On 22 August the Senate Community Affairs Committee released the report of its Inquiry into Out-of-Pocket costs in Australian health care.  This is a comprehensive document, which comprehensively addresses a long-neglected area of health policy and highlights the inequity and inefficiency of our current approach to out-of-pocket costs in the Australian health system.   The Committee (minus the Coalition members who put in a dissenting report) made a large number of recommendations, which have already been covered in Croakey and elsewhere.  The main thrust of these recommendations is that no new out-of-pocket costs should be introduced until major changes are made to the way in which out-of-pocket costs are managed within our health system.

Senate Inquiries can often feel like a fruitless exercise and there are many examples of where sensible and well-supported recommendations are shelved and ignored by governments for short-term, political reasons.  However, this Inquiry demonstrates the important role these inquiries can play in highlighting and addressing longstanding gaps in public policy.  Despite the fact that direct payments have a significant impact on how consumers access health care and which forms of care they access, out-of-pocket costs have been ignored by both sides of politics. Labor introduced an entire health reform agenda without including out-of-pocket costs as an issue (the National Health and Hospitals Reform Commission Report covers health funding in great detail but barely mentions direct consumer payments).  The Coalition has gone a step further by proposing sweeping new payments, without any understanding of how current costs are impacting upon consumers.   

The lack of policy recognition of this issue is evident when comparing out-of-pocket costs to private health insurance.  Private health insurance contributes less than half the funding of direct consumer payments to our health system yet there is an entire Branch of the Department of Health dedicated to overseeing policy and regulatory issues relevant to this area.  The Private Health Insurance Administration Council is a statutory authority that oversees regulation of the industry and in addition we have a Private Health Insurance Ombudsman whose job it is to protect the interests of people covered by private health insurance through administering independent complaints handling service and education and advice services for consumers. 

In comparison there is not one person within the Department of Health responsible for advising Government on out-of-pocket costs and their impact on consumers’ access to health care.  There is no advisory service consumers can contact if they have questions about the cost of their health care and no Ombudsman or authority to whom consumers can complain if they are facing health care costs that they cannot afford.   This is despite repeated evidence from both Australian and international sources that a significant number of Australians face cost barriers to accessing health care and that preventable admissions are placing an unnecessary burden on our public hospital system.

This Senate Inquiry Report goes a long way to filling this policy vacuum though analysing existing data, revealing how out-of-pocket costs impact on individual consumers and making a series of sensible recommendations about how to continue to develop policy in this area. Congratulations should go to the Committee for producing such a high quality report, in particular recognition is due to Rachel Siewert (Chair) and Senators Jan McLucas and Claire Moore (ALP), Senator Richard di Natale (Greens) and Senator Zed Seselja (Liberal) who were actively involved at all stages of the Committee process.  It’s easy to be cynical about politics in the current environment but exercises like this reflect the genuine interest and commitment many politicians have to the policy side of their positions.  Senate Inquiries are not the most glamourous or vote-winning of activities and they often occur during parliamentary recesses when parliamentarians could be at home, spending time with family and friends and shoring up their local constituencies. 

Recognition also should be given the Committee Secretariat, led by Committee Secretaries Jeanette Radcliffe and Matthew Crawshaw.  The role of Committee Secretariats often goes unrecognised but they play a vital and impressive role in driving the Inquiry process and in drafting the reports.  This requires them to assimilate and analyse a large volume of material and produce a comprehensive document, similar in volume and scope to a PhD thesis, in a matter of a few weeks or months – generally on an issue in which they have no specific qualifications or expertise.  

The entire Report is worth a read for anyone with an interest in this issue and there are a number of practical recommendations which outline how this issue can be progressed within the current health policy, funding and regulatory environment. However, three issues stood out to me as requiring further discussion. These were, as follows:

 1 Data

Good policy requires good data and the Report highlights that our failure to collect rigorous data on people’s expenditure on health care is a major data gap in our health system.  It means that we don’t have an accurate picture of the amounts of money people spend directly on their health care and what types of care they are spending this money on.  Most of the data we collect is restricted to a specific program, such as Medicare or the PBS, which does not capture the fact that most people with chronic and complex illnesses incur costs across a range of different areas. It also means that areas of expenditure that are not covered by government programs, such as aids and appliances, are typically under-estimated or ignored in policy making. Similarly, the costs of non-health goods and services associated with health care, such as transport and parking, are often ignored or under-estimated. These goods and services are as essential to consumers as the health care itself (if someone can’t afford the required transport costs then they can’t access the health care they need) and can be considerable.  These costs can be considerable.  In its research into parking costs the Chronic Illness Alliance found many consumers spending hundreds – and in some cases thousands – of dollars on parking per year.  The first step to developing policy in this area needs to be accurate and comprehensive data on direct consumer payments.

2. Complementary medicines

One of the issues explored in the report is the contribution of complementary medicines to overall health care costs.  In its submission to the Inquiry, the Department of Health argued that a significant proportion of out-of-pocket expenditure was for complementary medicines and similar health products which have no evidence base.  This is an important point – there is no policy rationale for subsidising products which have no therapeutic value – these are discretionary and should not be subsided by the public purse.  However, there are some important points that need to be made on this issue. Firstly, due to the lack of comprehensive data (see above) we don’t know who is buying these products. It may be that on average 30-40% of all out-of-pocket expenditure is on products with no proven therapeutic value.  However, this does not mean that every person could reduce their out-of-pocket costs by this amount without any ill effect.  ‘Average’ expenditure is not a useful concept in this area where there is such great diversity among consumers. Secondly, while many vitamins, minerals and complementary medicines may have no therapeutic benefits for the average person there are many people with specific illnesses and conditions which require these products.  For these consumers these products are not discretionary. For example, people with cystic fibrosis require large amounts of vitamins, digestive enzymes and nutritional supplements in order to obtain basic nutrition.  These products are as vital to them as prescription medicine and the costs can be considerable.   Finally, it is also pertinent to point out that many private health insurance funds (substantially subsidised by public funds) provide rebates for natural and complementary medicines.  The issue of whether or how we subsidise these treatment modalities is an important one but broader than the consumer co-payment issue.

3. Safety-net

Another issue raised in the report and in subsequent advocacy from peak bodies is the need for an adequate safety-net.  As outlined in the report, current safety-net arrangements are poorly targeted and vastly inadequate for a range of reasons.  Due to the diversity of consumers’ health care needs and ability to contribute to their health care costs, an equitable and efficient system of co-payments requires a comprehensive and well-targeted safety net.  As the affordability of health care is a function of two variables: disposable income and out-of-pocket costs, an adequate safety-net relies on being able to link robust data on consumers’ out-of-pocket costs with their income.  

Combining the MBS and PBS safety-nets is clearly a good start. However, as has been pointed out by the AHHA, this would still leave significant holes among consumers with complex and chronic conditions.  In particular, it would not address the needs of people who use medications not on the PBS and devices, aids and appliances for which there is little or no subsidy.  This proposal should be seen as an essential first step in the development of a more comprehensive safety-net rather than as an adequate response in itself.


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