Taxing The Health Issue
Sydney Morning Herald
Monday March 16, 1998
If people were asked, suggests ARTHUR CHESTERFIELD-EVANS, they'd pay more tax for public health care, but PAUL F. GROSS says that needs a huge act of faith.
THE "failure" of Australia's health system is exaggerated. What is happening is that people are leaving private health insurance because it is too expensive.
The public system is suffering because the Government is not putting enough money into it. Publicly funded systems are much more efficient than private models, because of the much higher administration costs and the profits or dividends associated with private systems. Public systems are also guided by what is best for health, rather than what is best for profit, and can organise prevention better. (Prevention is also cheaper than cure.)
A good comparison of public and private are the Canadian and US systems. The Canadian system is a single-insurer system. When it began, doctors could either opt in to a government- supported universal system, or opt out to a private system. Doctors went on strike and lost, but are now content relative to their US colleagues, who have angry and discontented patients and restrictive and invasive insurance companies.
The single payer makes for much greater efficiency and lower costs. Canadian hospitals spend 10 per cent of their resources on administration as opposed to 21 per cent for US public hospitals and 27 per cent for US private hospitals. Canadian Medicare takes 0.7 per cent for administration of health insurance. Australia's Medicare costs about 4 per cent, private funds here about 12 per cent.
The beauty of a "single payer" system is that the insurer cannot avoid paying, so cannot benefit from careful recruitment of the healthy, assiduous discouragement of the unhealthy and nit-picking over every account. This is the norm in the US and accounts for the huge rise in health administrators there. They are the people who try to minimise payouts. In the US, the elderly, high-risk people and the poor cannot get insurance. Fifty million Americans have no health insurance and another 30 million are under-insured for a major problem. Health costs are the highest cause of personal bankruptcy and the US poor's health status is virtually Third World.
It is worth comparing health systems in terms of some standard measures: cost, life expectancy and neonatal (newborn) death rates. Australia (1993-94) spends 8.6 per cent of GDP as against Canada's 10 per cent (1993) and the US 14.5 per cent. Despite its huge cost, the largely private US system performs very badly. The neonatal death rate was 6.2 per 1,000 in the US (1991), as against 4.4 in the Canada (1992) and 4.4 in Australia (1994). Male life expectancy in the US is 72.2 years, compared with 74.9 in Canada and 75 in Australia. The US, paying almost double what Australia pays, is doing worse.
Our health "crisis" must be seen in context. Our spending level is average for the OECD. Universal access to high technology is expensive, and the more privatised, the more expensive. The British spend only 6.2 per cent of GDP, but offer less high technology.
Australia has done well in containing health costs relative to many OECD countries for a number of reasons. First, because of migration, our population is not aging as fast as that in some other countries. Second, the dominant market power of Medicare and the pharmaceutical benefits scheme has kept doctors' fees and drug costs in better control than a free market would have (particularly with compliant health insurers). Third, successive Australian governments have run down the capital assets of hospitals (somewhat short-sightedly). But the basic principle is that private systems have higher doctor costs, higher administration costs, and a "need" for profits and dividends that make them more expensive than public systems and effectively a national overhead.
The Government should ask Australians: "Would you rather pay $1 in tax or $2 in health insurance?" because that is the situation.
Governments must be told in no uncertain terms to stop feather-bedding the private system, stop Federal-State bickering and put money into the public system. If the private system survives on its unsubsidised merits, so be it; if not, the market has spoken. - ARTHUR CHESTERFIELD-EVANS
AUSTRALIA is a lot smarter than is suggested by narcissistic whining about the underfunding of public hospitals, or the discernible lack of leadership by the peak organisations in health care to create affordable private health insurance.
Each year, the average Australian generates 11 doctor contacts, and we have a hospital admission rate of 250 per 1,000 population, both among the highest in the OECD nations. Despite these high use rates, the Australian Institute of Health and Welfare reported recently that we are unlikely to reach national health targets for major diseases.
We are told that the average Australian does not want to see an increase in income taxes, or in the Medicare levy that in 1996-97 raised about $3.6 billion per year of Australia's total health expenditures of just over $42 billion. The premiums paid to Australian private health insurance funds totalled $4.2 billion in 1996-97, more than the Medicare levy.
In 1998, a government giving leadership on health care reform might usefully canvass three options with the Australian population:?cp,7,9 * Sustain Medicare's "free" access to public hospitals, "free" (when bulk-billed) medical services and subsidised PBS drugs, leaving the private insurance funds to wither further.
* Restructure Medicare to make it accessible on a means-tested basis to a defined set of benefits, with a restructured private insurance system covering all care beyond the defined benefits.
* Restructure Medicare and withdraw the tax rebates for health insurance, so that private health insurance is effectively sidelined (as in Canada), passing to the States the major responsibilities for hospitals, medical and community services while leaving public, private and voluntary organisations to compete for funding from a single Federal Government channel (as proposed for Holland).
That first option is effectively a "do-nothing-but-wait" option. It is politically irresponsible, it won't fill the obvious gaps in home health care or community care that cause us to use hospitals at today's unsustainable rates, and it will not persuade the private health sector to negotiate on affordable private health insurance.
The second option requires intestinal fortitude by the Prime Minister and Minister for Health to convince the public that a defined benefits package, including new benefits for long-term care of the aged and chronically ill, can be sustained with minimal increases in either income taxes or the Medicare levy.
It also requires the private sector to prove that it can offer new health insurance and information to patients at affordable prices - and until this proof is visible, we can write this option off even though it is the best long-term "mixed" solution.
The third option is effectively the Canadian health financing scheme, already the second most expensive in the world after the US. It requires a huge act of faith to believe that a government-run health system is superior to the current public and private mix when almost every developed nation in the world is resiling from government control while seeking private sector investment. It would attract bipartisan support - but that doesn't make it the best option because higher income taxes would be required to replace the $4.2. billion of private insurance premiums. - PAUL F. GROSS
© 1998 Sydney Morning Herald