keynote address at the Doctors Reform Society National Conference 7 August 1999

Stephen Leeder

I am delighted to be present with you today. Over the years the Doctors Reform Society has developed as a major medical voice on matters of social policy in relation to medicine and healthcare in Australia. It has occupied a somewhat radical position at times, putting the needs of patients and the public before itself. It has not behaved as a trade union or as a professional college. Both of these roles have their place, but they are not your roles. It has been your task to ensure that the socially aware voice of medicine is heard in the debates about such things as Medicare. I have invested personal energy principally in the Public Health Association of Australia which plays a not dissimilar role for some doctors but mainly for other health professionals interested in the broad field of public health. It has been good lately to see the two groups - DRS and PHAA - converging their energies with others through the Friends of Medicare, an informal group that has been established to ensure that Medicare does have friends this winter, when it seems fashionable to take it political hostage and starve it, and then remark that its muscles appear to be thin.

Friends of Medicare was the name we chose carefully for our group. I had one correspondent who blew a hole in my email with an attack based on the assumption that we were there to protest the perfection of Medicare. ‘How stupid this was’, she said. I replied quickly, assuring my critic that, perhaps being something of an odd bod, none of my friends, including Medicare, could possibly claim to be perfect, nor do I regard them as such. Instead, our friendship is based on mutual understanding, tolerance, the occasional outburst of frustration, even failure from time to time. But also we share good times, laughter, and love. Friends of Medicare have a similar regard for Medicare. We are not thin zealots dressed in white shirts and black ties protesting Medicare's sinlessness: we are there to help it grow, adapt and change. We aim to enable it to fulfil its mission.

Now having said that Medicare is no more perfect than my close friends know me to be, or I know them to be, let me say that it isn't bad either! Its universal coverage, its foundation in democratically-collected taxes, its support for public hospitals and general practitioners, are all high quality attributes. William Hsiao, from Harvard, has studied health systems worldwide. He concludes that an ideal and workable health system consists of a mandatory universal insurance scheme and a global budget with one payment system. There is also a need for powerful organised agents who act on behalf of consumers to contract effective health services. Of three options for organised agents - managed care, area health services and GP fundholder groups Hsiao concludes that the GP fundholder model is "the most efficient with least transactional costs" (Hsiao 1998).

Medicare (and let's accept for the moment that this term is an acceptable descriptor of the entire publicly funded health service in Australia) fulfils most of these criteria, although it is true that about one-third of the $44 billion we spend on health care each year comes directly from the hip pocket, for co-payments, physiotherapy, aromatherapy, over the counter medications and private hospital insurance and care. So we are basically on the right track and we should be clear about that. The relation between the private and public systems is troubled and defensive at present, and we need intelligent new ways of bringing the two closer together. I do not know what forms such new partnerships would take but they might include a greater use of private capital in hospital development (especially with changes to the capital gains tax laws).

However, every time the shroud is waved from the balcony of a public hospital in protest that it can no longer cope, public confidence in Medicare is weakened. Why should it not be? It is extremely fortunate that, as a counter, the lived experience of countless Australians using the public health service is largely that of satisfaction and gratitude. This experience is a counterfoil to the publicity about waiting lists, deaths and disaster in the system as things go wrong and lives are lost, and crowded accident and emergency services.

What you may correctly deduce from what I have said so far is this: I'm pleased to be here and pleased to be among friends! I also regard Medicare as a friend - not perfect, but well worth sticking with. I have ambivalent feelings about publicity that says the system is not coping, because it is essentially wrong and because of its potential to weaken public support.

In the time remaining to me this morning I would like to ask you to think about the future and how we can play a role in setting health care in this country on the right track and when I say ‘we’ I mean you as members of DRS and myself in the roles I occupy.

I believe we need to have at our disposal material, perhaps in the form of fact sheets to be given to the media, politicians and concerned citizens, that sets out the facts about health care. The PHAA are beginning work on this at the moment and it would be a good idea for the DRS to get involved in the material’s development (see http://www.phaa.net.au/friends_of_medicare/frame_friends_of_medicare.html ). Several topics come to mind that could be usefully covered in this way, namely the myths about Medicare, reasons for resisting major change to Medicare and why we need national debate about the future of our health service. I will now mention each of these topics.

Myths about Medicare
There are three myths about Medicare where we need to be able to present facts to the contrary. The first myth is that Medicare is a safety net and that rich people should be denied access to it. Medicare is a universal health insurance system paid for by us all and that covers everyone, rich or poor. The rich contribute much more to it because of their taxes and higher levies. They may use Medicare when they need it. If through means testing they are debarred from doing so, the universal tax base for Medicare will crack and down it will come.

The second myth is that private and public hospitals work as equal partners. In fact, the private system does around one-quarter of the work that the public hospital system does, and little of the emergency and chronic care. Rebates for private health insurance therefore will not take the pressure off the public system. I am told there has been no increase in private hospital usage as a result of the Federal Government’s 30% rebate, a colossal $1.7 billion injection of funds into the private health insurance industry. Of this Neal Blewett wrote recently, ‘The chief advantage of the rebate is that it provides a really wonderful nest egg for a reforming government to do something really creative within the health system’. A study recently conducted but yet to be published surveyed 2,500 people on their private health insurance intentions. The survey predicts there will be something in the range of a 0.5% drop to a 1.5% increase in private health insurance membership by the middle of next year. Pouring billions of dollars into subsidies is like gold-plating the bathroom when the entire house needs repair. Financiers who salivate over the massive reserves of private health funds should be told to turn their gaze elsewhere.

Neal Blewett, in his recent John Chalmers Oration at Flinders University, offered the following analysis of the impact of changing private health insurance rates on public hospital services.

"The key public issue has been the decline in the numbers of those with private health cover. Prior to Medicare private health insurance numbers were running at about 60% of the population. Today, fifteen years later it has fallen to about 30% and the decline seems inexorable. The simplistic argument from this is that the decline has imposed unsustainable burdens on the public hospital system hence long waiting lists and a sense of crisis all stemming from the fall in the numbers with private health insurance.

There is little to sustain this analysis [B]eds in private hospitals have increased under Medicare, private hospitals have a bigger share of hospital work than prior to Medicare and activity in the private hospital sector has increased at least as fast as within the public hospital system. Despite the fall in the privately insured, private hospitals are doing more work than ever before. There is no suggestion here that any fall-off in private health insurance has led to any fall-off in private hospital usage. Thus the plausible hypothesis: fall in private insurance levels leads to fall in the usage of private hospitals and thus to extra pressure on the public hospitals seems unsustainable.

Where the fall-off in private health insurance has had an impact is within the public hospitals themselves not so much in increasing the load of the hospitals but in changing the mix of patients within the public hospitals. Most people giving up private insurance seem to be those who in the past used public hospital facilities but as private patients. Prior to Medicare approximately 50% of public hospital patients were public patients and 50% were private patients. To day the proportion is 90% public to 10% private. This change does not impose an additional workload on the public hospital merely a change in the status mix of its patients.

But this change does, however, have a cost. Private patients in public hospitals were an additional source of revenue for the public hospital system, a source of revenue that fell with the decline in the privately insured. While there are efforts to compensate the States for this fall in hospital revenues in the early Medicare agreements between the Commonwealth and the States the Commonwealth almost certainly underestimated the impact of this change and in the cost-constrained 1980s was niggardly in compensation. This led to State tit-for-tat exercises in cost shifting thereby transferring costs from stretched public hospital budgets to Commonwealth Medicare."

The third myth about Medicare that needs to be dealt with is that copayments will kill off insatiable demand. This may be criticised first as misplaced market fundamentalism which is no solution to the peculiar problems of paying for health care. George Soros, a spectacularly successful capitalist, writes in The Crisis of Global Capitalism about a crisis in the values that drive society. It is appropriate, he says, that contemporary market economics assert that ‘only market values should be taken into account when the objective is to determine the market price.’ But when considering social structures other than the market, such an assertion ignores a wide range of individual and social values that do not find expression in market behaviour. ‘How society should be organized; how people ought to live their lives, these questions ought not to be answered on the basis of market values. Yet market fundamentalists have transformed an axiomatic, value-neutral theory into an ideology.’ He then explores ‘how market values penetrate into areas of society where they do not properly belong’. Copayments will not rid the land of the major reasons for people being in hospital - they are sick. Copayments return us to a dim past, are expensive to administer and selectively disadvantage those least able to pay who are also the most likely to be sick. Rather, consumers need to be better educated to make appropriate use of those services, and not to be beaten over the head with a financial hammer when ill and in need of help.

Secondly, in relation to the proposed infliction of copayments, it is possible to examine evidence from studies on their effect on the use and outcome of health services. Back in 1991, when federal health minister Rev Brian Howe and Ms Jenny Macklin (now Shadow Minister for Health) were conducting the National Health Strategy, health economist Professor Jeff Richardson of Monash University produced a paper entitled The effects of consumer co-payments in medical care (Paper No. 5).

The centrepiece of evidence in that paper is a health insurance experiment conducted by the US Rand Corporation, a government sponsored private research organisation. The study, carried out at six locations in the USA, involved 5,809 people randomly assigned to one of four different fee-for-service insurance schemes or to a pre-paid group practice.

Amongst those enrolled in the Rand experiment, the effect of a co-payment was almost entirely upon access into the health system and not upon subsequent use of resources per episode. Co-payments had a greater impact upon lower income persons, particularly their children, and upon those with poorer health. In terms of reducing services, co-payments had the same effect on services judged to be ‘necessary’ and ‘unnecessary’ but had a greater effect on reducing doctor attendances by the poor and sick. There was little overall health impact on general or mental health in the experiment. At a health economics conference last year Richardson re-analysed the responsiveness of demand to variation in net price and the results were very close to those in the National Health Strategy paper.

In 1993, Richardson wrote again in an editorial in the Australian Journal of Public Health following the publication of a paper by Rosenmann and Mackinnon that claimed bulk-billing causes a significant increase in service use. Richardson summarised his view about co-payment at that time. First, the evidence suggests that bulk-billing affects general practice services, services where patients may exercise some discretion, but does not impact on the majority of specialist services. Second, if, as is often asserted, bulk-billing is associated with an increased number of doctor-induced short visits, then this outcome is a function of the incentives embodied in the present fee schedule and it is the schedule which should be adjusted. Overall, bulk-billing is not associated with generalised over-use but with over-use from a very small sub-group of doctors. Third, bulk-billing is the result of price competition and an excess doctor supply. Raising prices and inconveniencing patients may reduce service use and output per doctor but a reduction in doctor productivity and a suppression of price competition does not represent sensible microeconomic reform.

Reasons for resisting major change to Medicare
There are three things that we should try to stop those charged with developing our health services from doing - going backwards; demolishing where renovation is needed; and ignoring international experience with health service delivery - and we need to be clear about the reasons. Each of these could be covered in a fact sheet as well.

The temptation to do any or all of these will be strong. The inequity of access to hospital care prior to universal health insurance is easily forgotten. Today's hospital and the entire context of medical care is utterly different, especially in the organisation and technology that supports it, to forty years ago when public and private, charity and paying patients were treated differentially.

Demolition provides an instant, explosive thrill, but Medicare retains admirable features. Rather, there is a need to refresh its coverage of services especially outside hospital, make it more efficient, improve the quality of service, and better integrate hospital and community care. The co-ordinated care trials, in which funds are pooled and used for the management of clients with chronic and usually complex conditions, are important. In the trials, funds from hospitals, medical benefits, pharmaceutical benefits, home and community care - are attached to the patient rather than to a care setting. Successful co-ordinated care will break down the separation between discrete settings, the basis for present funding, to provide continuity of care across different settings. The care co-ordinator is in most cases a general practitioner. The formal evaluation of the co-ordinated care trials is yet to be published, but we might imagine that patients will declare that they have found it better to be managed through a complex system than to be left to lurch from building to building, some funded one way and some another or some not at all.

There are currently explorations under way as to how general practitioners could in future participate in public health efforts with communities. Naturally I am pleased. Equally importantly, however, I believe is the need to explore how general practice would function in a co-ordinated care setting and how Medicare would fit. Is there some element within that that we believe would be best left to patients to pay for themselves? If so what is it and why? Debating and discussing these possibilities seems to me to be very important for DRS. You could lead the way with suggestions for experimental innovation that could be truly trend setting for the 21st century.

Another instrument of health service, the Area Health Service, is also often the object of the demolisher’s enthusiasm. "Let’s return to hospital boards," we hear. A proposal being flagged currently is that co-ordinated care be more broadly applied to the whole health care system, with regional bodies (Area Health Services are the obvious organisations to perform this role) contracting with local agencies to provide services. It would be open to private hospitals to participate, enabling the regional body to purchase services from the most efficient provider. Whatever the particular mechanisms, such a system would do much to break down the barriers between services underwritten by different funding sources.

Third, while imports of complete health services from other countries are not desirable, elements of them must not be ignored. There is much for us to learn from the US, the UK, New Zealand, Canada and Europe. Insights from other countries might help establish new and better ways for the States and the Commonwealth to share the cost and risk of health care. If the States are cut free to experiment with alternatives, we should maintain the great strength of our current health system - its universality. If risk-sharing was easy it would have been done long ago. But it is within our reach and strong leadership can make it happen.

Why we need national debate about the future of our health service
Finally there are three things we should encourage those who wish to reform health care to do. The first is to establish a national debate, like Bob Carr's splendid drug summit, about the contemporary and future purpose of the health service. It should reaffirm the social values we wish to express through our health service including, one may hope, equity of access, high standards of quality, little waste and evidence of health gain as a result of health care. This will not be appropriately served by a review by the Productivity Commission, a reference akin to taking a cat with a cough to the local hardware store for diagnosis and treatment. The Senate Inquiry, announced recently into health, may be a better option.

Second, we should all reconsider whether we are spending enough on health in Australia. We do not overspend on health at present compared with many other countries. Discuss spending more at certain points on the margin, using new and more efficient ways of doing old business. Courage is needed to discuss raising the Medicare levy by 1% to put a further $2 billion per annum into health care. By taking pressure off the public hospitals this would create space for innovation, expansion to services not covered, such as essential dentistry, and efficiency reform. To quote Neal Blewett again:

"[I]n an age where there is considerable popular resistance to increases in general taxation, there may be less resistance to increases in a Medicare levy, which fully captured the costs of health care. This would be likely particularly if people were confident that any increase would go to health and not be siphoned off by other Commonwealth departments or State treasuries. Ultimately in a democracy the voters must decide, one way or another, how much of the community resources should go to health and how broadly these should be allocated. The task of politicians should be to provide a framework to facilitate such decisions."

Third, in shaping a desirable future we all need to build stronger bridges with the community and with consumers. There is no dispute that information technology is changing things in interesting ways, not least among these being the improved access that many people are gaining through the web to health-related information. It is true that such access at present is preferentially for those with the best health, but the rate of uptake in the US suggests that the reach of the web in Australia will continue to grow across socioeconomic division lines quite rapidly. With increased access to the evidential basis for health and health care, more people can be recruited to serious debate - about what the health service may achieve, its underpinning values, what we want from it, what it is reasonable to expect the health service to do for us, as well as specific suggestions about best practice for a wide array of ailments.

Put simply, an organisation such as DRS needs to position itself at the front, not the back, of the IT pack. The fact sheets that I have referred to can lend themselves very easily to web pasting. By entering into interaction with consumers through IT, we can build understanding in the community about health issues. This broadens and strengthens the democratic base on which decisions about health services can be built for the next century.

In conclusion, although Medicare is not perfect, its universal coverage, foundation in democratically-collected taxes and its support for public hospitals and general practice make it a strong and effective system. Publicity that says the system is not coping threatens to weaken public support and to counter this we need to arm ourselves with information that sets out the facts about health care. Importantly, we need to dispel the myths about Medicare, fight against efforts to demolish Medicare and encourage national debate about the future of our health system.

The value of having clear and coherent responses to these major aspects of the Medicare debate cannot be over-estimated. We need to play the same messages over and over and stick with them. Having stumbled almost by accident on a health service model that by any reckoning is amongst the world's best, we should be very cautious about tolerating change except where the evidence in favour of change is convincing. By establishing the importance of facts in the debate, we will have made an excellent beginning.

References
Blewett, N. ‘The Politics of Health’ 1999 John Chalmers Oration, Flinders University, 8 July 1999.

Hsiao, W. 1988 ‘What does an ideal and workable health system look like?’ Presentation to the 24th National Congress of the Australian College of Health Service Executives July 15-17 1998, Hobart.

Richardson, J. (1991) The effects of consumer co-payments in medical care National Health Strategy Background (Paper No 5)

Richardson, J. ‘Bulk-billing of general practitioner services: the evidence Australian Journal of Public Health 1993;17:74-5

Soros, G. 1998 The Crisis of Global Capitalism: Open Society Endangered Little, Brown and Company, London.

This is the text of a keynote lecture delivered by Professor Stephen Leeder, Dean Faculty of Medicine, University of Sydney, at the National Conference of the Doctors Reform Society on August 7 1999.

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