In the National Health And Hospitals Network For Australia’s Future, the Government recognizes two pressing problems in health care financing and administration – fragmentation of services, leading to cost and blame shifting, and our country’s high rate of hospitalization, resulting, in part, from a lack of integration between primary care and hospital care.

On this latter point, the report finds:

The Australian Institute of Health and Welfare has estimated that potentially
preventable hospitalisations represented 9.3% of all hospitalisations in
2007-08. This equates to approximately 441,000 hospitalisations in public
hospitals, with an average cost of about $4,230 per episode of care.

What that means is that if the Government can get primary care to take the load off hospitals, there could be a saving in hospital costs of almost $2 billion a year.

Just how the Commonwealth will integrate primary care and hospital care, however, is not
clear. Local Hospital Networks will integrate regional hospitals, but they will be responsible for hospital care only. The only reference to their wider integration role is that they “will be obliged to work with local primary health care providers”.

It is notable that the Commonwealth is to fund 60 percent of the “efficient” price of hospital care, leaving the states to pick up the balance and any gap between the “efficient” price and actual costs. In other words, the Commonwealth is taking responsibility for funding, but is taking less responsibility for managing. This is similar to its Medicare reimbursements, which leaves consumers paying the open-ended gap. It is still only in the Pharmaceutical Benefits Scheme where we see the Commonwealth exercising strong price control, guided by cost-benefit assessment.

The Commonwealth may be overselling the virtues of combining funding streams. Even if all or most of government funding comes from the Commonwealth, it will still be allocated into different programs, as it is now.  For at least 35 years the Commonwealth has funded the Medical Benefits Scheme and the Pharmaceutical Benefits Scheme, but they operate as separate programs, with different payment methods and different structures of consumer co-payments. The inconsistencies in levels and types of co-payments lead to consumer confusion, and tend to direct consumers to services with lower co-payments rather than the most cost-efficient services. It is disappointing that this problem is not
addressed.  Jennifer Doggett’s recent paper for the Centre for Policy Development outlines clear and simple solutions to the co-payments mess.

Another issue left in the “too hard” tray is the funding of private hospitals. Although they

provide 40% of all hospital episodes of care, they are outside the mainstream of health care funding. Funding of private hospital care is disjointed, some coming through private insurance, some through the Medical Benefits Scheme, some through the Pharmaceutical Benefits Scheme and the balance through co-payments. There is no reason why they should not be brought into the same integrated funding scheme as public hospitals, on a competitive basis. That would reduce our dependence on private insurance – an expensive and inequitable way to share health care costs – and would mean all Australians, regardless of means, would have access to the same hospital  facilities, private or public, consistent with the Government’s policy of social inclusion.

To its credit, however, the Commonwealth, while drawing on many of the commonsense
recommendations of the National Health and Hospitals Reform Commission, has wisely ignored two of the Commission’s more outrageous suggestions – its “Denticare” plan, which would have seen tax funding for dental care churned through private insurance, and its “Medicare Select” option, which would have entrenched private insurance as a paternalistic bureaucracy between consumers and health care providers.

It’s a promising start, but there is still more to be done.

This piece was first published at Croakey, the Crikey health blog on 3 March 2010. Ian
McAuley expands on these thoughts in New Matilda today.