A viable alternative to letting policy wonks determine health policy

A more flexible regulatory framework for intermediaries is essential to allow an individualisation of health-maintenance strategies. Since conventional health insurers lack the capacity to manage the health risks of their members to prevent crises and restrict hospitalisation rates, a heavy regulatory regime remains appropriate for this form of insurance. Intermediaries, on the other hand, would be in the business of employing resources and strategies to manage risk. They would have a financial incentive to keep their members well and out of hospital (Australia’s hospitalisation rates are now the highest in the Western world). The introduction of behaviour and outcome-related rebates, bonuses and penalties as incentives for members to manage their own health risks would be critical. It should be permissible, for instance, for intermediary tables to differentiate between smokers and non-smokers. Bonuses and penalties should be permissible related to compliance with strategies involving immunisation, screenings, dietary and exercise patterns, and weight loss. Effecting compliance with such strategies would be essential for the intermediaries in managing their own financial risk.

In this model of pre-paid budget-capped health-care management, SKHS would have a financial incentive to monitor the outcomes of care of its pools of patients and tailor its practices to objectives such as improved pre-admission and post-discharge reviews, reduced infection rates, fewer post-surgical complications, and lower readmission rates. Its aim would be to develop marketable health value advantages around these outcomes to attract more members, thus creating competition in a sector with a long history of pseudo-competition and provider-initiated restrictions on market activity.

The SKHS strategy is an opt-in strategy. If consumers are not convinced of this course, they would have the right to remain within the old regime.

Health-care reform in Australia will involve a combination of comprehensive public policy change and entrepreneurial initiatives in a variety of settings. But it will also involve rediscovering a culture of active agency and self-help on the part of consumers, without which the dominance of the health debate by politicians and provider guilds will continue for a very long time to come.

To start the process of reform, we should begin not with abstract concepts but with real places like South Kingsville where ordinary people do indeed make history.

Disclaimer: Vern Hughes was Executive Officer of South Kingsville Health Services Co-operative Ltd.