Health care reform in Australia has reached an impasse. The public
sector, medical bodies and private insurers face each other in a glorious
stand-off. Medicare retains popular support but is structurally incapable
of containing demand for health services or restricting expenditure growth
even though its available resources are limited.
Private insurers are unable to curb health treatment costs, and remain
unable to attract significant new members. Doctors' organisations lament
the high-turnover treadmill of general practice, and the long waiting
lists at public hospitals, but fiercely resist the introduction of
contracted arrangements with insurers or alternatives to fee-for-service
payments in primary care.
The key to health care reform now lies in the development of structural
mechanisms which can assign to consumers the capacity and the incentive to
contain health costs and to integrate service delivery systems. The
following is a strategic approach to health care reform based on the
development of these structural mechanisms in the present so as to create
the conditions for favourable public policy change. Without the creation
of these conditions, the present stalemate will continue.
Integrated Health Care is a partnership between two friendly societies
which provide health insurance and an alliance of community and
membership-based organisations who have a short-term interest in
purchasing health insurance for their members, and a long term interest in
health care reform.
As a driver of health care reform, Integrated Health Care will aim to
give its enrolled aggregate of health consumers both a capacity and an
incentive to contain health costs and to integrate service delivery
Rationale for reform
Neither Medicare, insurers or doctors currently have the capacity and
the incentive to contain health costs and integrate service delivery.
Medicare provides medical benefits for highly compartmentalised
interventions with no structural ability to integrate primary care or to
curtail over-servicing. It provides hospital benefits but its only means
of containing costs is rationing of services (exercised indirectly by
state governments). It provides no means for the substitution of lower
cost regimes of care for higher cost regimes.
Health insurers reimburse medical, para-medical and hospital expenses
but have no capacity to contain the unit costs of these expenses or to
co-ordinate or integrate service delivery. There is no mechanism available
whereby insurers can identify and manage disease risk before it becomes an
episode of illness.
Doctors are remunerated on a fee-for-service basis for
compartmentalised interventions. They are not reimbursed or rewarded for
collaborating with practitioners across disciplinary boundaries to develop
integrated care regimes or to monitor health outcomes. Fee-for-service
incorporates powerful financial incentives to over-servicing and
discourages preventative care.
Our strategy is based on five principles:
- Information asymmetries between doctor and patient require the
intervention of intermediaries or brokers which make available
comparative price and service quality data to patients, and enable
patients as consumers to purchase their preferred services.
- The purchases facilitated by consumer intermediaries must be fully
cost-conscious. Costs for episodes of treatment or care must be
specified and transparent so that intermediaries may substitute lower
cost for higher cost puchases.
- To offer integrated and cost-effective care, consumer intermediaries
must be able to package a mix of services and insurance products to
meet a variety of consumer preferences.
- Consumer intermediaries must be able to compete for subscribers of
members on the basis of package price and service quality.
- Consumer intermediaries require a framework of internal and external
regulation to limit the impact of adverse selection and moral hazard.
Putting the structure in place
As a first step, our two friendly societies will jointly underwrite a
health insurance plan for the members of organisations participating in
the venture Integrated Health Care. These may be associations, clubs,
churches, credit unions or any membership-based organisation.
Participating organisations will be entitled to input in product design,
marketing and management levels for the plan. The financial performance of
the plan may be linked to commission and fee income for participating
organisations. Transactions and direct marketing will be undertaken by the
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