bureaucrats in Canberra, under pressure from very powerful vested interests find it difficult to face the fact that their policy advice to governments on the subsidies to high cost  health insurance companies has resulted in appalling public policy.

    My forlorn hope is that an Australian Government will one day eliminate the $7 billion corporate welfare which the Australian taxpayer presently provides to PHI. There would be a bonus in money saved by the government, but more importantly it would shore up Medicare’s position as a single payer that could better control costs. Until that happy day occurs, I don’t really care whether Medibank Pte is public or privately owned. It makes no difference.  It is part of a high cost parasitical industry. All private health insurance is undermining the universal, efficient and equitable public health insurance system called Medicare.

  • Fran Baum & Paul Laris. Beware of the crocodiles, they will keep you out of the garden!

    We interviewed  20 former Australian Federal and State and Territory health ministers about the extent to which they were able to focus on promoting health, health equity and social determinants of health during their tenure. Social determinants of health are the conditions of everyday life (income, housing, food availability, employment, education) and the structural factors that shape those conditions (distribution of wealth, taxation levels, extent of political empowerment) that combine to determine health outcomes and their distribution. Evidence from the Commission on the Social Determinants of Health showed that action on the social determinants are vital to achieving equitable health outcomes.

    One health minister told us of a public servant who advised: ‘Health has two components to it. There’s health services, which is like a swamp full of crocodiles, and public health which is like a very pleasant garden’. The public servant noted that most ministers try and spend as much time ‘in the garden’ as possible but warned the minster to “make sure there’s a fence around the swamp and the crocodiles can’t get out first”.  From our interviews it was clear that nothing detracts more from a focus on social determinants than hospitals demanding ever more resources and ensuring they get on the  front pages. The strategies our ministers reported included “divide and rule”, for instance make allies with GPs at the expense of other groups of doctor  and having a very well-articulated, evidence-based policy framework to “divert money away from this monster of hospital based critical care”.

    Part of the process of fencing in the crocodiles was trying to shift the system towards primary health care, which as one minister said is “the only way to ameliorate the galloping demands and costs of the acute health care system”. Health ministers who had achieved a shift in health care resources in the direction of equity frequently reported it as a politically difficult move, given the competing, often emotive, calls for funding for the acute care sector. The good news is that when they did make a shift in the direction of primary health care they reported it as a legacy of which they were proud.

    Our interviews were with health ministers who held office between 1988 and 2010.  In the current health policy context even fewer few health minsters appear able to fence in the crocodiles. In South Australia we have seen very significant reductions in spending on our community health services, all done under the guise of a health funding crisis. Yet last year the salaried doctors received 9% pay increases, which seems to be a case of the crocodiles running the show! It will be interesting to monitor what happens in Queensland where Minister Springborg appears to be trying to fence in his crocodiles by introducing more stringent contracts, despite threats from the doctors about mass resignations unless Springborg backs down.

    Our study showed that only really brave health ministers are able to stare down vested interests sufficiently to make changes that are likely to increase health equity and bring about action on the social determinants of health. One of the most important things that might drive this action is a strong commitment to social justice and redistribution and a rejection of the current commitment to market fundamentalism as the bible which drives policy decisions. It is tempting to speculate that the influence of  content- free managerialism has joined with careerism amongst politicians  to reduce the likelihood of any effective ministerial commitment to equity.   A number of the ministers we spoke to felt that a spirit of redistribution had been more event in the 1970s and 1980s before the religion of neo-liberalism occupied the state. The introduction of Medicare was possible because it was linked to the Accord between the government, unions and business.

    If we are to see health ministers in the future who are driven to pursue health policy aimed at achieving health equity then they are going to have to stand up to some very powerful ideologies and players. These include the organised medical profession, those pushing market fundamentalism as a basis for organising society and a powerful medical-industrial complex that lobbies for privatisation of health services. With such pressures it becomes easier to see why the compelling evidence on the social determinants of health equity quite rarely translates into enacted policy.

     

    Reference

    Baum, F. Laris, P. Fisher,M. Newman, L. MacDougall C.  (2014) Dear Health Minister:  tend the garden but make sure you fence the crocodiles. Journal Epidemiology and Community Health Published 2 January 2014,  doi:10.1136/jech-2013-203040 http://jech.bmj.com/content/early/2014/01/02/jech-2013-203040.abstract.html?papetoc

    Fran Baum is the Matthew Flinders Distinguished Professor of Public Health and Director Southgate Institute for Health,Society and Equity, Flinders University. Paul Laris is Member Medical Board of Australia and adjunct researcher Southgate Institute for Health, Society & Equity, Flinders University.

     

     

  • 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.

    ​

    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.