HEALTH SYSTEM REFORM REVISITED ANDREW PODGER 4 May 2007

2 Health System Reform Revisited Moving forward – next incremental steps Systemic reform – room for compromise amongst reform advocates PHI – no consensus, but need for a coherent policy Controlling costs

3 Assessment of Australia’s Health System Generally good: - overall health outcomes - equity and access - but Indigenous health terrible - and cost control an increasing concern Not well-designed for emerging challenges - patient-orientation for chronically ill, frail aged - allocational efficiency

4

5 Moving forward – incremental steps Sensible recent measures strengthened primary care, broadening MBS, GPs strategy eg mental health, care coordination ageing-in-place, increased community care for aged information investments national accreditation of workforce

6 Moving forward – further incremental steps Disappointing omissions to date - regional reporting and planning - cooperative approaches to primary care planning and delivery - long-term commitment to increased Indigenous primary care resources - rationalisation of federal responsibilities for aged care Possible further incremental steps - additional funds for primary care in regions with low spending - CSHA focus on outputs and best-practice purchasing

7 Systemic Reform – Room for compromise? Common ground - single funder - regional framework - increased primary care/prevention - funder/purchaser/provider framework Differences - which single funder model - role of PHI

8 Possible compromise on single funder model (Transitional?) collaborative approach - bilateral financial agreements - some form of ‘health commission(s)’ - state role in regional planning and purchasing bodies - national policy parameters set by Commonwealth after consultation Commonwealth as single funder/purchaser still best option for long-term

Model for Single Commonwealth Funder Health System

10 Single Funder Model FUNDER RESPONSIBILITIES PURCHASER RESPONSIBILITIES PROVIDER RESPONSIBILITIES NATIONAL LEVEL Health policy and standards (dept) Health financing (dept) Health regulation (agencies) System performance reporting (AIHW) Research (NHMRC) National advisory council Purchasing and pricing rules (operations agency or ‘commission’) Healthcare protocols (ditto) Regional operations oversight (ditto) Payments administration (Medicare Australia) Any national health care centres REGIONAL LEVEL Regional health care services operations (authorities under national agency/’commission’) Regional advisory board Eg teaching hospitals, specialist centres LOCAL LEVEL Eg hospitals, primary care centres, specialist services, residential aged care, community care services

11 Possible administrative arrangements under compromise model National policy department advising Australian Government Minister on policy and standards ‘Commission(s)’ as joint purchasing authority - with regional planning and purchasing bodies linked to community and provider groups eg GP Divisions Medicare Australia as administrative agent of Commission and its regional bodies, paying for most health services AIHW as independent reporting authority, including annual regional reports on population health, service utilisation and expenditures.

12 PHI – need for coherent policy Which philosophical view of equity and choice? (a) all must be in same queue; or (b) anyone may jump the queue, but then forgo right to any subsidy; or (c) anyone may jump queue, and retain right to some of the subsidy otherwise available Judgment may depend in part on the standard of the publicly-funded system Do competing health funds improve efficiency? (not much if at all)

13 Estimated Hospital Costs per person per year by Funding Source, 2002 ‑ 03

14 A coherent policy under philosophy (c) Cap PHI rebate, and remove additional subsidies for the aged Remove Medicare Levy Surcharge exemption Establish even playing field for public and private hospitals for both public and private patients - require casemix purchasing in next ACHSA - case for further reform over time with funds meeting all hospital costs of their members whether public or private patients, and including in-patient MBS and PBS (with adjustments to subsidies) Firmer contracting with doctors and clearer insurance benefits for members - no or known fees - aggregate copayment limits

15 Future financial controls Continue PBS/MBS cost effectiveness approaches - extend to hospital procedures etc Continue to develop more sophisticated purchasing policies - including more use of competition amongst providers Regional budgeting and use of soft caps Realistic approaches to copayments, particularly for any new Medicare-covered services, and where choice available Continued but reduced (hopefully) role for queuing

16 Conclusion Australia’s health system generally good - but not designed for emerging challenges Recent incremental measures mainly in right direction - but complacent on patient focus, allocative efficiency and cost control - key priorities now regional framework, improved primary care/prevention (partic. Indigenous), rationalised aged care Systemic change viable and worthwhile - much common ground - room for compromise to move to single funder Less common ground on PHI policy - need to settle coherent approach that is fair, promotes efficiency and allows choice Need more realism on cost controls