Sick Medicare needs mending

Australia's public health system is costly and in dire need of reform. A funding overhaul that shifts financial responsibility from the bloated public sector bureaucracy to the individual is one solution.

The small target-style of electioneering preferred by the major parties has taken most of the ideas and vision out of election campaigns.

However, it would be a mistake to think that rising healthcare costs are not a critical spending issue for Canberra. And one of the key health policies of the Labor Party could have long-term consequences for all Australians, who could be denied choice and control over how and when they access health services.

In 2011, the Gillard Government established 61 Medicare Local agencies across Australia, which are tasked with helping to plan and coordinate health services in designated regions.

The Coalition had committed to review Medicare Locals if it won government, but during last week’s people’s forum, Tony Abbott ruled out scrapping them.

But rising health costs are already putting stress on state and federal budgets, and the financial pressure will increase as the population ages in coming decades.

One proposed solution for these problems is to create a single national funder for health, in the belief that the Commonwealth – with its larger tax base – will be better able to shoulder the financial burden, and that this will lead to more efficient health spending.

A way of establishing a single funder (suggested by many health academics) is for state and federal health funding to be pooled and allocated to regional fund holding agencies.

In effect, these new regional health authorities would combine the putative primary care responsibilities of Medicare Locals with the role and responsibilities of the Local Hospital District bureaucracies that are now in charge of running public hospitals.

However, giving public sector bureaucracies even more control over more of our health dollars is a bad idea, given the waste, inefficiency, and other problems that plague Australia’s public hospital system

The better option is to allow individuals to have more control how they spend their own health dollars to purchase health care and buy health insurance. We also need much greater choice, competition and personal responsibility in health if we are to address the long-term cost challenges facing an ageing Australia.

A way of achieving this – and of short-circuiting the push for public sector managed care – is to split existing Medicare funding into two new funding streams.

One stream would be used to fund superannuation-style, personal Health Savings Accounts, which individuals would use to pay for lower-cost health care such as GP visits.

The second stream would fund insurance vouchers, which individuals would use to purchase health insurance from competing private health funds covering higher cost chronic and catastrophic conditions.

Under a ‘New Medicare’ system, health funds would be responsible for purchasing hospital care for their members. This would facilitate reform of public hospitals, which would have to address barriers to productivity in order to compete on price and quality with more efficient private operators.

Health funds would also have a financial incentive to ensure members with chronic conditions received all necessary care in order to avoid costly hospital admissions.

We would have a private sector form of managed care, with health funds acting as agents for their members and negotiating service contracts with providers. However, the vast majority of occasions of services for routine health care would be paid for by individuals using the money accumulated in Health Savings Accounts. People would also be free to choose their doctor, who in return for a professional fee would act as agents for their patients and advise on how best to spend their health dollars to access appropriate treatments.

This is the great advantage of a Health Savings/Insurance Voucher system: it would maximise patient choice where choice is appropriate, while enabling a genuine system of private medical practice to flourish. It would close chronic care gaps in the current system and achieve meaningful public hospital reform, while also seeing off the threat of public sector managed care.

This is the kind of visionary debate about health we should be having, but are never going to get in an election year.  But unless we start seriously talking about alternatives to the status quo, I fear we will end up with a more bureaucratic and monopolistic health system than we currently have.

Dr Jeremy Sammut is a Research Fellow at The Centre for Independent Studies and the author of the TARGET30 report, Saving Medicare – But Not As We Know It.