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Health reform: states reneg? « Previous | |Next »
December 2, 2010

National health reform has become more complex with the new Baillieu Government in Victoria threatening to back out of the COaG deal the Rudd/Gillard Government had signed with the states. This involved the states handing back one-third of their state’s GST revenue in return for increased funding and a guarantee that the Commonwealth will fund 60 per cent of hospital costs. Apparently the NSW Liberals threaten to follow the Baillieu Government.

I'm unsure of the reason for this, given the spiralling costs of running the public hospital system, or what the proposed alternative would be. I would have thought that the core strategy for the Liberal states (WA, Victoria, NSW) is to obtain real growth in federal funding for the public hospital systems over the next decade. This position assumes that the Liberal states want to maintain the Medicare policy of universal access to comprehensive public hospital services (that is their stated policy position).

Jeremy Sammut, a research fellow at the Centre for Independent Studies, thinks otherwise in his Ridicule the prescription to induce health reform at the ABC's Unleashed. He radically questions the policy consensus on the long-term sustainability and bipartisan political desirability of Medicare.

He says that we need to:

go back to first principles and admit the original error which, of course, was the decision to establish a government-run health system in the first place....Hospital care needs to be treated like any other good the community desires. It needs to be purchased by or on behalf of patients from providers who compete to deliver these services at the efficient cost of production.The health fund an individual joins to insure themselves against the risk of serious illness should be responsible for doing the purchasing. Each fund should be free to purchase services from the public or privately-owned facility that is able to deliver the best quality care at the best price. Artificial restrictions on hospital bed numbers would not exist in such a system in which the supply of hospital care was demand-driven.

What is necessary is real structural health reform--the key is not health delivery but health insurance not health delivery. To achieve it, Sammut says, the myth of ‘free’ hospital care needs to be busted. We know there is not enough money in the economy for governments to pay for all the hospital care required each year. Hence the need to restrict or ration access to hospital care.

We therefore need to fund hospital treatment overtime by paying for insurance premiums. Medicare should be scrapped and the ‘right’ to taxpayer-funded health care replaced with a health voucher. Each Australian would use their taxpayer-funded voucher to purchase private health insurance.

Genuine health reform is dumping social democracy's Medicare, that is premised on health care as a core government service and responsibility, and embracing the neo-liberal's free market profit driven approach to privatised health care.

An alternative approach going back to first principles is to rethink the way that health care is reduced to hospital or emergency care. The costs of hospital care can be reduced by keeping people out of hospital by investing in preventative primary care, so that people do not need to end up in emergency departments of hospitals. That too is structural reform.

In arguing for his market-based approach Sammut neglects to mention that it is the market failure in health care that requires government intervention in the form of Medicare. Nor does Sammut mention the large public subsidy of the private health funds through the mechanism of the private health insurance rebate. This was introduced by the Howard Government to ensure a consumer shift to private health insurance to help the health insurance industry stay afloat.

The problem the Gillard Government faces is that Labor under the previous Rudd/Gillard government got sidetracked in its reform of the health system by placing the emphasis on the funding of hospitals; and away from strengthening the relationship between preventive care and hospital care. Sidetracked because from federal Labor's perspective it is the relative isolation of the general practitioners that they fund from the rest of the system needs to be addressed. Federal Labor had proposed to do this with a national network of primary health care organisations to be known as Medicare Locals.

Consequently, the current debate on national health reform has been reduced to one about hospital funding, not better health care through developing a more functional nexus between hospital and community health and primary care services.

| Posted by Gary Sauer-Thompson at 10:39 AM | | Comments (10)


Under the privatised model of health care in the US the health providers (health funds) do very well, but the patient outcomes are woeful...many having given up on health care altogether, or going into bankruptcy because they can't afford to pay their emergency (not electable) medical bills.

Sammut's argument is that Medicare is propped up with bad theory--in this case the theory of supplier-induced demand which health policy has been in the thrall of for decades:

According to the theory, the demand for hospital care will always exceed the supply. No matter how many hospital beds are available, doctors will always find patients to occupy them. Because of the ‘information asymmetries’ in health, medicos inflate their incomes by putting people into hospital irrespective of whether treatment is really necessary.... But despite the credibility gap, the theory of supplier-induced demand has underpinned the bed reduction policies that all state health departments have implemented since the mid-1980s.

So more doctors nurses etc deliverying preventative primary care at a primary care clinic (for back pain, or over-weightness, high blood pressure etc) results in supplier induced demand for hospital beds!

the doctors send people off to hospital for unnecessary treatment.

It's much more likely the consumer will be given a course of pills by the GP for high cholesterol to prevent the heart attack that will land them in hospital.

it doesn't take long to hear the "health thought police experts" mantra come to the surface when talking about preventative care re overweightness, lack of fitness, obesity and nutrition. The libertarians appeal to consumer choice fails to mention that food policy in Australia is largely driven by the interests of the food industry at the expense of the public good of the public health perspective.

The problem with Federal Labor's approach to primary care is that it entrenches GPs as the gatekeepers of care.

A good case can be made for reforms that step beyond this gatekeeper approach to include allied health and community based programmes that would help people to become empowered to manage their condition---eg., for diabetes.

Back to the vexed issue of "renigging".
Interesting, how it comes out now what a Trojan Horse Baillieu has been for the Coalition nationally?

It is tiresome that people get repeating the pro-prevention and pro-primary care anti-hospital ideology with complete disregard of the evidence. I have answered these non-evidenced based arguments in detail.

The problems in the health system are systemic and require structural reform - not new forms of central planning by 'wise' experts and 'benevolent' bureaucrats.

anti-hospital arguments?

The post does refer to strengthening the relationship between preventive care and hospital care; and the relative isolation of the general practitioners from the rest of the health system.

the post does not oppose the reforms to public hospitals or increased funding to them. It supports those reforms--they are necessary--- but argues that the debate and reform process needs to be widened from equating health with emergency care in hospitals.

The commonwealth has a core interest in reform to primary care since it funds GP' clinics through Medicare. Given that interest it is reasonable for them to ask how the primary care "network" can be made to function more efficiently and be more effective in ensuring a healthy population.

One would have to question the good sense of entering into any major long term deals with this Labor government given its poor history and the thin hold it has on power.

Let's hope the federal government's health reform process is not derailed by the states. In theory, Medicare Locals could provide the spark for a real focus on preventive care, which is what the thinkers in health policy have been calling on for years. The potential for these primary care based bodies, with broard community representation, to take the politics out of health care policy, is significant. One hopes that governments can resist the obvious power blocks to see this refom through.