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

Aug 20, 2013

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

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

In our view the key failures have been as follows.

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

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

This article was published in Croakey on 19 August 2013.

Ian McAuley

John Menadue

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