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Commission of Audit’s health hit list: experts respond

The National Commission of Audit has made 86 recommendations with a focus on the federal government’s 15 biggest and fastest-growing areas of spending. Health is near the top of the list, with the Commission…

The Commission report recommends private health insurers take on a greater role in Australia’s health system. AAP Image/Lukas Coch

The National Commission of Audit has made 86 recommendations with a focus on the federal government’s 15 biggest and fastest-growing areas of spending. Health is near the top of the list, with the Commission recommending sweeping changes such as a slew of co-payments and a delayed roll-out of the NDIS.

This includes a $15 co-payment for all Medicare-funded services ($5 for concession card holders), a co-payment for visits to emergency departments where the patient could have seen a GP, and a rise in co-payments for pharmaceuticals.

It also recommends private health insurers play a greater role in Australia’s health system.


Stephen Duckett, Director of the Health Program at Grattan Institute

The Commission of Audit report is like a curate’s egg: good in parts. It is broad ranging, covering the whole of government. If adopted, its recommendations would reshape the federation. Its focus is on a sustainable budget, an essential goal.

There are two broad ways to rein in government spending: control costs or shift costs. The Commission recommends both. In terms of controlling costs, its recommendations on PBS spending are good, echoing previous Grattan recommendations. The Commission is right that an independent, expert body should negotiate drug prices and that a budget should limit spending.

The Commission also attacks the regulatory detritus that impedes competition and efficiency in the health sector, including in community pharmacy and private health insurance. It recommends rationalising the alphabet soup of agencies in the health portfolio. Streamlining these bodies is broadly sensible, as long as important issues are still tackled and independent advice remains.

The “cost shifting” recommendations are where the dangers are. Some are sensible: the income test for the Seniors' Health card should incorporate all income, for example. Some are not. The most obvious example is the proposal to abolish bulk billing and introduce a government-mandated co-payment. This will have a big impact on poorer people and save little money relative to other policy options.

The recommendation to end Medicare’s universality is another backward step. The Commission says higher income earners should be forced into private health insurance and excluded from Medicare coverage. This is the start of a slippery slope to Medicare becoming a second-class scheme for the poor.

Fortunately, the government has already said it will pick and choose from these recommendations. It should choose recommendations about managing the system better, cutting anti-competitive regulation and targeting support to people who need it. It should focus on managing costs, not leaving consumers to foot the bill.

Pharmaceutical Benefits Scheme

Philip Clarke, Professor of Public Health at University of Melbourne

In terms of the Pharmaceutical Benefits Scheme (PBS), the National Commission of Audit’s report is quite radical. There are two good ideas and a very bad one.

On the very positive side, they recognise the potential for significantly cutting waste by reducing the high price of generic drugs in Australia and the inefficiencies in drug pricing generally. Their idea of an independent pricing authority is based on a similar body in New Zealand, and it moves away from ministerial decisions to this independent body.

This is quite a major change and the idea of capping the budget for pharmaceuticals and having this body redistribute funds would be a very significant policy shift. Such a move would provide stronger incentives to drive efficiencies, although it would ultimately depend on the skills of that agency to make hard-nosed decisions about what types of drugs to fund, de-list and to produce saving through price negotiations.

That’s quite different to the current process. The current system has a gatekeeper for a drug to get past, but once it’s on the PBS, there’s not much incentive to renegotiate prices or delist drugs that are no longer cost-effective.

The other positive that’s again radical from a political perspective, are the recommendations to deregulate pharmacy ownership and location rules. The current rules have meant that pharmacies numbers have stood still since the 1990 although we spend four times more on drugs and have 90 million more prescriptions. Reforms would dramatically increase competition in this sector.

The negative thing for the PBS is what they are recommending for increased co-payments. The report recommends all medicines, including concessional ones that are currently free, should attract a co-payment increase of up to $5. Here the policy reform is less well thought out. It doesn’t seem to me to create any price signals in terms of having different costs depending on the actual price of the drug.

And I worry about co-payments acting as a disincentive to take medications. There’s a lot of evidence from overseas that high prices for medicines are a major source of non-adherence or non-compliance to medication regimens.

The commissioners have really have thought about quite major sweeping reforms for the PBS rather than just tinkering. Clearly, I think you could build on what they’re recommending and redesign some of aspects. But overall, having a bold vision is more useful in this area than in many other aspects of health-care system.

Private health

Anthony Harris, Director of the Centre for Health Economics at Monash University

The Commission recommends reintroducing a private health insurance market for primary care and having a mandatory private insurance replacement for Medicare for the better off.

In other words, it recommends replacing Medicare with a competitive insurance market where premiums are set according to the individual risk and characteristics such as smoking or weight.

The aim appears to be to reduce government spending rather than the cost of the health system – as it is far from clear how these proposed reforms would do anything other than increase total expenditure on health.

What is missing in the Commission’s rationale is the recognition (widespread among economic analysts) that private health insurance markets are inherently inefficient, and that government provision of insurance is both cheaper and fairer. The Commission admits to some of this when it says:

where a third party, such as the government or an insurer, is paying for a service, moral hazard can lead providers and consumers to use more services than would otherwise be demanded.

This is part of the story. But so is private health insurers' inability to charge a fair premium when risks are unknown and the same coverage is needed for everyone who is sick, irrespective of income.

Yet the commission comes to the conclusion that allowing health funds to expand their coverage to primary care settings will improve the health of Australians at lower cost than public funding of Medicare. No evidence is provided for this.

Allowing private insurance to cover primary care services will not only lead more services being used, but will inevitably result in a rise in medical fees. All the evidence suggests that a single national insurer is cheaper to administer and is better able to control costs.

The proposal runs counter to the basic principle of Medicare and similar public health care systems: that we want the poor to have the same high quality care and attention as the rich, paid for in fair way.

A private insurance system will inevitably be more expensive; even if it reduces out-of-pocket costs for care, it will result in more, not less, service use and expenditure. It might reduce government expenditure, but it will increase total expenditure on health as a proportion of GDP at a time when hysteria about that ratio seems to have reached fever pitch.

National Disability Insurance Scheme

Karen Soldatic, Lecturer in Social Policy at UNSW Australia

The three issues identified in the National Commission of Audit’s report about the National Disability Insurance Scheme (NDIS) – fiscal risk, technical issues affecting its rollout and changes to its advisory board – and two of these are not necessarily unexpected.

As the report states, this is major policy change. This is a completely new way of delivering services, particularly the NDIS’ focus on personalisation, where individuals can direct their supports to areas they feel is of most benefit to their own lives and relationships.

People with disabilities have been waiting for a long time for a fully resourced, responsive and enabling scheme. Talking about fiscal risk raises the question of how much longer they should have to wait.

The report also says there may be some technical issues about the NDIS' rollout, and that they might delay it.

There’s no doubt that there will be some technical issues, given both its newness and the outcomes it is trying to achieve. There are always technical issues with any new large-scale policy directive.

The best way of managing, and learning, in such a new environment is to keep going and learn as we go, adapting, changing and amending those areas that we can identify as needing change.

This is why the NDIS has a number of trial launch sites just so system changes can be monitored and amended before the full rollout of the program.

A critical part of the learning comes from having a strong advisory body that is actively engaged in the development of the program, ensuring it maintains its intent of effective disability support, participation and social inclusion.

The report is suggesting this advisory body be consolidated with the existing board, but could that preclude having the voices of people with disability and their advocates driving the process? People with disabilities have waited long enough for something like the NDIS.

Preventive health

Rob Moodie, Professor of Public Health at the University of Melbourne

It was widely expected that the National Commission of Audit report would recommend the Australian National Preventative Health Agency (ANPHA) be axed but the report only talks about two aspects of its budget. It seems ANPHA is being sliced rather than axed.

The report recommends creating a new National Health and Medical Research Institute (NHMRI) that will combine the National Health and Medical Research Council, Cancer Australia and the research budget of the Australian National Preventive Health Agency.

It says the NHMRI should “align and fully embed health and medical research in the health system” to “improve patient outcomes and deliver efficiencies by improving the evidence base available to clinicians and patients”.

That’s all good and well but there’s no talk of any notion of prevention. What I’m concerned about is what might happen if they continue to dilute the role of prevention because it’s very hard in the existing set-up to be able to focus on it without a specific agency.

The police say they can’t police their way out of alcohol-related problems on the street. In the same way, our hospitals won’t be able to treat their way out of diabetes, obesity, and tobacco-related harm. But still we’re watching declining investment in prevention.

That’s the agency’s research budget, its data collection and reporting on health outcomes funding will be subsumed into the Health Productivity and Performance Commission (HPPC).

So this announcement accounts for the research part and the data collection part, but whatever else is left of ANPHA we don’t know. There’s no indication about what else might happen.

What concerns me is the diminishing importance of prevention. We all say prevention is better than cure, but it’s constantly reversed in terms of funding allocation and political priorities across all governments. And its successes are ignored.

Imagine how crowded our hospitals would be if we had 75% of men still smoking as we did in the 1950s. Imagine how crowded they would be if we had done nothing about road trauma in the last 50 years and we still had 4,000 or more people dying on our roads and ten times that number being seriously injured every year. Blindly cutting preventative health budgets just doesn’t make sense.

Health reform

Jim Hyde, Professor of Public Health Policy at Deakin University.

There is no evidence for the assumption in the National Commission of Audit’s report statement that making health more competitive and efficient will either lower costs or improve outcomes. In fact, there is evidence that too much competition drives down health outcomes. Increasing the supply of practitioners in Australia and elsewhere, for instance, has increased cost because of the professional strength of health associations.

Neither is there any evidence that regulation reduction will improve health. Imagine a regulation-free anti-smoking environment! The reason that the tobacco, alcohol and fast food industries are so opposed to regulation is that it holds them accountable for health outcomes and assists people make better choices about their health behaviours.

Public health in the areas of food safety, clean air and water and hazards are built on regulation and government intervention, not on a free market.

Let’s not even exercise the arguments about the inequity of co-payments in health. Co-payments do not lead to efficiency or effectiveness – words that don’t appear in the report – but to inequity and declining health outcomes. We know this from Australian and international research and it is completely irresponsible to ignore the evidence and recommend something that will lead to bad population health.

One of the biggest possible savings in health appears to have escaped the Commission’s notice. The report supports the ideological anti-free market mechanism of private health insurance that has done virtually nothing for health outcomes and has driven up health expenditure.

The costs of not investing in quality and safety, of not regulating some behaviours including some practitioner behaviours and of wilfully disregarding excellent evidence is completely outrageous and likely to be unacceptable to the community and electorally unpalatable.

It certainly won’t lead to reduced costs or government expenditure, and it certainly will not lead to better health outcomes.

Join the conversation

15 Comments sorted by

  1. Paul Richards

    integral operating system

    Nothing new in this article. Mungo MacCallum summed up the outcome in October 2014 last year.
    "The Commission of Audit is there simply to provide cover: to produce a report the government can use to justify its own rhetoric. And of course if it all comes undone, the Commission will make a very convenient scapegoat." Mungo MacCallum

  2. Comment removed by moderator.

  3. Sue Ieraci

    Public hospital clinician

    ''d. encouraging the States to introduce a co-payment structure for public hospital emergency departments for less urgent conditions that could be appropriately treated in a general practice setting; ''

    This one raises its head again.

    How is one to know prospectively which conditions could be ''appropriately treated in a general practice setting''? EDs are not just for people who are dying, they provide second opinions and rule-out potentially dangerous conditions, as well as being accessible at all hours.

    Some patients have conditions that are less urgent but too complex for general practice. Are these people to be penalised?

    Who will take the responsibility of coding a patient into or out of free ED care?

    1. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Sue Ieraci

      Hospitals have costs of capital, operations and maintenance that make them "very expensive". Encouraging people to use them does not necessarily increase costs, except perhaps for maintenance / wear and tear - the capital costs are already sunk, and staff cannot be turned on / off as much as "management" would like.
      For teaching hospitals, I think having lots of patients increases the quality of learning experienced by nursing and medical staff, and means second (and third and fourth...) opinions…

      Read more
    2. Sue Ieraci

      Public hospital clinician

      In reply to Robert Molyneux

      Spot-on, Robert. You have it in a nutshell.

      ED ''costs'' are averaged across all attendances - the budget divided by the number of attendees, modified by a basic complexity or urgency formula. But it's all a mathematical exercise. As you say, staff don't come on or go off according to demand - the plant and staffing are fixed.

      Again, as you say, one ED visit might also substitute for several GP, specialist and test visits - so the cost should be compared to all those episodes added together.

      The tussle of "GP substitutability'' of ED episodes of care is not about what's best for patients, or even about cost-effectiveness - it's about cost-shifting between Medicare and the states.

      (And a qualifier: EDs don't pretend to provide family medicine or continuity of care as GPs do. "Simple'' presentations to ED are mostly injury-related single episodes. Different (though overlapping) spectrum of care).

    3. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Sue Ieraci

      Hi Sue,
      As a business analyst, I have a keen interest in e-health. I have had lots of tests recently, with lots of different ways of recording and communicating the results. Really steam driven. The GP is supposed to be the central repository of all this stuff, but they are pretty archaic as well.
      I went to RPAH ED for a kidney stone (stent implanted), then a month later I went to a urologist and then to RPAH Pre-Admission Centre (twice) to prepare for getting the stent removed and another search for the (small) stone. Chasing around for the various test results from various locations took about an hour each time.
      Getting the national e-health record system working would save millions every year.

    4. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Robert Molyneux

      BTW: The Neurology Registrar at RPAH, being new to Australia, helped me by telephoning me at home a couple of times to discuss my condtiion, and arranged for a couple of tests to be done (on the same day, at the same location) and an appointment with a specialist Neurologist (after a week, at the same location). What service!
      Of course, this completely stuffed up the correct process, which is that I should have gone to my GP, waited for a couple of hours, and got her to write 3 letters to the 3 service providers (so they would send the results back to her) and I would have made the 3 bookings myself.

  4. Rab Abernethy

    helicopter pilot

    I hear several commentators comparing unfavourably how little of our GDP we spend on public health compared to the USA, 9% vs 18% seems to be the general consensus.
    This is highly deceptive as anyone who has lived in the US will attest. Firstly, that 18% is spread across 300 plus million people. It's benefits are nowhere to be seen, especially amongst inner-city populations.
    I knew older Americans, many with professional qualifications but age-unemployable in their professions and trades, now having to do demeaning work as cleaners, step 'n' fetchits etc just to be on a company health insurance scheme for themselves and their families.
    I think our commentators, mostly on the left, would do well to be less disingenuous when throwing around comparative statistics.

    1. William Raper


      In reply to Rab Abernethy

      I am unsure what you are meaning.

      Are you arguing for or against more expenditure on health in Australia?

      Or against US style privatised health insurance?

    2. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Rab Abernethy

      And Obama Care is required because...?
      How is 9% versus 18% deceptive? When at the same time you point out that "It's benefits are nowhere to be seen, especially amongst inner-city populations." Are you saying that not only do Americans spend a huge amount on their health systems, but the outcomes are unfairly spread?

  5. Cris Kerr

    Volunteer Advocate for the value of Patient Testimony & Sustaining our Public Healthcare Systems

    A greater role for private health insurers = federal shifting of responsibility for quantifying and qualifying health spending against the success or otherwise of health outcomes to the private sector.

    And what happens after that responsibility is handed over to for-profit health industry insurance providers whose private investors will expect ever-increasing profitable returns or who may have related conflicts of interest in markets/services/products, such as... provision of medical or hospital…

    Read more
    1. Matt James

      logged in via Facebook

      In reply to Cris Kerr

      Far more effectively articulated than my attempts. Its worth reiterating that private insurers like the very dangerous Bupa have been without doubt deliberately kept out of the spotlight by almost all of the main stream press, bar one or two little reports buried well away from page one. Nothing like the media onslaught, some positive but I would say mostly negative reports waged against Medicare.

      This I find very disturbing. But while The Conversation deserves credit for printing Ian McCauley's thoroughly researched papers comparing Medicare with the Private Insurers (backed up with plenty of non cherry picked budgets and spending graphs), they seam to have become buried underneath all the other health care reports? Why? I do not understand this considering Ian reported data no one else was. The Conversation released his papers far sooner than the overwhelmingly NEO Classical SMH BTW.

    2. Cris Kerr

      Volunteer Advocate for the value of Patient Testimony & Sustaining our Public Healthcare Systems

      In reply to Matt James

      Hi again Matt.

      Latest news is that the May budget will divide (weaken) the Private Health Insurance Administration Council (PHIAC).

      PHIAC will be split up - some to ACCC and some to Prudential Regulatory Authority.

      This will weaken the Private Health Insurance Administration Council's regulatory and enforcement powers.

      The Health Minister has previously flagged a greater role for private health insurers (insuring/reimbursing for doctor consultations / treatment?), and the govt has also…

      Read more
  6. Lora Bowman

    logged in via Facebook

    Does anyone see "The Elephant in the Room" called ALCOHOL ? The commissioners named smoking and over weight being reduced and contributing to less hospital costs. Was it Mr. Moodie who said, can you imagine how much health care would cost if we had not reduced smoking by informing the public of the consequences? What about The Sacred Cow Alcohol. When have you told the people there would be the same health impact for drinking (as smoking) because the Centers for Disease Control does not demand the…

    Read more
  7. Earl Gullion

    logged in via Twitter

    The compound in alcohol that causes birth defects (not unlike mr. Pitorius) is called TERATOGENICS. IT IS IN ALL ALCOHOLIC BEVERAGE ,WINE, BEER, SPIRITS. IT CHANGES THE DNA IN BOTH SEXES. So women are educated enough to know when they drink there is a chance of conceiving while alcohol is in their system. The label has a WARNING: that it can cause birth defects, but they think it is only the women who can cause this---men are just as much in jeopardy as the women. AFTER FINDING (WITH THE PREGNACY TEST KIT) SHE IS PREGNANT --HER QUILT THAT THE BABY COULD BE BORN WITH DEFORMED LEGS OR ARMS SHE GETS AN ABORTION. This is worse that thalidomide in Canada back in the 60's. This stuff is all over the world. The most painful part of this, is our Government knew it all along . But did not name the POISON that causes cancer, bipolar.dementia, ect. Tell me if anyone cares?