Social Justice | Michael Green


Is this the end of Medicare?

A national institution, Medicare turns 40 this year. But are budgetary changes such as the doctor co-payment the beginning of the end for universal healthcare?

MEDICARE was always a shit-fight. It became law in the most extraordinary circumstances: one of a handful of bills passed during the only joint sitting of federal parliament in the nation’s history, after the double dissolution election in 1974.

As the Whitlam government prepared to introduce the system – then known as Medibank – its opponents rallied.

The Australian Medical Association marshalled a million-dollar “Freedom Fund”, donated by members. Determined to stop bureaucrats interfering with patients, it hired a former Miss Australia to front its publicity campaign. The General Practitioners’ Society of Australia circulated a poster depicting social security minister Bill Hayden dressed in Nazi uniform.

And that’s just the opposition from outside. Dr Anne-marie Boxall, co-author of Making Medicare, says Whitlam had little support, even from within the Labor Party. The party platform advocated a fully nationalised model, along the lines of the British National Health System (even though it may have required a referendum).

By contrast, Whitlam’s plan was for a public insurance scheme. Health services would be delivered by a mix of public and private providers, but paid for by taxpayers and guaranteed for everyone.

“The crucial members of his caucus didn’t agree with him, but he was adamant,” Boxall says. “He’d done a lot of thinking about it. So he waged the war of public opinion and he won.

“It’s an amazing political story.”

Medibank began full operation on October 1, 1975, just six weeks before the dismissal of the Whitlam government. The Fraser government tinkered with the system several times before abolishing it – only for it to be revived by the Hawke government in 1984 in almost exactly the same form.

Thirty years later, Medicare enjoys overwhelming public support. Politicians will swear to defend its honour, no matter their stripes or the system’s shortcomings.

And yet, in the wake of the federal budget, many people believe Medicare is under threat. The target of most ire is the proposed copayment for doctor’s visits, under which even the poorest will have to pay for up to ten appointments each year.

But are these changes the beginning of the end of universal coverage, or another nail in its coffin? Or are they in fact a distraction from the deeper afflictions at the heart of Australia’s health care system?

Health minister Peter Dutton describes the Coalition as “the greatest friend Medicare ever had”, echoing a line Tony Abbott employed during his days as health minister.

The coalition has demonstrated its amity with a host of surprise announcements, including the copayment, which also affects diagnostic tests, such as x-rays, blood tests and prescription drugs. (These charges will be capped for children, low-income earners and the chronically ill.)

More people will pay the Medicare levy surcharge, and fewer will qualify for the private health insurance rebate. Billions of dollars have been cut from public hospitals, and the preventative health agency and other health promotion programs have been shut down. The savings will be directed to a $20 medical research fund.

Dutton says that without these reforms, spiralling costs will jeopardise Medicare’s viability. “The government is very keen to keep Medicare and strengthen it. To keep it universal, we have to make sure it’s affordable. In my view Medicare is only sustainable if those people who have a capacity to pay contribute to the system.

Professor John Deeble, now 82, was one of the original scheme’s architects. He says that although costs have been rising, they’re manageable. Health spending by our governments is low compared with other wealthy countries.

“This is not really about the sustainability of Medicare or anything like it,” he says. “They just want to spend the money on something else, simple as that.”

The Medicare levy – currently 1.5 per cent of taxable income – was established as a premium for public health cover. If the nation’s health costs rise, the government can raise the levy, Deeble says. In that way, people’s contributions are determined by their capacity to pay – their income – not by how often they need treatment.

By introducing copayments instead, the government is embracing something fundamentally different: a ‘user-pays’ notion of fairness in health funding.

In Medicare’s first incarnation, when social security minister Bill Hayden introduced the bill to parliament, he declared that the new health system’s three motivating principles were “social equity, universal coverage and cost efficiency”.

Although the full details of the Coalition’s reforms haven’t been released, public health experts have been unanimous in their critique: as a package, it’s simply bad policy.

“We’ve actually tried all these solutions before, which is why we know they don’t work,” says Boxall, who is the director of the Deeble Institute for Health Policy Research.

“We need to step back and look at the structural problems with our health system.”

Among these are two key vulnerabilities, unforeseen at the time of Medicare’s design: the rise of private health care, and the growing burden of chronic illnesses.

“What we like about Medicare are the principles it was founded on,” Boxall says. “Things have changed. So what are we doing to improve universality, equity and efficiency?


For most of the 20th century, Australia had a two-tier medical system: a very basic insurance system for the working class and a fee-paying model for those who could afford it.

“Doctors offered quite different services, and in many cases different waiting rooms for each group,” says Associate Professor James Gillespie, from University of Sydney’s school of public health, and co-author of Making Medicare.

The World Health Organisation says “universal coverage” means “all people have access to services and do not suffer financial hardship paying for them”.

But under Medicare, we’re already failing the test on equity. More than one-in-six Australians say they don’t see a doctor or fill prescriptions because of the cost, according to an international study published last year by the journal Health Affairs. Other research has shown that people who live in poorer neighbourhoods are much more likely to delay medical care than those in the wealthiest suburbs.

Even without the new copayments, Australian patients fork out a lot for treatment from their own pockets, compared with other developed countries.

The two-tier system has re-emerged. One reason, says Gillespie, is that “both sides of politics have refused to think seriously about the role of the private system”. Major reviews commissioned by both the Howard and Rudd governments specifically excluded an examination of its role.

When Medicare began, private hospitals were a small industry, run by churches and charities. But in the last two decades, they’ve become big business, where doctors earn much more for their work.

Until the 1990s, private health insurance was in terminal decline. But spurred on by the Howard government’s incentives – the Medicare levy surcharge and lifetime cover discount – just under half the population now has private cover.

“We’ve ended up with a private system that shifts services away from the public and creates more privileged ways of doing things,” Gillespie says.

He says private funding can contribute to universal care, so long as core services are delivered the same way to everyone. Canada has a similar system to ours, but private insurance isn’t allowed to cover the services offered by its public system.

“If there’s a different system for those who can afford better, you end up with a residual service, which gets squeezed and becomes second best,” Gillespie says.


The coalition argues the copayment is a “price signal” to alert people to the real cost of treatment. But there’s something unusual about healthcare – even economists say so. In simple terms: you can judge how you’ll feel if you forgo buying a hamburger, but not if you forgo visiting the doctor.

“In the case of healthcare, part of the product itself is giving you that information,” explains Professor Jeff Richardson, from Monash University’s centre for health economics. “You’re not in a position to judge what life would be like with and without it.” All of which means that promoting efficiency is more complex than imposing a price signal.

Likewise, the relationship between health expenditure and outcomes is not straightforward. The nation’s health costs have been rising, but compared with other OECD countries, our total health spending – both private and public – is just below average. It’s half that of the United States, as a percentage of GDP.

“When the government says Medicare is unsustainable, it’s lying,” Richardson says. “The Australian government could spend much more on health if it wished. It’s simply a political and social judgement that it doesn’t want to.”

Curiously, despite Minister Dutton’s warnings about unsustainable health spending, his reforms – which aim to push more people into the private system – will end up costing more overall.

When the government acts as our single-insurer under Medicare, it has the power and incentive to bargain hard: as a result of bulk billing, GPs incomes are low by international standards. But with many different payers – like in the US system – it’s easier to for private insurers increase fees than control costs.

And for now, GPs and pharmaceuticals are the most cost-effective parts of the health system. Increasing their price will push more patients into hospitals, which are much more costly.

The measures are not a question of efficiency, Richardson says, but rather, an ideological choice that health is an individual responsibility, not a shared one, like defence or policing.

“If we swing over to the private sector and push it back on individuals, the health of poorer people will suffer and overall costs will almost certainly rise,” he says.

Dutton, however, maintains the measures aren’t about ideology, citing the Hawke government’s plans to introduce a $2.50 copayment for GP visits in 1991. (Paul Keating scrapped the idea when he took over as prime minister.) “I strongly believe that the changes we’ve put forward will improve access and the standard of care provided by GPs,” he says.

But the biggest challenge to the standard of care now comes from an entirely different source, one his reforms do nothing to address.

In Australia, the greatest healthcare inefficiency is found in a disconnect between the system – the fragmented network of hospitals, specialists and GPs, and their mishmash of state, federal and private funding – and the kinds of illnesses we have.

Where once we suffered acute ailments, we now need ongoing support with chronic conditions, says Dr Steve Hambleton, the outgoing president of the Australian Medical Association.

This change is partly a measure of success. The number of deaths from heart attacks, for example, peaked in the 1970s. But living with heart disease requires continual treatment and adjustment, especially as you develop other conditions. “The system doesn’t treat those people all that well,” Hambleton says.

Patients with chronic diseases need to see a broad range of health professionals and have frequent tests – but they are often seeing them in a piecemeal way with little continuity or communication between experts. Many of these, such as physiotherapists, psychologists or dieticians, are excluded or receive only limited funding under Medicare.

Both parties have attempted limited reforms to address the rise of chronic illnesses and the needs of our aging population. The Coalition brought in chronic disease management plans, which extend benefits to other kinds of treatment, beyond doctors. Labor’s super clinics and Medicare Locals aimed to bring together and coordinate different health services for patients. But the changes have been piecemeal.

“We need a proactive, long-term approach to care, supporting primary healthcare to keep patients out of hospitals, and make sure people don’t fall through the cracks when they move between community and hospital care,” Hambleton says.


THE wide, bright, hallway of the Victorian Aboriginal Health Service in Fitzroy is humming: people young and old are waiting and chatting; some are on the go, others hovering around a wood heater.

Today, a specialist is visiting today to conduct an ear, nose and throat clinic.

Jason King, the centre’s CEO, says they offer an holistic service. There are GPs, dentists, allied health professionals, visiting specialists, social workers and financial counsellors, all supported by Aboriginal health workers from within the community. “It’s not pumping them out every ten minutes. It’s ‘How’s mum and dad going? How’s uncle going who lives with you?’

“We’re the central hub, this is where people come and see family,” he says.

Last year, the health service celebrated its 40th anniversary, a history that has coincided with that of Medicare. Each year, about a third of the state’s Aboriginal population pass through its doors.

The centre’s model of integrated care, embedded in the values of its community, is exactly what doctors and experts have ordered – along with the World Health Organisation, the OECD and several Australian inquires going back decades.

But King says the co-payment and cuts to preventative health will either cost the centre patients or take a chunk out of its budget. Either way, that means fewer services.

There are 28 Aboriginal community-controlled health centres around the state. Jill Gallagher, CEO of their peak body, says Aboriginal health remains worse than the rest of the nation, and Victoria is no different.

“The life expectancy in Fitzroy is the same as the life expectancy in Fitzroy Crossing,” she says. “For every dollar spent on Medicare for a non-Aboriginal person, about 60 cents is spent on Aboriginal people. Access to primary healthcare is still not equitable, in spite of the fact there’s four times the burden of illness in the Aboriginal community.”

Dr Mary Belfrage, the Fitzroy service’s medical director, says any barriers to accessing health care cause people show up later, with advanced conditions, which are more expensive to treat. “It all translates to worse health outcomes, but it’s also inefficient,” she says.

“This isn’t about party politics or a particular budget. It’s about the principle of equity and how it impacts on health.”

Read this article at The Age online


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