Health policy news has been making headlines of late.

There’s been:

• the Federal Government’s long-awaited announcement on the new Primary Health Networks;
• the move to financially penalise conscientious objectors to childhood vaccination (the merits of this approach have been questioned by some public health experts);
• calls for action on mental health reform in the wake of a leak of the National Mental Health Commission’s review of mental health programs and services (some more background here);
• and reports that the forthcoming federal budget will cut copayments for some prescription medicines.

No doubt, the AMA’s launch of its Public Hospital Report Card 2015 will generate more headlines.

But don’t be deceived; an examination of recent history suggests we remain far from having a useful national conversation about health policy.

If we were, perhaps we would be discussing some of the questions raised below, in an editorial from the National Rural Health Alliance’s latest Partyline magazine.


Twelve useful questions for considering the current health policy context

Gordon Gregory writes:

It’s not many years ago that health reform was an important part of the contemporary policy debate. The ‘national conversation on health’ – as it would now be fashionably described – was wide-ranging and involved many interest groups.

It was informed by a number of key inquiries and reports. A Healthier Future for All Australians was the report from the National Health and Hospitals Reform Commission, chaired by Christine Bennett. Tony Hobbs led on the development and publication of Australia’s first National Primary Health Care Strategy. And Rob Moodie helped lay the path for Australia to be the healthiest country by 2020.

One weekend back then the Commonwealth decided it was going to take over public hospitals from the states. For a slightly longer period Medicare Locals were going to ensure that coordination in primary care involved all health professions, not just doctors. Apart from anything else, this would give the primary care sector an adult relationship with the hospital sector.

What exciting times they were! There were disappointments on many fronts, but the debate was broad, inclusive and ambitious.

Since last May’s Budget there has been one issue, and one only, in health policy discussions: whether or not there should be a co-payment in Medicare.

The debate has pitched two fundamental principles in direct, winner-take-all opposition.

The first is that a universal health insurance system, funded through progressive taxation, should give people access to no cost or low-cost medical care and public hospital services irrespective of their income, place of residence, ethnicity, health status or age. This is the “It’s ok for millionaires to be bulk billed” argument. (An important assumption is that they pay their full share of tax.)

The second is that people who are able to contribute to the cost of a public service should do so directly as well as through the progressive income tax system. This is the “People who can afford to pay should do so” argument.

They can’t both apply. One of these principles must be ‘wrong’, the other ‘right’.

Notwithstanding the importance of the battle between these principles, is it appropriate to have focused only on it? The short answer is no.

By considering a hierarchy of questions one can see the Medicare co-payment in its proper perspective.

Question 1: Do we have a national budget emergency?

No we do not. Rumours of the death of Commonwealth, state and territory financial capacity have been greatly exaggerated.


Q2: Do we have a medium-term structural budget challenge?

Yes we do. We always have had. It’s the need for economic structural change.

It is needed because of changes in the relative prices of various goods and services around the world. Because of bilateral and multilateral trade deals, weather events in Canada and Siberia, and boardroom decisions everywhere.

The composition of Australia’s earnings is altered by events beyond our control. They include the rate of growth in China, international exchange rates, and the effect of changes in Australia’s international competitiveness (think motorcars and, more deeply, submarines).


Q3: Bearing in mind fairness and the composition and status of vulnerable groups, to what extent should this medium-term structural budget challenge be met through cuts in essential services as distinct from changes in taxation arrangements (eg. for superannuation, negative gearing, trusts), and/or economic growth and/or bracket creep?

To a very limited extent, surely. (Relying on those last two requires governments to hold their nerve beyond one electoral cycle.)


Q4: To the extent that service cuts should contribute to meeting the budget challenge, to what extent should they be in essential services such as health, education, public housing and transport?

Surely: to a limited extent.


Q5: Is the proportion of public spending going to the health sector increasing at a rate which is (to use another fashionable term) ‘unsustainable’?

No it is not. National health spending as a proportion of GDP has increased from around eight per cent to around 9.5 per cent of GDP over the past 20 years and is forecast not to rise dramatically. The 2015 Inter-Generational Report projects a decline in Commonwealth health expenditure but this is largely due to reductions in payments for health care to the States. These cuts are already affecting things like public dental health services – as well as hospitals. The States and Territories are in trouble on this front.


Q6: If the proportion of public spending going to health were to increase, would the public object? (When an economy is growing, a lower proportion of public spending does not equate to fewer dollars. But an increased proportion for health means a lower proportion for some other area(s) of spending.)

The Abbott Government’s Commission of Audit reported that “a rise in the share of the nation’s income devoted to health care is not necessarily a matter of policy concern as long as the expenditure is cost effective, used efficiently, and the benefits outweigh its opportunity cost “.


Q7: If additional resources are required for health and health-related expenditure, would the public be willing to pay more in taxation specifically for health (i.e. the Medicare levy)?

Answer: not sure – but let’s have the discussion with them.


Q8: In these circumstances, would the public be willing to pay more in (progressive) income tax?

Again, we can’t be sure; but there is a strong case to be made for the fact that, compared with other OECD countries, Australia is a relatively low taxing nation overall when all taxes and transfer payments are considered.


Q9: If all else fails and the proportion of public expenditure going to health has to fall, what proportion of the savings should come from:

  • cutting less effective or ineffective MBS items (using the MSAC mechanism);
  • reducing ‘futile care’;
  • price control (through international comparisons) for medicines, prostheses and interventions;
  • changing attitudes of patients and clinicians to health tests;
  • reducing over-doctoring (maybe through the introduction of Geographic Provider Numbers); and
  • workforce efficiency gains from changes in scopes of practice? 

The first of these options provides the Government with a robust process for making sure Medicare is as efficient and effective as possible. Before any new service can be funded under Medicare it must be assessed by the Medical Services Advisory Committee (MSAC), an independent expert committee that provides advice to the Minister on evidence relating to the comparative safety, clinical effectiveness and cost-effectiveness of any medical service or technology considered for listing under Medicare. 
For several years, MSAC has been reviewing items that were listed on Medicare years ago – because some of them may no longer be effective or cost effective. So far MSAC has reviewed only a handful of the thousands of items listed.


Q10: What proportion of health expenditure goes to general practice services?

In 2013-14 it was about six per cent – one third of the total cost of medical services. This can be compared with 40 per cent to hospitals and 14 per cent for medicines.


Q11: What other things could be done in the health sector to reduce health spending in the medium term?

These are the more radical health reforms we were all interested in some five years ago:

  • increased spending on illness prevention;
  • finding out why some social determinants (eg smoking rates) are hard to improve – especially in rural and remote areas;
  • integrating health, aged and disability care more closely; and
  • having the Commonwealth and a single State/Territory strike an agreement for an integrated, unitary health system.

Q12: So how important is a Medicare co-payment in the context of the nation’s overall financial circumstance?

In and of itself, it is negligible. However, it has been of significance because it has chrystallised questions about the principles of our health system and has led to discussions about them.

A Medicare co-payment is a touchstone issue that reveals how governments, bureaucracies and various interest groups think about the longstanding challenge of equitable and sustainable financing of health care.

The broader health debate has been bankrupted – mainly because we are asked to believe that our governments are as well.


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