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How thirty years of privatisation in Australia has undermined health and equity

Introduction by Croakey: For decades, successive governments of all political persuasions in Australia have pushed and promoted privatisation agendas.

Privatisation has directly affected healthcare delivery as well as the determinants of health across many areas, including social policy, education, employment, prisons and infrastructure.

Yet, the impact of these policies upon health and equity has scarcely rated a mention, according to new research that calls for systematic action “to bring back private services into public control”.


Marie McInerney writes:

Privatisation of public services in Australia over the past three decades is likely to have had an adverse impact on population health and contributed to the increase in health inequities, according to a review by Stretton Health Equity at the University of Adelaide.

Researchers Dr Julia Anaf, Dr Toby Freeman and Professor Fran Baum report that their narrative review looking for the health impacts of privatisation in Australia found “little evidence for the benefits of privatisation, with a need for greater attention to political and commercial determinants of health in policy formation and in research”.

“Our review found no evidence of equity considerations being built into privatisation projects,” they wrote.

They noted that the costs and benefits of privatisation have been “borne inequitably, with a clear transfer of public funds and resources to the private sector with health inequities flowing from these social and economic inequities”.

As she reported recently for Croakey, Baum participated in the 5th People’s Health Assembly in Argentina this month, where the People’s Health Movement (PHM) denounced the global trend towards privatisation of healthcare, saying it has “created multi-tiered health systems where the rich can afford the best privatised healthcare and people in poverty have little access and minimal services.”

Recommendations

The Stretton narrative review, published last week in the Globalization and Health journal, says that different forms of privatisation and impacts are difficult to overcome because they are so embedded in the current political landscape.

To deal with that in the short-term will require fairer contracts, better governance, accountability, and regulation, the researchers say. But in the longer term, they argue there is a strong case for re-nationalising a broad scope of public assets, including electricity transmission, airports and roads.

The review showed the COVID-19 pandemic had “particularly challenged the privatisation narrative, forcing government to re-evaluate the role of the public sector”, they wrote, pointing to the Victorian decision to revive its State Electricity Commission to fast-track de-carbonisation “as the Government lacks confidence that the private sector can do so in a timely manner”.

The review cites a 2014 McKell Institute investigation into ownership of the health system that warned that “privatising public assets is a business ‘fraught with risk’, especially in relation to healthcare”.

It showed that private operators “may choose to only manage the most profitable services, leaving the public sector to undertake the more difficult and costly work”.

The authors also quote an analysis by health policy expert Professor Stephen Duckett of public-private partnerships for hospitals that indicated a very high failure rate, “probably in excess of 50 percent”.

Critically, they write, the McKell Institute argued that policy makers considering widespread health privatisation should first determine whether it “risks eroding the concept of universal healthcare and whether it could threaten equity of access”.

Important determinant of health

The authors said their review aimed to address a gap in the literature by exploring what evidence exists for positive and negative outcomes of privatisation, how well societal impacts are evaluated, and the implications for health and equity.

The results, they say, support the view that privatisation is more than asset-stripping the public sector, and is a comprehensive strategy for restructuring public services in the interests of capital – making it “both a political and commercial determinant of health”.

The paper tracks how privatisation gathered force from the 1990s in high income countries, “enacted by governments which adopted neo-liberal policy prescriptions”. Australia joined the fray at both state and federal levels.

At its basis, privatisation involves displacing the public sector through modes of financing, ownership, management, and product or service delivery, including where traditional public sector functions are outsourced to private providers, they write.

Over the decades competitive tendering has been expanded to core government activities, such as prison management, employment assistance and government services, prompting concerns in the social welfare sector about a range of negative impacts, including loss of autonomy, reduced collaboration and diversity, and increased administrative costs.

The Stretton analysis revealed only five documents which mentioned (generally qualified) positive aspects of privatisation and none explicitly reflected on the relationship between privatisation and health, they said.

However, existing research described the impact of privatisation on known social determinants of health, with most reporting negative effects on five key themes:

  • the public cost of privatisation
  • loss of government control and expertise
  • lack of accountability and transparency
  • constraints to accessing the social determinants of health
  • benefits to the private sector.

Although privatisation can lead to increased efficiency, the authors say it may be difficult to distinguish between gains from increased competition, regulation, or privatisation.

Also, where there are gains, the costs and benefits are distributed unequally between consumers, employees and shareholders.

Loss of government control and expertise

A 2020 Senate Inquiry into the privatisation of state and territory assets and new infrastructure heard that outsourcing human services has negative outcomes for the most disadvantaged Australians while also undermining the capacity of the public sector to design and deliver effective services, the review says.

That manifested, during COVID-19, in management failings in the rollout of vaccines, testing and tracing, and by the use of casualised and under-qualified workforce in aged care, it says.

The review also highlights the introduction of the cashless debit card in Australia, to reduce social exclusion and address social harms like gambling and substance abuse. In the first year of trial under a PPP arrangement with the private bank Indue Limited, the card cost approximately $10,000 per participant to administer, with $128.8 million included in the forward estimates to expand the program.

“As well as the financial impost, the relinquishing of primary control of the data to a private entity undermined the government’s exclusive powers of surveillance, with potential for further data-sharing,” the authors say.

“It changed the relationship between the citizen and the state and reproduced the social harms the card was purported to address.”

Lack of accountability and transparency

The review highlights issues with privatised prisons, where Australia has the highest rate of private incarceration per capita, with 20 percent of the prison population held in privately run facilities, yet no evidence that they are cost effective, the review said.

“There is a lack of state uniformity, evidence of improved performance and efficiency gains are incomplete and lacking transparency, there is poor public reporting, and the true cost of private incarceration remains unknown,” it said.

The review notes also that while accountability systems and performance management have become more sophisticated, publicly available information allows for little real scrutiny.

Other researchers have reported that commercial-in-confidence provisions ‘cast a shroud of secrecy’ over Victoria’s privately operated prisons, undermining the ability to identify contractual violations or potential remedial actions.

Human rights

The review found wide-ranging constraints to accessing the social determinants of health spanning privatised employment services, education, human rights, and infrastructure, including where abusive features that breached human rights in Australia’s immigration detention facilities were exacerbated by the privatisation of management.

A competitive tendering framework in job support services had perverse incentives that resulted in ‘creaming’ or ‘cream skimming’ processes that focused on more able clients with better employment prospects, and ‘parking’ harder to place clients.

“These are forms of ‘adverse selection’ where clients are chosen for assistance in inverse proportion to need,” they write.

Employees are also affected by privatisation, they report, with some faith-based service providers facing internalised conflicts over their roles, “unable to fulfil their distinctive holistic core missions and express their values when governments prioritise market-based approaches to contracting out”.

Negative impacts on union membership and influence were also reported.

“Unions are arguably an unappreciated social determinant of health,” the authors write. “They help to raise wages, decrease inequality, decrease discrimination, improve workplace safety and affect other health determinants.”

Private sector benefits

The review highlights nine case studies of privatisation during the 1990s, which concluded those who gained most from privatisation were those with resources and influence, while those who were most negatively affected had no opportunity to even engage in the decision-making process.

The clear winners included: politicians and political advisers; consultants and associated businesses; banks and financial institutions; high-income employees; political parties; investors and new owners; consumers and customers.

Clear losers were low-income and non-management employees; citizens and the state, they said.

The authors say that reversing privatisation is not easy but suggest there are also other ways “to bring back private services into public control”.

One is to abolish compulsive competitive tendering to eliminate the role of bidding by the private sector, another is policy reform to prioritise public ownership and control over privatisation.

“Arguably, in 30 years of privatisation in Australia, there is no instance of privatisation where the public would have benefitted as much as if the asset remained in public hands,” they write.


See Croakey’s archive of articles on the commercial determinants of health

 

 

 

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