Doctors Reform Society of Australia

Why Medicare Must be Defended

Medicare is a major national achievement. But it is permanently under threat from vested interests, particularly in the current economic climate. The idea of public ownership is treated with derision as if 'Government' could never be efficient. 'Common good' is taken to be some sentimental notion of universal welfare that needs to be cut to make Australia 'internationally competitive'.

Medicare has problems that are common to all health systems in the developed world. The growth of technology has meant that life can be prolonged significantly, provided there is enough money. Death always wins in the end. The danger is that the bulk of health spending will be in the last 6 months of peoples' lives making modern health systems an expensive way of dying and not cost-effective in terms of allocation of national resources. Doctors are not always good at controlling this problem, as they argue that only by striving will they improve their skills and results. Their own interest is also served by doing as much as possible, especially in a fee-for-service system. Patients want as much care as possible, and the technology and drug companies are keen on as many sales as possible. Medicare has a major role here and can be a major force in getting a sensible balance between health and dollars by saying to doctors, "Here is a finite amount of money- deliver as much health as you can with this amount of dollars". Ideally this would be in a salaried rather than a fee-for- service system so the doctors do not have a vested interest in some patients over others.

Medicare has Strong and Persistent Enemies

1. Private Health Insurers. Health insurance is very lucrative. Huge amounts of money are paid in premiums. But private insurers are not as efficient as Medicare. Because Medicare is so large, it can detect fraud by looking at the statistics of who does what. Because it is universal, it does not have to look at every little bill and determine whether the individual patient is entitled to the service. This means that Medicare's running costs are about 4% of its payout (5.5% if you count the cost of collecting the taxes). Average costs for big insurers are around 12% of payout. So about 7% of inefficiency is there already. Big companies want to make profits, and this is over and above the return shareholders want. Medicare needs no profit at all.

2. The owners of hospitals and treatment facilities. These groups want to make profits and are increasingly owning medical centres. Young GPs are simply unable to compete with the centres and sign over 55% of their gross Medicare incomes to work for these companies. The companies are also becoming vertically integrated so that the same company owns the general practice, the X-Ray and pathology, and the hospital that does the more lucrative procedures. Doctors can be pressured to do more tests or procedures, and rewarded accordingly. This does not always occur of course, but some of the better known entrepreneurs were famous for it.

3. Doctors make more money per case from private patients than Medicare ones. Since 1974, when Medibank (now Medicare) came in, the rebate has risen at about half the CPI, and bulk-billing has been encouraged. In General Practice most doctors bulk bill. Because their incomes are set by the Medicare rebates (and how many patients that they see) Medicare has lowered doctors fees and led to shorter visits. Specialists have controlled their numbers so have been in a better bargaining position. They can dictate their fees by having a different waiting time for those who pay private rates and those who do not. But for all doctors, the more private work they have, the more money they make. So in general, doctors support Medicare in so far as it allows the very poor not to either suffer or to be bad debts, but for the rest, they prefer as many non-Medicare patients as possible.

4. Governments have changed their approach and are currently trying to act like businesses. They are trying to shift the costs elsewhere, rather than taking responsibility for society's problems. When they talk about 'more involvement of the private sector in health', they mean 'some one other than us paying'. This means the patients, either directly or through insurance.

Once it is established in the public mind that there are two queues, one for Medicare and one for private patients, then the principle follows that health care given relates to income, not medical need. Those who are able to afford it will insure themselves and not be directly affected by the Medicare's problems, so that eventually only the politically impotent will be left in Medicare. This will allow the standard to fall further. Private patients spend money on treatment, (even if it is the non-cost effective kind), and basic services will be denied to poorer people, as in the USA.

Current Threats to Medicare:

1. That the government will introduce a 'co-payment' for some or all patients, which means that the patient has to pay the first part, say $5, of the cost of the consultation. Currently co-payments are illegal for bulk-billing doctors.

2. That the government would unilaterally reduce the percentage of the doctors' fees that it reimburses under the Medicare agreement. Doctors would then have to make up the difference by charging a co-payment.

3. The government will continue not to raise the Medicare rebate to keep place with inflation. Eventually the doctors will have to charge more than the rebate, especially as companies now owning the medical centres are taking a big percentage of the GPs' share.

All three changes will involve payment at the time of the consultation. The 'co-payment' will rise with time.

Overservicing

It is true that some people with minor complaints may not come as often if they had to pay. It is estimated that a co-payment would reduce Medicare usage by about 15%. But these poor people who would be discouraged by a price signal are the ones who have the worst health and are the hardest to help. If there were a 15% drop in patient numbers, doctors would have an income drop and some spare time and would do a bit of marketing to compensate. Health screening, regular check-ups, reminder letters are all nice little earners. But these would be for the middle class, so there would be a net transfer of medical effort from the poor to the wealthier. This makes the co-payment a very bad way to cut the national treatment bill or improve health which increasingly relates to social class! In fact the wealthy overservice most- by wanting the best of everything.

Some Clear Conclusions.

1. The 'market' has little place in health care. 'Markets' assume equal power between providers and 'consumers' and that the 'consumer' can 'choose' to consume or not consume. If the 'choice' offered is 'pay or die', the consumer has no power. When treatment needs to be 'marketed', it is no longer an essential service. The 'market' analogy is a nonsense.

2. The USA has the worst health system in the developed world. 37 million people are totally uninsured and cannot get health care. Massive heroics are done to save the lives of those who have plenty of money, and insurance companies tell patients which hospital they can go to and how long they can have in there. Yet the cost of the US system is 14.5% of GDP and rising. The health insurance packages offered by employers are a major drain on business and restrict people from changing jobs. In comparison, Australia's health system costs 8.4% of GDP and is steady.

Why any patient except a very rich one would want to abandon the Australian system and change to that of the US defies description. But the reasons for other vested interests are plain to see. We will increasingly have to fight for Medicare. Get ready for it!

Just How Good is Medicare?

After all the claims that the Australian Health system is in crisis, it is worth looking at some objective criteria. People come from all over the world to look at Medicare as a success. Life expectancy is a way of measuring the health of a population, and the cost of health can be measured by the percentage of GDP spent on it. Below is a table of OECD figures. The first column is the female life expectancy as an indicator of population health. The second is the percentage of GDP spent on health in 1990, the third is the number of hospital beds per thousand population, the 4th the percentage of the economy that is governmental, and the 5th is the percentage of the health system that is public.

Country	Life expectancy	% GDP	beds / 1000	% public	% govt
Japan	76	6.6	15.7	15.7	71.9
Iceland	76	8.6	16.7	37.6	74.7
Sweden	75	7.6	12.9	61.7	79.8
Spain	75	6.6	4.3	43.0	80.5
Greece	74	5.4	5.1	33.9	77.0
Switzerland	74	7.8	9.5	34.0	68.3
Australia	74	8.2	9.8	36.3	68.0
Netherlands	74	8.2	11.6	55.9	71.3
Canada	74	9.5	na	46.3	72.2
Italy	74	8.1	7.2	42.5	77.6
Norway	73	7.4	14.5	54.7	95.3
UK	73	6.2	6.4	42.3	83.5
France	73	8.6	9.9	49.7	74.4
Germany	73	8.3	10.8	46.2	71.6
Austria	73	8.3	10.6	49.6	67.1
Belgium	72	7.6	9.8	55.3	88.9
NZ	72	7.2	8.7	na	81.8
USA	72	12.4	4.8	32.9	42.2
Denmark	72	6.3	5.9	58.2	82.8
Ireland	71	7.0	6.0	37.6	74.7
Portugal	71	6.7	4.6	42.5	61.6
Finland	71	7.8	13.0	41.2	81.0
Turkey	64	4.0	2.1	35.8	36.1

Figures from: Taylor R. and Salkeld G. Aust. & NZ J. of Public Health 1996 Vol 20 No 3.

Australia does very well. It has the seventh longest life expectancy for males, and its percentage of GDP spent on health is 9th (8.2%). It has the 11th highest number of beds per head of population. It has a relatively low public component of its health system 20th (68%) which means is the 5th most highly privatised (column 5) despite the fact that higher public expenditure generally correlates with a better result both in terms of life expectancy and GDP spent.

Australia is not a highly taxed society in that it has a relatively small public sector, coming in at 17th out of 24 in the OECD. Another fact not shown in this table is that Australian health spending from 1975 to 1990 actually declined 1.6% in real terms, one of only OECD 5 countries to do so. In the same period US costs rose 25.8%. What we should learn from the US is how not to do it!

The key health indicators of infant mortality and life expectancy relate to per capita income up to a certain level, but after that they relate to the equity of distribution of that income rather than health spending.

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