HEALTH SERVICES IN TRANSITION:
MANAGED COMPETITION OR PUBLIC HEALTH?
This is the second of two articles based on a report given by Dr Con Costa to the national conference of the Doctors' Reform Society in South Port (Qld) from August 7-8. The first article looked at proposals from one of Medicare's architects, Richard Scotton for "Managed Competition", where private "budget holders"* compete in an open market to provide coverage for health services. In this week's article Dr Costa looks at the direction in which health services are being taken and the question of sustainability of the public system. So is it happening? Privatisation and Managed Competition as the future of our health system? Certainly all the pieces are falling in place. Consider the following developments: * case-mix; * purchaser-provider split; * internal markets; * repeated attempts to introduce copayments (patient contribution when bulkbilled) * contracting out of cleaning services, laundry, etc; * government funding of private system increasing; * colocation of public and private facilities; * private health fund contracts with doctors and hospitals; * public bed and ward and hospital closures; * inadequate funding of public hospitals; * private management of public hospital such as Modbury in SA; * Port Macquarie in NSW, a private hospital providing for public patients; * the push for means testing of public hospitals and Medicare; * Medicare offices accepting claims for the private health funds; * changes to community rating (not all people changed the same for private health insurance). All of these developments point in the one direction: towards privatisation and Managed Competition. Too often these changes are defended with claims of the "unsustainability" of Medicare as it is. But what is "unsustainable"? The process which is occurring has nothing to do with the "unsustainability" of Medicare or the public system. This is merely the language of opponents to the public system who would like to create a sense of crisis in the community. The crisis is in the private health insurance industry, and for those who want to introduce their private model for health care in the face of an extremely workable and popular health system — Medicare. The State Liberal Premiers screaming loudest for the dismantling of Medicare — due to its "unsustainability", have in fact cut their public health budgets the most. Commonwealth outlays in hospital services increased by a real 24 percent in the six years to 1997/1998. During the same time Victoria "dropped" its recurrent spending on hospitals by 27.5 percent and South Australia dropped its funding by 23 percent and WA remained static. There is no blow out in costs in Medicare or the public health system. Our expenditure of around 8.6 percent of GDP is on a par with most OECD countries. Of course we should always be looking at better efficiencies from our health dollar. When we talk about more efficiencies in the health system — we mean real efficiencies by building on the strengths of Medicare and our public system. For example: * better management of chronic illness in general practice by introducing alternative methods of payment to the piecework/fee for service system, encourage GPs into a team based approach to health care and computerisation; * wider introduction of day only surgical procedures and a better interface between hospitals and community practice and primary care; * beefing up of community and Home Care services to reduce need for expensive hospitalisations. Unsustainability is a relative term — just like the terms freedom, democracy, etc. Unsustainability for whom and for what. But if "sustainability" were really the concern of our federal politicians then why throw away $1.5 billion annually on the 30 percent Private Health Insurance (PHI) Rebate — a 30 percent subsidy for private health insurance. So far this has only brought in 50,000 new members. This values each PHI membership at $28,000 a piece — for a product which costs only around $1,000 a year for the individual!! Putting it in perspective, $1.5 billion would pay for 12 500-bed hospitals every year. It is six times what we spend annually on the federal public dental scheme (which has huge waiting lists and where thousands of elderly and/or poor Australians line up every day in the hope that they might be able to get their teeth or chronic pain fixed so that they can at least be able to chew some decent food.) Let's be fair dinkum about funding the Public Health System. 1. If the Federal Government can throw away $1.5 billion annually on the 30 percent PHI rebate why can't they find $1.5 billion annually from the current large federal budget surplus (which runs in the billions of dollars) to take funding pressures off our public hospitals. 2. Why is the higher Medicare levy — the penalty put on higher income earners who do not take out PHI — being put back into consolidated revenue rather than into the health system? 3. Why hasn't the Federal Government come up with the extra $150 million that they promised the States in the last round of Medicare funding agreements? 4. Why isn't the Federal Government forcing Victoria and South Australia to honour the Medicare agreements? How could Kennett have taken a 26 percent increase in health funding and spent 27 percent less on public health funding? Stop further public subsidies If the public system is "unsustainable", it is because of the heavy federal subsidies going to the private health insurance industry. It follows that we should immediately stop any further subsidies to the private health funds. Let the private health insurance industry sink or swim on their own "market forces". We should be wary of further penalising high income earners via further increases in their Medicare levy or excluding them from the public system - - means testing. Medicare must remain a universal system. Not just because 60 percent of the funding of Medicare comes from the 40 percent top income earners but also because it is the vocal middle classes who help to maintain high standards within the system. Proposed inquiry Governments have inquiries in order to overcome public resistance when they want to push through their policies. No government would set up any inquiry without knowing the outcome and particularly, already having in mind who would head such an inquiry. Inquiries are set up by governments to smooth over hiccups in the preferred process, not as open-ended think tanks. The Productivity Commission, in particular, has a reputation of preparing the way for the next (unpopular) steps in policy implementation. The Commission in the past has left no stone unturned when it comes to privatisation, competition policy and the generation of profit-making markets. Health would be no exception. The Productivity Commission sees health as one of the services requiring "reform" to which concepts such as productivity, efficiency, incentive, competition and market mechanisms should apply. In its 1996 Stocktake on progress in micro economic reform the Productivity Commission said, "that time has come for a wide ranging assessment of the nature of public involvement in education, health and community services." "As in other parts of the economy, governments should endeavour to use competition to encourage value for money in service delivery." The Productivity Commission has advocated rebates or some type of "voucher system" attached to the patient/user of the service, rather than subsidising providers of a service. That way providers would compete for clients on the health market. Under this approach the distinction between public and private provision becomes much less important. There is more emphasis on what services rather than which system delivers them. It sounds very like the managed competition model. Needless to say the history of the Productivity Commission needs to be kept strongly in mind with recent calls for inquiries into health funding by the Productivity Commission. Conclusion Our best chance of keeping a decent health system is to be united in a broad alliance of health care workers, unions and community organisations, as well as engaging the middle class in the struggle to defend Medicare. As with education the middle class, with their higher disposable incomes, will be encouraged by the Government and health insurance funds to believe that they can purchase a better product under the Managed Competition model. They will be susceptible to suggestions that they will be able to buy "the best care" and which an under-funded Medicare may no longer be able to provide. Those on higher incomes will need to be constantly reminded that the true freedoms in health care are guaranteed only in the public system. In our public system we have the freedom to go to our chosen doctor or to attend at any local casualty/A&E without having to get permission from the insurance company. Also our doctor has the freedom (relatively) to treat along medical lines as considered necessary, without needing to get approval from an insurance company. Under a Managed Competition approach, with its Managed Care cost controls, such freedoms would quickly disappear. Instead we would have a whole lot of empty freedoms — "freedom of choice" of budget holder (meaningless if we are chronically ill or poor or in need) and "freedom of choice" of a thousand different private health care plans. For the economic rationalists it is not a question of whether Medicare is a "good" or efficient system or whether it is sustainable. Medicare simply blocks their way. *People would sign up with a private budget holder (or Medicare) who contracts for health services on their behalf from hospitals and other providers. The funding presently distributed through Medicare would be allocated to budget providers (mostly private outfits) according to the number of people they have on their books. The government funding would provide a minimum "safety net" level of care and anything beyond that could be purchased through a package from the budget provider. In line with competition policy Medicare would compete on the same basis as the private budget holders (health funds).