Beyond band-aids: Medicare needs structural reform

The crew at The Medical Journal of Australia must be feeling rather pleased this week by the publicity and debate generated via this week’s edition, particularly the articles on Medicare by Dr Tony Webber and on corporatisation of medicine by Ray Moynihan.

Below is some wider commentary, reproduced from The Conversation, with articles from:

• James Gillespie, Deputy Director, Menzies Centre for Health Policy & Senior Lecturer in Health Policy at University of Sydney, argues that fundamental reform of Medicare is needed to address “major structural faults within the system”.

• Gawaine Powell Davies, Associate Professor at University of New South Wales and Director of the university’s Centre for Primary Health Care and Equity, calls for more effective funding mechanisms for healthcare.

• David Baker, Research Fellow at University of Canberra and The Australia Institute, and author of Bulky Billing: Missing out on fair and affordable health care, says it’s time to move beyond band-aid policies and make structural changes to Medicare to ensure greater value for the health dollar.

• Jane Hall, Professor of Health Economics and Director, Centre for Health Economics Research and Evaluation at University of Technology, Sydney, says Australia lags behind other countries in moving away from fee-for-service to develop better funding mechanisms.

Given such comments, it’s not surprising the AMA was set on framing the debate as being about simply a few “bad apples”, rather than indicative of broader systemic problems. Meanwhile, in an article in Tuesday’s Crikey bulletin, I argued the need to take a broad perspective to addressing wastage in the health system.

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Medicare needs a fundamental rethink

James Gillespie writes:

The debate about Medicare has received a new focus with comments from Dr Tony Webber, the former director of the Professional Services Review – the body that regulates success to Medicare and Pharmaceutical Benefits Scheme benefits by health professionals.

Dr Webber’s opinion piece in the Medical Journal of Australia (MJA) criticises the medical profession’s treatment of the Medical Benefits Schedule, arguing that there has been considerable misuse of Medicare through overpayments. Dr Webber estimates that as much as $3 billion is being lost.

There was a quick response from the Australian Medical Association (AMA), which accepted that there were some instances of abuse but argued that it was a matter of a few bad apples, common in every occupation, and not a systematic problem that runs through medical practice. The debate quickly turned into a tit-for-tat, at least in the general media.

But the points Dr Webber raised go more deeply into how we practise medicine. Many of the abuses he identifies stem from deeper structural problems of the system, not from a sudden outbreak of evildoing among doctors.

Medicare was designed in the 1960s and 1970s to meet the problems of that period. There has been no major review of the way it operates since then. What we have had is a series of patches – knee-jerk responses as problems become major political embarrassments for government.

In some cases, these have been band aids to hold the system together, such as the addition of Chronic Disease Management Medicare items to the Medicare Benefits Schedule, or interventions to remove political criticism, such as the Howard government’s financial support for bulk billing. Neither has resolved core problems that have been growing for several decades.

It’s important to remember that when the Medicare system was designed, we were a much younger society and the problems in the health system revolved around very short episodes of disease. You went to a general practitioner if you had a sniffle or some other minor complaint. And the fee-for-service system works very well with such occasional contacts. Hospitals worked on an entirely separate system that dealt with very serious illness.

We are now living healthier, longer lives, but an ageing society brings with it a greater burden of chronic disease. Instead of short episodes of illness, ending in death or cure, this growing burden comes from serious and continuing illnesses, such as diabetes, chronic heart disease, and respiratory illnesses. These need continuity of care and management, rather than an expectation of complete cure.

But the Medicare system wasn’t designed to encourage continuity of care. Instead, it uses fee-for-service to fragment care into short episodes. A major criticism of the current system is that it doesn’t provide optimal care because it’s episodic and as a result, it may be creating incentives for abuse of the system as doctors’ incomes are generated by multiplying episodes of care.

And these problems have been compounded by some of the changes in the way medicine is practiced. The lone GP or small partnership – characteristic of the business of medicine in the 1960s – has been increasingly displaced by a growing corporatisation of medical practice at the expense of more traditional forms of practice organisation.

But we know little about these new forms of organization, not being able to answer questions such as what types of demand do they generate within Medicare?

There are anecdotes about abuse of the system, but real evidence is thin. The demand – and supply – for better evidence has been the driving force of reform of clinical practice. The evidence base for improving the organization and funding of health services needs equal attention.

But ultimately the Australian health system has proved very hard to reform. This hardly makes us unique in the world, but there are some very specific barriers to change. The complexities of our Federal system, with divided responsibility and control of primary care (largely Commonwealth) and hospitals (largely the states) were at the foreground in the Rudd and Gillard governments’ reform projects.

And the reform of Medicare raises some deeper ideological sores. Universal health cover – whether Medicare or its Whitlam government predecessor, Medibank – faced a wall of hostility from most sections of organised medicine and the Coalition parties.

Medibank was introduced in 1975; by 1982 it had been dismantled by the Fraser coalition government. Its reintroduction by the Hawke government in 1984 as Medicare provoked similar levels of fury from the Coalition parties, virtually up to the eve of the 1996 election.

Now both sides of politics have become locked into set positions. For supporters of the system, any suggestion of a need for substantial reform is still greeted with apprehension, a possible opening for yet another attempt to undermine universal health coverage.

Even John Howard’s timid acceptance of Medicare in 1996 did little to remove these fears. It can be argued that Howard came to accept that hostility to Medicare had been a principal issue that kept the Coalition in the wilderness from 1983 to 1996, a mistake he was not going to repeat. His health minister, Tony Abbott, repeated a mantra – “the Coalition is the best friend that Medicare ever had”.

A broad consensus (if still grudging in some quarters) runs across Australian politics in support of the main elements of universal insurance. But we need to move beyond the frozen politics of the 1980s and 1990s and recognise that there are major structural faults within the system and that reform needs to start with a fundamental rethink of Medicare.

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The following comments were in response to interviews conducted by Reema Rattan at The Conversation.

Where Medicare lets us down: Gawaine Powell Davies

The articles in today’s MJA about Medicare and its capacity to deal with abuses by clinicians and by corporate interests raise important issues.

There are many with strong interests in Medicare: it allows doctors a reliable source of income that impinges little on their professional independence, consumers a passport to the health care that they choose (if they can find it and pay the gap!), and commercial interests a safe revenue stream. On the other end stands Treasury, holding the thin blue line for the taxpayer. In the middle stands the Professional Services Review team, with the government on the sidelines, understandably wary of annoying powerful interests.

This would not matter if Medicare were up to the job of providing equitable and affordable health care for a population with increasingly complex health care needs. Unfortunately in its present form it increasingly isn’t. Fee for service is not good for supporting preventive or chronic disease care. Important areas of care – think dental – are not funded because of the difficulty of controlling expenditure. Allowing clinicians to determine – by their choice of where to practice – where public funds will be spent leaves disadvantaged communities and populations underserved.

It is ironic that the areas that were cited as open to abuse – dental and allied health care for people with chronic conditions – are areas where the government has tried to extend Medicare to meet important needs. The lesson is not to pull up the fee for service drawbridge but to find more effective funding systems for these and other areas of public – the public’s – publically funded – health care.

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Time to move beyond band-aid policies: David Baker

The former director of the Professional Services Review, Dr Tony Webber, argues that upwards of $2 billion in Medicare funding is being rorted. The insider rorting of public health funds is possible in part due to policies that use incentive payments to achieve savings.

In the recent research paper – Bulky Billing: Missing out of fair and affordable health care – The Australia Institute found that despite the payment of incentives to GPs, pharmacists and providers of diagnostic testing to increase bulk billing rates, Australians were still paying more than $1.1 billion in extra fees for these services and prescription medicines.

Incentives, it appears, are not producing the intended savings for Medicare or Australians as taxpayers or patients.

The use of incentives is largely invisible to patients engaging with the health system and with most Australians only having sporadic engagement with the health system, the associated learning costs of understanding health funding is very high.

As such, people don’t know when government incentives are affecting how much they have to pay for medical care. And due to the nature of the relationship between patients and their GP, they are unlikely to challenge what their doctor charges. By extension this would also include referrals for diagnostic testing or allied health care.

Medical professionals, on the other hand, have a greater knowledge of the ins and outs of medical funding and – for some – the opportunity to find ways of rorting the system.

There are at least three billion reasons why structural changes to Medicare and not band-aid policies, such as paying incentives, are needed to ensure greater value for the health dollar and that the goal of Medicare to provide fair and affordable health care is realised.

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Systems should reward appropriate care: Jane Hall

The report by Tony Webber on the professional review component of Medicare really brings two issues to the fore – one is around fraud and the other is around the appropriateness of the level and type of services provided.

Fraud is dishonesty – at its most blatant it’s claiming for services under Medicare that haven’t been provided. Clearly, there should be no place for fraud within the health-care system but in any large and complex organisation, there needs to be a process for ensuring that the expenditure of funds and the use of resources is indeed appropriate.

That’s part of what needs to be done and we see it in all sorts of systems, whether in insurance systems or financial systems. Big corporations require ongoing audits, and that’s all about the responsibility for accountability and trust.

Clearly as the system gets more complex, it needs a more complex auditing system and that’s auditing in terms of process, not just financial accounts.

That’s one issue raised by the report and the extent to which processes need to be further developed within the Medicare payment system really requires very detailed knowledge of the current processes – to be able to say exactly what the situation is. But there’s no doubt that the principle of continually improving processes means there needs to be ongoing investment in developing fraud detection.

The other issue raised by Webber is the extent to which all those services provided under public funding are indeed appropriate. And appropriate from the social perspective; appropriate in terms of their effectiveness and their efficiency.

What we know is that the provision and determination of what is appropriate depends a lot on clinical judgement. And that judgement varies across individuals, that what one person judges to be appropriate may not be found by another to be appropriate even though they have the same training.

So there’s the possibility for variations in the way that appropriateness is determined. This isn’t about honesty or dishonesty, it’s about the exercise of judgement.

What we also know is that the way people are paid for the provision of services – whether they be doctors or people in other occupational groups – affects the decisions that they make, whether wittingly or unwittingly. In general, where there’s room for discretion, people will take the course that most rewarding to them – financially or otherwise.

Not surprisingly, under a fee-for-service health-care system, we see a tendency to provide more services than under alternative ways of paying for health care.

What we see in other countries around the world, where people are also grappling with this, is the attempt to develop financial systems that reward appropriate care. And that’s appropriate in that socially-optimum sense. So we’re seeing attempts to move away from fee-for-service and to use other ways of paying for service; for rewarding providers who deliver optimum care and penalising those who don’t.

There are some attempts to develop these approaches within Australia but at this stage we’re behind the international leaders in developing alternative financing mechanisms and pay-for-performance approaches. What we can learn from other countries is how important it is not just to agree on the principles on which these payments will be based on but to agree also on getting the details right.

Details such as the level of payment, mechanics of identifying what services are being provided and what should be provided.

Australia is really falling behind the rest of the world in making the best use of research evidence and of modern information systems to ensure that the implementation of new approaches will be based on the best available information and will be monitored and evaluated so that we don’t make expensive mistakes.