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Address to the consumer health forum



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SPEECH NOTES FOR THE HONOURABLE BRIAN HOWE, HP

DEPUTY PRIME MINISTER AND

MINISTER FOR HEALTH, HOUSING AND COMMUNITY SERVICES

OPENING ADDRESS TO THE CONSUMER HEALTH FORUM

"PAYING FOR HEALTH CARE:

CONSUMERS AND THE AUSTRALIAN HEALTH CARE SYSTEM".

10.00AM

THURSDAY 10 DECEMBER 1992

UNIVERSITY HOUSE, AUSTRALIAN NATIONAL UNIVERSITY

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

INTRODUCTION

Ladies and gentlemen, I am pleased to be here this morning to make the opening address to this conference. The theme - "Paying for Health Care" - is the subject of of heated debate in this country at the moment.

I would like to acknowledge the important contribution

made to the health debate by groups such as the Consumer Health Forum.

Many of the interest groups involved in the debate have access to very considerable resources with which to express their views. This is not the case for consumers. It is important that we are reminded that it is people and their health and wellbeing that is most fundamental.

While it is inevitable that we should focus on health financing and economics, we must not lose sight of the fact that finance is no more than the necessary means to achieve our purpose of improving the health status of all Australians.

(HEALTH FINANCING SYSTEMS AND MEDICARE)

Yet these arrangements - and in particular health

insurance systems - have a profound impact on the quality of each individual's life. That is, the insurance systems we as a society put in place to reduce or eliminate the financial costs of medical and hospital services for

individuals.

Ultimately, the type of health care system we have and

how it is financed depends on the values that we, as a nation, attach to the pursuit of certain health policy

objectives such as equity, efficiency, improved health outcomes, consumer choice, provider autonomy and consumer satisfaction.

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Medicare - introduced by Labor in 1984 - is quite simply the fairest and best health financing system Australia has had. In short, Medicare is one of the Government's success stories - and more than 70 per cent of Australians agree. So what does Medicare do for Australians?

. Medicare provides universal access to health services based on need;

. Medicare is based on the principles of universality, access, equity, efficiency and simplicity;

. Medicare finances health care on an equitable basis - an individual contributes on the basis of their income;

. Medicare has successfully constrained health costs at around 8 per cent of GDP. Compare this with the United States which spends nearly 14 per cent of GDP yet denies access to basic health services to many millions of Americans;

, Medicare has maintained choice in the Australian system. Consumers have the right to be treated publicly or they can elect private treatment.

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And it is by these fundamental principles that we should judge our health system.

Important as financial issues are, they are not an end in themselves. This is why I am concerned to ensure that the principles of Medicare are seen as national principles, fundamental to our health care system at Commonwealth and State levels, effectively belonging to all Australians.

Having consistent objectives in health across the country seems to me to be a fair expression of what it means to be one nation.

It is important particularly at this time that we do not take Medicare for granted.

If people care about getting access to affordable, quality health care when they need it, they need to understand the alternatives that are being proposed, particularly by elements of the medical profession and the Federal Coalition.

Undeniably, health care has changed for the better under

Medicare, particularly from the point of view of health consumers. Medicare has delivered quality health care to

all Australians at an affordable price.

Australians recognise this - and so does the Coalition. For them it has been a tragedy that universal health insurance has now become so entrenched. Even they know that they must speak of the need to preserve it in some

form.

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However, the Medicare they propose bears no relation to the current system.

Some may have hoped that in the circumstances, the Conservatives might have moved to a position of constructive criticism and provided some suggestions as

to how we could deal with some of the pressures in the national health system within the context of the overall principles of Medicare.

This has clearly not been the case. FightbackI illustrates that the Conservatives' agenda is, as ever, to advance the interests of the same old groups - the Australian Medical Association, the private insurance funds and the Liberal Party. The public interest once again is to be sacrificed on the alter of private as opposed to public interest.

Let me hasten to say that of course there is considerable room within the Australian health care system for private doctors, hospitals, health care services and for private

insurance.

Indeeed private health insurance contributes $2.8 billion

a year or 11.7 per cent of the nation's health expenditure. To put this in perspective, the Commonwealth provides more than $13 billion a year.

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The Coalition is therefore not only proposing to have "the tail wag the dog. " They want to make that tail

larger.

In terms of private health insurance, the Commonwealth provides an indirect subsidy of some $1.5 billion a year. This includes around $700 million a year under the Medicare Benefits Scheme for in-hospital private patients and some $829 million to subsidise bddays for privately insured patients in public hospitals.

Because Medicare provides universal coverage, private insurers are able to keep premiums well below the true cost of care for their privately insured patients.

The Commonwealth also underwrites the costs of many of the ancillary health services that need to be provided in a modern health system. We need to do that in a way which contains overall costs as well as having an eye to the viability of the services being provided.

FIGHTBACK!

The Coalition's Fightback! health policy presents a fundamental shift towards private health care at the expense of the public sector.

While it is impossible to predict the full impact of the policy because of lack of detail, commentators are unanimous on one point. Fightback! would significantly increase health costs and re-introduce a two class health

system.

And who would pay? Not the Federal Government. The burden would fall on consumers.

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Analysis by the Departments of Finance and Health,

Housing and Community Services has estimated that Fightback! would blow-out health costs by $2 billion a year, add 0.7 per cent to the CPI.

My Department has calculated that the average Australian family would be $22 a week or more than $1,000 a year worse off.

Fightback! would offer tax credits to families on $30,000 or less a year to encourage them to purchase private health insurance and penalise families earning $45,000 or more which do not have private cover.

For a family on an income between $20,000 and $30,000 a year, Fightback! offers a tax credit of $200 a year. But the cost of basic family cover is more than $800 a year. Should the family purchase private health insurance, they would be $600 a year worse off. And remember this is basic cover, not top cover which pays for treatment in a private hospital.

Fightback! would also dramatically change arrangements

for visits to the family GP.

. Bulk billing would be abolished for 13.5 million Australians; bills would have to be paid upfront before obtaining a rebate;

. the Medicare rebate would be cut from 85 to 75 per cent;

. and gap insurance would be allowed for up to 85 per cent of the AMA Schedule fee. As you all know, the AMA Schedule is some 30 to 40 per cent higher than the Medicare Benefits Schedule.

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Έ or the average family, this means the extra costs of co-payments and the need to seriously consider gap insurance to minimise the costs they would face.

It also means that the upfront cost of going to the doctor for most people would increase from zero to

$31.00.

The Fightback message is clear: Health costs will soar as a result of underwriting doctors' fees to the AMA Schedule;

Medicare has been remarkably effective in controlling health costs. It imposes a crucial restraint by encouraging doctors to stick at or close to the Medicare Benefits Schedule fees.

Medicare ensures that doctors do not charge more than 85 per cent of the Schedule for any service which is directly billed. More than 70 per cent of GP services are direct billed - meaning the patient incurs no out-of-pocket cost.

Up to 76 per cent of all medical services are being delivered at or below the Medicare Schedule. The result is control over health costs.

In administative terms, Medicare is also much more efficient and less costly than a diverse private system involving a multiplicity of payment and collection agencies.

Private health funds spend up to 15% of their revenue on administration.

Medicare spends less than 4%.

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Listening to Joseph White on radio yesterday, I was staggered to hear that 1% of all GDP in the USA is spent on health fund administration.

Private health funds do not have an exemplary record in controlling costs. They have tended simply to increase their premiums - and less often their benefits - whenever

private hospitals raise their fees.

Ken Judge, director of Britain's King's Fund Institute, the health policy analysis division of the King's Fund, visited Australia in April and wsaid he was surprised by the "moribund state of the Australian health insurance

industry".

He remarked that the industry seemed "incredibly uncompetitive and unimaginative" and that there "isn't actually much choice on offer to the Australian people about the kinds of health coverage they can buy. "

Professor Stephen Leeder has commented that the rationale for the proposed regression to multiple private insurers - other than winning the support of the private health insurance industry - is very unclear.

So if Dr Hewson doesn't choose to change his health policy over the next ten days, he would be well advised

think about how to control costs.

I suspect the Coalition could yet discover a new friend in the Trade Practices Commission.

Whatever the Coalition's motives - consumers should rightly be concerned about the impact of the Fightback!

policy.

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Let me list a few of my concerns.

I am very concerned about legitimising a fee structure based on the AMA Schedule with all of the attendant consequences of raising the cost of health in this country by 30 or 40 per cent. It is hard to believe that such a move could do anything more than massively blow-out health costs.

Dr John Deeble has estimated that the Fightback! health policy would cost Australians an extra $1.42 billion a year - doctors would reap $1 billion of that total as a result of higher fees. He claims that the Coalition health policy's extraordinary generosity towards doctors is a "blatant rewarding of political support", which

"sits very ill within a policy portrayed as based on rationality, efficiency and the elimination of restrictive practice gains".

Dr Gwen Gray describes the Fightback! policy as politically perilous, the most plausible explanation for which she claims "seems to be an ideological commitment to small government, private enterprise and individual

self-help".

Yet the US, "home of support for the free market", is seemingly in the throws of abandoning an exclusively employer-financed, entirely private-insurance, market-based solution to health-care access and

financing.

And is it any wonder? As Jeffrey Richardson, Professor of Health Economics at Monash University, points out, the US health system — devoid of price controls and run by the medical profession, private hospitals and drug firms —

leaves 40 million citizens without health insurance, one million without essential care each year and creates a health bill about 50 per cent higher than Australia's.

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If the Coalition succeeds in achieving their aim of a greatly expanded private sector, Australia will be heading down the US road at the same time as the US is adopting a national health insurance scheme similar to

Medicare.

It appears that the Coalition is intent on taking an incredible amount of resources and throwing them into a bottomless pit. What happens to that money? How will the Coalition Health Spokesperson, Dr Woods, ensure that it does not all end up in the pockets of doctors, private health insurers and private hospital operators? Very

simply, he can't.

It is unlikely that a single Australian would be better off; would have better access to services; or would enjoy a better quality of services than they do today for far less cost.

The fact that much of this increased cost structure is going to be picked up by private insurance funds

certainly does not have me sleeping more easily because I know that it can only mean higher costs for families and for taxpayers. I might be more comfortable if I thought there was a solid policy rationale.

What is particularly staggering is that this "gift" to the AMA is totally at odds with the Coalition's

industrial relations policy.

What it also reflects is a simplistic approach to health

policy. It is no more than a financing solution.

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In contrast the this Government has instituted comprehensive reforms in the area of general practice which have been warmly welcomed by the Royal Australian College of General Practitioners, the Doctors Reform Society and other key professional groups. These are significant because they are helping to build a strong basis for the reform of primary health care.

It shows that the Government is not willing to see a decline in the status of general practice. Primary health care must become more important in the future rather than less important.

That is the most important policy objective over the next five year.

Rather than repeat the rhetoric about GPs being gatekeepers, we have tried to see how we can restore the central role of doctors in a primary care network that links medical practitioners with their ancilliary colleagues at the community level but also with their colleagues in the hospital sector.

This Government is tackling difficult issues such as doctor numbers; improving the status of GPs; and linking GPs back into the hospital system and with other ancilliary health workers.

The Coalition simply has no agenda for dealing with primary health care. This fact has even been acknowleged by the AMA. Fightback! contains a health financing system that is geared towards rewarding a small group of vested interests at the expense of comprehensive and necessary reforms to primary health care.

This Government is undertaking the most comprehensive

structural changes in health care in Australia's history. It is imperative that our health care system is able to

cope with the changing demands of a growing and ageing

population.

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MEDICARE AGREEMENTS

No one here today could have failed to notice the debate that is raging about hospital funding and reforms in this country. The Commonwealth is in the final phase of negotiating new five-year Medicare Agreements covering hospital funding for the States and Territories which come into force on July 1, next year.

These Agreements ask the States and Territories to undertake structural reform in the hospital system and implement complementary legislation to affirm the principles of Medicare in return for an extra $1.6 billion in funding over six years. That's on top of a

fully indexed hospital funding grant of $4 billion a year to States and Territories.

In essence, the Commonwealth wants to ensure that no public hospital is disadvantaged because it takes on extra public patients. Public patients should get access to public hospitals on the basis of need, not insurance status or ability to pay. The bonus pool arrangements

will reward States that take on extra public patients and penalise those that don't.

This debate is about access.

The system has tended to provide incentives for hospitals to give preference to private patients over public

patients. Under the new Medicare Agreements, public and private patients will be treated in a neutral way, if you

like. Access will be on the basis of clinical need.

One most seriously question the resolve of NSW and Victoria to actually improve public access.

NSW and Victoria should also consider seriously what the Coalition is offering.

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The Coalition would cut at least $1.3 billion a year in direct funding to public hospitals. Instead it would direct $1.4 billion a year to private health insurers through subsidising private health insurance and through a direct grant to the reinsurance pool. The Coalition would also slice a five per cent off general revenue

grants to the States - worth $719 million in 1991/92 dollars according to Fightback! - further restricting the States' ability to provide public hospital services.

And how would hospitals calculate their budgets with such an ad hoc approach to funding? Today I am issuing a challenge to Dr Woods to spell out in detail how much he would fund the States. I know that he won't respond to that challenge.

I have met with Conservative Health Minsiters around the country and I can tell you that they are not exactly, to quote one minister, "rosy-eyed" about Fightback!. They know they would be worse off.

Again we see the Coalition's solution is purely linked to

financing.

In contrast, the Federal Government wants real reform.

We want to build on, not destroy, our achievements since

1984.

Two years ago, the Australian Health Ministers Conference set up the National Health Strategy to look at ways of making our health system more efficient and effective.

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The Strategy released a detailed issues paper on hospitals which included a raft of core reforms required to meet the needs of Australians into the next century. A significant number of those reforms were endorsed by all Health Ministers at the April Health Ministers Conference.

This year's Budget marks a commitment to implementing those core reforms.

The Budget included:

. $118 million to improve capital investment and $70 million over two years to reduce waiting times for elective surgery.

. continuing the development of the casemix program so that Australia has a system where hospitals are funded on the basis of what they actually do and not on the basis of historical entitlement.

. funding the piloting of Area Health Management Models to demonstrate how population-based planning and funding can lead to improved continuity of care and to show how the needs of local communities can

be more effectively met.

, funding Demonstration Projects to investigate ways of devolving budgets within hospitals to clinical units in order to support a more cost effective use of resources.

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These reforms are based on detailed research and a

long-term approach to the changing health needs of this country. The Strategy has found that there are pressures in the hospital system. There is a need for further structural reform and improved efficiency. That is what our reforms are designed to achieve.

Talk of crisis persists and waiting lists for elective surgery are usually cited as evidence of Medicare's failings.

Both the Coalition and the AMA have recently indulged in shroud waving exercises to try and frighten Australians about waiting lists for elective surgery.

Let me stress that it is currently impossible to quantify the number of people on waiting lists because there is no uniform collection of data or management of waiting lists.

Let's assume that some 60,000 people are on waiting lists - that represents two per cent of the 2.85 million

admissions to public hospitals in 1990 - 91, or about seven days work.

Some of those people may be on more than one list; some are no longer waiting as their operation has been carried out at another hospital; some are not actually waiting but have booked in advance; in certain speciality areas

such as opthamology and orthopaedics there is a shortage of doctors.

There is a need to lift the veil off waiting lists.

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The Federal Government is providing $70 million over two years to develop better ways of managing waiting lists. These include steps to ensure that a patient's place in the queue is decided on the basis of clinical urgency and not on whether they are privately insured.

People on waiting lists must be treated solely on the basis of need. A national system of data collection is being developed so that we can accurately measure waiting times and lists and develop better management strategies.

There is nothing in the Coalition's policy that would lead a rational person to believe it could reduce waiting times. The Coalition claims that greater reliance on the private sector and contracting out will result in increased efficiency and shorter waiting lists. But the reforms they allude to have already been carried out within the hopital sector. That's barring contracting out on a wide scale. But recent studies have dismissed the Coalition's claims that they could achieve efficiencies of 15 to 20 per cent by contracting out. Even five per cent is viewed as optimistic.

Under Medicare, the public hospital system has met the challenge of increased demand extremely well so far.

Over the past decade there has been a 30 per cent increase in demand for hospital services as measured by hospital admissions.

Productivity improvements have assisted in meeting the demand. According to the National Health Strategy's Issues Paper No 2, all evidence suggests considerable

improvements in hospital productivity over the past decade as measured by declining lengths of stay and declining real costs per admission.

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However, as I mentioned earlier, studies suggest that there is scope for further improvements in hospital productivity.

Negotiation of the new Medicare Hospital Agreements with the States are an essential part of implementing the necessary reforms. The new Agreements will be more than a "hospitals" agreement. They will provide the framework for relations between governments and reforms across the full spectrum of health and aged care strategies.

You will be aware that some States are claiming that they will be worse off under the new Agreements. As I have said on a number of occasions, this is simply not the case.

The new Agreements will provide extra funding of $1.6 billion over six years, with $280 million provided in 1993-94.

This represents a seven per cent increase in funding in the first year. The grants will continue to be indexed to provide enhanced real growth. As a result of the

additional funding, real growth from 1992-93 to 1997-98 will be in the order of three per cent per annum.

I repeat that all States will be better off under the new

Agreements. The Commonwealth made a commitment in the August Budget that all States and Territories would receive a substantial net gain through a combination of the bonus pool for public patients, the incentive package

for hospital reform and the redistribution of Financial Assistance Grants.

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For some States to suggest they will be worse off is, at best, misleading and at worst, deliberately dishonest.

CONCLUSION

In sum, Australia's health care system is not in crisis. Rather it is in the process of transforming into a system that better serves the interests of consumers rather than doctors and other vested interests.

Through Medicare, we are re-shaping our health care system so that it better serves the interests of health care consumers - and not solely health care providers and the medical profession etc. Groups like the Consumer Health Forum obviously have a crucial role in developing such a system.

Labor's vision of health care - universal access to quality care for all Australians - is becoming a reality and groups such as the Consumer Health Forum are an integral part of this process.

Many of the themes expressed in my address today are taken from the second publication in the "Poles Apart" series on the regressive effects of Dr Hewson's

Fightback! package.

"Fightback! Why it's Bad for Your Health", draws upon the many analyses and commentaries of Dr Hewson's Health policy produced during the past year. It is a very thoughfully prepared document which is published by the ALP's National Secretariat.

In launching "Fightback! Why it's Bad for Your Health", I commend the book to all those who want to fight for

Medicare and to fight for equity in this nation's health services.