An edited version of a speech delivered by John Menadue, a director of the Centre for Policy Development, to the Victorian Healthcare Association Annual Conference this morning. Full version is here.
Medicare is at risk if the government adopts the National Health and Hospital Reform Commission’s proposals on Denticare and Medicare Select.
These proposals would put private health insurance in a dominant position despite the clear and unmistakable evidence around the world that countries with high levels of private health insurance do not effectively control costs.
The commission proposes that under Denticare “everyone would have the choice of getting basic dental services … paid for by Denticare either through a private health insurance plan or through public dental services.” Denticare would be funded by an increase in the Medicare levy of 0.75% of taxable income ($3.9 billion).
This is a blatant make-work proposal on behalf of financial intermediaries. Part of the funds from the Denticare levy collected through taxation would be churned a second time through private health insurance companies that have administrative costs, including profit margins, of about 15%. This is three times the administrative cost of Medicare.
The most sensible course to fund dental services would be to extend Medicare to particular dental services in the same way that Medicare funds medical services.
The other leg-up for private health insurance that the commission suggests is Medicare Select. The commission seemingly has deliberately allowed Medicare Select to be projected as a firm proposal when on closer examination, it seems that it is only a suggestion that requires further study.
Or at least that is what one commissioner, Stephen Duckett, said. In Crikey on July 31, 09, he said: “The Reform Commission did not recommend Medicare Select; it recommended examining the issue.” I can understand why Duckett, who knows more about health policy than most, would have reservations about Medicare Select.
In any event, the ambiguity seems to have worked a treat, designed to put the issue into the public domain without too much ownership by the insurance industry. Medicare Select is off and running.
The commission has drawn selectively on overseas experience to support its case for Medicare Select. Ignoring countries as diverse and as successful in healthcare as the Nordics, Taiwan, Japan, UK and New Zealand, the commission is obviously impressed with the Netherlands as an example of “social insurance”.
A few years ago the Netherlands government introduced compulsory private insurance. It is still early to make a final assessment, but the early signs are ominous. It is a weak reed for the commission to rely on.
The record of private health insurance around the world raises alarm bells. Our experience is no different. The $5 billion corporate subsidy to PHI is one of the worst pieces of public policy it is possible to imagine.
Yet the commission wants to use more public money to extend its role. The private health insurance industry relies on lobbying and political pressure rather than debate or logic to defend its interests. I am yet to find a senior official in Canberra who will privately defend the government’s support of private health insurance.
If people want to buy a Mercedes Benz or private health insurance, that is their right, but why should the community subsidise them to jump to the top of the queue, undermine the public universal system and push up costs?
The Australian auto industry receives a $6 billion subsidy over four years. The health insurance intermediaries get $5 billion per annum in government support in Australia. (The $5 billion includes the $4 billion subsidy, takes into account the persistent under-valuation of the cost of the subsidy and the cost to revenue of the taxation rebate.)
Private health insurance, through gap insurance, has facilitated the biggest increase in Australian specialist doctors’ fees in a quarter of a century. Specialists now charge on average 50% above the Medicare scheduled fee. It is hard to find a better illustration of how private health insurance fuels increases in costs.
It is suggested that managed competition in health insurance will improve markets and choice. But what we need most in Australia is competition in the delivery of health services, particularly among doctors and pharmacists who benefit from widespread restrictive practices and closed shops.
The Rudd government should quickly and clearly reject the commission’s recommendations on Denticare and Medicare Select and then get on with the worthwhile proposals of the commission.
The commission is laying the grounds for the eventual demise of Medicare, perhaps not under this government, but down the track. The end result would be a two-tier health service — a public tier for the poor and a private tier for the wealthy. Equity would go. Efficiency would go. And social solidarity would be a thing of the past.
Now is the time for all good people to come to the aid of Medicare
John Menadue is a director of the Centre for Policy Development. He was formerly Secretary of Prime Minister and Cabinet, Ambassador to Japan and CEO of Qantas. He conducted reviews of the NSW Health Service in 2000 and the SA Health Service in 2003.
Agreed totally John but where the NHHRC really fails is in not having or stimulating a national debate about what principles we want to underpin our health services. That should have been their starting point. We lurch from one proposal such as Medicare Select to another without any elaboration of what we as citizens want the guiding principles of our health care system to be – and it is ours, we Australian citizens. We need these guiding principles before we can judge comprehensively different proposals. I agree very much with you on Denticare and Medicare Select and I am also confident that if we had these ‘people’s principles’ they would not support Denticare or Medicare Select either. But we need them rather than having to speculate about them.
Yes ‘now is the time for all good people to come to the aid of Medicare’ and the emphasis must be on ‘all’ and the people must be citizens.
Is it too late? NHHRC did recommend citizens’ juries for priority setting. What about for principles?
It would be valuable to have John Menadue’s analysis and opinion of a consequential that needs to be faced. To require people who have incomes on which they pay high marginal tax rates to pay for anything they want in health care (or education) beyond what the public sector provides to pay for it all out of after tax income with no government subsidy just as we would think it right to require them to pay for their film going or tropical holiday surely depends on some odd assumptions.
Is it to be assumed that there is only a limited quantity of good health care or education so that no financial inducements by the spending of private money can improve either its total quantity or its quality? Surely not. Is it to be assumed that the community interest is best served by medical and educational priorities being determined by the professional providers alone, perhaps simply on technical grounds which don’t stack up against any rational assessment of community interest, or perhaps on more-or-less undisclosed private ethical grounds – at all events without the chance for those strongly motivated to know why they are spending their own money to affect the way resources are used by their input?
Perhaps the case for encouraging people with high incomes to put their own money into education is even stronger than for health care though there is the additional consideration in the case of health care that getting the CEO of an ASX 300 company back to work quickly, or even a run of the mill QC, is a better outcome for the community as a general rule than allowing an 80 year old retired person equal priority.
Very important article, John.
We need to stop subsidizing private insurance companies immediately, and redirect that money back to the public system. The absence of a viable public option for dental procedures has resulted in a conspiracy between dentists and private insurance to gouge the public. The gap fees are chasms, and whenever a benefit is raised, the prices get bumped up to gobble it up.
Private health companies are corrupting the principles and cost effectiveness of universal health-care provision, and they are providing little benefit to the majority of Australians for what we pay them.
Given all the problems the U.S. is having with its junkyard of a health system, why are we pushing towards a similar model? The answer is simply because private health insurance companies want to make bigger profits here, like they or their counterparts do in the U.S. On every other measure, a private health insurance dominated health system leads to massive financial costs to individuals, families, and the country as a whole as well as poorer health outcomes.
Any government that directly or indirectly contributes towards weakening universal, public funded health care is serving nobody but the greedy and immoral interests of a few corporations and therefore acting against the financial and health interests of the community.
The Howard government did this to their shame. The Rudd government has also continued many of Howard’s policies to their shame and if Rudd tries to go down the Medicare Select path, then all his talk about the neocon era being over will be nothing but empty, hollow words – a case of yet another government in servitude to corporate profiteering at the expense of our individual and collective wellbeing.
Yet another example that Rudd has identical policies to Howard. There is no difference, and anybody who thinks so its just kidding themselves. Just like Howard, he’s trying to eliminate medicare and bring in an american style ‘death’ system.
Private health insurance is a useless product we are forced to buy, forced upon us primarily by greedy medical specialists. Its not enough that they run the most disgusting closed shop in Australia, restricting specialist numbers, but they have to also kill Medicare, which they’ve always hated.