John Dwyer. Structural reforms to healthcare – two major reforms.

Apr 5, 2016

Does the government understand the structural reforms to health care needed by modern Australia?

 Political pre-election posturing at the moment has involved many debating the question that asks ’Do we have a spending or a revenue problem in Australia?” Certainly when it comes to our health system we should first be asking what structural reforms would make that question less important. 

While the idea that States could tax their citizens to pay for hospital care vanished in a flash, there is a distressing significance to the idea ever having been floated in the first place. It means that the Coalition still does not understand the components of the structural reforms needed to improve both the health outcomes and cost effectiveness of our health system. Implemented, the proposal would have further entrenched the inefficiencies in a fractured health system.

Equitable, cost-effective health care in modern Australia requires two major reforms.

Informed opinion, generated by world-wide evidence, suggests that the first major reform requires us to appreciate that the funding for the total spectrum of health care, which includes hospital, community and the primary care funded by Medicare, needs to be pooled so that these services can be integrated. Funding flexibility is a crucial issue, as this would allow differential spending on various components of the system depending on regional need. For example, rural primary care is more problematic than rural hospital care. Sadly this imperative is obviously not in the conscious mind of a government that would enshrine a separation of hospital and primary care funding as demonstrated by their State tax proposal.

The concept of regional funding is very important as different regions with very variable demographics and health priorities are readily demonstrated in our huge country. In our present system we have Local Hospital Districts and Primary Health Networks (PHNs) within a State boundary. While the latter are meant to improve the quality of Primary Care and better integrate individuals care and provider availability there geographical boundaries make this impossible. There is only one PHN for Tasmania and only one for the whole of Western Australia outside of Perth! New Zealand has 80 such organisations.

If one agency held all the health dollars available for health care and logical health districts were established without reference to State boundaries a resource distribution based on local needs not just population density would markedly improve health outcomes and cost-effectiveness. Regional fund holding in the UK sees “Commissioning Agents” able to seek providers for that regions health needs. This was to be the approach taken by the short-lived “Health Care Commission”, established by the Whitlam government.

Federation has failed our health system as it has prevented it being operated as one system in which three components are fully integrated (Primary, Community and Hospital care). This is our unique disadvantage within the OECD. Now, 40 years after the idea was first suggested there remains an urgent need for COAG to pool all our health dollars and establish a State/Federal “Health Commission” to disperse the funds. The COAG meeting of health ministers later this week should commit to a reform journey with this initiative as the destination.

Currently our States are responsible for funding our public hospitals with a variable, oft insecure, contribution from Canberra. Hospital admissions continue to increase steadily and the growth in hospital spending far exceeds any increase in Medicare spending. Because of the responsibility/funding divide, States are at the mercy of the success or otherwise of Primary/Community care to reduce the number of people requiring hospital care. They have no levers to pull to control demand. Figures from the Australian Institute of Health and Welfare suggest that 600.000 admissions to public hospitals each year could be avoided by a better-resourced Primary Care system. It is clear that a future featuring affordable and excellent hospital care is dependent on reducing the demand for hospital care.

So a second major reform is long overdue. We need a major structural reform to change our outdated hospital, doctor and sickness centric system to one that focuses on the prevention of chronic illness, the reduction of hospital admissions and “team medicine”. A multidisciplinary team working in the one practice integrating all the care needed by enrolled patients. In much of the world this proven approach to better health care is referred to as the “Medical Home” model. It provides the needed components for modern primary care. Patients enrol in a practice populated by a team of health professionals from different disciplines to Improve patient’s health literacy and maintenance of a healthy lifestyle. Continuity of care allows for early recognition of problems that if not treated could become serious and chronic. The range of services needed by patients with established chronic diseases are provided in their “one stop shop” and the practice is resourced to extend care into the home/community to minimise the need for hospital admission.

Such a model necessarily increases practice expenses, as the multidisciplinary team the patient needs has to be funded. However, doing so will reduce hospital admissions and so for the whole system is cost effective. The program will need more commonwealth expenditure and that should also include funding for prevention strategies. Having more water bombers available for the fire season would be welcomed but their availability should not mean that hazard reduction during winter is not prioritised. We can do a better job of coordinating care for patients with advanced, incurable chronic diseases but in focussing almost entirely on this priority we are doing little to turn off the tsunami of Australians who continue down the path to chronic avoidable illness.

The tentative step towards introducing the “Medical Home “ model into Australia announced last week is welcomed conceptually but it is focussed entirely on the management of established disease not strategies for minimising the current flood of Australians developing chronic disease and the “Healthcare Home” as envisaged is a pale reflection of the fully developed model described earlier. A detailed plan needs to be presented before any judgement can be made on the likely success of this first step. The plan, as announced, would aim to provide patients with “multiple chronic illnesses”, who stick with one GP for their care, benefit from better-integrated care. A participating GP practice would receive fixed amounts quarterly for providing the enhanced care. While moving away from a fee for service model for the care of chronic illness and appreciation of the need to integrate a range of needed services is welcomed it is not clear how the GP conducting the orchestra will be able to fund the additional players needed. For a scheme said to involve 200 GP practices and 65,000 patients the suggested cost of $21 million seems totally inadequate and anyway, what does it mean when we hear the scheme is to be cost neutral?

As usual, the devil is in the detail. How much will the practices be paid for the integrated service? Will this payment (capitation) vary depending on the number of chronic problems suffered by a patient? What level of morbidity will set the threshold for entrance into the scheme? How will the trial’s outcomes be measured? Who will determine the additional staff requirements and the skills they need as well as the financial compensation they will be offered in the scheme? Etc.

All these questions can be addressed and have been elsewhere, but how much better would be this initiative be if it were to establish thirty or more fully resourced Medical Homes to prove their worth in the Australian context? We need to continue to advocate for that suggestion.

John Dwyer is Emeritus Professor of Medicine at the UNSW.

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