Medicare turns 30 and begins to show signs of ageing

Some Australians are struggling to get timely access to affordable health care. AAP Image/Dave Hunt

Tomorrow marks an important Australian milestone: 30 years of Medicare and the guarantee of universal access to health care. Before Medicare, it was not that uncommon for people to avoid using health-care services because of the cost, or for people to experience serious financial hardship when they did.

But while Medicare has served us well, the health needs and expectations of Australians have changed over the past three decades, and cracks are beginning to show.

Some Australians are struggling to get timely access to affordable health care, especially in rural and remote areas. And many of the increasing number of people with chronic health conditions receive fragmented care, largely because it is delivered by a range of public and private providers working in relative isolation.

Under the microscope of the National Commission of Audit, health expenditure is receiving renewed scrutiny. In recent months, advocates have aired numerous reform proposals, including ones to abandon bulk-billing and introduce a A$6 co-payment for GP services, abolish the private health insurance rebate, and explore options for public/private partnerships in health.

Other longer standing and more thorough reform options being pushed by advocates include: establishing Medicare Select, a universal model that would see Medicare and private health insurance funds compete for membership, and introducing health savings accounts that would see people take responsibility for managing their own health funds, made up of government and personal contributions.

Although the reform options on the table are many and varied, most have two features in common: they are about financing health care and/or changing the balance between the public and private sectors.

Debates about the latter are long overdue; the Rudd government’s National Health and Hospitals Reform Commission has often been criticised for missing the opportunity to address this issue in its wide ranging review of the health system.

The current structure of the health system means many people with chronic health conditions receive fragmented care. Image from shutterstock.com

However, history shows that focusing on financing alone, while ignoring underlying structural issues, means the problem is unlikely to go away.

The longstanding debate over private health insurance subsidies is a case in point. The central argument is about whether or not government rebates, subsidies, or tax breaks for those with private insurance can be justified. But they never progress much beyond this, and any calls to tackle the underlying structural issue – the difficulty private funds have competing in the market because there is a competitor, Medicare, that is compulsory – have fallen on deaf ears.

In other industries reliant on government subsides, the debate is no longer just about money. In the car industry, for example, debates are now about how effective government subsidies have been in helping the industry to make the structural adjustments needed to compete in a changing economy. There are even government programs to support the industry to change.

There is little talk in the health insurance industry of structural change, despite the fact that the private health insurance rebate amounts to about A$5 billion a year**.

Debates about out-of-pocket costs for health care follow a similar form. Australians pay more for health care out of their own pockets than people in most other developed countries (including the United States). Past governments have attempted to remedy this problem by establishing safety nets, providing tax offsets, or allowing private health insurance to cover some, or all, of these out of pocket costs.

These solutions, while providing temporary relief to those who can afford to outlay the money in the first place, do not tackle the underlying structural problem. Governments can do little to constrain prices, and therefore out-of-pocket costs in health care, because the vast majority of out-of-hospital care is provided by private practitioners (such as GPs, dentists, physiotherapists) working on a fee-for-service basis.

Public and private hospitals compete for private patients. Flickr/Phil Dokas

There are options for structural reform on the table, ready for governments to consider. The role of private health insurance with respect to Medicare is one of the most fundamental.

In some areas, private insurance duplicates Medicare (both fund inpatient hospital care, for example). In other areas, private insurance complements Medicare by offering additional services or products (choice of doctor, possibility of private room in hospital, many allied health services).

The extent of duplicative insurance provided by private funds is almost unheard of in the rest of the world. It is a structural issue that needs to be addressed if we are to improve the efficiency and equity of our health system.

Another related area ripe for reform is the way public and private hospitals work together. Currently, both are competing for private patients. In some states, public hospitals have revenue targets for private patients but, at the same time, they have waiting lists for public ones because of budget restrictions.

Some of these public patients are eventually treated in private hospitals on the public purse because they have waited longer than clinically necessary. The government sometimes even pays a premium for care contracted out to the private sector just so they can get it done.

Many hospital executives in the public and private sectors have told me during interviews that this situation is ludicrous; the two sectors are tripping over one another, rather than working effectively in collaboration.

As funding reform options are debated in coming months, there is an onus on health experts and commentators to shift the debate away from narrowly cast discussions about financing to more productive ones about the structural problems in our health system. If we don’t, we are unlikely to see reforms of the scale or significance of Medicare that solve pressing problems in our health system anytime soon.


Anne-Marie Boxall’s latest book Making Medicare: The Politics of Universal Health Care in Australia, co-authored with Jim Gillespie, was published in September by UNSW Press.

** This article originally said the private health insurance rebate amounts to A$30 billion a year – this has now been corrected.

The Future of Medicare Conference opens on 13th August in Sydney.