Australia can get healthier by using resources wisely and making smarter choices
by Jennifer Doggett
In 2007, the Labor Government inherited a health system long overdue for reform. Australians are living longer than we did a generation ago, partly due to medical advances such as the ability to identify and treat early-stage heart disease. However, while we’ve been winning the battle against many acute, short term illnesses, many chronic conditions such as diabetes, have been on the rise. These conditions require longer-term and more complex care, often involving multiple health care providers. Trying to get our current health system to provide this type of care is like using a typewriter to twitter.
This chapter provides an overview of the state of Australian health policy, its challenges, and recommendations for specific health reforms.
The story so far
Australia’s health system was designed for another era and another generation of Australians. In fact, neither of the two major federal health programs – Medicare and the Pharmaceutical Benefits Scheme (PBS) – have changed significantly since they were set up (in the 1940s for the PBS and the early 1980s for Medicare). Along with the need to update these programs, there are other drivers for reform, such as the historical unfairness of a system in which some groups with the poorest health status have struggled to receive the care they need. These groups include people with chronic conditions, those living in rural and remote communities and Indigenous Australians. The need to change Australia’s inflexible and archaic health workforce practices has also added to the pressure for reform.
Many attempts to solve these problems have been held back by structural barriers to change, such as the historical division in funding and service delivery responsibilities between the Commonwealth and State/Territory governments. This split, which makes little policy or financial sense, has led to gaps, duplications and cost-shifting across different levels of government. Confusing governance arrangements have also reduced transparency and accountability in all areas of health care. These barriers have greatly hindered our health system from adapting to meet our changing health care needs.
Fast facts: Where does health funding come from in Australia?
The reform agenda
In 2007, the Labor Government was elected on a platform of health reform and made a pre-election commitment to address the structural problems within the health system. Soon after taking office, the Government instigated a number of inquiries and commissions 1 into all areas of the health system 2, including an overarching National Health and Hospitals Reform Commission (NHHRC) 3. A dizzying array of reports and strategies was produced via these processes, which recommended major changes to the funding and delivery of health care in Australia.
The Government has responded to these recommendations and announced a reform agenda to fundamentally change the way health care is funded and delivered in Australia.
Overall, there are many positives in the Government’s reform agenda. These include:
- An increased focus on prevention – aiming to reduce the rates of chronic disease and promote healthy ageing in the community.
- A re-orientation of the health system around primary care – aiming to reduce overall health care costs and increase equity within the health system.
- Setting national performance standards – aiming to drive quality improvements and empower consumers to make more informed health care choices.
- Rejecting Denticare and Medicare Select – NHHRC proposals which would have increased costs without delivering consumer benefits.
- Changing governance structures – aiming to provide greater transparency and accountability and increase community confidence in the health system.
However, there remain a number of gaps in the Government’s approach to reform which, unless addressed, will undermine the overall effectiveness of the proposed changes. These include:
- The lack of an underlying philosophy or set of principles – over the past few years of inquiries and public hearings, the community was not consulted about the principles that should guide our health system. This makes it difficult to assess whether or not the reforms reflect community values and expectations.
- Continuing confusion over governance issues – there are still no clear lines of accountability between federal and state/territory governments, Cabinet, ministers, boards, officials and clinicians.
- The improvements in transparency are only partial – a missed opportunity to use new technologies (Web 2.0) to drive community engagement, accountability and a focus on outcomes rather than inputs.
- No single pool of funding for health care – against the advice of almost every health economist, the funding silos remain.
- No systematic approach to consumer payments – while the reforms make major changes to the ways in which governments fund health care, they do not address the problems inherent in our current approach to direct consumer payments.
- Failure to address the problems with dental, Indigenous and mental health care – these three key areas, currently failing the community, have been largely ignored by the reforms.
- Continuing to support anti-competitive practices and pandering to special interest groups – medical professional and pharmacy groups, the pharmaceutical and private health insurance industries, and state bureaucracies, continue to receive unwarranted subsidies and special consideration, contrary to community interests.
- Maintaining current workforce boundaries – the reforms do not address the archaic workforce structure and rigid professional boundaries of our current health workforce.
- Failing to transform Medicare into an active purchaser of health services which delivers greater benefits to consumers.
- Ongoing funding for the Private Health Insurance (PHI) rebate – a $4.5 billion black hole in the health budget which has been left alone by the reforms.
Of course, well-designed reforms are only part of the story – implementation is just as important, as became clear during the previous Rudd term of government. The barriers to successful implementation were strong, due to an unfavourable Senate (relevant for some measures which require legislative change), a Federal Health Department with a poor record of driving health system reform and ongoing pressure to back down on some measures from interest groups with a vested interest in maintaining the status quo. The newly-elected Gillard government must identify entrenched cultures and recognise the need for change management processes throughout the health system if it is to surmount these challenges.
Mythbuster: Australia’s health system is fairer than most? Not for some
A 2008 Commonwealth Fund survey of chronically ill adults in Australia, Canada, France, Germany, the Netherlands, New Zealand, the United Kingdom, and the United States found that over a third (36 per cent) of Australians with chronic conditions reported problems with accessing health care due to cost. This was higher than participants from any other country, apart from the US.Source: Schoen, C., Osborn, R., How, S.K.H., Doty, M.M., and Peugh, J. (2008) In Chronic Condition: Experiences of Patients with Complex Health Care Needs, in Eight Countries, Health Affairs November 2008.
Idea #1 – Health credit cards and a single safety-net
a) Addressing consumer payments
Consumer payments are a major gap in the government’s health reforms. The reforms fail to deal with direct consumer payments for health care, despite the fact that these payments make up the third largest source of health funding in Australia and influence both how consumers access health care and which goods and services they access. The current ad hoc system of co-payments is inefficient, unfair and often does not reflect the actual cost of health care to the community.
There is strong evidence that consumer payments are causing financial hardship among some groups of consumers and restricting their access to cost-effective forms of health care. The safety-nets put in place to address these inequities are themselves complex and difficult for consumers to understand. They often do not target those most in need and also create perverse incentives to use less efficient forms of care. For example, someone with a sports injury may pay more for a course of physiotherapy treatment than they will for anti-inflammatory and pain relief medication – even when the physiotherapy treatment is more cost-effective.
A better approach to consumer payments for health services would be to give all consumers a ‘health credit card’ to pay for health care without upfront payments.
A single health safety-net should also be created to cover medical, dental, pharmaceutical and allied health care and target consumers who have difficulty affording health care. These two strategies would significantly improve both the fairness and efficiency of our health system.
b) How it works
The federal government issues all consumers with a health credit card to pay for all health goods and services with no cash upfront. The government assumes responsibility for paying providers the full amount of their fees for all health goods and services paid for by the health credit card. The government deducts any applicable subsidies (e.g. Medicare rebates) and sends the consumer a consolidated bill for the outstanding gap amounts.
Consumers have the option of making one payment for the total amount of all consolidated out-of-pocket costs for the given period or paying in instalments (similar to credit card payments) with minimal or no interest. Consumers are required to make a minimum monthly payment but the amount of this payment would be indexed to consumers’ ability to pay, and would be capped at a pre-determined level (for example 10 per cent of after-tax income per annum), so that no consumers would face financial hardship due to their health and medical bills. This would ensure that no consumer faces financial barriers to accessing health care and would create efficiencies by shifting complex isolated administrative processes from consumers and providers to a more streamlined process undertaken centrally by a government agency.
How it works: example
Lucy injures her leg skiing and requires treatment from a number of private health care providers, including a GP, specialist physician, exercise physiologist and osteopath. In addition to this, she requires prescription pain relief medication, has a number of x-rays and uses an ambulance service. The total cost of her care for the accident is over $3,000. She pays for all these goods and services with her health credit card with no up-front payment. This means that she can access the care she needs immediately, despite not having sufficient funds available. At the end of the month she receives a consolidated bill for the total out-of-pocket costs for her treatment of $600. As Lucy is a student on a low income she is able to pay off this debt in low monthly instalments of $80.
Mythbuster: Medicare means that we pay for less of our health care than people in other countries, right?
Actually, Australians contribute more to their own health care expenses than do citizens of many other countries, including the UK, Japan, Germany, France and the Netherlands. Even Americans, though they pay more overall than Australians for their health care, contribute only 13 per cent of their total health funding through direct payments (compared with over 17 per cent for Australians). Source: Organisation for Economic Cooperation and Development Health Data 2008.
Idea #2 – Regional health authorities and citizen juries
a) Addressing the distribution of resources
Australia’s current health funding system distributes resources primarily based on the location of providers rather than the needs of communities. This has resulted in an unequal allocation of Medicare and PBS funds, Medicare Safety Net funds, and the take-up of public subsidies for private health insurance across the population.
The allocation of resources differs markedly according to geographic location and often the people who need health care the most receive the least. People in large capital cities receive 23 per cent more combined Medicare and PBS funding than those in rural or remote areas, despite the fact that they are healthier.
Redistributing funds to regions based on need would address the current imbalance by targeting resources to the areas that are currently most neglected. The Labor reforms provide some scope for the regionalisation of health services through the establishment of Medicare Locals (MLs), regional primary care organisations which will be responsible for some population health functions.
Citizens’ juries are a form of participatory democracy which involves selecting a random sample of the relevant population and asking them to deliberate, as citizens, on issues such as how health resources should be allocated 4. The process involves giving them good information on the issues for debate; encouraging them to question experts to clarify that information or seek more information; and then giving them time to reflect and to make recommendations on the best use of health resources.
Using citizens juries to influence priorities for funding in each region would enhance consumer and citizen input into the health system and increase accountability for health funding.
b) How it works
Medicare Locals would be given a set budget for providing all health care in their regions. Budgets would come from a national pool of funds created by combining all current health funding, from federal, state/territory and local government sources. This would be distributed equitably by a new national agency on the basis of evidence about health care needs. Publicly available information on local health needs and health spending (regularly collected and updated in accordance with national standards) would inform decisions by Medicare Locals about the appropriate allocation of services and resources in that region.
However, under the federal government’s current reform agenda, Medicare Locals will provide only primary care services and have a very limited budget-holding role in areas such as after-hours care. They will take on responsibility for services such as health promotion and some chronic care packages but the majority of primary care will continue to be funded via MBS/PBS budgets. This means that Medicare Locals will not have the capacity to address the structural unfairness of the way we allocate health resources.
By strengthening Medicare Locals, giving them total responsibility for the health care needs of a defined population, they would have a genuine opportunity to address the geographical inequities in our current health funding system. This would also improve clinical co-ordination, data collection, health service planning, and the accountability and efficiency of health resource allocation.
Each Medicare Local would be required to establish a citizens’ jury to provide advice on the community’s priorities for resources allocation within the region and its underlying values for the delivery of health care. Citizens juries would not have a decision-making function or replace elected and appointed officials in Medicare Locals. However, they would provide these officials with information about the principles that the citizens believe should underpin their health services and on important issues such as resource allocation and competing priorities.
Idea #3 – Consumer controlled health budgets for people with chronic conditions
a) Problem: poor chronic disease management
One of the major challenges facing the Australian health system is to effectively manage the care of people with chronic illnesses. Caring for someone with a chronic condition requires a higher level of coordination and management compared with the care required for an acute health problem.
Chronic illnesses persist over time and often require care involving a mix of services and providers including, often, non-medical forms of care such as home-help, performed by non-professionals or family. The treatment and support options for people with chronic conditions are not always straightforward and may vary considerably depending upon individual preferences and circumstances.
Our major health programs, such as Medicare, have been developed for a community with predominantly acute care needs. They tend to be administratively complex and inflexible and are not well designed to meet the complex and varying needs of people with chronic illnesses. A traditional government program structure cannot operate without being able to define the range of services relevant for each condition in advance and to anticipate the varying needs of consumers with chronic conditions. The result is that people with complex care needs often end up making choices dictated by what fits the system rather than what is best suited to them. The system puts consumers in a passive and disempowering position, contributing to a poorer quality of life.
Consumers can be given greater flexibility and control over their care by giving consumers (or their carers) greater control over their care budgets. It would also help them become more engaged in their care and to obtain more individualised services which better meet their needs, providing incentives for the efficient use of health resources and the development of innovative strategies. 5
b) How it works
People with chronic illnesses whose needs are not being met by current services would be able to apply for a consumer-controlled health budget. When a budget is allocated, based on current cost of services, a plan would be developed by the consumer, together with a care coordinator (for instance, a GP or a social worker). This plan would detail options for allocating the budget, care goals and outcomes. The consumer (or carer) would then be able to allocate the resources as they wish, within guidelines, as long as they contribute towards meeting the goals set. The goals and outcomes would be regularly reviewed by the care coordinator, in conjunction with the consumer (and carer). Clearly, it would also be important to ensure that consumers (and/or their carers) were willing and able to take on the additional tasks and responsibilities required to manage their own budgets. For some consumers the potential benefits may not outweigh the effort involved in taking on this role and they should be entitled to receive high quality care managed in the current manner. It is also important to recognise and put into place mechanisms to avoid the potential for exploitation of consumers, in particular those who may be more vulnerable due to issues such as cognitive impairment, by carers, family members or service providers who may seek to benefit personally from greater control over a health budget at the expense of the consumer.
Quick wins: Three fixes in three minutes
Combining pragmatic politics and progressive policies
If major health system reform is all too hard, here are three practical solutions to long-standing problems with our health system which successive governments have failed to address. They can all be implemented without major structural changes and with minimal political risk.
Quick win #1 – Deal with the doctor dilemma
The problem: Too many doctors in some areas and not enough in others. For example, there are an estimated 335 doctors per 100,000 population in major cities and 148 in outer regional areas. 6
One reason for this is that the Government restricts the overall number of provider numbers (allowing doctors to provide Medicare-subsidised services) but is unable to control where doctors practice. This means doctors congregate in areas where they live, such as leafy green suburbs in major cities. This leaves many communities with a doctor shortage, in particular in rural, remote and outer-urban areas.
Governments have previously been reluctant to attach provider numbers to specific areas (which would greatly improve workforce planning) as the medical profession has argued that this would violate a clause in the Australian Constitution prohibiting civil conscription for doctors (and dentists). Other methods employed by governments to attract doctors to areas of need (such as bonuses for working in rural areas) are expensive and have only limited effectiveness.
The politics: The Government needs to juggle the needs of communities with doctor shortages with the political and public relations muscle of the Australian Medical Association (AMA) which vigorously opposes any restrictions on where doctors can practice.
The solution: Rather than tying new provider numbers to areas of workforce shortage (thus effectively forcing doctors to work in specific areas), the Government could simply restrict new provider numbers in the small number of areas of over-supply. This is a less coercive measure than compelling doctors to practice in specific areas (doctors retain the freedom to practice wherever they like, except in areas of over-supply) and therefore less likely to be opposed by the AMA or interpreted as comprising civil conscription. The result would be a more equitable allocation of the medical workforce without the need for increasingly high subsidies for doctors to work in areas of need.
How it works: Have a condition attached prohibiting the doctor from working in areas of demonstrated over-supply. Many provider numbers (for example those allocated to overseas-trained doctors) already have conditions attached to them so this would simply be an extension of the current approach to managing medical workforce supply.
Winners: Communities currently under-supplied by doctors. This includes almost everywhere apart from affluent inner-city areas.
Losers: Newly qualifying doctors wishing to practice in areas of over-supply.
Quick win #2 – Re-hash the rebate
The problem: A costly and inefficient rebate for private health insurance which costs more every year and delivers very little in terms of increased access to health care.
The politics: The rebate is generally agreed by health economists and stakeholders to be a public policy disaster. However, as much as many people resent being forced into taking out PHI, the rebate is seen as money in their pockets and removing it may cause a voter backlash.
The solution: Give private health insurance subsidies directly to consumers to spend on their choice of health care.
How it works: The funds currently going into the PHI rebate – approximately $4.5 billion per year – would be redistributed to low and middle-income households to spend on the health care of their choice. This would provide approximately $600 a year for each household earning less than $200,000 a year (this is based on 2007/08 figures from the Australian Bureau of Statistics publication Household Income and Income Distribution, published in 2009). These funds could be used to pay directly for health care services and products such as medical, dental, allied health and hospital costs, medicines and medical devices. It may also be used to purchase private health insurance. The subsidy could be used to pay for part or all of the health care product or service purchased. Any funds not used in one year would be saved and added to the additional contributions the next year so households would be able to build up a health fund over time, if they wished to.
The funds could be accessed via the health credit card (as proposed above). Alternatively, they could be linked to the tax or social security system or Medicare/PBS cards.
Winners: Consumers who would have greater choice in how they spend their health care subsidy.
Losers: 1) Private health funds would lose the current guaranteed subsidy (although if they are providing consumers with a useful service they might not lose members); 2) People on high incomes who currently receive the PHI rebate.
Quick win #3 – Reduce adverse reactions: a MedicinesWiki
The problem: Adverse reactions to medicines are a common – and often avoidable – problem within our health system. Over ten per cent of general practice patients report experiencing an adverse drug event (ADE) in the past six months 7 and overall it is estimated that more than 1.5 million Australians suffer an adverse event from medicines each year resulting in at least 400,000 visits to general practitioners and 140,000 hospital admissions. 8
Currently, we are not using the collective knowledge and experience of consumers to improve the safety and quality of medicine use in the community. Changing the way in which consumers can access and share information about their medicines would help improve the quality use of medicines and reduce the current high rate of ADEs.
With the trend towards consumers taking a greater role in managing their own health, it is important that they have the information, support and tools to use medicines safely and appropriately. This needs to involve consumers actively sharing information with others in a collaborative and interactive environment. There is also the potential for consumers to play a greater role in monitoring the performance of new medicines on the market through providing opportunities for them to report suspected ADEs and other side-effects. We need a new model of engaging consumers in promoting quality medicine use and reducing ADEs.
The politics: Both pharmacists and the pharmaceutical industry have previously resisted moves to provide consumers with more information about medicines.
The solution: A MedicinesWiki 9 would provide a single point of contact for consumers accessing information about their medicines and reporting ADEs. This would enable consumers to obtain information about their medicines and provide an interactive source of information from consumers on their experiences in taking the drug.
How it works: The Government would establish and host a MedicinesWiki and actively seek consumer contributions. The Wiki would contain information about medicines (similar to Consumer Medicine Information) as well as provide opportunities for consumers to contribute their experiences of medicines and to ask questions. Over time, the Wiki would become a source of information on medicines for consumers and for health professionals and regulatory bodies interested in identifying problems with medicine use.
Winners: Consumers, particularly those with chronic conditions.
Losers: None, although some pharmacists and doctors may see this as reducing their authority.
So crazy it just might work…
Prediction markets for health care
Choices about medical treatment can be some of the most important decisions we ever have to make. However, in our current model of health care, consumers typically get only one opinion on diagnosis and treatment options from their doctor. In some cases consumers may seek a second opinion but it is very rare for consumers to seek any additional views, partly because it is so time- and resource-intensive. Given evidence that there is considerable variation in clinical practices among doctors, this model has significant limitations. Where there is clinical variation, not all the experts can be right.
A better approach would give consumers facing potentially life-changing decisions access to the most comprehensive information possible. This is difficult within our current model of medical practice as relevant knowledge is spread among large numbers of people and consulting them individually is not practical.
One solution is prediction markets. Prediction markets provide one mechanism for cost-effectively capturing the knowledge held by a large number of individuals. They work as a betting exchange where people are able to bet on the outcome of a specific event. This creates incentives for individuals with knowledge of a particular issue to participate 10.
In practice, prediction markets have proven to be more successful in predicting outcomes than consultation with experts. Companies such as Google use this mechanism as part of their corporate planning processes. Setting up a prediction market for health care would give consumers the opportunity of accessing knowledge from potentially hundreds or thousands of doctors and using this to inform their health care choices.
In its first term in office, the Labor Government did more to progress health reform than the previous government managed in four consecutive terms. It tackled some of the most important structural barriers to reform and managed to gain COAG’s agreement to major funding and governance changes.
However, the failure of the government to articulate the principles underpinning the proposed changes means that the reform agenda lacks coherence and a clear link with community values. Overall, the reforms concentrate on the funders of health care and ignore important consumer issues, including co-payments for health services, and fail to address key areas requiring reform, such as health workforce practices and the need for a more equitable distribution of health resources. The Rudd-Gillard government also left some glaring policy failures of the Howard era untouched, such as the private health insurance rebate.
The challenge for this new electoral term will be for the minority Gillard Government to deliver on the promises of reform while addressing the gaps in the current agenda. Tackling the vested interests of professional and industry groups will be the key to driving reforms in these areas. Ensuring consumers and consumer interests are at the centre of all reform efforts will be essential if the next three years are to result in real improvements in health care rather than simply administrative changes which shift costs from governments to consumers.
Photo Credit: Selma Broeder, http://www.flickr.com/photos/selma90/3675162262/
- These included: the National Primary Care Taskforce; the National Health and Hospitals Reform Commission; the Preventative Health Care Taskforce and COAG processes. ↩
- Although some important issues, such as the private health insurance rebate, were excluded from these inquiry and consultation processes. ↩
- National Health and Hospitals Reform Commission (2009) A healthier future for all Australians – National Health & Hospitals Reform Commission Final Report June 2009. Available online: www.yourhealth.gov.au/internet/yourhealth/publishing.nsf/Content/nhhrc-report ↩
- More information on citizens’ juries, including a free ebook on how they work in practice, can be obtained from www.gavinmooney.com ↩
- The National Health Service in the UK is currently trialing a similar model (called personal health budgets). More information about this trial can be found at http://www.dhcarenetworks.org.uk/PHBLN/ ↩
- Australian Institute of Health and Welfare (2008) Rural, regional and remote health: indicators of health system performance. Available online: http://www.aihw.gov.au/publications/phe/rrrh-ihsp/rrrh-ihsp.pdf ↩
- Miller, G.C., Britt, H.C. and Valenti, L. (2006) ‘Adverse drug events in general practice patients in Australia’, Medical Journal of Australia, 184 (7): 321-324. ↩
- Roughhead, E.E., Lexchin J. (2006) ‘Adverse Drug Events: counting is not enough, action is needed’, Medical Journal of Australia, 184 (7): 315-6. ↩
- Wikis are being increasingly used in other areas of health and medicine. An example of a Wiki on Diabetes is available at http://diabetes.wikia.com/wiki/Diabetes_Wiki ↩
- One useful introduction to the features of prediction markets is: Watkins, J.H. (2007) ‘Prediction Markets as an Aggregation Mechanism for Collective Intelligence’, Proceedings of 2007 UCLA Lake Arrowhead Human Complex Systems Conference, Lake Arrowhead, California. Available online: http://hcs.ucla.edu/lake-arrowhead-2007/Paper10_Watkins.pdf ↩
AUTHORS(S): Jennifer Doggett