Health Reform

‘Living a healthy life, not simply managing illness’

Our health system is unsustainable. It is demand-driven, with no means to stem the growth in forms of illness and domains of illness management. It has no capacity to contain health costs. In the next decade as the population ages, health spending is expected to increase by 4-5% of GDP.

In 2009 the National Health and Hospitals Reform Commission outlined three options for reforming the Australian health system. Two of these retained the status quo (the present structure of the health system established with Medicare in 1984), with minor adjustments in financing arrangements.

The third option was called ‘Medicare Select’. It proposed significant reform of Medicare to enable consumers to better co-ordinate their use of health services and contain health costs within a continuing framework of universal public insurance. It drew upon the Dutch experience, the most innovative in Europe, in integrating public and private insurance and combining universal coverage with consumer-driven competition to contain health spending.

The Commission knew that Medicare Select would not be adopted in 2009, but it had the foresight to include it in its report, knowing that it would one day be revisited. It’s framework for building on and expanding Medicare with competing health plans was the right one for Australia. In retrospect, it’s 2009 proposal  lacked sufficient attention to the structure of its recommended competing health plans, and it also lacked a compelling rationale for why competing health plans were necessary for a better Medicare and a healthier society.

Our health reform agenda overcomes these deficits by drawing on Australia’s historical experience of consumer-governed intermediaries in the 19th and early 20th centuries in friendly societies and bush nursing associations. These were remarkable Australian achievements in consumer self-organisation and social innovation. We combine three elements – integrated public and private insurance, competing health plans, and consumer-governed intermediaries – in our proposed framework of Medicare Select with consumer governance.

fsaodkurrikurri1911[Members of AOD Friendly Society, Kurri Kurri NSW, Hospital Sunday 1911.]

This is a uniquely Australian governance model for health care that builds on and expands Medicare, while containing health costs and advancing integrated, person-centred care. It is oriented to living a healthy life, not simply managing illness.

The two major parties in Australia cannot reform our health system. It is too hard for them. They have given up trying and have opted to allow vested interests to have free rein in running the health system. As a result, health expenditure as a proportion of GDP will grow dramatically in the coming decade.

Our policy agenda is the only alternative to this abdication of responsibility and leadership by Australia’s failed political class.

Policy Agenda:

1. Our health system should be overhauled so that it is oriented to supporting Australians in living a healthy life. It should support individuals and families in minimizing health risks and maximizing healthy behaviours, while continuing to offer universal coverage in the event of illness and injury. Medicare would continue as a universal public insurance scheme.


2. In this reform, individuals and families would access Medicare-funded health services (hospital, dental, domiciliary, general practitioner and community health services) through a not-for-profit association called a health mutual. A health mutual is a consumer-governed membership association, a health care intermediary, that looks after the health of its members, encourages healthy living and minimizes health risks, organizes care and meets all of the member’s health care costs through a combination of Medicare contributions, co-payments and supplementary insurance.

3. Each health mutual would be required to specify an ethos, a philosophy of healthy living. The mission of each health mutual is to compete in keeping its members healthy and well and out of hospital. Competition between them would be, in part, a contest between rival philosophies of living a good and healthy life.

Our model of Medicare Select with consumer governance would comprise the following health mutuals:

Catholic (based on the Catholic community and existing Catholic health care);
Sports and Outdoor Living (based on active lifestyles and sports participation);
New Age (based on complementary health philosophies and practices);
Temperance (based on temperance societies and faith groups with a focus on abstinence from alcohol, tobacco and drugs);
Workers and Unions (based on union memberships with a focus on health and safety at work);
Seniors (based on seniors networks and approaches to healthy ageing such as the Japanese ‘Han’ system);
Indigenous (based on indigenous communities and traditional cultural approaches to well-being);
Rural and Remote (based on health strategies tailored to rural and remote communities).

International evidence suggests that competition across various sectors is best served with between 7 and 9 robust competitors.

4. Individuals would be free to choose a health mutual of their choice, and would be free to  switch from one to another, based on performance and quality of service. If one health mutual, for instance, increases the good health of its members, lowers obesity levels, and reduces hospital admittance of its members with chronic illnesses, it should expect to attract to it members from other mutuals.

5. Health mutuals would not be permitted to reject members on the basis of their health status or risk.

6. Health mutuals would use funds distributed by the Commonwealth to purchase health services on behalf of members. Commonwealth funding for each plan would reflect the risk profile of its membership. Plans with large numbers of high-risk members, for example elderly people with chronic illnesses, would receive more risk-rated funding than those with large numbers of young, healthy people.

7. Each health mutual would be free to contract with hospital, medical, dental, domiciliary, allied and community health services as they see fit.

8. Each health mutual would develop its own member-accessed electronic health record as a consolidated information system comprising the member’s consultations, treatments, health maintenance strategies and drug use histories.  This information would be transferable across practitioner and service delivery types with the aim of enhancing outcome monitoring and developing health-value advantages around objectives such as lower obesity levels, reduced infection rates, lower hospital admission rates and fewer post-surgical complications.

Successive Commonwealth Governments have failed to develop a viable patient-controlled electronic health record, and wasted billions trying. Membership-based health mutuals provide a more favourable structure through which to organise consolidated health information for and about each consumer. They also provide for the development of competing systems which have market-driven pressures for continuous improvement.

9. Each health mutual would have a strong incentive to develop an effective primary care system, engaging practitioners through pre-paid or non-fee-for-service or other arrangements as it sees fit. For the first-time, there would be structures within the Australian health system that have a financial interest in developing preventative strategies based on epidemiological screenings, comprehensive immunization procedures, risk appraisal and containment, and targeted interventions for at-risk individuals.

Most current expenditure by Commonwealth and State governments on health promotion vanishes into the night without trace. It usually promotes behavior changes such as more exercise or giving up smoking without any means of enabling individuals and families to actually overcome their personal obstacles to living a healthier life.

10. Some existing private health insurers hold expertise in various operational fields that will be important for health mutuals. Some insurers have a greater capacity than others to function as health mutuals; some will find it too challenging to move beyond the role of insurance providers.

Those that have a mutual structure would be encouraged to continue operating by merging or partnering with new health mutuals. Those which have a non-mutual structure such as Medibank Private (recently privatized by the Commonwealth in a short-sighted asset sale) and BUPA (a foreign entity that has aggressively bought up a number of previously mutual funds) would be encouraged to partner with health mutuals, providing they can find a compatible business format in which to continue operating.

11. Commonwealth and State governments currently fund a plethora of industry bodies in health care, many of which are provider and practitioner peak bodies that have convinced governments that they need taxpayers’ resources to run programs which address issues of service gaps, fragmented care, inadequate information systems, public health issues or preventative care imperatives. A system of Medicare Select with consumer governance will render most of these programs redundant.

With their defunding, a large proportion of the special pleading and rent-seeking that is currently generated by our provider-centred health system can be cleared away, as we move to a genuinely consumer-centred system of health care and illness prevention.