Author: Gillespie, Jim (A/Prof)

Title of Lecture:
The Australian Health Care System

Problem 0.01 Forum 2 2020

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 Forum 2: The Australian
Health Care System
Jim Gillespie

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 I Population Health and Health Systems

– Is there a relationship between population health and health care?

– Population health:
– “the health status of population groups, or whole populatio​ns” NSW Ministry of
Health (2019)
– “the overall goal of a population health approach is to maintain and improve the
health of the entire population and to reduce inequalities in health between
population groups.” Health Canada (1998)
– “the health outcomes of a group of individuals, including the distribution of such
outcomes within the group.” (Kindig AJPH 2003)

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 Social determinants of health

– The multiple determinants of population health outcomes:

– include medical care, public health interventions, aspects of the social environment
(income, education, employment, social support, culture) and of the physical
environment (urban design, clean air and water), genetics, and individual behaviour.
– These factors interact

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 Ten facts about social determinants and health inequalities

– The 20% of Australians living in the lowest socioeconomic areas in 2014–15 were 1.6 times as likely as the highest 20% to have at least
two chronic health conditions, such as heart disease and diabetes (ABS 2015a).
– Australians living in the lowest socioeconomic areas lived about 3 years less than those living in the highest areas in 2009–2011 (NHPA
2013).
– If all Australians had the same death rates as people living in the highest socioeconomic areas in 2009–2011, overall mortality rates would
have reduced by 13%—and there would have been 54,000 fewer deaths (AIHW 2014d).
– People reporting the worst mental and physical health (those in the bottom 20%) in 2006 were twice as likely to live in a poor-quality or
overcrowded dwelling (Mallett et al. 2011).
– Mothers in the lowest socioeconomic areas were 30% more likely to have a low birthweight baby than mothers in the highest
socioeconomic areas in 2013 (AIHW 2015a).
– A higher proportion of people with an employment restriction due to a disability lived in the lowest socioeconomic areas (26%) than in the
highest socioeconomic areas (12%) in 2012 (AIHW analysis of ABS 2012 Survey of Disability, Ageing and Carers).
– Unemployed people were 1.6 times as likely to use cannabis, 2.4 times as likely to use meth/amphetamines and 1.8 times as likely to use
ecstasy as employed people in 2013 (AIHW 2014e).
– Dependent children living in the lowest socioeconomic areas in 2013 were 3.6 times as likely to be exposed to tobacco smoke inside the
home as those living in the highest socioeconomic areas (7.2% compared with 2.0%) (AIHW analysis of the 2013 National Drug Strategy
Household Survey).
– People in low economic resource households spend proportionally less on medical and health care than other households (3.0% and 5.1%
of weekly equivalised expenditure, respectively, in 2009–10) (ABS 2012).
– People living in the lowest socioeconomic areas in 2014–15 were more than twice as likely to delay seeing—or not see—a dental
professional due to cost compared with those living in the highest socioeconomic areas (28% compared with 12%) (ABS 2015b).
(AIHW Australia’s Health 2016)

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 Health Equity

– Equity is the absence of avoidable, unfair, or remediable differences among groups

of people, whether those groups are defined socially, economically, demographically
or geographically or by other means of stratification. "Health equity” or “equity in
health” implies that ideally everyone should have a fair opportunity to attain their
full health potential and that no one should be disadvantaged from achieving this
potential. (WHO 2019)

– Health inequities are systematic differences in the health status of different

population groups. These inequities have significant social and economic costs both
to individuals and societies. (WHO 2017)

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 Health care system: access, equity, quality

– A good health system delivers quality services to all people, when and where they
need them. The exact configuration of services varies from country to country, but in
all cases requires a robust financing mechanism; a well-trained and adequately paid
workforce; reliable information on which to base decisions and policies; well
maintained facilities and logistics to deliver quality medicines and technologies.
(WHO 2019)

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 II The Australian health care state
1. Governments and health care: politics and policy
2. Health as an industry
– Market-driven: pharmaceuticals, medical services, for-profit hospitals
– Predominantly funded by government
3. Health as welfare:
– Market failure and government subsidy or direct provision
4. Regulation:
– Rule-making: environmental regulation, pure foods,
professional registration

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 Governments and health expenditure
Health spending 2017 $US per capita (OECD 2018)

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 Discussion

– Why do governments play such a large part in health care in almost all societies?

– What is meant by ‘market failure’?

– Information asymmetries (Arrow 1963)

– transactions where one party has more or better information than the other

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 What System?

– No single overarching ‘health system’ in Australia.

– Rather, health care is a complex web of services, providers and structures.

– All levels of government—the Commonwealth, the States and Territories, and

local government—share responsibility for health. They have different roles
(funders, policy developers, regulators and service deliverers) and in many
cases those roles are shared. (Federation White Paper)
– Often overlap and duplicate – mental health

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 1. Governing the Australian health system

– A federal system:
– ‘a constitutional division of power between one general government (that is to have power
over the entire national territory) and a series of sub-national governments (that individually
have their own territories)’.
Duchacek, Comparative Federalism, 1987,p. 194
Examples: Australia, Argentina, United States, India, Germany, Canada.

– Power is dispersed: each level of government is by law and in principal an equal partner.

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 Federalism

– Justifications:
• Decentralisation: closer to the people ‘subsidiarity’
• Diversity: the states as ‘laboratories of democracy’
– Criticisms
• Inefficiency: overlapping jurisdictions
• Cost shifting: the ‘blame game’, confused accountability.
• Barriers to change: federal systems less likely to have generous welfare and health
systems.

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 Constitutional powers of the Commonwealth

– S. 51 (ix) quarantine
– S. 51 (xxiiiA) the provision of maternity allowances, widows pensions, child
endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical
and dental services (but not so as to authorize any form of civil conscription),
benefits to students and family allowances. [added 1946]
– S. 96 …Parliament may grant financial assistance to any State on such terms and
conditions as the Parliament sees fit.

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 Federalism in health
Commonwealth States/Territories
• Quarantine • Public Hospitals
• Disability • Community care
pensions • Inspection of food
• Pharmaceutical outlets and other
regulation and retail health-related
benefits services
• Medical benefits • Medical and health
(Medicare) research
• Medical and • Regulation of private
health research hospitals
• Regulation of • Aged care facilities
private hospitals inspection
• Funding of aged
care and
standard setting
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 Regulating

– Rule-making:
– Medical Benefits Schedule
– Therapeutic Goods Administration/Pharmaceutical Benefits Advisory Committee
– Professional registration
– Australian Health Practitioner Regulatory Agency
– State governments: private hospital accreditation

– Australian Aged Care Quality Agency

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 Regulating

– The federal mix – Nationalisation of policy (federal-state agencies)

– Regulation of professions
– Food Standards Australia and New Zealand
– Pharmaceuticals:
– Therapeutic Goods Administration: approves drugs and medical devices for use in Australian
health system: safety and efficacy
– Pharmaceutical Benefits Advisory Committee
• Pharmaceuticals cannot be listed without its recommendation
• Criteria: efficacy and cost effectiveness

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 The Australian health care funding maze

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 Fiscal Federalism and the health system

– Vertical Fiscal Imbalance

– Gap between revenue raising capacities and expenditures between
levels of government
• Mismatch of resources and responsibilities
• Cost and blame shifting

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 Vertical fiscal imbalance (source: National Commission of Audit 2014)
State own-source revenue, State expenses and
vertical fiscal imbalance, 2013-14

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 The Australian health care system

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 Funding Flows in Health

The University of Sydney Source: Aust Dept Health 2012-13. Page 23

 Total Government Spending by Purpose

3% 2% 1% 1%
4%
5%
27%
5%
6%

6%

8%
17%
15%

Social security and welfare Health

Education Other Economic
General public services Transport and communications
Public order and safety Defence
Housing and community amenities Recreation and culture
Fuel and energy Agriculture, forestry and fishing
Mining, manufacturing and construction

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 Australian Health Recurrent
Expenditure 2015-16 (% 5 yr annual
growth)
Total Hospital 66.1 (5.9%)
Public Hospital 51.1 (5.5%)
Private Hospitals 15.1 (7.0%)
Primary Med Care 11.8 (5.0%)
Referred Med Services 17.7 (6.0%)
PBS 9.8 (1.8%)
Non-PBS Pharm. 10.0 (5.1%)

Total Recurrent Health 160.2 (3.2%)

($B)

The University of Sydney AIHW. Health Expenditure Australia 2015-16. Cat# HWE 68 Page 25
2017.
 Health Expenditure 2015-16

Public Hospital Private Hospitals Primary Med Care Referred Med Services PBS Non-PBS Pharm.

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 2. The health care state: health as an industry

– Health as an industry
– Predominantly funded by government, delivered by the private
sector: 65:70
– Large scale, globalised: pharmaceuticals, medical services, for-
profit hospitals
– From cottage industry to vertically integrated listed
corporations: general practice and other health practitioners

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 Public and private

Figure 3.1: Total health expenditure, by source of funds as a proportion of total

Per cent
Proportion
health of total health expenditure, by source of funds, 2004–05 to 2014–15 (%)
50 expenditure, 2005–06 to 2015–16
50.0

45.0
40
40.0

3035.0
30.0

2025.0

20.0

10
15.0

10.0
Source: AIHW Health Expenditure Australia 2015-16 .
0
5.0
2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15 2015–16
0.0
2004–05 2005–06 2006–07 2007–08 2008–09 Year
2009–10 2010–11 2011–12 2012–13 2013–14 2014–15

Aus tra lia n G ove rnme nt Australian Government Individua

State/territory ls local
and Series3 O the r non-gove rnme nt
Sta te /te rritory & loc a l gove
Health rnme ntsfunds
Insurance He a lth ins ura nc e
Individuals funds
Other(a)

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 Private health insurance 1971-2015

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 Types of Hospital Services

AIHW. Australia’s Hospitals 2015-16.

Health Services Series 77, 2017.
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 AIHW. Australia’s Hospitals 2015-16.
Health Services Series 77, 2017.
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 The Private Health Insurance debate

– ‘inherent tension between the policies of universal access to a ‘free’ public system
and community rating for private health insurance’
(Industry Commission 1997)

– A ‘grudge product’ – rising premiums and poor value for money

– Increases fragmentation: unable to fund primary care, can’t help members over
continuum of care.
– Fear that if PHI could fund primary care we would have a two tier system.
– ‘Choice’: the main funder of private hospital sector

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 Criticisms of PHI

– Drift of services to the private sector, following money, better conditions for elective
surgery
– A restructuring of the public-private division: private increasingly dominated routine
surgery (ophthalmology and orthopaedics led the way).
– Long waiting lists for these services in the public sector with growth of (unregulated)
dual practice
– Public sector dominated complex medical procedure, emergency medicine etc.

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 3. Health and the welfare state: access to services

– Market failure and government subsidy or direct provision

– Different forms of welfare mix:
• Government
• Social insurance
• Private: private insurance, out-of-pocket

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 Australia’s universal health coverage

Medicare Free Pharmaceutic

(Medical public al Benefits
Services) hospitals Scheme

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 Foundations: 1983

Medicare will provide the same entitlement to basic medical benefits, and treatment in
a public hospital to every Australian resident regardless of income. In a society as
wealthy as ours there should not be people putting off treatment because they cannot
afford the bills. Basic health care should be the right of every Australian.

Neal Blewett 2nd Reading Speech, Medicare 1983

.

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 Australian Universal Coverage
Govt funds 65% of all services

– Universal access to privately provided medical services, primary care and

specialists , under Medicare, which the Australian Government funds, with co-
payments by users when the services are not bulk-billed.
– Eligibility for public hospital services, free at the point of service, is funded jointly
by the states and territories and the Australian Government.
– PBS – subsidies wide range of pharmaceuticals outside public hospitals
– Private health insurance largely funds private hospital activity. The Australian
Government, in turn, funds this through the 30–40% rebates on members’
contributions

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 Private Health Care

– 40% of all hospital admissions,

– 90% of GP services
– More than 63% of out of hospital medical specialist
services
– 93% of pathology services
– 85% of radiology services MBS
– 90% of dental services
– ?Proportion of allied health services

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 Reform agendas: 1. Integrated care

– Chronic illness and demands for more coordinated/integrated care

– New models of practice: joint commissioning and regional management of services.
– Connecting the fragmented primary care/hospital systems

PHI as a barrier to integration

– Private insurers are prohibited from funding primary care, attempts to build links
have been blocked legally and politically.

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 Current reform: primary care

– Medicare is based on a fee for service model. This works well for
episodic and acute care.
But what about the one in two Australians who now live with some
form of chronic disease? Is fee for service the appropriate
funding model for these patients, who have ongoing expensive
costs and require ongoing interaction with multiple health
professionals for the rest of their lives?
The fact the Medicare services are now hitting one million per day
suggests not.
And its little surprise really, when you consider there is no
incentive for doctors to work with other health professionals for the
good of patients with complex conditions who need different types
of care.

– Sussan Ley. 28 October 2015

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 Reform agendas: 2. Value in health care

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