How should we provide health care – we’d like your views?

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Over 2001 and 2002 Roy J Romanow QC presided over a Royal Commission on the Future of Health Care in Canada.

Cynics say that governments never appoint commissions unless they know the answer in advance.

But the Romanow Commission did not align with the cynic’s mode. Romanow and his staff took on the task with open minds. They published research papers before any inquiries were commenced. They travelled widely, and received submissions from tens of thousands of Canadians, all of which were posted on the Web to encourage further discussion and debate.

While there were many specific ideas and proposals, Romanow found his basic task was to help Canadians articulate the values to underpin health care policy and the principles to guide program design.

Not surprisingly the Commission found strong support for the nation’s universal health care program.

At The Centre for Policy Development we believe such a process would be worthwhile in Australia. It would help embed our health care programs so that they are no longer changed precipitously at the whim of new administrations. And it would help us pull our now-disparate programs into an integrated system.

While we cannot replicate the Romanow Commission, we can ask readers and contributors to give their views.

At this stage, we are interested in the basic ways our health programs should be funded and delivered.

Without trying to constrain people’s ideas, we can see several options. Some may be unrealistic but we include them below to make sure we are covering the whole field. They are set out roughly in order of their call on public funding. (An ordering of their total cost would be very different.)

(1) Laissez faire – leave it to the market with government intervention limited to issues such as safety and accreditation. Health care would be considered to be similar to other goods – food, clothes, hardware. Some would suggest that even private insurance should be prohibited, because it interferes with market signals. Although no developed country leaves its entire health care system to an unregulated market, this is essentially the situation now for aspects of health care such as non-prescription pharmaceuticals and some ancillary services. The arguments in favour of such a system are that incomes, even of the poorest, have risen over the last 50 years, and that many decisions that affect our health (such as diet, and exercise) are already subject to personal decisions without government intervention. The main argument against such a system is that the poorest are often those with the greatest health needs, and that even reasonably well-off people can be devastated by high health care bills.

(2) Correction of market failure – as for laissez faire, but certain ‘public goods’ are provided by government – vaccinations, education etc. The benefits of vaccinations accrue not only to the recipient, but more widely to the whole community. Public education benefits all. But strictly ‘private’ services are left to the market. Competition policy is brought to bear on areas subject to possible price fixing or supply constraints. Such a policy is about using government interventions to ensure markets work properly.

(3) Welfare – leave it to the market, but provide a safety net for the poor and those with high needs. Possibly public hospitals may be restricted to those who satisfy means tests. We have elements of such welfare in many of our present programs, including the PBS and Medicare safety nets. Those who can afford to look after themselves should do so. Those who oppose such a system point to the deterioration which occurs when the well-off have a system of their own.

(4) Private insurance – use private mechanisms to spread our risk. People may choose to take more or less insurance. Private insurance may be encouraged through subsidies. Under a US-style model, private insurance would be the dominant form of funding, those without private insurance would have a basic, parsimonious cover. There are more restricted private insurance models, such as the one operating in Australia. Proponents of private insurance suggest that it is better to use private mechanisms rather than taxes to spread health care costs. Some also suggest that private insurance ensures survival of private services. Opponents point to the high administrative costs of private insurance, and its inability to control overuse of services.

(5) Universal public insurance – we use the resources of the state to spread our risk. This can involve lower administrative cost and better control of cost and utilization than private insurance (reduction of ‘moral hazard’). Co-payments can be used to sustain some market discipline and to relieve budgetary pressure. Funding can be structured so as to achieve equity outcomes, for example with relief from co-payments for those with high needs or limited means.

(6) Universal free provision – health care is free to all, seen as a ‘solidarity’ good – something we choose to share. No-co payments are collected. Our public hospitals operate on this basis, as did programs such as Medicare bulk-billing in their earlier manifestations. Demand for services would be high, and there would be some combination of queuing and expansion of resources to cater for this increased demand.

Different arrangements impose different costs. A system heavily reliant on private insurance (4) may be able to contain budgetary costs, but would probably be the most expensive of all options in terms of total costs. An unbounded ‘free’ system (6) may impose high budgetary costs, while imposing very low private costs.

The imposition of those costs differs. Tax-funded systems impose higher absolute and proportionate costs on those with more means, even though they are not the heaviest uses of health care. With market-based solutions costs fall on users, without regard to means; these include the costs of preventable ill-health among those who cannot afford treatment.

We would like your response – this could be a ‘vote’ for one of the above, a few lines of comment, other options, or an article in its own right.

Once we have collated your responses we will go to our readers and contributors again, and ask more specific questions – such as whether public funding and delivery should be federal or state, and where our priorities should be (mental health, aboriginal health etc).

The Centre for Policy Development Policy Advisory Group

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