JOHN MENADUE. Labor’s proposed Australian Health Reform Commission is a welcome start.

Mar 28, 2019

For many years several of us in Pearls and Irritations have argued that we need an independent and professional health commission to lead an informed public discussion on health issues and recommend to the Commonwealth Government and COAG on how to improve our health system. In world terms we have a good system, but it is really unchanged since the Hawke government in 1983 introduced Medicare which was based on the Whitlam government’s Medibank of 1975.  

The core problem in health reform is that the providers have an effective veto on reform. They bitterly opposed both Medibank and Medicare. The providers like the AMA, Australian Pharmacy Guild, private health insurance funds and Medicines Australia dominate the public discussion on health policy. Or as the Productivity Commission put it in December 2017 ‘Suppliers, rather than patients, are currently the centre of the current [health] system – a cultural anachronism..’.

A health system should surely place the highest priority on the public/patients and what is in their interests. We obviously need the cooperation of the very professional clinicians that we have in Australia but clinicians and other providers are the means to the end. Providers must always be secondary to the interests of the public and patients.

Our health system is dominated by the interests of providers and ministers and senior officials in the Department of Health and Ageing listen to them and not to patients . The public is effectively disenfranchised in health policy.

As I have often described the situation ‘Health Ministers may be in office but they are seldom in power’. The providers are well organised and funded with many staff, resources and lobbyists. They are able to press their interests ahead of the public. Underfunded journalists with one or two exceptions are unable to contest or examine the need for change in our health system in the interests of the public.

The Department of Health and Ageing has little economic expertise and is structured to reflect the interests of providers. It sees its role as helping the minister manage the providers and minimise their political damage. DHA has consistently failed on important policy development and reforms.

Even commissions like the National Hospital and Health Reform Commission under the Rudd government have been dominated by providers and insiders. The Chair of NHHRC was a senior executive of BUPA. Not surprising this commission had very little impact.

Because of this domination by providers an independent and professional AHRC is very welcome. But it needs to be carefully structured, resourced and tasked. As a permanent commission it should be established by legislation.

If a Shorten government is elected it should be very careful about the composition of the commission, the principles that should guide it and the priority health issues on which it should focus.

Composition of the Australian Health Reform Commission

It should be composed of say nine or ten people who are independent and professional. The Reserve Bank board is a useful guide. The bank board has proven to be immune from special interests and their lobbying. Its senior staff effectively inform the public on key economic issues. It is respected as being professional, independent and serving the public interest.

The AHRC should include clinicians, economists, business people, trade unionists and most importantly, a heavy weighting with influential members of the public. There should be no ‘representatives’ of the providers on the commission.

The AHRC would need a small but high quality secretariat. It could be funded with savings from the under performing Department of Health and Ageing.

Principles and Guidelines for the AHRC

Just as the Australian government gives the Reserve Bank guidelines on inflation and employment, so it should give the AHRC principles to guide its operation. These principles could be as follows.

  • A universal system available to all regardless of income.
  • A focus on users rather than providers.
  • Emphasis on keeping people healthy (prevention) rather than on the treatment of illness. The urgent invariably displaces the important in today’s health system.
  • Single national insurer with purchasing power to bear down on costs.
  • We need to spend our health dollars efficiently.We spend $12 billion a year on inefficient private health insurance. Through fee for service we reward doctors for treating illness rather than keeping people healthy. We have too many ‘adverse events’ and over-servicing and over-treatment.
  • Solidarity and social inclusion. The growing two-tier system is the antithesis of social inclusion.
  • Autonomy and choice, provided it does not impose costs on others.
  • Personal responsibility for keeping ourselves healthy.

The priority programs which AHRC should consider.

We need reform, broadly in priority order below.

  1. Out of pocket costs of 20% in Australia are amongst the highest in the OECD. Some specialist fees are outrageous. Co payments 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. Persons on 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. Most importantly out of pocket costs need to be reformed to ensure equity and efficiency.
  2. Primary care is the key reform area, particularly for prevention, keeping people healthy. Australia has an obsession with hospitals. They should be the last resort rather than the first. Denmark has reduced the number of hospitals from 98 to 32since 1999. But we keep pouring more and more money into expensive hospitals. Countries such as the UK and NZ have high quality care in part because of the philosophy underlying their healthcare, 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. The government should pursue possible contractual arrangements with general practice as an alternative to fee-for-service. Other financial arrangements such as bundled fees for services should be examined.
  3. 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.  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. As taxpayers we fund the training of doctors. We subsidise 80% of their income through Medicare and then issue new provider numbers for them to practice in areas that are already over supplied. That is absurd. Nurses, allied health workers and ambulance staff are denied opportunities to upgrade and realise their professional potential. Pharmacies should be providing more basic medical services for the community rather than continuing to focus on being shopkeepers rather than professionals. There will never be adequate delivery of service to people, particularly for the aged, without radical workforce reform, mainly within primary care.
  4. Private health insurance. The Commonwealth Government subsidy of about $12 b. p.a. which includes loss to revenue through tax incentives should be progressively means tested and the funds saved used to directly fund other health services, e.g. mental, indigenous and dental healthcare. The $12 b. annual subsidy favours higher income earners. 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 worldwide is clear that countries with significant PHI like the US have very high costs. PHI is a scam in the same way it was in the 1970’s before Gough Whitlam introduced Medibank/Medicare.
  5. 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 nothing of the sort. It is not even within the health portfolio. We need transparency to high light waste, abuse and over and under servicing. We are ‘flying blind’ without this information being made available in an understandable form. Medical services should be subject to the same rigorous cost-benefit examination as pharmaceutical services. Medicare is not doing it. For example we really have no idea how good our private GP is or the competence of specialists in private hospitals. There is little or no peer review. Medicare has a treasure trove of data that could inform us about the performance of providers. But the information is not provided in an easy to understand way. Why for example do the rates of caesarean section vary so enormously across the country and are much higher in private hospitals?
  6. The Blame Game. We need to integrate both hospital and non-hospital services. Unfortunately attempts to resolve the Commonwealth/State blame game that hinder integration have been largely unsuccessful. I have suggested 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 plan the delivery of health services in the State and so provide more cohesive hospital and non-hospital health services. Delivery of health services would continue through existing health agencies. The 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. Hopefully success in one State would then encourage other states to swallow their pride and improve their health services by cooperating with the Commonwealth.That proposal is perhaps utopian! A more modest version might be as the Productivity Commission in December 2017 briefly described. “Prevention and management of complex health conditions, by integrating care by GPs and other clinicians with care in hospitals, is a key initiative. Change can be orchestrated locally if the Australia, State and Territory governments move away from centralised control, leaving much greater scope for local experimentation and flexibility in solutions at the health district level. The division of responsibility between the Commonwealth, States and Territories is a major obstacle to improvement in the quality, equity and efficiency of health care.’  This is a politically hard one but it is very important.

An Australian Health Reform Commission could a game changer in health reform if it is wisely and carefully selected and tasked.

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