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Behold the elephant! Private health insurance and the Commission

By Fiona Armstrong - posted Thursday, 26 February 2009

The report out last week from the National Health and Hospital Reform Commission has been eagerly awaited by health reform advocates. Fundamental reform of our health care system is long overdue and many of the ideas put forward in the report reflect the energy and enthusiasm that has gone into advocating a shift in the focus of our system to investing in primary health care, to provide services close to where people live, address health care needs in a holistic way, and keep people well.

This is appropriate; the evidence for investing in comprehensive primary health care is sound, most other countries are doing it, and it’s commonsense that keeping people well costs us all less in the long run. The method for funding and governing these new entities however is far from clear. But this is not the reports biggest failing. That is reserved for the willingness with which the Commission has reflected the ideas of those with vested interests, unreservedly accepting that the current balance of health care resources (raised through taxation, private health insurance, and out-of-pocket contributions) is appropriate, even advocating (with no justification whatsoever) that this unique “balance” must continue.

That’s not to say the report is all bad. There has been a genuine commitment to represent much of the feedback they received, and perhaps that is appropriate in an interim report. People want to be acknowledged and to know they have been heard. But some were clearly louder than others.


One of the most severe criticisms levelled at national health policy approaches in recent years has been the unwillingness to tackle vested interests in the system, to make tiny incremental reforms so as not to upset the most voluble of stakeholders. How refreshing it would have been, and what an opportunity missed, for this report to seriously consider the true value of health care in a country such as ours at this particular point in history. But rather than consider what a well designed system should look like, a system that could make Australia the envy of the world in terms of innovation, equity and positive health outcomes, and all done in a fiscally responsible and sustainable way, the Commission has chosen to tiptoe around the vested interests it is so familiar with.

It offers instead (in terms of serious structural reform - see chapter 12) either completely unpalatable and confusing options (option C - a radical and complicated system of managed care using compulsory social insurance); more of the same (option A); or an option (B) that appears to remove the states altogether from the health care landscape. Now this may just be a quick way to dismantle federalism, but despite their obvious failings in the running of many hospitals (due to no small measure to inadequate resources being provided by the federal government), the states do have (unlike the federal government) a degree of expertise and capability in terms of health care administration.

That is not to say there are not strong arguments for the regional health authorities outlined in option B. On the face of it (there’s not much detail) this looks to be the most palatable option for many stakeholders. But rather than talk of a federal “takeover”, whose confrontational connotations no doubt sound exciting to some, it would be more appropriate (as other commentators have suggested) to consider that the federal government should have full fiscal responsibility for health care, but not its delivery. This would eliminate the cost shifting that occurs in the current split.

It makes sense, of course, for there to be nationally consistent standards and frameworks for health care, nationally consistent data, regulation, performance targets and national health goals. But this does not necessary oblige the federal government to provide all the care. As is well acknowledged in the report, much of Australian primary health care is delivered by private providers. And though they may be talented and committed, there are not many bureaucrats in the federal department of health who have spent much time running hospitals.

Hospitals seem strangely absent from this report even though for the most part, they dominate the political health care debate. Improving the funding, streamlining services, boosting the step down services as people transition from hospital are all important ideas, but there is little sense that these overcrowded, sometimes dangerous places that provide more than four million (public hospital) services nationally each year, are facing anything other than mere shortage of funds.

It is true that much could be improved in the administration of hospitals, and most particularly their safety and quality. But removing the inefficiencies in the currently complex distribution of funds would free up resources with which to address these ills. For the overworked staff, often unable to provide anything other than the most urgent care, for the people admitted to them, risking adverse events, medication errors, and hospital acquired infections, this report will be disappointing.


Obviously the proposals in the report need debate and the Commission is welcoming (concise only however) feedback. There has been an effort to think creatively about dental care, and providing national insurance for dental care is long overdue. It’s just that the Denticare option, like many of the options in the report, does not question the fee-for service model and the role of private health insurance in delivering the money. There needs to be serious questioning of the notion that private health insurance needs to be part of the mix. There is no justification made in the report nor any acknowledgment of this elephant in the room. For the sake of evidence-based policy, for the sake of efficiency, transparency, and fairness, it needs far greater scrutiny in the final report.

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An edited version of this article was first published in The Weekend Australian on February 21, 2009. The Australian Health Care Reform Alliance (AHCRA) is an alliance of 50 health professional, consumer, and health service organisations. AHCRA will hold a National Health Reform Summit in Melbourne on March 2-3, 2009 to discuss the NHHRC Interim Report.

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About the Author

Fiona Armstrong is a Melbourne based public policy analyst and commentator. She has a background in health policy and is an active campaigner for health reform in Australia. A longstanding environmentalist, she has recently turned her attention to climate policy.

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