Australian governments would be unwise to assume that their multi-billion dollar health funding package will solve the problems in health care.

The COAG package seems to be more about spending more money than the sort of serious reform that’s needed. It’s very largely going to mean more money to train people to work the same way as they’ve done for 150 years.

I see no agenda or strategy as yet to address the design and structural problems of what we loosely call our health “system”.

The major design problems that are yet to be addressed include:

An archaic workforce where demarcations and restrictive work practices abound. The health sector is the largest and fastest growing sector in the Australian economy, yet its work practices have been virtually unchanged since the 19th Century.

If there is not a 40% productivity improvement to be achieved over 10 years by breaking down professional barriers and in upskilling and multiskilling the health workforce, I would be very surprised.

We have about 300 nurse practitioners in Australia when we should have thousands. Ten per cent of normal births are delivered by midwives in Australia. In New Zealand it is 90%. The medical colleges place barriers on entry. The exemption of retail pharmacies from competition policy, results inevitably in high prices and restricted hours of service.

Quality and safety problems abound but are not addressed in a systematic and concerted manner. Each week we have about 200 avoidable deaths in our hospitals, and I estimate that the cost of avoidable mistakes in our hospitals is over $6billion pa.

The Federal Government provides a $6billion annual subsidy to the private health insurance industry when it would be much more efficient and equitable for the money to be paid by a single payer directly to hospitals both public and private, and to not-for-profits. The private health insurance industry has misled us that subsidising financial intermediaries is necessary to ensure private health delivery. Medicare and particularly Veterans’ Affairs have shown that it is more equitable and efficient to pay money directly to private providers rather than channel it through high-cost financial intermediaries.

A highly medicalised and sickness model of care. Medical services attract about 95% of government funding at the expense of prevention and public health. Payment on the basis of fee-for-service provides quite perverse incentives. More income is to be made out of treating sickness rather than keeping people well.

Inexplicable variations in clinical practice. Patients with the same condition will be treated very differently, depending on which hospitals or health care provider they seek. In the reviews that I chaired in NSW and SA, very large practice variations were very obvious and across a wide field with no discernible difference in health outcomes. Birth by Caesarean sections is probably the best-known example with some areas notorious for interventions well above the average rate. Medicare has enormous data about clinical practice patterns which it should disclose in the interests of both equity and efficiency.

The introduction of e-health has been glacial despite the potential benefits in patient satisfaction, reduced costs and fewer mistakes with modern information technology This is not a political or philosophical issue. It is an operational and administrative matter for which government officials must bear the chief responsibility.

There is not only fragmentation between commonwealth and state health programs, but within governments. What real analysis is made of the health benefits of say, spending another $1billion in Pharmaceutical Benefits Scheme rather than $1billion in Medical Benefits Schedule? I am not aware of any attempt to integrate these two very large programs to maximise health outcomes at lower cost, particularly in other parts of health care.

The numerous health programs are not focused on patient needs and health outcomes, but on historic producer inputs. In theory, governments have generally abandoned input based funding but not in health. A more integrated system would have programs not based on inputs (PBS, MBS, hospitals) but around classifications of users, e.g. by age, type of service (chronic/acute/occasional) or by region. None of these output classifications will be perfect, but they would be much better than our input-based focus.

Provider-based programs also give great power to the providers — doctors, drug companies, hospitals and the private health insurance industries to dominate the public discussion and the allocation of resources. The community and patients are largely excluded in major decisions affecting their health and the allocation of scarce health dollars. Those with lobbying power, the media-savvy, and the powerful skew resources in their interests.

A countervailing power of informed community members and patients is essential to break the power of vested interests who will concede incremental change but not structural change in the delivery of health services.

We have very hospital-centric services at the expense of primary care. According to the OECD figures of 2005, the number of acute hospital beds per 1000 of population was 3.5 in Australia, 3.1 in the UK, 2.9 in Canada and 2.2 in Sweden. The public pressure is always for more hospital beds, when we need programs to reduce the pressure on hospitals and treat people in the community or in their homes. At CPD we envisage a rollout of 200 primary health care clinics across Australia with each having an average 100,000 population catchment.

The centres would be as large as possible to provide wide professional multi-disciplinary coverage. These clinics are not only necessary in themselves, but they also offer the best way to address some of the major design problems I have referred to before, eg workforce, prevention and fragmentation. It is hard to reform existing institutions and practices, particularly in hospitals. It is hard to teach old dogs new tricks. A new architecture of primary care provides an opportunity to address long-standing and entrenched design and structural faults.

In short, there should be no more extra money for health without reform.

John Menadue AO is a board director of the Centre for Policy Development. He headed the Department of Prime Minister and Cabinet from 1974 to 1976, working for Prime Ministers Gough Whitlam and Malcolm Fraser. He has recently chaired major health reviews in NSW and SA.

Peter Fray

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