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Health reform starts with principles and must then consider practicalities.

By Tim Woodruff - posted Monday, 17 May 2004

We are at a crossroads. We can decide that our health system should continue to adhere to the principles of universality, equity, access, and efficiency, aiming to provide timely access to quality health care independent of means, or we can let the market play an ever-increasing role. Medicare was introduced on the basis of these principles. The Coalition is delighted our health system is moving more in the direction of the market. "Health is a market. If the doctor charges you, you ought to expect to pay something," said Tony Abbott at a party function recently. But the public continues to indicate support for Medicare and more tax revenue being put into health, even at the personal expense of forgoing tax cuts. If we decide to continue the move towards a health system based on market forces, those principles will be increasingly ignored. The only way to hold to those principles is to have a tax-based funding scheme such as Medicare. If we decide on adherence to those principles and a tax-based funding scheme, we can look ahead to how we might improve our health system because Medicare, even before the Coalition began its market-directed changes, was far from perfect.

What are the problems which need to be addressed?

  • Lack of integration of services.
  • Lack of accountability and transparency. Who is responsible?
  • Inadequate primary care leading to increased morbidity and unnecessary use of more expensive and dangerous services, especially hospital services.
  • Inadequate workforce planning.
  • Inadequate Aged Care provision.
  • Inadequate resourcing (money and staff) of hospital services.
  • More specific major problem areas include Aboriginal health, mental health, dental health, health of the intellectually disabled.
  • Minimal involvement of the community in health system structure and function.
  • Inadequate control of safety issues compounded by adversarial medical indemnity system.

Before any of the above can be addressed the current system must undergo some simple corrections to adhere to the basic principles outlined. First, rebates for services must be the same for patients independent of the status of the patient. Thus, the recent increase in the rebate for bulk-billed pensioners and health care card holders must be extended to all bulk-billed patients. Second, government payment for services must be at a level that minimises the need for a safety net. The aim should be to remove the need for safety nets by removing significant copayments. The very existence of copayments present a financial barrier to care for the most needy and disadvantaged in our community but does not affect the access to care for the well heeled. This is clearly inequitable. Third, taxpayer-funded support for the private health industry (PHI rebate and Medicare Levy Surcharge exemption) must be removed as it transfers both money and resources (staff) from the public sector to the private sector and is therefore inequitable.

Even with these corrections, major changes need to occur to improve our health system and address the above problems.

The lack of integration of services is due to a variety of factors but at least in part it reflects the diverse funding sources for the various services, and the difficulties of determining accountability for services. Cost and blame-shifting between the commonwealth and states is rampant and a fertile ground for improvement. Estimates of the costs of the federal/state divide in health services start at $2 billion annually, and then rise, depending on the modelling. But it’s not just the cost, it’s the limited accountability that is a major problem in pressuring for improved services. At the very least what is needed is a transparency and accountability of funding determined by an independent body eg the Australian Institute of Health and Welfare (AIHW). A one-off audit as recently suggested by Jeff Kennett is fine as a start but what is needed is an ongoing analysis of who is doing what with our taxes. Armed with that information the public can demand action. Currently the fog of information allows politicians off the hook.

There are other suggestions, however, that address the funding issue more comprehensivley. The concepts of pooled funding or a unitary source of funding theoretically offer a solution to the federal/state divide. Unless based on a commitment to the principles outlined above and guided by a national set of standards however, such concepts have the capacity to reduce equity and universality while removing inefficiencies and saving direct government health outlays. Thus, a unitary source of funding in the hands of the current federal government would much more rapidly take us down the path to an inequitable US-style system with huge costs paid for by consumers and increased indirect costs born by the community as our overall health status declines to that seen, for example, in the US.

Assuming a commitment to the principles and to a national set of health system standards, a unitary source of funding as suggested by the Australian Health Care Reform Alliance (AHCRA) could be a significant reform. There are three major problems with the proposal as currently suggested. First, the commitment to principles is not consistently advocated as an essential and integral part of the proposal. Second, there is no commitment to addressing the inequity of resource transfer ($3.3 billion annually) from public to private inherent in the current support for the private health industry. Third, it remains unclear where accountability lies in such a funding model. Inevitably, however, a unitary source of funding must reduce duplication inefficiencies and some blame-shifting and would promote integration of services.

The concept of pooled funding has been proposed by the Labor Party prior to the last election and has been further expanded recently by Julia Gillard with the suggestion of pooled funding being spent through regions. Although they have committed to the principles outlined above, the lack of commitment to redressing the inequity of the private-health industry subsidy raises questions about the depth of commitment to those principles.


Addressing the problem of funding and accountability is central to adequately addressing most of the list of problems outlined above. Improvements can occur within the current funding model but they will be modest. Assuming the funding issue is addressed, what else needs to be done?

A national Primary Health Care Strategy is required. Basing this on Divisions of General Practice is a potential disaster given the recent review finding that a primary care focus was not the main focus of the Divisions. General practitioners are indeed crucial to primary care but far from exclusively so, and a move away from a doctor-controlled view of primary care is required. Primary health-care centres based on the well-functioning Community Health Centre model (with GPs) in Victoria can form the basis for the development of a functional, integrated primary health-care strategy with patients as the focus. Inadequate support to doctors to practice good medicine is a major part of the problem which has led to GP workforce disenchantment. A supportive primary health-care structure can improve that.

Workforce planning requires both long and short-term strategies. Some are already in place but are inadequate. In the short term the main issue is to make the practice of medicine a worthwhile experience, whether for GPs, specialists, nurses, or any other group. Inadequate resourcing, whether in terms of income, or work conditions, or career path, must be addressed. With respect to specialists, however, one of the main shortages relates to public versus private hospitals. There is no shortage of most specialists in the private hospitals in the larger cities. The shortage is next door in the public hospitals. As long as taxes support private hospitals and the public hospitals are under-resourced, this artificial shortage will continue. The other major problem relates to the restriction of training by some of the specialist colleges.

Aged-care inadequacies continue to waste huge amounts of public hospital resources. A major injection of funds is needed. It is a cheaper option than having aged care patients in public hospital beds.

The many other problems listed above have their own solutions but the basic changes required to deal appropriately with these other problems are addressed above. Thus, the basics are a commitment to principles of universality, equity, access, and efficiency, combined with a national set of standards, forming the basis for a restructuring of funding to remove the gross waste of resources, to provide transparency and accountability, and to move to a more integrated health system.

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About the Author

Dr Tim Woodruff is Vice-President of the Doctors Reform Society.

Other articles by this Author

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