John Howard’s policy of matching Labor’s bribe and don’t frighten the horses on Medicare may neutralise health as an election issue, but it will surely fail as a long-term solution to Australia’s health problems.
It fails to understand Medicare’s weaknesses and therefore fails to do anything about them. And without those weaknesses being fixed, Medicare fundamental strength will be eroded.
The strength of Medicare is its universality and its safety-net security. Howard got it right in acknowledging that. He joins about 90 per cent of Australians and even 68 per cent of doctors who approve of Medicare.
But Medicare has in-built self-destructive mechanisms. They have not been addressed by either major party.
Twelve years ago, when Medicare was created it was built upon a base of some 65 per cent of the population having private health insurance.
With that base, Medicare was going to work well. But people thought, why bother insuring if Medicare will pick up the bill? Seriously, would you insure your car if you could get it fixed for nothing? Now only 35 per cent have private insurance.
Howard said, “”I believe the right mix in health policy is to retain Medicare as a base.”
If only he had done that. If he meant it to be a base, he should have said everyone should be entitled to a Medicare rebate, whether they are insured or not. Private insurance pay-outs should be only for any costs over and above the Medicare rebate.
People should be able to take their Medicare cover and any insurance or cash they have and seek out whatever health services they want from whatever provider they want. Public hospitals should charge all patients the same, not cross-subsidise public with private patients.
It would mean charging all patients. Social security recipients should use social security to pay the difference between the Medicare rebate and the charge and those in work should pay the difference in cash (with some sort of ceiling) or insurance if they wish.
Howard’s plan is to give people rebates or cash for people taking out private insurance most of which will go to cover them for the first 70 per cent of so of costs which would have been picked up by Medicare if they had been uninsured.
It may fool one or two people, but it will not stop the drift from private insurance. People will simply not buy something they already own with Medicare … insurance against a catastrophic health event.
Even with the Howard subsidy for private insurance, the cost is simply too high for what you get: a queue jump for elective surgery and a few bells and whistles.
To use the car analogy, the present system asks people to take out a full second premium of hundreds of dollars just for tea and coffee in the repair shop and a jump on other customers when the pranged car is gong to be fixed for free anyway. And if it is severely pranged it is going to jump the queue anyway, at least to get you back on the road.
Moreover, the Howard subsidy is inefficient. It involves a circle of bureaucrats and duplicating private structures. Medicare processes claims far more efficiently than the private insurers.
Further, private insurance will remain inefficient while both major parties insist on community rating. It is nonsense to charge the same premium for vastly different risks. Young, fit people should not pay the same premium as the old and infirm.
We are seeing the effect of this absurdity: young people are fleeing private health cover because it is such a poor bargain. It means more money is leaving the health system.
Once again, the answer is to have Medicare benefits paid to everyone, whether they are insured or not, and for private insurers to offer top-up and add-on insurance tailored as they see fit to their clients.
Howard has also failed to address the ever rising cost of the Medicare system.
Federal health spending per head has gone to $910 a year in 1997-98 from $690 in 1989-90 in constant prices.
Some is due to an ageing population and some to less private insurance. But a lot is due to over-serving.
Twelve years ago there were 2.3 doctor visits per person per year, now it is 3.6. Ten years ago 44 per cent of doctors bulk-billed; now 77 per cent do.
Public-health sector spending is at $27 billion a year. (The Medicare levy raises about $1 billion.) Private spending is at $13 billion. The total is 9 per cent of GDP and rising. It is better than the US at 14 per cent but not as good as UK, much of Europe and Japan.
Sure, health is fundamental and we should be spending a lot on it, but we should be doing it efficiently and effectively. And we are not because of Medicare in-built deficiencies.
Doctors are paid according to the number of visits. The best way to attract and keep patients is by bulk-billing so the patient pays nothing. With medicine, patients are usually ignorant and let the doctor do all the deciding. So the doctor has a blank cheque. The doctor can encourage visits and recommend expensive radiology and pathology at no cost to the patient. The price mechanism as a means of restraining over-servicing is gone.
Sure, lots of doctors do it for love and good medicine and lots of patients only visit with genuine illness. But money counts.
There should be a compulsory co-payment for all medical services. It has acted as a major money saver with the Pharmaceutical Benefits Scheme. Patients ask if the treatment is necessary if they have to pay something.
Savings on over-servicing can still be made even if you give pensioners and low-income earners the equivalent of, say, 26 co-payments a year in cash. Suddenly they prefer to keep the money than go to the doctor for a chat with the slightest sniffle.
At present all the evidence is pointing to over-servicing and over-use of expensive diagnostics rather than people staying away from doctors and getting sicker.
The co-payment should be very low for those on benefits; those in work should pay much more and be permitted to insure against it if they want.
Neither Howard nor Keating have addressed hospital funding. Keating wants to kick Jeff Kennett, so he will not openly support case-mix funding which has been successful in Victoria.
The Commonwealth should directly fund hospitals on a case-mix standard. That means hospitals get paid according to the number of each service provided. The hospitals would then get paid for what they do, and they would therefore get more efficient.
In short, we need Medicare to make sure everyone is covered for catastrophic medical costs and to ensure those who have no money still get good treatment. But unless some cost restraints are introduced and more private money is dragged in by those who can afford it, Medicare will not be able to achieve that for much longer. Medicare is killing itself. In providing so much for those who do not need it, it is denying itself the wherewithal to provide for those who do. Alas, neither party appears to have seen the problem, let alone devised a plan to deal with it.
If you want Medicare as a base, it should cover the poor almost totally and cover everyone else to the extent that the are left with a bill that will not bankrupt them or a bill they can insure against.
And the levy that funds it should equal what is being paid out. Otherwise we are kidding ourselves, but we can’t do that for much longer.