Here's a recipe for a more equitable health care system in Australia

Any health care system is first and foremost a social institution built on the cultural stance of the nation it serves. It is thus not happenstance that the US, with its emphasis on neo-liberal values, has a much larger private health sector than the Scandinavian countries, where social solidarity is important.

Aboriginal health funding and the distribution of power

Very real inequities exist in Aboriginal health care and in its funding, exemplified by a case study of Derbarl Yerrigan, the Perth Aboriginal Medical Service.

There are three reasons why spending on Aboriginal people's health should be higher per capita than for non-Aboriginal people:

• The health problems of Aboriginal people are much greater.
• There is some evidence that, as a form of positive discrimination in favour of Aboriginal people, health gains for Aboriginal people are valued more highly by the Australian community in general than health gains for non-Aboriginal people (i.e. vertical equity is considered appropriate).
• The problems of access - particularly with respect to cultural barriers - are greater for Aboriginal people. Services need to be made culturally secure.

There are precedents in various health service jurisdictions for having a higher level of spending on Aboriginal health services because need is greater. A ratio of three was used in the resource allocation funding formula for Queensland. In General Practice Divisions, the ratio for Aboriginal people is 2.9. Writing in the Australia and New Zealand Journal of Public Health in 1996, McDermott and Beaver in the Northern Territory, on the basis of relative needs, suggested a ratio of four.

The "standard" approach to equity - horizontal equity - argues that all health gains, no matter to whom they accrue, should be weighted equally. Vertical equity suggests that there should be positive discrimination for the disadvantaged and that any benefits to them be weighted above one.

In the citizens' juries in Perth in 2001, the ratio proposed was 2.7 In the Resource Development Formula in NSW it is 2.5.

To arrive at a composite figure for weighting Aboriginal people for the factors listed above, the three ratios (2.9, the lowest for relative need, 1.2 for positive discrimination, and 1.75 for cultural security from a study of Derbarl Yerrigan) are multiplied together.

This gives a factor of more than five.

Looking specifically at primary care in Perth, the level of spending in the general population on Medicare community doctor services (similar to the services that Derbarl Yerrigan provides), was $765 per capita. Multiplying by five would give a figure of more than $3,800. The level of expenditure at Derbarl Yerrigan at the time (2000/01) was $829, slightly higher than the Perth overall figure ($765) but well short of $3,800.

The actual level of funding of Derbarl Yerrigan was about 10 per cent ($800,000) below their level of expenditure. As a result, they were forced to close one of their successful branches providing services to clients in the Midland area on the outskirts of Perth. Yet, it can be argued that it was a direct result of Midland's success that they had over-spent. Midland had increased its client base from 400 to 2,100, at an extra cost that exceeded their overspend of $800,000.

At the same time, Perth teaching hospitals were overspending by $100 million, about 12 per cent of their budget and about 120 times the overspend at Derbarl Yerrigan. The Perth hospitals did not have to close anything.