Spending more money on health makes sense. Wasting it does not, writes Ross Gittins.
The stark truth is that, where money is concerned, our health system is a bottomless pit. Our spending on health care is going to keep growing strongly, year after year, without end. And we're never going to reach a point where we feel we've spent enough.
Why not? Partly because the population is ageing, but mainly because our desire for better health is insatiable.
Medical science will continue coming up with a steady stream of ways to prolong our lives and ensure the extra years are of high quality. We'll want to leap on to every new "breakthrough". Trouble is, new medical technologies are almost invariably a lot more expensive than those they replace.
It's a safe bet that, as our incomes grow in coming years, we'll be devoting a higher proportion of them to spending on health care. If we're richer we'll have to spend more on something, and health is a better thing than most other possibilities.
But most health care is financed by the public sector. So to say we're going to be spending an ever-growing amount on health care is to say we're going to be paying ever-rising taxes.
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There's nothing terrible about that. Health care is a perfectly sensible thing to be spending more on and, particularly because of our desire to ensure it is made available on the basis of need rather than means, taxation is a perfectly sensible way to pay for it.
What is terrible is this: the bucket into which we're going to be pouring all this extra money leaks like mad. Our health system is quite inefficient and permits a lot of waste. Far too much of the extra money ends up fattening the incomes of health workers (particularly medical specialists) without doing much to give us better health.
That's another respect in which health-care spending is a bottomless pit. Mixing metaphors, it's clear we ought to get a new bucket before we start pouring a lot more into it.
But what would a system that gave us better value for money look like? Dr Vince FitzGerald tells us in his report to the Victorian Government, Governments Working Together.
He presents for debate an amalgam of the latest and best thinking by health economists and others about the system we should work towards. It's one the Kiwis have started adopting but, be warned, it's radical stuff.
The big problem with our health "system" is that it's so fragmented. This would be true even if responsibility weren't divided between the Commonwealth and states. We look after different aspects of health out of different boxes: boxes for general practitioners, specialists, other health professions, public hospitals, private hospitals, the Medical Benefits Scheme, the Pharmaceutical Benefits Scheme and aged care.
This fragmentation means no one in the "system" accepts ultimate responsibility for the health of the individual. You can get doubling up, but you can also get people slipping between the cracks (such as when hospitals simply discharge sick people they don't believe they can help any further).
So you get a lack of co-ordination and continuity of care. You get huge scope for wasteful cost-shifting games and you don't necessarily get the most appropriate treatment from the most cost-effective source.
FitzGerald argues that the answer to divided federal and state responsibilities is not for roles to be rationalised but for much greater co-operation between governments. To this end he suggests the setting up of a national body, the Australian Health Commission, to design, drive and monitor the reform process.
The reform means establishing a completely integrated health-care system. And the key element would be up to 30 "regional health agencies" across the country.
The federal and state governments would pool all the money they presently put into all those different boxes and divide it up between the 30 regional health agencies. It would be split on a per-head basis, after allowing for the health characteristics of the people in each region.
Thus the regional agency would be the "budget-holder" - it would hold all the money that any government was going to spend on health care or aged care for everyone in its region.
It would purchase from "providers" all the medical services needed by its people. Providers would include GPs, specialists, physiotherapists and all other allied health professionals, as well as public hospitals and private nursing homes.
The agency would have contracts with GPs and other providers specifying how much it would pay for which services and the size of any co-payment they were permitted to charge on top. Because it would hold all the public subsidy to be provided in a region, the agency would be in a strong position to bargain with providers.
The point of all this would be to improve accountability and incentives. The agencies would be accountable (possibly to their state government) if they overspent their budget or failed to maintain the health of their populations.
They would have an incentive to avoid waste by always finding the most cost-effective way to deal with people's problems and to save money down the track by putting a lot more emphasis on prevention, health promotion and early diagnosis.
They would shift the focus to the needs of particular patients rather than to outfits that care only about doing whatever it is they do.
This would be such a radical change it would have to be phased in over five or 10 years. You would have to test it extensively through pilot programs before you introduced it state by state.
Not sure you like the sound of it or something like it? That's understandable. But the pressure for radical reform of the health system will come every time people look at their pay slips and see how much tax they're paying.
considering that specialist are being paid below market demand in the public sector.. esp Obsterics and surgeons.. their liabilities are fairly high