Advance Australia Fair - Building Sustainability, Justice and Peace

Workshop - Unhealthy Nation

Sunday 31st July 2005

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Tim Woodruff

President, Doctors Reform Society

I’d like to talk in a general sense about how the system works, or is supposed to work, how it used to work, and where we are headed. I appreciate that some people in the audience will come from health backgrounds, consumer backgrounds and some people won’t have either of those, will just be interested in the general issue. So bear with me if some of the stuff I say is rather familiar to you.

An idea that all of us would accept is that a health system should be geared towards improving health outcomes. We know that there are crucial social determinants towards health outcomes, which Helen will talk about more. As well as that, for people to have any health outcomes related to the system they’ve got to have access to it. The access is partly determined by those socio-economic factors, but it also depends what kind of a health system you have that allows you to access it.

I’m going to mainly talk about that access. You can access the health system the same as somebody else and have a much worse health outcome as somebody else with the same disease. I’m talking about the basics of how you get to that health system and how it is constructed in society by the government.

Just to remind you, Medibank was introduced in 1974 and Medicare in 1984 after Fraser had dismantled Medibank. Prior to that, what kind of a health system did we have? If you were behind a white, picket fence you would have this view as expressed by John Howard to Michelle Grattan just before the 2001 federal election. “Introducing Medibank was a cardinal mistake. Before Medibank we had a perfectly functioning health system”.

However, there were alternative views and information to back them up. There were an awful lot of uninsured and underinsured people in Australia at that time whosimply weren’t accessing health care. The most common reason for being in the debtor’s prison in South Australia was failure to pay medical bills. Interestingly, a general practitioner at that time who is still practicing in Melbourne and was a Federal Councilor in the Australian Medical Association (AMA) said that the system we had before Medibank encouraged under-service and under-utilisation of health services. People delayed coming to see the doctor because people couldn’t afford it and they were hoping that nature would improve their health. That’s from an AMA person, and it’s important to remember that the AMA was extremely vociferous in opposing the introduction of Medibank and Medicare. Their opposition was actually the stimulus for our organistion (Doctors Reform Society) to show that there were some doctors who cared about the public health system.

At that time, the ones not behind the white, picket fences, were looking at addressing those concerns starting with the issue of a lack of access to health care. They said that if we are going to have a system, we need everyone in it – paying taxes to support it and able to use it.

What they introduced therefore, was not a health system, but very simply, a public health insurance scheme. That’s what Medibank and Medicare are – insurance schemes. The difference is that the premiums that you pay are through taxes and through the Medicare Levy. Everybody pays taxes, you can’t get out of it, especially now we have a GST. Not everybody pays the Medicare Levy, but the Medicare Levy only funds about 15% of government health spending. It is a tax-based system and the premiums depend on your income. The produce of this health insurance is supposedly timely access to quality health services.

What has Medicare funded?

Firstly it funds community access to doctors through the rebate. That’s what it was designed to do. Secondly it funds access to public hospitals without having to pay anything at the time. Thirdly it supports the Pharmaceutical Benefits Scheme, allowing access to a huge range of drugs at reasonably affordable prices. It is important to remember that the public health system , has a huge component of funding that goes to aged care. It also funded some smaller targeted health projects.

Community access to GPs
When this system was introduced, the idea was to take away the financial disincentive for patients to see a doctor or a specialists, but most importantly, a GP. To do this they introduced the system of bulk-billing. They set the rebate at a fee that they thought was a reasonable income for the doctor and then each GP could chose whether to charge the patient directly and go for a little bit of a co-payment, or to accept what the government was offering. Their clear intention was to encourage GPs to bulk bill unless they were really philosophically opposed to the idea of bulk billing and wanted people to pay a little-bit. And it worked.

It worked because they set the fees and GPs were happy with it. It also worked because there were enough GPs around in most places, not in rural and some other areas. In most places there was competition. When I started my colleagues who were going into a bulk billing practice set up right next door to a well established doctor who was charging over the mark. This basic market principal brought bulk-billing rates from 50%, when Medicare was introduced, right up to 80% back in 1996 which is as high as we’ve got. At that time in 1996, in most general practice consultations you went in and signed a form. Most of the 20% would have been to people who could afford to pay apart from some of the rural and regional areas where there was no competition. The other advantage of that system is that the hassle of having to find the money and pay when you are in a bad way was just not there. There was no obstruction or barrier, except actually getting to the doctor. That worked very well.

Public Hospital Sector
Bulk billing worked very well, the public hospital sector was working quite well, because it was funded in a very complicated way. The public hospitals were and are a bit of a mess because they’ve relied on the old federal-state interaction. We all know many examples of how that works and doesn’t work and sets up a bit of a problem. Essentially, most of the time the public hospitals were well-fed with money and they could provide a reasonably timely service. And the PBS was continuing to provide ready and affordable access to virtually all of the drugs that most doctors would think were appropriate and sensible to provide.

What happened to the system?

Before 1996, there was a general change in society, at least in the movers and shakers at the top, and what they believed our society should base itself around. There was an increase in emphasis on competition, on user-pays, on personal responsibility, on all of those things that go with it.

In 1990 the ALP government suggested we should have a co-payment for patients to see a GP. They introduced it but it never got passed as there was fierce opposition, but it was representative of that shift. The Labour Party did introduce a co-payment for pensioners and healthcare card holders for their prescriptions which wasn’t there previously.

There was a concern that patients were over-using the health system, their access to general practice. There was also a concern that doctors where over-using it, because they could just get a patient back, to sign a form, and they’d get another $20, or however much it was. To control the excess costs that the government perceived was the problem they decided that they could halt it by reducing the amount they pay the doctors. That might then get doctors to charge patients and that will slow down the demand for services. They didn’t worry about the fact that was essentially punishing patients for a problem in the system. They began to let the rebate decline relative to what doctors thought their income should be. They also prevented the numbers of doctors growing to cope with the increase in demand. With that kind of set-up doctors were pushed away from bulk billing.

This all happened before 1996. But when we go to 1996 when the Howard Government came into power we see changes that are more in that direction. Firstly they didn’t do anything about the workforce, they let it decline relative to the need. Secondly they let the rebate decline relative to what doctors felt was needed. Thirdly they continued to increase co-payments for drugs. Then they decided to support the private health industry through the Private Health Insurance Rebate (PHIR). The arguments for the PHIR are all so pathetic. I don’t know whether you’ve heard these before. Firstly, back in 1984 when Medicare was introduced private healthcare insurance was running at about 60% of the population and it gradually declined as people realised that it wasn’t good value for money and that they didn’t need it. And it kept going down until it was at about 30%. That was when the government decided that things were terrible and they couldn’t have the private hospital industry falling away so they had to do something to support it. So this was all rhetoric because in fact the private hospital industry had not declined at all. The private hospital industry had increased the size of their market in comparison to the public sector. So despite a fall in coverage the private hospital industry was actually growing relative to the public industry. This was one of the myths they pushed. It was wrong, they just made it up. They were right on the decline of private health insurance coverage.

They introduced the PHIR and virtually nothing happened. It gave a slight tweek of about .5% - 1%. They then ran a scare campaign and introduced the ‘lifetime community rating’ which meant that you couldn’t go into the insurance fund for a year so that you could go into a private hospital to get your hip done and then drop out. If you did that you had to pay extra to get into the fund, reflecting the years that you hadn’t been in. From a private business perspective that sounded very reasonable. If you own a car and don’t have insurance, but know that you’re going to have an accident and you buy insurance just to cover that cost, you are essentially ripping everybody else off in the fund who are paying on a more long term basis. This rule, combined with the advertising campaign was what made private health insurance coverage increase dramatically. That was what made it go up, not the rebate. Most people who had private health insurance where managing without the rebate, it was the scare campaign and the change to the lifetime community rating that made it go up. It is now steadily tracking down again, about 1% a year as people realise that even with the lifetime community rating it is not all that good a deal.

The private health insurance support from the federal government costs about $3.1 billion every year. In the context of a health budget that is about $50 billion, that is about 6%, a pretty big percentage. They way that works is - you get 30% back of whatever you pay on your insurance. Also, if you’re on over $100 000 income per couple, you’re meant to pay a Medicare Levy of an extra 1%. If you take out private health insurance you’re back down to the 1.5% that everyone else pays. Say you’re on $250 000 a year like John Howard is. You take out top health cover with all the extras, costing you $3500 a year. You immediately save 1% of your income, which is $2500. You’ve already paid off a huge slab of your private health insurance levy. Then you get the 30% rebate. So John Howard on $250 000 per year takes out private health cover and ends up $50 ahead. It is the most amazing situation where we have people who are wealthy being paid, by taxes, to take out private health insurance. I’m not sure that there’s any other country that could match it.

Having seen that they introduced a huge support of the private health industry there are two groups in the next set of changes. The first one is that they had decided to separate pensioners, cardholders and children from the general population in terms of how much money they get for the consultation. The rebate for those people was going to go up and the rebate for everybody else was going to stay the same. They were no longer treating everyone in the same way. The message to doctors is very simple: “doctor, you’re not getting as much money for that person if you bulk bill them, you should charge them”. They weren’t as blunt as the Labor Party had been in 1990, they were more subtle and cunning because what they said was “GPs, go out and charge people who are not pensioners and card-holders. Otherwise you’ll be getting less to see a patient who works than one who is a pensioner.” They were already charging a lot of those people anyway, but now they had no intention to bulk bill that kind of person. This was a fundamental change in how Medicare was supposed to work because it separates the population into two different groups.

The other change they made that was clearly directed at making people pay more was simply to increase the co-payment on the PBS. That was across the board. It shows that they are happier with co-payments even though we know they are a barrier to access.

They then put a few electoral Band-Aids on top of that which where simply to take the heat off the health-care issue and get them through an election. They gave an over all increase in the Medicare rebate and they introduced the Medicare safety net. The safety net was always a nothing, they knew that, they lied about it, they got on with it and it helped. It kept doctors quiet, shut the AMA up and got them through a difficult phase. This didn’t fundamentally alter the idea of Medicare, but the other two changes went to the heart of Medicare.

Where are we headed?

The direction that we are now headed is to further enhance those ideas that started a decade ago in our society, of competition, user-pays and personal responsibility. What we are going to see is an emphasis to get people to change their thinking. The introduction of Medicare changed people’s thinking when it was introduced. They started thinking that health care was actually a right rather than a privilege. That in a community the community would support the health of any one individual and that barriers to accessing quality health care should be removed. By the time 1990 came, when the Labor Party suggested a co-payment, these ideas were so well entrenched that they had to back off. However, it’s 15 years later and those ideas are becoming less entrenched in our society. More people see the system as one in which there are rights and responsibilities. “I’m responsible for my own health. I have to earn money to pay for my health care and only if I can’t there should be something to help me”, perhaps some kind of safety net. This is what we had previously as means tested access to public hospitals before 1974.

The battle is now for the powers that be to actually change the thinking of the general community, to read it and then introduce changes bit by bit, carefully and cunningly. Bit by bit they are eroding the system and changing the principals that underlay it. What we can expect to see in the not too distant future is that private health insurance will be expanded to cover emergency attendance at private hospitals, then other services like radio-therapy or renal dialysis.

So private health insurance will be expanded to cover selected things in the community and then it will be expanded to cover visits to GPs. We’ll see them allow the Pharmaceutical Benefits Bill continue to expand horrendously which justify further cutbacks. The amount of drugs, the range and comprehensive nature of the drugs that the scheme covers will decline. Meanwhile co-payments will continue to rise and there will possibly be private health insurance for buying drugs as well.

Essentially what we are going to move towards is that Medicare, the public system, is going to become the safety net and the standards in that public sector will start to decline. Once we’re there, we are basically back to where we were before.

Myths about Medicare and the public health system.

• The first thing is that we can’t afford a public health care system. Of course that’s an outright lie because a publicly based system is so much cheaper than a privately based one. In the US they spend twice as much per person per year on health care and they die younger and they have higher infant mortality rates. The cost controls in the public sector do lead to problems, but the cost controls in the private sector are almost non-existent. The reason that in the US the commonest cause of personal bankruptcy is failure to pay medical bills is because people will sell or mortgage their houses for healthcare. There is a big problem with people perceiving that health care is too expensive, but it’s not.
• Another myth is that if one has private health insurance one should use it. In fact there are many reasons why that’s the last thing we want to promote. The reason that standards are maintained in the public sector is partly because of advocacy by people who use it. If the only people who use the public sector are those at the bottom of the socio-economic scale they will tend to be the less articulate, the less powerful and the less influential. We lose our advocacy if we tell people who can afford private health cover not to use the public health system. As well as that we lose doctors and nurses to the private health system because we are making it grow, which requires doctors and nurses and everybody else. And by and large the public education sector is training these people, further subsidising the private sector, although this too is changing. The main reason is that people who have private health insurance have just as much right as everybody else and they also pay for it. People are already demanding that they don’t pay their 1% Medicare Levy because they have private health insurance. We will move towards a public sector that wont be funded by the people that have the most money, which means it wont have enough money and the standards will fall.
• There is a myth that private health care is better. It is in terms of access in the city, but that’s it. There is absolutely no evidence that private health care is of higher medical quality than public health care. In the US there’s evidence that if you’re in a for-profit hospital, you’re more likely to die than if you’re in a public hospital.

Conclusion

The bottom line is that we are not going to address this issue unless we manage to reverse the thinking which says private is better, public is more expensive and worse, we need to have a private system for choice and all those kinds of things. Unless we address that fundamental philosophy then all we can do with our health system is make parts of it more efficient. There are a lot of politicians talking about health care reform and almost all of them are just about improving the efficiency, like wasting less money and integrating services better. They’re fine, but they’re not going to help very much in terms of the inequity.
And I’ll hand over to Helen Keleher to talk about that further.

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