Directions for health reform in Australia

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Last October Andrew Podger delivered a comprehensive paper to the Productivity Commission Roundtable on Productive Reform in a Federal System. The paper describes the nature of health systems, considers the successes and failures of the Australian system, and proposes directions for reform in the short and long term.

Podger reminds us that Australia’s health system performs well in comparison to other countries on a number of indicators including life expectancy, overall system effectiveness and waiting times for emergency departments and elective surgery. Our challenges lie in addressing the dismal state of Indigenous health in this country and managing the fact that people are living much longer and are requiring ongoing care. However, Podger acknowledges that we may have ‘squeezed the system too far’ by being too slow in responding to increased demand and failing to constrain demand by more appropriate care outside of hospital for those most at risk. Evidence of this can be seen in the recent increases in waiting times for emergency departments and occupancy levels and delay for those seeking elective surgery. Podger also looks at the financial side of the health system and the efficiency of the system warning us that public spending on health is expected to grow from 6% to 10% of GDP over the next 40 years.

Based on his analysis, Podger identifies four key structural problems in Australia’s health system: lack of patient oriented care; allocative efficiency; poor use of information technology; and poor use of competition. Four solutions are proposed and discussed:
– States having full responsibility similar to the Canadian approach
– Commonwealth having full financial responsibility
– Commonwealth/State pooling which Victoria has been promoting
– Managed competition
Podger favours a full Commonwealth takeover of the financial responsibility of the health system. Although it would involve costs and a complex and lengthy transition, it is a feasible option. To achieve gains in performance it would be necessary to establish regional purchasers and regional budget arrangements, as well as finding ways to improve primary care.

Recognising that a Commonwealth financial takeover is a bold step, Podger proposes several incremental changes that could be pursued that would be needed anyway if a takeover were to occur. First, there is a need to strengthen general practice and improve its links to allied healthcare, so as to improve care planning for the chronically ill and frail aged and play a larger role in prevention through assessments and advice for those most at risk. Strengthening primary care for Indigenous communities is also essential. Secondly, electronic health records and other IT support should continue to be a priority over the next few years. Thirdly, there should be small steps made towards ‘single funder, funding-follows patient approaches’ for the frail aged. This would make it easier for a consistent, patient oriented approach to be provided and could speed up the reform agenda for community care and ageing-in-place. Fourthly, further and targeted investments should be made into preventive health in areas such as smoking, obesity, nutrition and physical activity. Finally, additional energy should be directed to improving competition in acute acre and clarifying a sustainable role for private health insurance in our system.

The incremental changes that Podger proposes are intended to provide clearer direction to health reform and would also support serious consideration of a Commonwealth takeover in the not-too-distant future.

Download the full paper here.

The Centre for Policy Development

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