Dr Alonso Quixote MB BS FRACP, was engaged in general medical practice in Sydney’s Northern Suburbs for 38 years from 1970 until 2008, when he retired to travel, play golf, and actively manage his share portfolio. He was introduced to Ecinya about a year or so ago and conversations over a recent lunch revealed that he had written a major article on the Australian healthcare system in 1989. We asked for a copy which we read. We found it to be consonant with our own observations and experience about the medical system. Given the just released budget it seems an appropriate time to think about healthcare.
We then asked Alonso (not his real name, of course, as he does not seek acclaim for prescience) if he considered that his observations of 22 years ago were still pertinent today. His reply was that he would think about changing his up-front numbers, but overall he thought that his observations were even more significant today than they were in 1989.
The Federal Budget came down on Tuesday 10 May and $59,858,000,000 ($60 billion) was allocated for fiscal 2012 out of tax revenues of $350 billion, a sum equivalent to 17% of those revenues. It is difficult to get consolidated numbers on health as the states also make very significant expenditures, and the numbers that are available are generally poorly disclosed, perhaps with the aim of ‘hiding’ the reality of how much of our working lives are devoted to paying for our own, and that of others’, healthcare. Of the $350 billion of Commonwealth revenues $151 billion is projected to come from personal taxation, equivalent to 43%.
From what we can glean it appears that in fiscal 1982 Australia spent $10.8 billion on healthcare and this had risen to $103.6 billion at the end of fiscal 2008. According to our calculations the average annual growth in healthcare costs is 9.1% which means that, should this continue, that healthcare doubles every 8 years. During this time frame healthcare costs have risen from 6.3% of GDP to 9.1% of GDP. This seems excessive, provokes thoughts of disequilibrium, misallocation of resources and affordability. Our guesstimate for 2012 is that national healthcare costs rise by about 8% and absorb about 8% of GDP.
In a world of political correctness and dumbing down of public discourse, to raise the question of ‘value for money’ and ‘unsustainable trend’ about healthcare, questions one’s humanity and sympathy for those suffering illness, disability or infirmity.
Having Dr Alonso tilting at the proverbial windmill and still keen to do so, merits, at least, our applause.
National Australia Bank economics team budget commentary
Under ‘Key winners’ section: Health
“Health expenses are expected to continue to grow over the forward estimates (by 4.6% in real terms) from 2011-12, with an additional $3b in new health funding announced in the Budget. Hospitals pick up additional funding for sub-acute beds, regional areas and key projects for development and expansion (Royal Hobart Hospital, Port Macquarie and Tamworth). The biggest funding beneficiary is mental health – especially suicide prevention – this is partly offset by savings in the Better Access initiative which removes a large chunk from local GPs. Diagnostic imaging also gets a boost and Medicare Locals receiving marginal additional funding. The April funding agreement with pathologists provided greater certainty but caps growth. There is limited new real funding for dental.”
Funding for The Royal Hobart hospital is $240 million (Mr Wilkie), the Tamworth Hospital Redevelopment $120m (Mr Windsor) and Port Macquarie Base Hospital $96m (Mr Oakeshott). These sums will be spent, we imagine, over a couple of budgets, and may not be fully reflected in the $60 billion of projected expenditures.
Dr Alonso Quixote’s Medical Journal Article of 1989
GETTING BETTER VALUE FROM THE MEDICARE SYSTEM – patients should have the right to decide treatment standard
In the past few years many medical practitioners have become progressively disenchanted with their practice.
Much of this is the result of increasing red tape, increasing antagonism from the media, increasing litigation and manipulation of fee structures in such a way that many practitioners, especially those in general practice performing old fashioned caring family medicine, are finding their incomes are being markedly eroded.
On the other hand sensible intelligent people realise that we simply cannot continue pumping endless amounts of money into health. It is immediately accepted that Governments can only allow a finite amount of money to be allocated to this area.
The problem as many practitioners see it is that those who universally bulk-bill, over-service, over-utilise new technology and those who have entrepreneurial back-up are responsible for a dramatic increase in national medical services cost.
However, in practical terms, these people are, in general, not regarded highly by their peers, and broadly, it is this group which is distorting the national health bill.
Patients patronise these entrepreneurial doctors and their new, plush, expensive, clinics because it costs them nothing.
They are superficially impressed by a system which is encouraging them to be checked out with sophisticated investigations (at no expense to the individual patient) and they, ignorant of the costs, applaud the system.
They know no better! There is absolutely no accountability when the patient doesn’t pay!
In fact there is a strong financial incentive for the doctor to overdramatise the medical problem of the patient and, therefore over-service.
It is a frivolous waste of money and there is no evidence whatsoever to suggest that we are getting value for our health dollar.
We are now at a stage where, under the current system, modern society cannot afford the uncontrolled use of new technology.
As there is little or no accountability in ordering these investigations, there are those who have taken significant financial advantage to create in the minds of the public and government false distortions in doctors’ incomes.
The new differential rebate scheme for experienced GPs will not significantly change things, and could actually aggrevate the problems.
Therefore, energy should be directed at getting value for money and controlling excesses. Who better than the patient to decide?
People are crying out for the return of the old family doctor concept, yet governemnts are actively discriminating against them by encouraging the flashy bulk-billing type of medical care.
There are a number of ways to solve this dilemma, but the best way to control excesses and to make the doctors justify their investigations is to make the patients at least partly responsible.
The Solution
The aim as stated above should be getting better value for our health dollars. Value for the patients, for the doctor, for the government.
At present patients are entitled to claim for each service and if they are bulk billed there is no cost to them.
The solution is achieved by making the patient responsible for, say, the first $500 of all medical expenses in any one financial year (and, say, $1000 per family).
The first $500 would not be claimable against Medicare. These figures are arbitrary, but once the system is operating, patients will will question the necessity of investigations, and they would effectively control unnecessary costs. The present scheme could take over once the agreed amount had been exceeded.
Present welfare card holders would be treated as they are now (i.e. continuation of bulk-billing).
This would mean that patients would not only be paying their Medicare levy, but they would also be liable for the first agreed up-front excess each year. However, they are totally covered (as in the present system) after this excess has been passed.
As there would be significant savings to the Government, they would have to consider a trade-off with the public. Perhaps abolish the Medicare levy or provide tax cuts.
The Consequences
The repercussions of this proposal are very interesting. It would:
- Reduce the nation’s health bill significantly.
- Result in a significant reduction in general unnecessary investigations.
- Still provide care for the underprivileged through the welfare system, yet not financially embarrass any person, as all would be medically covered after the agreed nominal amount had been exceeded.
- Reduce the incentive for patients to request unnecessary specialist evaluation for basic primary health care problems eg: pap smears, blood pressure control, checking notes regarding progress of asthma treatments etc. Since specialists’ fees are up to four times the fees of GPs, the patient would have to consider the necessity of seeing a specialist. This would then decrease the very real problem of extensive waiting lists for specialists. In practical terms, specialists can return to their true role of consultants, rather than an increasing tendency to become involved in primary healthcare, which is not their role.
- Significant reductions in administrative public service paper work in processing accounts. This saving could be quite startling!
The suggested disadvantages are:
- The patient would be out of pocket, but this could be offset in other ways.
- Patients may delay seeking advice about potentially serious conditions. While this could be a concern I really wonder how serious a problem this would really be. There are excellent public health education programs and patients will have have to learn to take some responsibility for their own health.
No mention has been made of the private health system, Pharmaceutical Benefits Scheme, or medical insurance, but these costs could be incorporated in such a system.
The front end deductible fee would have to be reassessed in such circumstances.
We did have a great health care system. If we don’t take some responsibility now, I fear there will be a progressive destruction and breakdown in our national health scheme.
ECINYA footnote
ECINYA has long believed that health insurance should operate in similar fashion to car insurance. If you use the sytem less you are entitled to a ‘no claim’ bonus. This can be constructed over the life of the insured.