Government Assault on Private Health Services

By Peter Dutton - Australian Polity - Volume 2 (Number 1)

The Gillard Government is preparing the ground for what has been described as a “horror” May budget. Various media outlets have been briefed by the Government, and most reports have included speculation the health portfolio will be forced to give up billions in savings.

With her economic credentials in tatters Julia Gillard will be keen to be portrayed as having delivered a tough budget – moving forward with decisive action, so to speak.

Whilst we will not learn the full details until Wayne Swan’s speech on May 10, we can be assured of one fact: the cuts in health will all be from the private sector.

For all the talk of health reform which started with Kevin Rudd’s infamous words in the 2007 campaign that he would “fix” Australia’s 750 public hospitals or seek to take them over, the most substantial actions have all been attacks on the provision of private medicine.

Any objective analysis of the provision of health care in this country would give a tick to the efficiency and productivity of the private sector. For example, private hospitals perform 64 per cent of surgery in Australia and received about $8.4 billion in revenue from all sources in 2008-09, compared to over $32 billion for public hospitals. That is why it makes no sense for a Government facing an ageing population and massive demands to deliver more in health services to deliberately seek to attack private health providers.

The attacks on general practice, private health insurance, ophthalmology, oncology and pathology started from the first days of Labor returning to office, and it is only just the start. Ideological attacks are dangerous because they are not made on sound health or economic grounds, and they have long term negative ramifications. If you are attacking the most productive parts of the sector simply because you do not agree with the private sector being involved in health, it leaves patients worse off and opens concerns about sovereign risk.

For example, the Pharmaceutical Benefits Scheme is one of the most efficient medicine supply schemes globally, and underpins the provision of world class medicines to Australian patients with an annual spend of about $8 billion. The system is not perfect, but it is a demonstration of an efficient pillar of the Australian health system. It is a demonstration of the involvement of the private sector in the delivery of health services, and up until now it has enjoyed bipartisan support.

The Government recently entered into a memorandum of understanding with the industry. The memorandum of understanding — aimed at providing certainty and stability — had only just been put to bed when the Gillard Government announced they would not be honouring the assessment process for listing medicines. Until now, companies went through a rigorous and independent assessment process undertaken by the Pharmaceutical Benefits Advisory Committee (‘PBAC’). Essentially, if the PBAC found it cost effective and therefore in the best interests of patients and taxpayers to have a medicine listed, and the cost was less than $10 million a year, the Minister listed the respective drug. In the case of a listing costing more than $10 million a year, Cabinet approval was required. Without any warning, the Government announced that even with a PBAC recommendation no new listings would be made without individual Cabinet approval. This announcement means every medicine listed will, for the first time, be based on a political decision.

The Minister has announced that seven medicines will initially be delayed despite being recommended for listing by the PBAC.

The Minister has stated that, “these medicines will be reconsidered for listing when circumstances permit”.

It is a strange set of priorities, with the Government trumpeting the hundreds of millions of dollars it is spending on bureaucracies and administrators under the guise of health reform whilst denying patients access to treatments for schizophrenia, chronic pain, lung disease, among others, because of the fiscal situation.

Over the next four years this Government will spend $477 million to establish Medicare Locals, $91 million for the Independent Hospital Pricing Authority, $118 million for the National Performance Authority, and an unspecified amount for the National Funding Authority. Without even considering the $20 billion that will be spent on interest payments, it is unconscionable that proven and efficient frontline clinical services and programs are being targeted for savings.

Although this decision got drowned out by the disastrous announcement on the Carbon Tax, it was an attack on the private sector and holds risk for investment by pharmaceutical companies. It opens up a real question around sovereign risk. Why would companies invest hundreds of thousands of dollars in an assessment process, only to get an approval by the independent authority that goes nowhere?

This was merely the latest attack on the provision of private health services.

The Government’s policy of GP Super Clinics is another attack on the provision of private medicine. At the heart of the Liberal Party’s approach to medicine are the principles of choice and fee for service which is increasingly becoming a clear point of difference with the Government’s approach.

Whilst only ten of the promised 64 ‘Super’ Clinics have been fully delivered, evidence of their detrimental impact on existing health services is already apparent.

The situation is undermining expansion of existing clinics in those areas and jeopardising further private investment in large comprehensive care clinics. It is offensive to see $650 million gifted to medical groups to establish general practice clinics to compete next door to existing privately owned practices.

Imagine the public outrage if the Government were to start funding a McDonald’s restaurant next to a family owned and funded McDonald’s restaurant.

Government funded clinics are being built in marginal seats across Australia, not in communities where there is market failure. There is no lack of capital to establish medical practices in metropolitan areas, and they are being built everyday at a fraction of the cost borne by the Federal Government. The Government’s direct attack on the provision of private medicine is offensive enough to free market principles, but it gets worse. The Government is also allowing special dispensation for Super Clinics to employ overseas trained doctors in areas where existing private practices are prohibited from doing so. This has resulted in patients leaving disadvantaged privately owned practices and going across the road to the ‘Super’ Clinic because waiting times are reduced due to the employment of overseas trained doctors.

The result is not more patients being seen, but simply General Practitioners across the country who have sunk their own capital into their small business having the value of their investment undermined by a Government determined to squeeze private medicine at every turn.

This Government’s attack on private General Practitioners does not stop at capital investment. Medicare Locals survived Gillard’s revision of Rudd’s version of reforms.

There is a conspicuous lack of detail about the full role of Medicare Locals and their intrusion on private practices, but they come at a substantial cost of $477 million.

The Prime Minister has stated she wants “to make sure that Medicare Locals over time become fund holding organisations”.

It is not specified, including in the Government’s Guidelines, what the extent of these fund-holding responsibilities will be and what are the implications for fee for service.

A direct shift away from fee for service will have serious implications for patient choice, clinical autonomy and private investment. A transition from fee for service to capitation payments has not been evaluated and subject to appropriate debate.

The Government’s imposition of its capitation payment for diabetes without full consultation or the development of a specific evidence-base is a concerning indication of what might be to come.

Taking decision making away from patients and clinicians is a major change to the core principles of our health care system — it should not be undertaken lightly and it should be subject to intense scrutiny and debate.

Appropriately, the Government eventually back-flipped and the measure will be trialled, but it is just another example of decisions based on ideology rather than a strong evidence-base.

Medicare Locals will also have a role in direct service delivery.

The discussion paper on governance and functions states that the “Medicare Locals’ initial role in direct service delivery will be based on the existing responsibilities and arrangements of Divisions of General Practice” and that “this may evolve over time”.

Again, either it is unknown or deliberately unspecified, the extent of Medicare Locals’ service delivery responsibilities.

Threats of Government involvement in direct service delivery at a GP level creates further uncertainty, will stymie private investment and disrupt existing patient-clinician relationships.

It is the wrong tactic for the Government to undermine existing GP services. Government policy should focus on leveraging established infrastructure rather than duplicating and competing for service delivery.

In the next parliamentary sitting week the Gillard Government will introduce legislation to make private health insurance more expensive for Australian families. Labor’s ideological hatred of private medicine runs no deeper than in the area of private health insurance. During the Keating years Labor ran private health insurance down to a coverage rate of only 34 per cent. The resurrection of private health during the Howard years paid a significant dividend with over ten million Australians now with private coverage, almost 45 per cent of the population.

One of the first moves of the Rudd Government was to attempt to curtail assistance to Australians privately insured. With the assistance of the Independents, the Opposition blocked the changes in the Senate. For the Gillard Government, private health insurance remains unfinished business. With the assistance of The Greens, the reductions in assistance to families who receive assistance under the thirty per cent rebate will see young and healthy policy holders leave their private cover. Like any insurance pool, once the low risk policy holders exit the pool — and the older patients and those in most need of expensive medical attention remain — premiums rise and we end up with a spiralling effect and the sorts of low coverage rates Labor was proud of under Graham Richardson.

In health, the debate over the next decade and beyond will be about productivity. The Rudd Government, and now the Gillard Government, are as economically reckless as the Whitlam Government — having squandered billions.

People in the health sector, once sympathetic to Labor, have been seething since not one dollar of the stimulus monies was spent in health. Their anger has only compounded with all the massive expectation of health reform, resulting in nothing tangible having been delivered or even put on the table. Health workers see the Government’s own position has been over-hyped, and an opportunity has been missed.

Labor’s ideological attack on private health services will put pressure on health budgets in an environment where the proportion of people over 65 is expected to nearly double by 2050 as is spending on health as a proportion of GDP. The most productive way of delivering health services is through the private system with appropriate investment into the public sector.

In Government, the Coalition supported investment into both the private and public sectors. In Australia, one cannot operate successfully without the other. That will be the approach of an Abbott Government.