The virtues of healthy choice and competition

As governments have a relatively poor record of aligning provider incentives with the needs of health consumers, and of ensuring cost control, the key challenge going forward will be to ensure that Australia builds on existing levels of private health provision, delivering greater value for money and ultimately a more responsive and sustainable health system.

A number of commentators have proposed a range of reform measures to deliver real and long-lasting choice and competition within health care. Some of these reform ideas include:

• better targeting of Medicare, Pharmaceutical Benefits Scheme and other public sector health incentives to those in genuine need, including those with chronic conditions in low income brackets and the elderly, and further encouragement for individuals outside of these groups (particularly high income earners) to pay for their own health care needs. This could include, for example, incentives for people to “opt out” from the Medicare system (and reduce tax liabilities in return);
   
• promotion of greater self-reliance in health financing by establishing tax-sheltered “Medical Savings Accounts” allowing individuals to withdraw funds, without penalty, in order to pay for their own medical expenses;
   
• encouraging the further development of the private health insurance industry by removing regulatory roadblocks, such as restrictions on insurers covering a more comprehensive range of mainstream health services including non-hospital treatments;
   
• the removal of anti-competitive health sector restrictions and regulations, including in the areas of workplace relations reform, the supply of medical practitioners, prescription drug supply, and other restrictive practices. Governments should also observe competitive neutrality principles between public and private sector health providers, including hospitals, in their policy and regulatory settings;
   
• Further devolving financial and operational responsibilities from state government central bureaucracies to individual public hospitals, as a first step towards their eventual privatisation and ownership by either private or non-profit entities. In the interim, further opportunities for contracting out of public hospital services to the private sector could be explored; and
   
• wherever possible, further extending the application of price signals in health care (pdf file 1MB), including higher co-payment contributions for services covered by Medicare as well as charges for prescription medicines.

Consistent with these measures, other commentators have referred to the need for a rationalisation of Commonwealth and state roles, and for health reforms to include a clearer delineation of funding, regulation, monitoring, purchasing, asset ownership and service provider roles between government agencies and private sector participants.

In summary, health reform should not be in the direction of more government spending and regulation. This will only exacerbate the existing bottlenecks and inefficiencies of the system. The focus should be on greater choice and competition that would improve the responsiveness and efficiency of supply, enhance value for the health consumer’s dollar, and enable consumers to express their preferences more effectively. If we are able to achieve this, then Australians should reasonably expect that good care will be readily available well into the future.