John Menadue. Privatising Medicare’s payments system and the erosion of Commonwealth Public Service capability.

The government has apparently accepted the advice of the Commission of Audit that Medicare’s payments system should be reviewed with the possibility of privatisation. The payments system includes Medicare, the Pharmaceutical Benefits Scheme, Aged Care Services and Veterans’ Affairs.

It sounds like another expression of neo liberalism, that only the private sector can be efficient and cost-effective.Let us see whether that is so through market testing. I remain sceptical.

As a regular user of Medicare services and payments, I am not aware of problems in the payments system. But if there are problems, the government should fix them.’.

This proposal on privatizing Medicare payments is part of the continuing trend to degrade government capability in both policy and administration of programs. The Australian Public Service is becoming short of senior people who understand the complex world of business strategy and those things required in commissioning the delivery of services or planning infrastructure investments and their delivery. In social policy it is not at all clear that the Commonwealth now has the people who understand the big systems that are so essential to a large part of what the public sector does.

In between jobs, the new Secretary of PM & C put the problem this way in an interview with Laura Tingle in the AFR in May 2015. He said:

‘I think our institutions are being eroded in their capability and eroded in public trust. … Over time large parts of the public service have lost their policy development edge.’

He has been replaced in Treasury by John Fraser, most recently a banker. Yet much of the governments’ deficits around the world have occurred as a result of governments having to bale out the banks for poor decisions and poor risk management.

The problems that we apparently have with Medicare are common to many agencies. Good accounting in government has been abandoned and replaced with narrow financial metrics. Outside a few agencies, there just isn’t the capacity to do proper cost/benefit analysis. Many decisions are made on the run on the basis of cash outlays over four years.

This failure of government administration suits private providers who exploit ministers’ and bureaucrats’ lack of analysis capacity and the domination of short-term cash outlays in the public presentation of the budget.

It also suits neoliberals to get as much off the budget as possible even if the community is worse off. This is happening in the health sector. Some government expenditure is relieved by pushing business towards private health insurance, but we know that administrative costs of private health insurance are three times higher than Medicare. Furthermore we know that the growth of private health insurance makes it harder for Medicare to control fees. So whilst the budget may look a little better, the community is much worse off.

We have had glaring examples of how government policy, capability and operations have been run down to the benefit of accounting and consulting firms who come and go with projects and their ‘economic models’, but there is little building of intellectual capital in the process.

Staff numbers in the Australian Taxation Office have been cut back at a time when we have record tax avoidance and hundreds of our major companies paying no tax at all.

I have rarely seen a root-and-branch criticism of a department as we saw with the Australian Public Service Commission Capability Review of the Department of Health and Ageing last year. The Secretary of the Health and Ageing at the time is now Secretary of Finance.

The Department of Immigration and Border Protection has become securitized with a focus on border protection and control at the expense of nation-building and humanitarian programs. Senior and competent people with knowledge in nation-building and refugee programs have left the department. We see the result most graphically in the snail-pace response to settling 12,000 refugees from Syria. Less than 10 have arrived! Canada has put us to shame.

The Attorney General’s Department failed to tell security agencies about the risk of Mann Haron Monis weeks before he entered the Lindt Café. The Attorney General’s Department has carriage of the policy and implementation of ‘meta data’ through the Data Retention Act. We were told at the time it was urgent because of the terrorist threat. But the policy cannot be introduced until the end of 2017at the earliest because of flawed implementation. AG’s department has just not been up to the job.

One reason for the pink batts problem was the loss of  implementation capability in the Department of the Environment. That same department has bungled the approval of the Carmichael mine.

The Department of Defence is subject to very little effective checking of its very expensive capital projects. It keeps making the same mistakes. As John Stanford put it in this blog on 11 December last year

‘Our defence acquisitions keep repeating the mistakes of the past, from mixing and matching systems inappropriately and accepting excessive risks, to allowing political judgements to override efficiency considerations and the proper regard for the public purse. In the new submarine acquisition, we seem to have learned nothing from the Collins Class procurement’.

When the new submarines are delivered China and India will have nuclear submarines.

The Department of Defence has a one-line budget appropriation which effectively denies rigorous examination of mega-dollar projects by the Department of Finance and others.

The sorry story continues with the mega funding of roads. As Mike Keating and Lucas Fraser pointed out in the policy series in last year’s blog

‘A reasonable projection of planned road expenditures indicates that the accumulated stock of debt to FY 2023-24 could be of the order of $114 b. When added to the already accumulated debt, this amounts to a total accumulated road-derived public sector debt of $140 b. within a decade, a matter than until now has been entirely unreported’. Where is the Department of Transport or Infrastructure Australia when we have such gigantic and wasteful expenditures on roads”?

There is a dismal and concerning story about how the capital of government is being deliberately eroded.

We are paying a very heavy price for neoliberalism and the down-sizing of government that goes with it. The selling of Medicare’s payments system may be another step along this path.

The coinage of the Australian Public Service is being seriously devalued. Can the threads of good policy development and administration be recovered? It is getting late.

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