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A conversation we ought to be having about healthcare

Anne-marie Boxall from the Commonwealth Parliamentary Library has written a timely and important article for the FlagPost blog, titled: Paying for health care: how can we sustain it?

It is republished below with her permission, and will be worth revisiting when the post-budget protests erupt.

Anne-marie Boxall writes:

At budget time, the federal health minister has one of the toughest jobs. We got a glimpse into this a few weeks ago when the Government announced that it had decided to defer listing some new drugs on the Pharmaceutical Benefits Scheme even though they work and have been deemed by experts to be cost-effective. The announcement sparked outcry from consumer groups and health care organisations alike.

The Minister found herself in this unenviable position because the amount of money available to spend on health care is finite. This is not just a dilemma that arises at budget time however.

Governments around the world are becoming increasingly concerned about how they will fund health care into the future because in most OECD countries, health expenditure is growing at a faster rate than gross domestic product.

The harsh reality is that we cannot afford to do everything that we want or need to do to improve people’s health, at least not without finding new revenue sources (for example from taxes, the private sector and individuals). As Minister Roxon explained last week, the constraints on public sector financing mean that governments will need to play a more active role in determining what will, and will not, be funded in health care. In health circles, this exercise is known as priority setting.

In a forthcoming Parliamentary Library Research Paper I examine the fiscal sustainability of the Australian health system in more depth. In addition to priority setting, I outline a range of mechanisms currently being used to help control health expenditure and examine how effective they are. I also outline a number of other options that could be considered, including:

• paying health care providers in different ways (there are numerous options but the World Health Organisation considers salaries, setting strict budgets, and using capitation payments to have the most potential for containing costs);
• stimulating competition between the public and private sectors, as long as it drives improvements in the quality of care and delivers better value for money;
• monitoring and exerting greater control over the capacity of the health system (for instance the number of health care professionals and health facilities makes a significant difference to overall health expenditure); and
• ensuring government funds are only used to fund the highest quality and most effective of all the treatment options (physiotherapy, for example, might be more effective for back pain than drugs or surgery).

One thing the paper makes clear is that there is virtually no easy savings to be made in the health care sector anymore. Doing anything to make Australia’s health system more affordable will be tough, so beware of anyone spruiking simple solutions. It is not simply a matter of compiling a list of the most cost-effective or cheapest treatments and funding them first. Other countries have tried this ultra-rational approach and found that decisions provoked so much outcry that they were politically untenable.

In the United States, recent attempts to make resource allocation in health care more rational led to claims that the government was introducing ‘death panels’. In the United Kingdom, the decision to deny access to certain cancer drugs led to similar claims. Even if governments hold out against such protests, often there just isn’t enough evidence available to make an informed decision about which treatments deliver the best bang for the buck.

Making the health system more sustainable is also not as simple as getting those people who can pay more to do so. Individual contributions, such as fees, co-payments and other out-of-pocket payments, already account for about 17 per cent of total health expenditure in Australia.

And there is already compelling evidence that the cost of health care poses a real burden for some people and stops them from getting necessary care (see here, here and here). Shifting more of the cost burden onto individuals would make it even more difficult for people with low incomes to get essential health care, and it would make our health system less equitable.

It would also mean that Australia was moving in the opposite direction to most other OECD countries, which have reduced the proportion of total health expenditure coming from individuals over the last decade. It’s not possible to explain the reasons for this trend without further analysis, but it may be that other countries have come to agree with the World Health Organisation that relying on individual contributions to control the growth in health care costs is a relatively blunt instrument and the least equitable way of funding health care.

With no easy solutions on offer, the only way this or any future government is likely to make our health system more sustainable is to undertake more fundamental and potentially unpopular reform (this would include considering some of the options outlined earlier).

Governments will have to make the public more aware that there are limits on what they can spend on health care. No one will like it when the funding cuts affect them, but it might help if they have some understanding of why. Governments will also have to convince health care providers that changes are needed so that better care can be provided at a lower cost.

If reforms threaten the incomes of health providers, then they may need to innovate and find new and more profitable ways of delivering services.

Governments will also have to initiate a national debate on some of the key issues that underpin the issue of sustainable health funding. Are we, for example, prepared to consider solutions such as paying more tax? Or, do we want to move away from public financing and encourage the private sector and individuals to play a greater role?

Admittedly, a reform agenda along these lines would be politically difficult for any government. However, it is likely to be more effective than the current approach.

To date, governments have tended to view the health system in its components parts because it is so large and unwieldy. As a result, there does not appear to have been an overarching strategy for reigning in the growth in health expenditure. Instead, it appears that governments have had a series of one off battles in various sectors of the health system over time.

Instead, governments could consider viewing the health system as just that, a system, and begin developing a clear strategic plan for how we as a nation will tackle the problem of ensuring the sustainability of the health system.

Given that just about any proposal for constraining health expenditure provokes outrage, when it comes to engaging in battles over health funding, it seems that governments would have little to lose by being strategic about the battles it takes on in order to deliver outcomes in the long-run.

Comments 4

  1. Dr George Margelis says:

    It is great to see that the discussion has moved on to the real problem, The way we currently pay for healthcare in Australia and many other countries drives the current problem of increasing costs without driving better outcomes.
    Anne-Marie has summarised the option, what we now need is leadership to drive them through. The health cost problem is potentially much more dangerous than many of the other issues the government has turned its attention to. We can try introducing more taxes to help cover the costs, but at some stage you just run out of taxable income, so reform of the system now is really the only option.

  2. Leo Braun says:

    “The harsh reality is that we cannot afford to do everything that we want or need to do [like the pink batts] to improve people’s health, at least not without finding new revenue sources (for example from taxes, the private sector and individuals). As Minister Roxon explained, the constraints on public sector financing mean that govts will need to play a more active role in determining what will, and will not, be funded in health care”!

    • So much for all that monumental grandstanding observed alike within the concluding spin of the Aug 21, 2010 federal election, to culminate with Julia Gillard as Prime Minister. Not before she fooled betrayed voters: “I am determined to make a difference for Australians on health. Help me make this difference by supporting your local Labor candidate. I have always understood in my core, how important health is. It’s why I am so passionate about improving Australia’s health services and taking a leadership role with the States”!

    Surely cunning to seduce naive voters whatever it takes to get elected on the false pretences, then ignore constituents elementary needs!

  3. Captain Planet says:

    Are we, for example, prepared to consider solutions such as paying more tax?

    speaking for myself, hell yes.

    do we want to move away from public financing and encourage the private sector and individuals to play a greater role?

    only if we want a public health disaster as inequitable as America’s.

    Governments will have to make the public more aware that there are limits on what they can spend on health care.

    Hmmmmm.

    Perhaps if we cancelled the FBT rort for vehicles.
    Perhaps if we abolished the diesel fuel rebate for industry.
    Perhaps if we raised the medicare levy to 5 %.
    Perhaps if we scrapped the private health insurance rebate.
    Perhaps if we stopped funding private school education for the rich.
    Perhaps if we raised the corporate tax rate.
    Perhaps if we means tested the aged pension and stopped handing out free bus tickets to everyone over the age of 65.
    Perhaps if we stopped fighting expensive wars invading other people’s countries.
    Perhaps …. we could afford to spend what we NEED to provide every Australian with the health care THEY need.

    Here’s a thought… how about we make road construction and maintenance a user – pays system, and provide universal free healthcare.

    Or how about we make the NBN construction and access a user pays system…. and provide free universal healthcare.

    Here’s an even better one… how about we concentrate more spending on preventative health, outlaw cigarette smoking, and stop permitting and encouraging the purchase of cars capable of travelling at 300 km / hr. We may find that a heck of a lot of our health spending is actually unnecessary.

    Thought provoking article, which unfortunately starts from the presupposition that health care spending needs to be reined in. Frankly, I think it needs to be expanded. As technology advances and new treatments become available, of course medical costs
    will rise.

  4. Leo Braun says:

    “Govts will also have to convince health care providers that changes are needed so that better care can be provided at a lower cost”.

    • Imperatively, independent MPs balance of power be invoked to confront the institutionalised coercion where closed-shop affiliates of the orthodox medical fraternity are precluded from advertising any competitive services or to display pleased clientele testimonials apropos attained cure. Under taboo information-flow doctrine, because competition found to be detrimental to the closed-shop affiliates. Hell-bent to retain their autocratic status quo!

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Federal Budget 2020-21
Federal Budget 2021-22
Global health and climate change
2019-20 climate bushfire emergency
asylum seeker and refugee health
Climate emergency
disasters
Ebola
extreme weather events
flooding 2011
global health
NHS
NZ Election 2017
WHO
health
Health workers
Healthcare and health reform
abortion
adverse events
aged care
allied health care
Australian Medical Association
cancer
cardiovascular disease
child health
Choosing Wisely
chronic diseases
co-payments
Cochrane Collaboration
complementary medicines
conflicts of interest
death and dying
diabetes
digital technology
disabilities
e-health
emergency departments and care
Equally Well
euthanasia
evidence-based issues
general practice
genetics
health & medical marketing
health and medical education
health and medical research
Health Care Homes
health ethics
health financing and costs
health reform
health regulation
health workforce
HIV/AIDS
hospitals
HRT
infectious diseases
influenza
international medical graduates
journal articles
LGBTIQ
medical marijuana
Medicare Locals
men's health
mental health
MyHospitals website
National Commission of Audit 2014
National Health Performance Authority
naturopathy
NDIS
NHMRC
non communicable diseases
nurses and nursing
oral health
organ transplants
out of pocket costs
pain
palliative care
paramedics
pathology
Pharmaceutical Benefits Scheme
pharmaceutical industry
pharmacy
Pregnancy and childbirth
primary health care
Primary Health Networks
private health insurance
quality and safety of health care
rural and remote health
screening
sexual health
social media and healthcare
suicide
surgery
swine flu
telehealth
tests
TGA
trauma
women's health
youth health
Indigenous health
#CTG10
#NTRC
Acknowledgement
cultural safety
Indigenous education
Lowitja Institute
NT Intervention
social and emotional wellbeing
Uluru Statement
WA community closures
News about Croakey
PIJ Commissions 2021
Public health and population health
#PreventiveHealthStrategy
#UnmetNeedsinPublicHealth
air pollution
alcohol
consumer health matters
COVIDwrap
environmental health
Fetal Alcohol Spectrum Disorders (FASD)
food and nutrition
gambling
Government 2.0
gun control
health communications
health impact assessment
Health in All Policies
health inequalities
health literacy
human rights
illicit drugs
injuries
legal issues
marriage equality
Media Doctor Australia
media-related issues
nanny state
National Preventive Health Agency
obesity
occupational health
physical activity
plain packaging
prevention
public health
public interest journalism
road safety
sport
sugar tax
tobacco control
transport
vaccination
violence
Web 2.0
weight loss products
Royal Commission
Social determinants of health
discrimination
education
housing
justice
Justice Reinvestment
NBN
Newstart
poverty
racism
social policy
Summer reading 2020-2021
Tasmanian election 2021
Testing Croakey News category 1
The Croakey Archives
#cripcroakey
#HealthEquity16
#HealthMatters
#IHMayDay (all years)
#IHMayDay 2014
#IHMayDay15
#IHMayday16
#IHMayDay17
#IHMayDay18
#LoveRural 2014
Croakey Conference News Service 2013 – 2019
2013 conferences
Australian Centre for Health Services Innovation Forum 2013
Australian Health Promotion Association Conference 2013
Closing the Credibility Gap 2013
CRANAplus Conference 2013
FASD Conference 2013
Health Workforce Australia 2013
International Health Literacy Network Conference 2013
NACCHO Summit 2013
National Rural Health Conference 2013
Oceania EcoHealth Symposium 2013
PHAA conference 2013
2014 conferences
#IPCHIV14
AIDA Conference 2014
Congress Lowitja 2014
CRANAplus conference 2014
Cultural Solutions - Healing Foundation forum 2014
Lowitja Institute Continuous Quality Improvement conference 2014
National Suicide Prevention Conference 2014
Racism and children/youth health symposium 2014
Rural & Remote Health Scientific Symposium 2014
2015 conferences
#CPHCEforum
#CRANAplus15
#HSR15
#NRHC15
#OTCC15
Population Health Congress 2015
2016 conferences
#AHHAsim16
#AHMRC16
#ANROWS2016
#ATSISPEP
#AusCanIndigenousWellness
#cphce2016
#CPHCEforum16
#CRANAplus2016
#IAMRA2016
#LowitjaConf2016
#PreventObesity16
#TowardsRecovery
#VMIAC16
#WearablesCEH