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Can Medicare cope with chronic illness?

By Anne-Marie Boxall and Stephen Leeder - posted Tuesday, 10 October 2006

Two speeches, one from Mr Beazley and one from Mr Abbott, within a week raised questions, albeit in an unusually quiet way, about the future of health care in Australia.

No one is prepared to say it, but the time has come to rethink the future of Medicare. While in its current form it has served us well for 20 years, it is not configured to meet the greatest challenge facing the health system in the 21st century - preventing and managing chronic diseases.

To date, neither major party has been prepared to tackle these issues publicly, but that may be changing. Superficially, their reticence is understandable. The Labor Party is nervous about criticising current Medicare and conceding the upper hand. The Coalition is equally reluctant, having learnt painful lessons before about the electoral costs of threatening to dismantle Medicare. But these concerns may not be in the best interests of health care in Australia, nor, paradoxically, in the best long term interests of Medicare.


Recently, Tony Abbott addressed the Centre for Independent Studies on, "What if we could start again? Elements of the ideal health system". He urged listeners to stop "thinking radical thoughts" and instead focus on "solving practical problems".

He pointed to successes achieved through practical incrementalism - increased bulk-billing rates, general practitioners investing more time in health promotion and improved co-ordination of care for people with chronic illnesses. Access to allied health services has also increased. These small-scale solutions, however, are no longer enough. Australia is falling behind other developed countries in important areas of chronic disease prevention and management, such as asthma, obesity and diabetes.

Current Medicare may be part of the problem. It favours curative over preventive care.  Unfortunately the biggest health problems - those of chronic disease - are not curable and need ongoing care, which the current system is poorly suited to deliver. Forty years ago, people died of heart disease in their 60s, but now they are living well into their 80s with heart failure and diabetes.

Abbott is right. We can’t start again. Our health system is built around Medicare and it is designed primarily to pay doctors and hospitals for treating sick people episode by episode. This configuration is not easily able to provide supportive, preventive care or connected care for people with health problems that stretch over decades. Under Medicare, only a small amount of money (just over 5 per cent) goes towards community-wide health promotion activities, while over two-thirds is for hospitals, medical care and pharmaceuticals.

Small-scale incentives within the framework of the existing Medicare will never be enough to do what is needed now to tackle chronic disease. Changes such as improving urban design so people are encouraged to be active, preventing young people from taking up smoking and fostering community support for people at high risk of mental illness are needed if we are to do better. These things can only be achieved if we adopt a new way of funding and organising our health system. We need not ditch Medicare altogether, or the principles that underpin it, but we do need to re-think the form it should take to meet our future needs.

There are alternatives that deserve careful examination because of their potential to better manage chronic disease. "Managed competition" is one option. Under this system, funding for Medicare and all other public health program funds would be pooled and allocated to "regional health areas" according to their health needs. Fund managers in each area would be able to offer health services most suited to the needs of local people - including prevention.


In a lecture on the health system given at Macquarie University the week before, Kim Beazley signalled that the Labor party might be willing to talk about health system reform. He announced that the Labor Party saw health reform as a crucial economic issue.

It is not only the costs of health that now worry us but also the lost productivity due to chronic disease sapping the workforce. As the number of people suffering from chronic illnesses increases in Australia, the economic implications worsen. More people will need to take more and more sick and carers’ leave, making the economy less productive overall.

The 2007 election is not likely to be won or lost over health, so the Coalition is probably unperturbed by Labor’s comments. Yet current Medicare is struggling with burdens it is ill-equipped to carry. Labor has pointed out that Medicare’s weaknesses are the economy’s weaknesses, too. Start talking about the economy, and we are all ears.

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About the Authors

Anne-Marie Boxall is a PhD student with the Australian Health Policy Institute at Sydney University.

Stephen Leeder is professor of public health and community medicine at the University of Sydney, and co-director of the Menzies Centre for Health Policy.

Other articles by these Authors

All articles by Anne-Marie Boxall
All articles by Stephen Leeder

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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