Some observations on the NHHRC’s Interim Report
A social insurance model, based on the principles of the recent Dutch healthcare system reform, might be an answer to fixing Australia's health.
Can Australia sustain a universal health care scheme into the 21st Century? Recent trends in health care spending, the general economic situation and the intergenerational changes that will occur as the baby-boomers hit their seventies must challenge this cherished feature of Australian life.
The National Health & Hospitals Reform Commission must have this on their mind as they prepare their final report, scheduled for release in June. In its Interim Report it floated 3 options for the long term running of the health care system (The Interim Report is available here).
Option A involves the least structural change with the Commonwealth taking over all of primary care and directly funding hospitals on a marginal case mix funding basis. This option is unlikely to be attractive to the Commonwealth treasury as it leaves it with an uncapped liability. It could also lead to variation between States, as their capacity to match extra Commonwealth funding will vary.
Option B looks a lot like the NHS in England and Scotland. The Commonwealth would fund and operate the health system through regional health authorities. The number of regions might vary and they could be as large as a State. Other than getting the funding into one source, which is an important objective, there is not much to see that a Commonwealth operated regional structure would do better than what States have achieved so far. NSW, which has been using this model for many years, is not noted for its success. It is difficult to see how the Commonwealth would really be attracted to taking over the political risk of operating the nation's public hospitals.
Option C is the most radical – it suggests Australia move away from a tax funded to a social insurance model, perhaps based on the principles of the recent Dutch healthcare system reform. In essence consumers would select from among competing health plans to organise their Medicare benefits. Such plans would likely be health insurance funds, but could be public agencies or even health provider groups. These plans would receive risk adjusted funding for their members to reflect different health costs associated with age, gender, presence of chronic disease, region and socio- economic status. Funding for the health system would involve either a hypothecated tax or combined with direct payments (subsidised based on income) to the chosen health plan. The role of the health plan is to keep costs down and act as a prudent purchaser on behalf of their members. Purchasing arrangement could be regulated to include the Medical Benefit Scheme, Pharmaceutical Benefit Scheme and even hospitals payments could be regulated to ensure access and an orderly transition. This is the only option that links public and private health and creates incentives for managing the increasing burden arising from chronic disease.
To most observers this option appeared to come from left field, but the new Dutch health system is being watched with interest by a number of countries including Germany, Switzerland and even the US. It has the features that I believe make it a suitable model for the challenges of the future. Perhaps the Commission will agree, so it is time to find out more about what this model has to offer.
Elsewhere I have described the details of the Dutch reforms and how they could be applied in Australia (see http://www.achr.com.au/pdfs/MedicareChoice.pdf) and Francesco Paolucci at ANU and his colleagues have suggested an "opt out" model (see http://www.acerh.edu.au/publications/ACERH_WP2.pdf)
Radical reform must always be less likely than tinkering at the margins, but Australia has shown before that it is up to the task – the introduction of GST, compulsory superannuation and even Medibank (mark 1) spring to mind. Let's hope the Commission will opt for recommending the radical reform that will take Medicare well into the 21st Century.
Prof Johannes (Just) Stoelwinder (MBBS, MD, FRACMA, FACHSE, FAFPHM) is Chair of Health Services Management, Department of Epidemiology and Preventive Medicine, Monash University. He is also a Director of Medibank Private Limited. Past appointments include Professor and Head of the Health Service Management Development Unit at Flinders University and Board Member of the Private Health Insurance Administration Council. For over 16 years, until the end of 1998, he was Chief Executive Officer of the Southern Health Care Network, and its antecedent teaching hospitals, the Monash Medical Centre and the Queen Victorian Medical Centre. Just has also held professorial appointments in the Business School and Medical Faculty at Monash University and has been a Visiting Fellow at a number of international organisations including the King's Fund, London, UK; Kaiser Permanente Medical Group, Oakland, Boston University and the Wharton School, University of Pennsylvania, USA. He was formerly a specialist physician and Fellow of the Australasian College of Physicians.
Michael Gill
April 27, 2009 at 5:55 am
Options for the Australian Health System
Professor Stoelwinder makes a number of useful comments. My concern is that given the size of the recently announced stimulus packages and the speed of expected expenditure, we may just be about to stand on the edge of a financial cliff. The health sector, especially the acute sector is already under pressure. NSW is failing to pay invoices and may limit expenditure on selected hopsitals. Other jurisdictions have numerous other 'hidden' probelms. I suspect that by 2018 health expenditure as a percentage of GDP will be much higher than the current 9%. If this happens, government is unlikely to cope as the massive debt of earlier years will remain. The outcome could be option D:
– the end of our universal health system
– very high insurance premiums, hence only for the wealthy
– cash on entry for emergency services
– rapid growth of the private sector