The Guardian August 25, 1999


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 
* 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 

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 

* 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 

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 

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 

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.


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 

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 

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 

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).

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