How to reform the health system so it makes life better for consumers

4. Consumers have no access to information systems around which the complexity of the system is structured and disconnected provider interests entrenched.

5. Private insurance is divorced from any active role in the management and delivery of health care. This means private insurance cannot contain costs without public subsidy. Private insurance is therefore unsustainable.

Medicare has successfully provided universal health care access for all Australians, but it now needs renovation if it is to give us patient-centred integrated care. There is no question of Medicare being removed - the question is how to introduce some form of managed competition to empower the consumer and curtail fragmentation.

Take the management of the top ten chronic conditions that consume so much of federal, state and private health budgets (heart disease, stroke, lung cancer, colorectal cancer, depression, diabetes, asthma, renal disease, arthritis and osteoporosis). Who has a financial incentive to curtail the risk factors in these conditions and curtail hospital usage? Answer: no-one. Australia has a higher hospitalisation rate for these conditions than the UK, Canada, USA or New Zealand.

Management of these conditions is currently dispersed amongst a plethora of programs and providers. Paul Gross of the Institute for Health Economics and Technology Assessment has proposed pooling funds from four sources (MBS, PBS, public hospital subsidies, and Home and Community Care payments) to make capitation-based payments with appropriate risk adjustments to agents of these patients to manage these conditions. The agents may be a GP, a community health centre, or indeed a health fund who would receive an up-front annual payment to co-ordinate the care required, to manage and reduce health risks, and minimise hospital admissions.

In this kind of managed care, consumers must be free to choose their agent, and to switch from one to another based on performance. In turn, the agents would receive a bonus payment based on patient satisfaction and health and functional outcomes.

This approach is infinitely preferable to continually pouring more tax dollars into public hospitals irrespective of health outcomes. The German Parliament, not usually known as a paragon of free market zeal, introduced a similar scheme in 2002 for the management of four selected conditions.

This is one approach to creating the two new markets we need to renovate Medicare:

• competition among budget-holders as agents of consumers who compete for the allegiance of patients in acting on their behalf; and
• competition amongst providers and practitioners to supply services to consumers through these agents or budget-holders.

We can manage competition well enough in the AFL to give us an even finals series. Why can't we manage competition in health care to give us better health?