Medicare Select – Entrenching Inequality in Health Care? | DISCUSSION PAPER

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In its Final Report, the National Health and Hospital Reform Commission made a number of recommendations for change to Australia’s health policies and programs.  Some of these are very worthwhile but one of its main proposals, ‘Medicare Select’ is decidedly less so.

This proposal would involve all Australians becoming enrolled in a government-funded health care plan, but with the option of moving to an individual (private) ‘plan’. Government funding would be directed to the private plan on a per capita basis, and the private plan could involve extra services funded by private insurers. The ‘plans’ would be managed by private corporations or not-for-profit organisations.

What does the Commission mean by a plan? Many Australians have a health care plan developed for them by their general practitioner, to address their particular health issues at a given time. This is not what the Commission is talking about. The Commission’s ‘plans’ are not so much about managing your health, as about managing the cost of providing you with health services.

‘Plans would negotiate contracts with public or private health service providers that would provide services to members. Providers would compete for contracts based on price and quality of service. People would be free to choose public or private health service providers as long as the provider had a contract with their plan.’
The language the Commission has used to describe Medicare Select is clearly referring to ‘managed care’ – systems of financing and delivering health care to enrollees in programs that are:

‘…intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on inpatient admissions and lengths of stay; the establishment of cost-sharing incentives for outpatient surgery; selective contracting with health care providers; and the intensive management of high-cost health care cases. The programs may be provided in a variety of settings.’
In the USA managed care is delivered both through Health Maintenance Organisations (HMOs) (where care is provided only through those hospitals, doctors, and other providers with which the HMO has a contract) and Preferred Provider Organisations (where providers who have covenanted with an insurer or a third-party administrator, provide health care at reduced rates to the insurer’s or administrator’s clients).

According to the Parliamentary Library, ‘Medicare Select most closely resembles the Israeli and Dutch Social Health Insurance (SHI) schemes. In these schemes: funds are collected and distributed centrally by the state rather than paid directly to health plans; it is compulsory to be a member of an SHI plan; people are able to change health plans; and voluntary supplemental insurance is available for an additional premium.’

While ‘Medicare Select’, as presented, may have superficial appeal, it has several shortcomings:

  • The primary shortcoming of ‘Medicare Select’ is that it appears to have been designed to secure an ongoing major role for private insurers, who will continue to impose an excessive bureaucratic and financial overhead on health care, without adding commensurate value.
  • Secondly, it is based on a misunderstanding of the role of ‘choice’ and planning in markets for health care, for we cannot know what our future health care needs will be.
  • Thirdly, it is likely to result in cost escalation, to the benefit of providers; this is an outcome of the intrinsic moral hazard and weak purchasing power associated with private insurance.
  • Fourthly, it makes it comparatively easier for a government to progressively redefine Medicare, the government program, as a bare bones program for the poor or needy, thus entrenching a two-tier health system.

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