Rudd’s health reforms avoid the real problem

Kevin Rudd says he has a “positive” plan to fix health care. Many people have welcomed his plan for a takeover of public hospitals by the federal government, desperate for something to be done about the state of the health system.
But Rudd’s plans continue the economic rationalist model that has seen our health system deteriorate, and fail to address the basic need for more funding in the system. Hospitals will receive no new funding for four years under the plan—despite rising costs every year.
At the core of his plan is a new funding formula, designed to deliver “efficiencies” in the sector. This is code for cost cutting. The “case-mix” formula, under which hospitals would be allocated a set amount of funding for each operation, was first introduced by notorious Liberal Premier Jeff Kennett in Victoria.The public wants action taken to fix up hospitals, but Rudd has avoided proper funding as a solution
It was claimed as a success for driving down hospital costs in the state. How? Through forcing hospitals to cancel surgery, leaving patients waiting months for operations.
When Latrobe regional hospital ran through its budget in 2008, it responded by cancelling 500 hours of elective surgery and closing 20 beds, according to an investigation by Stateline.
Peter Craighead, CEO of Latrobe regional hospital in Victoria told the program that the funding formula meant, “Our revenue’s increased by about 20 per cent over the last four years, but our costs have gone up by 32 per cent.” As he put it, “A number of our procedures actually cost more than what we get funded for.”
Dr Doug Travis, a Victorian urologist who has worked in the system for 30 years told The Age, “People have to accept that the hospital system is not meeting demand. We haven’t got enough facilities, doctors and nurses to deliver the healthcare the public expect and want. That’s the major crux of the problem and there’s only one solution for that and that is increasing services. That is going to cost money.”
But this is precisely the problem that Rudd has avoided in delaying any funding increases.
There are inefficiencies in the health system. Doctors have long complained that cost-cutting across the system ends up costing hospitals more in the long run. According to Con Costa of the Doctors Reform Society, “Policies that make short term and minor savings at one level prove to be enormously expensive to the system as a whole”.
As he explained “Australians are too often treated by their GP by prescription, blood test or radiological investigation—at very high cost to the system… Thousands of men are now having a simple blood test for prostate disease—called Prostatic Specific Antigen. The test is not reliable… Nevertheless, it has taken off and now de rigeur for diagnosing prostate disease amongst Australian GPs. [It] seems it’s much quicker to order a simple blood test than to wait for a patient to undress and perform an uncomfortable rectal examination. And time is of the essence for Australia’s GPs—where the waiting room is often over-crowded”.
But Rudd’s plan has ignored the need for a plan to integrate the total health system and eliminate these problems. This is because it would mean increasing the bulk-billing rate the government pays to GPs and undoing the privatisation of nursing homes.

Private health
Perhaps most alarmingly, Rudd has failed to target the private hospital system, which leaches money away from the public system and helps inflate hospital fees. As Ian McAuley noted in New Matilda, “private hospitals have their privileged stream of funding through heavily subsidised private insurance”.
The private health insurance rebate, paid by taxpayers, will remain at $3 billion a year, even if it becomes means-tested. This is money sucked out of the public system that the 56 per cent of the population that cannot afford private health insurance relies on.
Private health insurance exists to enable those that can afford it to skip the queue in the public system for treatment. But the result of this is to force up hospital bills across the board, because doctors can charge more in the private system.
The government claimed that offering the rebate would reduce its health costs by encouraging more people to take up private health insurance.
But as the architect of Medicare John Deeble has said, “Less than half of the [money] spent each year on the private health insurance rebate actually goes on hospital care and the same sum would have transformed public hospitals.”
The private health rebate is nothing more than a subsidy for the rich—and one that undermines the idea of an equitable health system where everyone gets the same treatment.

By James Supple


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  1. Everybody with private health insurance also pays the Medicare levy when they pay their taxes. They should then have some say how their health taxes should be spent. Some people choose to pay for private health cover instead of using their disposable income on luxuries such as holidays, alcohol and poker machines.Its amazing how many aged pensioners and low income earners who actually make a choice to spend their limited income on health insurance. Who would deny them the private health rebate! These are the same sensible people who insure their homes and belongings and see paying health insurance as no different. Did the architect of Medicare not tell you that Medicare was introduced as “universal health care for all!”

    The cost of health care has dramatically increased since the inception of Medicare but also people’s expectation of the health care system has risen dramatically.

    After 30 years in the health industry I have come to the conclusion that when health services are provided to people free of charge there is the perception that that service has no monetary value when in fact the opposite is true. Just look how the outlook changed when pharmacist started putting the real cost of the medication on precriptions dispensed through the PBS.

    Australians need to wake up to themselves and realise that while we dont have the perfect health system we are way ahead of many other countries!

  2. Encouraging private health is a grossly inefficient way to spend government health money. Private companies cream off on average 25 per cent of total costs for administration and advertising, and more still in profit. This is money that never finds its way into spending on hospitals.

    While of course there are some lower income earners who feel they need private health insurance, the fact is that disproportionately it is taken out by the rich. Increasing taxes on the rich and using them to fund hospitals while abolishing private health insurance would probably end up saving them money, and put more money into health.

    Worse, the rebate and the push to get more people into private health has simply encouraged doctors in private hospitals to charge more–pushing up costs for everyone. According to Tim Woodruff of the Doctors Reform Society, “In 2001 a study in the Medical Journal of Australia showed that the charges for having the coronary arteries investigated in a private hospital after a heart attack were twice that of the costs in the co-located public institution, using the same facilities.”

    It has also allowed insurance companies to continually increase their fees at much higher rates than inflation.

    You say that when people receive free cover they do not appreciate its monetary value. Firstly I would question whether people’s health and often their lives should be valued primarily in monetary terms. But that fact is studies has shown that private hospitals encourage doctors to perform unnecessary procedures which waste money. So it would actually be more “economically efficient” to abolish private health and put the money into the public system.

    The claim about aged pensioners taking out private health insurance is misleading as they are they group with the lowest take up of private health cover of any age group. In addition they are also the group the use hospitals the most–which shows again how ridiculous encouraging private health insurance is


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