The four crucial problems with Medicare that we haven’t come to terms with

6 September 2018

– by Professor Anand Deva, Integrated Specialist Healthcare
This article first appeared in the Australian Financial Review


The Medibank bills, passed by the Whitlam government after the double dissolution election in 1974 were a triumph of vision and good public policy for a young country seeking to provide healthcare equitably. Our public healthcare system remains one of Australia’s greatest assets.


But 43 years later, what was put together with the best of intentions, is increasingly coming undone. The healthcare system is under threat from a confluence of four forces: ageing and the emergence of chronic disease, advances in medicine, a transactional schedule of payments, and fragmentation among providers and patients.


These forces are creating a hostile, adversarial and competitive atmosphere in the face of a shrinking pool of funds. The May budget, freeze and keeping health off the front pages, has done nothing to fix these underlying problems:



1. Ageing and the emergence of chronic disease.


All statistics point to Australians becoming physically and mentally sicker as the average population age continues to rise. If we look at disease patterns in a younger population, we see rising rates of overweight/obese Australians (two times higher since 1990) and diabetes (three times higher since 1990), which threaten to reduce life expectancy for the first time in generations. With fewer people working and more retiring over the next few decades, the current healthcare system will be paid for by a harder working, tax-paying minority.



2. Advances in medicine.


Medicine has become much more expensive because of new technologies and treatments – reaching 10 per cent of the overall GDP for the first time in 2014. The range and price of new medicines and technologies coming onto the market is such that the entire federal budget could be spent on health. The problem is that these advances have created the unrealistic expectation that modern medicine is infallible and can work miracles. This raises a tricky question: should the latest – and often the most expensive – treatments really be offered immediately without a true assessment of their efficacy and/or comparison with existing treatment options?



3. Transactional schedule of payments.


The Medicare item schedule places a transactional value on each of the points of access to medical consultations, diagnostic tests and treatment. There is an item number for a consultation or procedure and the providers get paid accordingly.


The Medicare item number schedule was probably a necessary way of funding payment, but it placed a monetary value favouring procedural specialists over primary care physicians and non-interventional specialists. This has created rifts within the profession and changed our practice. There seems little reason why Medicare places less value on a GP encounter compared to a specialist encounter and/or procedure – even when the former can be just as effective.


That also creates an incentive for darker forces to come into play, with some practices and individual medical practitioners trying to maximise item number revenue instead of what may be best for the patient or the system – sometimes called throughput practices. While the Medicare rebate freeze was lifted in the budget, its long period of stagnation, lagging behind inflation, has resulted in increasing out of pocket costs being passed to patients even with private health insurance. For some, these additional costs can block access to care in the private sector placing additional burdens on public waiting lists.



4. Adversarial relationship. Fragmentation, disconnection and conflict amongst stakeholders.


The system is complex and resists change. The most obvious divide is between state and federal responsibilities for administering portions of the public health system.


There are however, further competing and fractious “partners” who are more interested in growing their share of the market or acquiring assets to preserve both revenue and control. The relationship between many of these players can be quite adversarial at times – for example, health insurers proposing non-payment for “poor” quality outcomes to both private hospital providers and doctors – and may well become more adversarial as the funding pool shrinks.


The big concern is that these forces are now pushing our healthcare system into dangerous territory. The rise in demand coupled with funding pressure has started to affect accessibility and affordability. There are a growing number of Australians who are stuck between a public system that they are not sick enough to quickly access and a private system that is out of reach.


As a fourth-generation doctor, I also perceive a change in mindset and behaviour of the profession since the advent of the transactional Medicare funding schedule and the growth of medical entrepreneurship. My ancestors worked very much in an honorary capacity – giving their skills and time freely to those who were not able to afford it while balancing a good income from patients that could. Perhaps the pressures of private practice and the lure of greater transactional income have devalued this more noble pursuit?


Health arguments tend to revolve around money: that more cash equals better results. But we actually need to create a new paradigm in how we approach healthcare in this country. This change needs to come from the ground up rather than from policy makers, corporate offices and insurance companies who do not have instant feedback on the effect of their decisions. We have to also build a more cooperative alliance amongst all players with the intent on solving problems of affordability and access while maintaining quality of care.


Anand Deva of Integrated Specialist Healthcare is professor of plastic and reconstructive surgery at Macquarie University, project lead – integrated care, NSW South Eastern Area Local Health District, and director of the Integrated Specialist Healthcare Education and Research Foundation.


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