How sick is our health system?

The Commonwealth’s concern is only for its own budget, rather than the nation’s total health outlays and what can be achieved with those outlays. State governments are focused almost entirely on hospitals, and miss no opportunity to shift blame and costs onto the Commonwealth. The Commonwealth has had no health workforce policy; thanks to misguided tertiary education policies Australia faces severe shortages of health professionals.

With such neglect and fragmentation it’s surprising that we do as well as we do. Credit goes to health professionals, who are generally overworked (and over-managed). And while professionals keep each clinic, pharmacy, or hospital ward operating well, the whole is certainly less than the sum of its parts.

There is no consistency in health policy. We may reasonably expect some difference between Labor and Coalition policies, perhaps with Labor more supportive of “free”, tax-funded health care and the Coalition more in favour of market forces, but no such division is evident.

Labor has gone along with increases in PBS co-payments, while, on the other hand, vigorously defending medical bulk-billing.

The Coalition has introduced an extremely generous and expensive open-ended safety net for medical consultations, and has diverted about $4 billion a year to supporting private insurance, thereby diverting resources away from public hospitals, and, contrary to its own ideology of “self reliance”, encouraging over-use of services which are free at the time of delivery. (Those who criticise Medicare as a manifestation of the “nanny state” conveniently forget that private insurers are “nanny corporations”.)

What a health “system” would look like

At the Centre for Policy Development (CPD) we gathered a group of health care experts to come up with their suggestions on what a health system for Australia should look like. There was a strong convergence of views, and a strong belief, supported by basic calculations, that a properly integrated health care system could deliver significantly improved services without the need for any more funding. (The full report A health policy for Australia can be found at the Centre’s website) Our main conclusions were:

First, there should be one locus of responsibility for health programs. There are arguments as to whether this should be at a state or Commonwealth level. The states, in general, are more proficient at program delivery than the Commonwealth, are much closer to the people, and are better placed to handle regional needs. Whichever level of government provides services, funding should remain a Commonwealth responsibility, and the Commonwealth should have a role in establishing standards of care, providing shared services, ensuring interstate transferability, and providing shared services such as pharmaceutical evaluation and price negotiation.

Second, there should be integration of programs. If program division is required, it should be on user lines, rather than provider lines. To illustrate, at present there are three major programs - pharmaceuticals, hospitals and medical services. These divisions are based on providers, and reflect the legacy of old practices; for example, pharmacies were kept separate from medical clinics because they were essentially small chemical laboratories. User divisions could be on demographic groups (for example, aged care, adolescent, youth etc), on groups with special needs (for example, aboriginal health), on conditions (mental health, reproductive health), or on types of care (for example, occasional, acute and chronic care).

Third, there should be a consistent policy on health funding and allocation to replace the incoherent mess of funding arrangements. The basic question on funding is the extent to which we should pay for health care from our own pockets, as opposed to the extent to which we pay for health care from pooled funding. There are arguments for more use of market forces and for a completely free system, but whatever way we go there should be consistency.

Wherever the division occurs, private insurance should have no role, for in providing “free” services at the point of delivery it distorts incentives and muzzles market signals, and, as a means of pooling funds, it is administratively expensive, fails to achieve the equity of tax-funded pooling, and fails to keep service providers’ costs under control (which is why health care in the USA is so expensive).

In relation to funding, government policy should be concerned with the community’s total costs, rather than the present narrow fiscal focus. Governments have a role beyond looking after their own budgets; they should be concerned with total community costs, including not only direct out-of-pocket costs of health services, but also the costs of accidents, illnesses, poverty, environmental degradation and other factors which add to the community’s burden of poor health.

Fourth, health care programs should be universal. At present, thanks to the link between private insurance and private hospitals, we are developing “two tiers” of provision. Rather, all Australians should have access to the same high quality services. That does not mean all services should be free; to the extent there are co-payments these should be based on ability to pay. And a universal system is not necessarily a public system; even if, as is likely, the majority of funding is from the public purse, the majority of delivery could remain with the private sector, as at present.