This post compiles further reaction to health related recommendations of the National Commission of Audit, whose report to the Federal Government was released yesterday.

First up is an impassioned response from Tim Woodruff, vice president of the Doctors Reform Society, on expansion of private health insurance and the proposals to impose a $15 GP co-payment and to increase the costs of prescriptions.

These co-payments are killers. But they won’t stop politicians, newspaper proprietors, CEOs, or mining magnates getting whatever care they want or need.  This is a recommendation to return to class warfare, to beat the weak and reward the rich.  These are cruel and heartless recommendations designed to get Aussie battlers to do the heavy lifting whilst the wealthy complain about the cost of good home help.

It’s worth noting that the $15 GP co-payment proposal has even been rejected by Terry Barnes, former advisor to Prime Minister Tony Abbott and the proponent of a $6 co-payment which looks likely to be announced in the May 13 Federal budget (see his tweet above).

In the second article, Martyn Goddard, a health policy analyst based in Hobart, looks at a range of the Commission’s proposals and concludes they reveal “a staggering ignorance of the realities of health care funding and health economics”>

Dr David Briggs, Adjunct Associate Professor from the Schools of Health and Rural Medicine at the University of New England (UNE), takes a broader look at the Commission’s views on health reform, to ask: what problem are we trying to solve?


Tim Woodruff writes:

The Commission of Audit proposal for a $15 co-payment to see a doctor will result in preventable deaths as sick but struggling Australians think twice about seeking life saving health care.

The proposal to increase the Pharmaceutical Benefit Scheme prescription co-payment for everyone simply ignores the fact that already 20 per cent of sick Australians delay or don’t fill out their prescriptions for life saving drugs recommended by doctors.

These co-payments are killers. But they won’t stop politicians, newspaper proprietors, CEOs, or mining magnates getting whatever care they want or need.  This is a recommendation to return to class warfare, to beat the weak and reward the rich.  These are cruel and heartless recommendations designed to get Aussie battlers to do the heavy lifting whilst the wealthy complain about the cost of good home help.

But it is more than that. We all should want a clever prosperous country. Consigning Aussie battlers to the scrap heap if they happen to get sick is dumb economic policy. We need a healthy workforce. We need those who struggle to make ends meet to see that they are supported in their struggle. These proposals, if enacted, are designed to kick such people in the guts, to punish them for not being healthy and wealthy. Instead, we will have more people struggling, some mortgaging their houses to pay medical bills, others needing to take time off work to help relatives, many ending up in hospital with easily preventable problems if they could access good community outpatient or GP care.

As for the recommendation that private health insurance be more involved in primary health care, that is for GP and related services, this is a crazy proposal which attacks immediately the 54 per cent of Australians without private health insurance.  This is a recommendation to permanently divide Australians, to two-tier our health system. It simply ignores those who can’t afford private health insurance. It consigns them to the scrap heap of an underfunded safety net, staffed by under-resourced doctors, nurses, and other health professionals who still believe in fairness and equity but will struggle to provide.

In health the heavy lifting which our Treasurer demands will be borne by the Aussie battlers. The wealthy will hardly bat an eyelid. This is about the murder of Medicare and victory for the greed and sense of entitlement of the wealthy.


Martyn Goddard writes:

In brief, the Audit Commission report reveals a staggering ignorance of the realities of health care funding and health economics. Price signals, as with so much else, work differently in health. The recommendations, if implemented, will reduce the Commonwealth’s budget bottom line by a relatively small amount but the costs of that to other levels – states and individuals, who are far less capable of paying ‒ will be far greater.

The effects will not only be budgetary but clinical as well. Sick people will be allowed to get sicker and will end up needlessly in hospital. Some of these, inevitably, will die. Overall, these recommendations would mean the end of what remains of a universal health care system in Australia. Because the Tasmanian hospital system and the state budget are already so much more stretched than elsewhere, this state will be harder hit than any other.

Extended private health insurance: This measure would reduce the amount the federal government pays for health but the cost of care to individuals would increase by substantially more than the amount saved by the Commonwealth. This is because of the relative efficiency with which Medicare operates, and the relative inefficiency of private insurance. Medicare’s administration costs are around 3 per cent; when you allow another 1 per cent for the Tax Office’s costs of raising the money through taxes, the public system’s overheads for insuring primary care is around 4 per cent. Private insurers typically have administration and transaction costs of around 12 per cent, and they take around 4 per cent in profit. So that’s 4 per cent for the public system, 16 per cent for PHI. This looks like a measure driven much more by blind ideology than by practicality.

PHI premium rebate: The 30 per cent rebate on private health insurance, currently (according to Treasury) the fastest growing government program, last year chewed up around $5.5 billion but it has never worked. It was introduced about 15 years ago to try to get people to take out private insurance but enrolments barely shifted. What did work was the ‘stick’ of ‘Lifetime Health Cover’, by which people would pay much more if they didn’t sign up by a particular date. But the rebate has been left in place by successive governments, has never had any substantial effect (because health insurance is not cost-elastic: people go on paying anyway).

GP co-payments: The Commission proposes far higher and more damaging payments than those proposed by Terry Barnes: $5 for concession care holders, $15 for everyone else. Even when the ‘safety net’ kicks in, people will have to go on paying ($7.50 and $2.50). The Commission seems to be unaware of extensive research showing that cost savings accruing from such copayments result in much higher costs in hospital inpatient care.

A study of over-65s in the US (published in the New England Journal of Medicine) showed that for every dollar saved through a co-payment (in both co-payment receipts and in reduced demand) hospital costs rose by $3.30. This is because some people, faced with an extra out-of-pocket expense, decided not to go to the doctor, found their condition getting much worse and ended up in hospital. Under the Australian system, the savings from this proposal would accrue to the Commonwealth and the (much higher) costs to the states.

Our hospitals will become even more overcrowded if this measure goes through. The effect of existing out-of-pocket expenses (GP charges and PBS co-payments) are already the most likely explanation for a good deal of the unsustainable increase in hospital costs at a state level over the past 15 years. This proposal is insane.

Hospital co-payments: The Commission proposes that states should introduce similar co-payments for GP-style patients attending public hospital Emergency Departments to prevent what it calls ‘cost-shifting’ by patients. Again, this displays a startling ignorance of how hospitals work.

First, someone going to a Tasmanian public hospital emergency department with a GP type presentation is likely to have to wait for four or five hours to be seen: most will probably choose to go home instead and not seek care. There is plenty of research (from the College of Emergency Medicine among others) showing GP-style patients are not a major driver of emergency workload because they can be quickly dealt with. The cost shifting of this measure (from the Commonwealth to the states) will come in the form of seriously ill inpatients whose condition could have been treated by a GP.

Reviewing the Medicare list to remove items found to be cost-ineffective sounds logical but there are huge practical difficulties of which the Commission seems to be unaware. The Medicare Services Advisory Committee, which doesn’t rate a mention, has been doing this job for well over a decade. There is indeed a problem in that most Medicare items have never been examined for cost-effectiveness. But the cost and complexity of going this is enormous. A cost-effectiveness analysis of any item will typically cost around $250,000; there is a very small number of people qualified to undertake these exercises and they’re already busy. This proposal is a dead letter: it’s already under way, and covering all or most of the list would take many years and be immensely expensive – if there was the specialist staff available to do it, which there’s not.

Reducing Commonwealth contribution to public hospitals: The Commission proposes reducing the Commonwealth’s contribution to growth in public hospital costs to 45 per cent. This will put even more strain on the hospital system and on state budgets. Recent figures from the Australian Institute of Health & Welfare show that between 2001-02 and 2011-12 health costs as a percentage of tax income rose for the states and territories from 16 per cent to 25 per cent and for the Commonwealth from 22 per cent to 26 per cent. If the ‘mining boom’ tax cuts had not been made, the Commonwealth’s figure would not have shifted. In terms of the ability to pay – the most relevant measure here – this represents an already a very large and successful cost-shifting exercise. These recommendations would powerfully increase that cost-shifting from Canberra to the states and to patients.

PBS co-payments: Increasing PBS co-payments from $36.90 to $41.90 for general patients and requiring people (including concessional patients) to go on paying even when they reach the safety net threshold will further increase the already large numbers of people failing to fill prescriptions. This is another disastrous, inhuman and startlingly ignorant proposal. The Commission seems to be unaware of the clinical impact of the swingeing PBS co-payments already in place. There is a very large body of research evidence on this. The comments on the Medicare co-payment apply here also. The PBS is already irrelevant for general patients for around half of drugs on the PBS list, because the co-payment is higher than the cost of the drug. This measure is economic and clinical vandalism.


David Briggs writes:

The Commission of Audit Report could ruin my slides!

I have had some fifty years’ experience working in the Australian health system and have been subject to an almost continuous experience of health reform over that time. So much so that my academic expertise is focused on the management of health systems and the importance of Primary Health Care and preventative services to that reform and improvement in care and services.

Then I read the latest ‘ideas’ in the National Commission of Audit report just released and wonder about some of the suggestions made relative to the underpinning values of Australians. I am not opposed to reform, nor want to argue the specifics at this stage, but I do need to ask what problem are we trying to solve?

In my various roles in the Australian health care system I often get the opportunity to present on that system to international audiences. I take a comparative approach and demonstrate Australia’s privileged position against a range of like countries. After all a global or world view really determines our relative performance.

I tell my international audiences that Australia spends about 9.7 per cent of GDP on health, I delight in telling my North American colleagues that that is about half of what they spend and less than the OECD average and less than at least some nine other OECD countries. An achievement to be proud of! Do we really want to move towards the USA experience and costs?

When I talk to my Thai colleagues they are proud that like us they are committed to universal access to health care. Further, they give priority to their rural poor through a committed government focus on Primary Health Care and Prevention. They are passionate about this national priority!

If you look at the map of the world most countries are committed to universal health care. The exceptions being the United States, the countries of Africa and parts of Asia. We are in the majority in being committed to universal health care.

Despite our success and commitments as a nation I admit in my presentation to our inability to extend universal access to those of poor socio-economic circumstances and to indigenous Australians but suggest strong government and health professional groups commitment to addressing these needs. We know what the needs are but our structures and mixed accountabilities and strict funding regimes work against providers delivering integrated care.

Given that I am probably ‘reform weary’ I do not get too excited about the Audit Commission’s  recommendations. I remember the fairly recent national health reforms, that despite enthusiasm at the time, became truncated, were partially implemented, changed the name on the front door to ‘local’, increased the number of bureaucracies at both State and Federal level and then we just got on with doing what we were already doing!

I note that the Commission recommends that the Minister for Health should come up with a report to the Prime Minister about how to best reform the health system. Can I recommend that he gets his advisors to look at a public policy called ‘localism’ and a principle called ‘subsidiarity’. This principle suggests that government should only fulfil a subsidiary function for those tasks that cannot adequately be dealt with by lower tiers. [1] This sounds like a good way to clean up the system and move towards ‘small government’!

With due respect I would then get the Minister to ask all the interest groups lining up to tell him what’s the next best health reform to ask them how their ideas fit within three basic concepts.

These concepts are that government should only get involved and deliver what they do best – that is addressing and removing perversity in funding and payment systems, levels of accountability and reducing expensive and onerous upward reporting and regulation. Secondly give providers incentives and space to pool resources to meet common agendas and provide innovation funding for new models of governance and service delivery at the local level. Third make all funding of programs contestable. Let public/private/NGO and even different levels of government agencies compete and/or form alliances to deliver programs locally.

For me, I just hope the outcome is that I don’t have to change those two slides too much.

I do not want to stand up and say that we spend an inordinate amount more in GDP terms than most countries on health care or that Australian values around fairness and equity are further diminished by fiscal reform.

Dr David Briggs is also National President of the Society for Health Administration Programs in Education (SHAPE), Editor, Asia Pacific Journal of Health Management (APJHM), Chair of the New England Medicare Local (NEML), and former National President of the Australian College of Health Services Management (ACHSM).





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