John Menadue. Why health reform is so hard. It’s about power.

Sep 27, 2014

You may be interested in this repost.  John Menadue.


I have been actively involved in health policy for over twenty years. Throughout that period Medicare has been the shining light that has well and truly stood the test of time. But necessary health reforms are hard. They are deferred or avoided.  Without ministerial leadership there is an enormous lethargy in the health system.

The major reason I suggest for reform being hard is the power of “insiders” and the way they exercise that power. At one level there are those insiders that administer health services. Health is a highly technical, large and complex field that is difficult for outsiders to come to grips with. This gives disproportionate power to health administrators on the inside. Then at another level which is ‘joined at the hip’ with these administrators are the vested interests or rent seekers who batten on the health service and dominate the public debate. It was the same type of vested interests who so selfishly led the opposition to Medicare in 1975. They are still with us today but in a different guise.

.These vested interested who can delay or veto reform must be recognised for the power they exercise.– the AMA, the Australian Pharmacy Guild, the private health insurance funds, Medicines Australia and the state and territory health bureaucracies..

The AMA is opposed to reform of the perverse incentives of the fee for service system of remuneration.FFS is not appropriate for chronic care; it encourages over servicing, over referrals and over prescribing. The financial incentive should be to keep people healthy through contracts and capitation in general practise and not financially reward doctors when the patient is sick.  .

The AMA is turning a blind eye to the growing corporate takeover of general practise and the associated vertical integration into radiology and pathology. The health sector is seen as easy picking by business, if only the government would get out of the way.

No government will lightly challenge the AMA

The Australian Pharmacy Guild stands in the way of competition and the need for pharmacists to become more health professional and less like shopkeepers. The APG often threatens to use its power through pharmacies across the country.

The private health insurance companies are expensive financial intermediaries who receive a $7 b annual taxpayer subsidy. PHI’s benefit the wealthy and most importantly weaken the power of Medicare to control prices. Gap insurance has underwritten an enormous increase in specialist fees. Now PHI’s want to move into general practice.  Government subsidized PHI is a major threat to health care in Australia as it has become so disastrous in the US. PHI sees governments as a relatively easy pushover.

Medicines Australia, that represents the manufacturer and distributor of drugs charges Australians $2b per annum more pa than New Zealanders for equivalent drugs. It is a powerful lobby group.

We have 8 state and territory health bureaucracies supported by their ministers that are very concerned to protect their own turf at the expense of an integrated national system. The federal government is reluctant to stare down the parochialism of the states

Unless we take the health debate to ‘outsiders’ and break the power of the insiders-the  rent seekers and vested interests-, we are unlikely to see significant progress in health reform. The vested interests invariably win out over the public interest.

There has been incremental change in response to political and budgetary pressures, but that has produces a patchwork set of arrangements that lack guiding values or principles. The debate is about ‘managing’ the health system and not about the values and principles that should drive it.

Eight years ago, Ian McAuley and I in New Matilda suggested some key reform that we believed were necessary to ensure universality and the improvement in both the equity and efficiency of our health sector. Those suggested reforms were.

  • To focus program delivery in primary healthcare which can provide an integrated range of services?  But the debate is focussed on iconic hospitals.
  • To move to a single, universal insurer and to avoid going down the US path.
  • To organise healthcare programs around the needs of users rather than in response to providers.
  • To rationalise user payments so as to achieve equity and not distort resource allocation.
  • To retain Commonwealth responsibility for funding and standard-setting and deliver programs through joint Commonwealth/State administrations.
  • To involve citizens in healthcare to counter the strong lobbies of service providers/vested interests.
  • To focus ministerial concern on health rather than health services because many of the key services to advance the health of the population are outside the health portfolio. E.g. poverty, diet and distance.

The public ‘debate’ on health is between the powerful rent-seekers with their well-funded public relations machines and the minister. The public is excluded from the debate and the media is ill-equipped to undertake the important examination of key policy issues. Under-resourced journalists are forced to rely increasingly on handouts by the rent-seekers.

Commonwealth  Ministers  for Health are very dependent on the Department of Health and Ageing, particularly, as is often the case with ministers who are not across the issues and don’t have a clear policy program themselves. Unfortunately ministers who rely on the DHA will be disappointed. The Department is ill-equipped .It is structured in ways that reflects the interests of providers, e.g. doctors and pharmacists, rather than structured on the basis of community interests, such as acute care, chronic care or demography.  DHA has little economic expertise. One very senior Commonwealth official said to me, DHA does not have any strategic sense in health policy. It doesn’t effectively integrate the Commonwealth’s own expensive programs, let alone make any real progress in bridging the Commonwealth and State divide. During the difficult negotiations with the states on health reform during the Rudd Government period, the Department of Prime Minister and Cabinet effectively had to step in because DHA was not up to the job.

The role-out of e-health by DHA is an expensive mess. DHA sees Medicare as a funding vehicle and not a policy instrument. Medicare is not even within DHA. The Department clearly sees its major role to keep the peace and keep the minister out of any public brawl or argument.  Health reform and health policy is an after-thought.

The Ministerial/Departmental model in health has failed. It is incapable of contesting the power of the rent seekers.

Governments are invariably captured by their own health insiders who are people of good will and professional skills but they have often spent their whole professional lives working in the health sector. Take the example of the appointment in 2008 of the National Health and Hospital Reform Commission. The Commission was overwhelmingly composed of health insiders with their limited horizons. The Chair was a senior executive of BUPA. Not surprisingly NHHRC produced very little worthwhile reform. Labour governments as well as Coalition governments like to smoodge the powerful vested interests and avoid political trouble.

I have been urging for many years two ways to overcome the problem of the powerful insiders and vested interests.

The first is to bring the Productivity Commission and Departments of Treasury and Finance into active involvement in health policy. The rigour and the outside view that they can bring is essential.

Secondly, because of the failure of the ministerial/departmental model which is intensified by the poor performance of DHA I have proposed the establishment of a Commonwealth Health Commission composed of professional and independent people to take responsibility for health policy administration, subject to government policy guidelines. The Reserve Bank has shown the value of an independent and professional body that can lead public debate on important issues and implement government policies. And not get waylaid by powerful vested interests.

Unless the governance problem in health is addressed we can forget serious reform. As part of this governance reform we need to drastically cut the power of lobbyists, both third party and in house lobbyists. Secret discussions and deals by vested interests with politicians and senior public servants must be stopped.

Health is too important a matter to be left to the health insiders.

What do they know of health who only health knows?

If there was one word I would use to describe the obstacle(s) to health reform it would be ‘POWER’



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