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Federation, fee-for-service medicine and other problems in Australian health care

By Gavin Mooney - posted Monday, 17 May 2004

The key problems of the Australian health service at a structural level relate to two key issues: first, the existence and size of the private sector; and second, the commonwealth-states split.

At the more macro level, the under-funding of the public system and the consequent lack of attention to equity stems from a chronically low tax base, and an all-too-little-progressive tax system.

At the more micro level, problems arise because of the continuing dominance of fee-for-service medicine in general practice; a focus on bulk-billing rates rather than on equity more generally; the under-funding and lack of cultural security in health services for Aboriginal people; the lack of technical efficiency and budget integrity in our major hospitals; and inefficiencies of allocation that see mental health and aged-care services relegated to Cinderella status. Finally, it is problematical that the AMA has too often almost a monopoly voice in advocacy in health care and that the Australian citizenry's voice is so muted.


Two numbers dominate health policy discussion in Australia: the percentage cover of private health insurance and the bulk-billing rate. They are not only unhelpful but stifle serious policy and political debate about the private sector and equity.

Compared to most OECD countries, Australia has a large private sector. This distorts social priorities in health care and results in inequities not only between rich and poor but also geographically. The latter is because private health-care, with its high financial returns to its staff, is almost wholly a metropolitan phenomenon. That makes it yet harder to attract staff to the bush.

Arriving in Australia just before the 1993 federal election, I was stunned at the very open attacks by the Australian Medical Association (AMA) on Medicare. I was used to the power exercised by the BMA in the UK and the Danish Medical Association. But the AMA's near apoplectic, explicitly ideological outbursts in opposing a public health-care system were breathtaking. Today it has learned a modicum of subtlety. It is clear, however, that it remains uncomfortable with public health care.

The split between the states and the Commonwealth is among the dafter parts of our system. Recently, some federal Liberal backbenchers suggested that the public hospitals should become the responsibility of the Commonwealth. Predictably, in my own state of WA, both sides of politics opposed the idea - after all, it would have seriously eroded their power base. The argument voiced was that the states are closer to an understanding of the preferences of the people. However, the question of who runs health services can, and should, be separated from how citizens' preferences are built into decision making. Centralising the management of health services nationally can be combined with being driven by state, regional or local community preferences.

The commonwealth-states split creates problems that are much wider than simply duplication and cost-shifting, bad as these are. The extent to which one can currently pursue allocative efficiency and equity is greatly compromised by the split. One bucket of money, one system would allow a far better opportunity to pursue some common objectives. Given this split, the sheer size of the private system and its pollution of the public system and we have a recipe for what may well be one of the worst designed and least equitable health-care systems in the developed world.

There is a need for some serious thinking about overall health-care policy objectives rather than continued fatuous discussion around a couple of numbers. What do we as Australian citizens want from the social institution that is health care? As a community, what good do we seek from our health-care system? That is the debate we need to have.


While we await a time when all health services are run by the commonwealth or all by the states, a joint commonwealth-states fund should be set up amounting to perhaps 10 per cent of the existing total spend and which could be used to purchase any health services. Cost-sharing would replace cost-shifting.

Aboriginal health is appalling. The fact that we have known this for years is worse. Not caring to do anything much about it is the real tragedy not just for Aboriginal people but for all Australians. It is a cancer on the decency of this society.

Institutional racism remains rife in health care. While Aboriginal health policy requires an across-government strategy, nonetheless it remains the greatest failure of the Australian health-care system. It appears that the people of Australia want to discriminate positively in favour of Aboriginal health. They are seemingly prepared to give a higher weight to improving Aboriginal health than to a similar improvement for non-Aboriginal people. The evidence is tentative, however, because neither governments nor researchers have taken the trouble to investigate this phenomenon in any detail. Perhaps governments don't want to know. Much progress could be made simply by listening to Aboriginal people with respect to how they want their health problems tackled and under what system of governance. A real start can be made by building culturally secure health services to overcome the cultural barriers that Aboriginal people face in trying to use health services.

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About the Author

Gavin Mooney is a health economist and Honorary Professor at the Universities of Sydney and Cape Town. He is also the Co-convenor of the WA Social Justice Network . See

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Curtin University Social and Public Health Economics Research Group
Feature: The Genome of a new health system
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