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

This article was initially posted in June last year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  1. Jen Hocking says:

    I’m a midwfe who finds herself doing a PhD after 20 years at the coalface. Particularly enjoying the health care system analyses.

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