PRIVATE health insurers came in for a pasting last week. In a submission to the Productivity Commission they recommended something called “”managed care”.
The doctors, nurses, community groups and virtually everyone else denounced the idea. They said it was a horrible US intrusion that would prevent patients from getting the best care. That may be true of some managed care, but it should not be dismissed out of hand.
Managed care is where the private fund takes over the control of a patient’s care for what the health boffins call an episode. The patient pays nothing, but the fund can determine who will be the health providers and, up to a point, what sort of treatment.
Managed care highlights at once all the strengths and weaknesses of our health system.
At the outset it should be recognised that Australia’s health system is among the best in the world, but it faces deterioration because of parsimonious governments and the silliness of attitudes that suggest economic activity in things like producing more hamburgers, widgets and household furniture is good but public spending on health and education is bad. These attitudes view increasing health spending as a problem caused by an aging population rather than palliation of it.
An expanding consumption of widgets is regarded by economists as wonderful; an expanding consumption of health services is regarded with disdain. Bizarre.
Anyway, back to managed care.
The normal pattern is to point to America and squeal with horror. The Americans spend 14 per cent of GDP on health; up to 30 per cent of people are not covered by insurance and are liable to go without health care if they are not wealthy enough to pay full cost. They also have managed care, which means that even if you are covered, you can get only the care the insurance fund permits from providers they determine.
It might mean, for example, that a particularly expensive or experimental treatment for AIDS, nausea, diabetes, Parkinson’s disease or whatever will be denied and a patient would have to pay full cost.
In Australia, treatment is demand driven. If the patient wants the treatment and it is on the Medicare or Pharmaceutical Benefits Scheme, the private health fund must pay out on it. All the patient has to do is find the doctor to prescribe it.
The funds object to this, saying they are at the mercy of unlimited demand by patients and an unrestrained desire by the medical profession to meet that demand.
To make an analogy with property insurance, it would be as if people could dial up a robbery whenever they wanted a new stereo system.
However, before we shed too many tears for the funds, there is one compelling restraint. Other than isolated cases of old hypochondriac biddies who like a good natter with the doctor, people do not like having medical procedures done on them. None the less, the open-ended, demand-driven system poses a threat to the health system. Either more money must come into the system to meet it, or the system must change.
Some elements of managed care can help here. One of the follies of our health system is that if you get clouted on the squash court and your nose is broken it costs nothing; if you teeth are smashed out it costs a fortune. Glasses, physiotherapy, nutritional advice, some help for people with mental illness and alternative therapy, some of which in conjunction with conventional medicine can be useful, are not on the Medicare schedule. Bizarrely, some are covered if a patient is having hospital treatment, but otherwise not covered.
In particular, physiotherapy, which can go a long way to reducing overall community costs of illness and accident, should be encouraged, not discouraged with price barriers.
Managed care can gather together complementary treatments. The other thing it does … indeed, insists upon in the US … is that insured people are required to have regular medical check-ups and doctors are required to take preventive action, particularly immunisations.
The main problem with managed care is that in its desire to reduce costs it can affect patient care for the worse. Typically, insurance companies like working on averages, but medical treatment is very individual. An insurance company might argue that in 98 per cent of cases generic aspirin does the job, and deny a more expensive drug. Worse, it might say that clinical trials show a particular treatment works only for 20 per cent of people and for most of those only temporarily so the insurance fund will not pay for it. When that sort of thing happens, the fund is, in effect, making medical decisions which should be a matter between doctor and patient.
Present law permits the funds to dictate who will be the provider for many services, and that may restrain costs. But when the funds can cut off payments for second opinions or for visits to some specialists who charge high, once again, they enter the realm of dictating the nature of the care, not just the cost of it.
The Productivity Commission, and hence the Government, faces a conundrum. At present, there is no price mechanism to contain costs. Instead there are perverse signals to patients and the medical profession that they can run up whatever bills they like, and the funds and Medicare will pick up the tab. But as soon as some price signals are inserted into the system they can affect the doctor-patient relationship. That happens by funds approving only certain doctors who in turn are encouraged to reduce the number of “”unnecessary” tests and opt for cheaper treatments.
The funds are right in claiming that many tests are unnecessary. The trouble is no-one knows which test on which patient is an unnecessary one before the event.
The trick will be for the Government to pick up the better elements of managed care, leaving the insidious ones behind. The extreme example of that is the very sensible ancient Chinese method under which patients only pay their doctor while they are well; when they get sick payments cease, giving the doctor an incentive to deliver effective treatment. The Hippocratic oath aside, all the incentives in our system are for over-servicing and very little towards pursuing life-long good health. To the extent that managed care can change that, it should not be totally dismissed.
The other side of the health-care equation is to get more money into the system. Medicare funded at between 1 and 2 per cent of income was fine while 60 per cent of the populace was mug enough to top it up with over-priced private insurance which gave them the right to jump queues for elective surgery and precious little else extra.The surprise is not that the crisis generated by the flight from private cover has come, but that it did not come sooner.
The Government is tinkering about with ideologically driven mechanisms to increase private cover, but they will not help much because of the inefficiency of the private funds, which spend more than five times what Medicare does to deliver each dollar of pay-out.
The answer would be to charge the proper rate for Medicare coverage, which is about 4 per cent of income. And the economic rationalists should close their eyes and imagine that health care is like widgets, golf clubs, hamburgers, the housing sector or anything else that they cheer when trade goes up.