Dutton signals major Medicare reform

In his first major speech on his vision for health reform (to CEDA) and follow-up interview on the ABC’s 7.30 Report, Health Minister Peter Dutton has signalled major changes to the Australian health system, including an increasing role for private health insurance and the private sector, a broad cost-cutting agenda and a focus on preventable and ‘lifestyle-related’ diseases.

Some of Croakey’s take home messages from the speech are below, along with commentary from other interested individuals and stakeholders.  Croakey welcomes debate and discussion so please add your analysis and reflections in the comments section below.   

1)           A health system in ‘crisis’

Dutton’s speech is big on the doomsday rhetoric. He talks about the ‘future crisis’ we are facing in meeting our health care needs and describes MBS spending as ‘spiralling’ and the forward estimates as ‘staggering’.  Clearly he wants to soften up the electorate for spending cuts in the May Budget on the basis that if he scares us enough we won’t mind dipping into our pockets to help meet our health care expenses.

Interestingly, elsewhere in his speech he appears to contradict this picture of a health system on the verge of collapse by stating ‘compared to other developed countries, we have a system that delivers’.

2)           A focus on costs rather than value

Dutton focusses almost exclusively on our spending on health, rather than on its value. He emphasises the increased cost of health care but does not mention whether the rising cost of care has delivered any economic (or other) benefits (such as increased productivity).   Again his language reflects a crisis situation (Commonwealth spending is ‘ballooning’) but the figures he cites don’t support this view.   Is $120 a week for ‘each man, woman or child’ really an excessive amount for a wealthy developed country to spend on health care?  Is a ‘year on year increase of around five per cent’ on health care something to panic about? Should a projected increase in health spending from ‘4 percent of GDP to seven per cent of GDP by 2050’ concern us enough to impose draconian spending cuts?

3)           No clear role for consumers

Dutton calls for a ‘frank, fearless and far reaching discussion on our health system’ but does not articulate any process by which this debate can occur and in particular does not signal any role for consumers.

He expresses his own view about what consumers want from public services ‘My judgement is Australians demand only a few basics from their governments and then they are happy to get on with their lives.’ However, he does not provide any justification for this belief or outline how he plans to engage with the community in developing options for Medicare reforms.

While he mentions the problems experienced by some consumers with out of pocket costs and ‘inequities which shouldn’t be tolerated’ he does not elaborate on how he plans to address these issues.

His focus appears to be on high level users of health care but his approach appears to be very ‘top down’ which will not help him engage with the consumer sector  (for example he talks about ‘the way in which we manage the most frequent users.)  Similarly, he presents data on MBS and PBS expenditure almost as though people who need to use these programs are to blame for the cost increases.

“Indeed a small group of patients account for a large proportion of MBS expenditure.  In 2012-13, ten percent of patients accounted for 46 per cent of MBS expenditure…….As with the MBS, much of the money spent on the PBS is accessed by a small cohort of people.  In 2012-13, 10 per cent of patients accounted for 58 per cent of PBS expenditure.”

Apart from some insensitivity to those people with serious and chronic health conditions, this approach creates a false picture of a community divided between the majority who have few health care needs and a minority who are using more than their fair share. The reality is that most of us will be high level users of health care at some point in our lives and ‘fairness’ is about meeting people’s diverse needs, not ensuring we all receive the same number of services.  Identifying areas where the system could be improved to better meet the needs of people with chronic and complex conditions is important and hopefully this is what Dutton intended to convey.  However, this rhetoric can easily result in stigmatising groups of consumers due to their health care needs – an approach which is both unfair and unproductive in achieving Dutton’s goal of a more efficient health system.

4)           A lack of focus on Aboriginal and Torres Strait Islander health

Dutton mentions Aboriginal and Torres Strait Islanders only once in his speech (to state that their health status is ‘still this nation’s most confronting health challenge’).   While he cannot be expected to cover all health issues in a single speech it is disappointing that this important issue did not receive more attention.  Hopefully he will focus more on Indigenous health issues in his planned future speeches.

5)           Concern about preventable chronic disease

Dutton focusses strongly on the need to improve the prevention and management of preventable chronic diseases (in particular obesity and diabetes) .  He emphasises that ‘one-third of Australia’s burden of disease is due to ‘lifestyle’ health risks such as poor diet, obesity, physical inactivity, smoking and alcohol misuse.’ and signals that this will be a high priority for his Ministry.

Dutton also acknowledges the need for these issues to be addressed at the primary care level and indicates that changes to funding arrangements may be on the agenda (we need to ‘look at the payment models’).

The current review of Medicare Locals (MLs) was not mentioned in the speech but given that prevention and chronic disease management are core business for MLs, it will be interesting to see how Dutton responds to the Review’s findings in relation to these issues.

6)            A greater role for private health insurance

Dutton mentions four areas of expenditure which made up nearly three quarters of Commonwealth health expenditure (MBS, PBS, PHI rebate and hospital payments to the states) and goes on to outline some of the problems with three of them.  The PHI rebate does not get subjected to any criticism for its ‘ballooning’ cost, despite the fact that a number of health economists and commentators have demonstrated its inefficiency and questioned its value.

In fact, Dutton directly contradicts these findings by stating that support for PHI is ‘the best way to keep costs low and to foster innovation’.   However, he provided no evidence for how PHI will achieve these goals beyond signalling they may take on a greater role in primary health care.

7)           The Commonwealth-State divide

Like every Health Minister before him, Dutton has bemoaned our federated health system and the problems it can create when ‘two and, in some cases, three levels of government’ have responsibility for health care.   He cites inconsistent performance across the states as a key problem and criticises the Rudd/Gillard governments for failing to address this.  However, he did not outline how he intends to resolve this ongoing issue.

8)           Co-payments

Although he has been cagey about new co-payments for GP and hospital emergency department services, Dutton’s speech clearly signals support for increased out-of-pocket payments for health care.

He says ‘picking up nearly 100 per cent of the cost in the public setting makes no sense for the taxpayer when the patient is prepared to contribute to their own costs’, a view which would be disputed by many health economists as it ignores any efficiency or equity benefits arising from a publicly funded system.

He also clearly sees co-payments as a preferred mechanism for increasing health funding as he discounts tax increases while stating ‘one important job of the Abbott Government is to grow the opportunity for those Australians who can afford to do so to contribute to their own health care costs.’

The SA Government is clearly taking the issue seriously and today has stated that a GP co-payment would cost the state an extra $80m.  The Consumers Health Forum also expressed concern about the introduction of GP co-payments saying that they would ‘erect a barrier between consumer and the entry point to the primary care system.’

Finally, Dutton states that this speech is the first of a series in which he plans to outline his vision for the future of the Australian health system.  Croakey will ensure these receive full coverage and analysis as they occur. In the meantime, leave your responses in the comments section below. Has Dutton made a solid case for radical health reform? Where do you think the spending cuts will occur? What will be the implications for consumers, in particular for those with chronic conditions? How should the health sector be seeking to influence the Health Minister on these issues?