Commentary 28th Feb 2014

On being treated well: reforming Medicare after 30 years

Treasurer Joe Hockey and health minister Peter Dutton have been in overdrive this past week lowering expectations for the May budget and reminding Australiansthat its 30-year-old Medicare system is "unsustainable" and, if we're not careful, Australia will run out of money to pay for health care.

Health minister Peter Dutton said he wanted to start a conversation about whether it's fair to charge patients to see their general practitioner. He's also suggested that allowing private insurance to cover part of the cost of medical fees will reduce public spending.

As others have already pointed out, these proposals won't solve a thing. A flat co-payment for doctor visits will not raise much revenue and will reduce access to those most in need. Allowing private health insurers to pay for out-of-pocket costs to see a general practitioner will lead to a rise in fees and an increase in total health spending.

A more efficient way to pay for the increasing cost of universal health care is to raise taxes and to improve efficiency.

But much of this discussion takes us back to the finance issues of 40 years ago rather than asking more pressing question: on what principles should Australia's future health system be based?

What do we want from our health system?

Aneurin Bevan, the architect of the British National health Service, answered this question back in 1952 and his answer is still as relevant today:

The essence of a satisfactory health service is that the rich and the poor are treated alike, that poverty is not a disability, and wealth is not advantaged.

In other words, a fundamental principle of Medicare is that we want the poor to have the same high-quality care and attention as the rich, paid for in a fair way. Health is not like other insurance markets because the poor need the same insurance against health risks as the rich, and the amount they need is not related to their income.

Yet the proportion of poorer adults with high out-of-pocket expenditure is the third-highest in the OECD, just behind the United States and Switzerland.

If the political sustainability of a tax-funded Medicare depends upon the acceptance of this principle that "we are all in the same boat", its economic sustainability depends on the recognition of the inefficiency of private payments (directly through co-payments or through private insurance), and the fairness of raising money through taxes on income.

A second principle is that the health system should improve health at a cost that is acceptable. We need to make sure that only those effective treatments and practices that have increased life expectancy and quality of life in the past 30 years are available to everyone at a reasonable cost.

Health is not like other insurance markets because the poor need the same insurance against health risks as the rich, and the amount they need is not related to their income.

Professor Anthony Harris

Australia has been world leader in assessing the value for money of new drug and medical services, and this needs to be expanded to consider a wider range of services, including prevention.

A final principle is that we want our health system to be responsive to patients. We want the system to provide care that is timely, personalised and seamless.

From fragmentation to integration

Providing integrated, patient-oriented care to all – care that crosses the boundaries between primary, community, hospital and social care and is focused on what is important to patients – has become a key goal of health systems in the 21st century. Reforming the jumble of responsibilities and payment systems that characterises the Australian health care system need not cost more.

A recent example of integrated care is Canterbury, New Zealand. Canterbury has a similar split health system to Australia, with the state and federal governments paying for different services. But Canterbury has adopted the mantra of "one system one budget".

Canterbury has managed to circumvent the tendency of health providers to work in isolated silos. Using local agreements to build professional trust, supported by information technology, health providers can map appropriate patient "pathways" in the local health system context. One key aspect has been to assess performance using a patient-relevant measure of "reducing the time wasted by patients within the system".

Part of the success in Canterbury has been a change from fee-per-item of service contracts (often with penalties or rewards based on performance) to what they call capacity based contracts. Where this involves multiple organisations, it is designed to create a joint incentive to manage cost and achieve the preferred outcome with payment based on joint results, and above all, a robust sustainable relationship built on trust.

This is a sharp change from what we do now in Australia – trying to control providers through financial rewards and penalties in the belief that otherwise they will run the system for their own benefit.

A change to more integrated care is not straightforward and there have been less successful attempts around the world in contrast to Canterbury. A first step here would be to have a functioning system of patient information collection and patient-centred outcome and experience data from GPs and hospitals. The United Kingdom has already begun this process.

Of course, this is not the whole answer to the growth in the cost health care. The drivers of expenditure growth are still there – technology, income growth and demographics - and we do need to make decisions on how much we are going to spend on the health system, the balance between prevention and treatment, and how we are going to raise the money to pay for it.

But we need to start with the principles on which we want to build the system. These are what matter for the sustainability of a publicly funded health system now – not a mythical percentage of national income that we can spend on health.

Professor Anthony Harris is the Director of the Centre for Health Economics at Monash University.

This article has appeared in The Conversation.

By Anthony Harris

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    Professor Anthony Harris

    Director, Centre of Health Economics Monash Business School

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