Opinion & Commentary
Reform must start with Medicare
The Gillard Government’s health reforms will not solve the biggest problem in the system – long waits for hospital treatment. Having the Commonwealth provide 60% of the money won’t make much difference when State health bureaucrats will remain in charge of capping public hospital budgets and rationing care.
If health reform is to amount to more than money shifting and rearranging the administrative deckchairs we need to address the root of the problem - Medicare itself.
It isn’t only the promise of ‘free’ hospital treatment without paying for insurance that makes Medicare superficially attractive to the Australian people. What seals public support for the scheme is ‘free’, bulk billed general practice visits on-demand.
Unfortunately, we can trace the rot right back to start of Medicare. Having lumbered the federal budget with the high cost Medical Benefits Scheme, the Commonwealth was determined to limit its financial exposure to the public hospital system. Instead funding half the annual operating cost of public hospitals (as the profligate Whitlam Government agreed to do under the original Medibank deal in the mid-1970s), the states where forced to make do with fixed health grants.
This was bad news for public hospital patients and staff. The loss of the Commonwealth cost sharing arrangement imposed heavy financial burdens on State governments with small sources of revenue and big, competing service delivery responsibilities. As private health insurance coverage collapsed and demand for ‘free’ public treatment increased, the State’s predictable response was to control expenditure by dramatically cutting the number of beds.
This is the reason Medicare provides ‘reverse insurance’. Minor health needs and expenses are excessively subsidised by the MBS at a cost of over $15 billion a year. Meanwhile, the sickest patients wait in the public hospital queues for a free elective or emergency bed. A system meant to be about equity delivers gross inequities in access to care.
The Gillard changes to hospital funding will ease the State’s budgetary difficulties at a cost of a third of their GST revenue. But the federal government has resisted calls to assume full financial responsibility for hospital care, let alone commit to a genuinely demand-driven system of activity-based funding. The extra cost to the federal budget would require the Commonwealth do something unpopular to lower the cost of the MBS like compulsory copayments or capitation funding.
For those interested in genuine health reform, there is no escaping these issues. Medicare is structurally flawed and misallocates scare health dollars. It must be replaced with a soundly constructed insurance system which subsidises exceptional, high cost health events. Reform must encompass alternative methods of health care financing, since there will never be enough tax dollars in the economy to pay for all the health services the community needs and wants to consume each year.
A ‘Medicare Select’ style scheme would allow individuals to purchase private insurance and pay for hospital care overtime by a combination of taxpayer-funded insurance vouchers and private premiums. To avoid the worst features of US-style ‘managed care’ – limitations on choice of general practitioner – Health Savings Accounts could be introduced to allow people to use their own money to purchase general practice and other primary care on a fee-for-service basis.
Jeremy Sammut is a research fellow at The Centre for Independent Studies.
