Our health system needs to target consumers who can’t pay

Those are the people who need healthcare the most, and where healthcare can make the biggest difference.

Without it, they will get sicker, which means more suffering, more healthcare, fewer productive years of life, and ever-growing costs for government budgets and the economy.

Annual taxpayer investment in healthcare dwarfs the revenue of any listed company.

Governments spent $179 billion on healthcare in 2022-23 – that’s more than the revenue of BHP, Woolworths, and Qantas combined.

But while corporations get ever more sophisticated, using data and advanced models to zero in on niche markets and set individualised prices, governments allocate capital for healthcare in much the same way as they have for decades.

In a persistent and perverse pattern, taxpayer-funded care is skewed towards the healthiest and the wealthiest.

Disadvantaged areas have around twice the level of psychological distress, compared with the richest.

But the richest neighbourhoods get about twice as much mental health care funding from the Medicare Benefits Schedule.

In GP deserts – the places with the lowest level of primary care, such as parts of Canberra – people are twice as likely to go to hospital with a condition that might have been prevented with primary care.

And the parts of the country where people die earliest get less care from specialist doctors than richer, healthier places.

In the 1970s, a Welsh GP, Julian Tudor Hart, described the problem as the “inverse care law”. He observed that when healthcare is a commodity, it is distributed like champagne: rich people get lots, and poor people get none.

Health is far from a commodity in Australia, with our mixed public-private market, but we still have champagne problems. The public sector must get much better at investing for the biggest impact.

The bulk of public funding either follows the clinician, wherever they prefer to live and work, or the hospital infrastructure, wherever it’s been built. And the billions of dollars in subsidies for private health insurance don’t shift care to those who need it most.

This approach hasn’t changed much since the 1970s, when we lacked the tools to identify and meet need with pinpoint accuracy.

But governments are increasingly awash in data about illness and healthcare. It’s time to start putting it to work and to focus funding on individuals and communities.

Primary care is a prime candidate.

Today, about 90 per cent of funding for general practice comes in transactional, fee-for- service payments. Payments are tied to GPs’ time, not patients’ needs or the best way to deliver care. The AMA has just called for more than a billion dollars a year to be added to GP fee-for-service payments.

But two expert reviews have recommended that 40 per cent of funding be shifted from those payments to flexible budgets for each patient a GP clinic cares for.

This would let clinics spend more time planning and improving care, deliver care in new ways, and fund a wider range of clinicians, such as allied health workers or pharmacists.

The budgets would be adjusted for individuals’ needs: higher for patients who are sicker and have greater health risks, such as being poor or old.

This would allow clinics to expand in areas where patients can’t afford to pay fees, but have higher rates of chronic disease – exactly those with the most to gain from better primary care.

The federal government has made a start, providing small additional payments for clinics that care for patients who live in aged care homes, or visit hospital frequently.

But much bolder change is needed to make the system fairer, and more efficient, and to get to the 40 per cent target the expert reviews recommended.

There are plenty more examples. Many parts of Australia have extremely low levels of specialist care, vaccination, and GP care. All of that is clear in data that governments hold.

Yet we persist with obstinately data-blind, broad-brush approaches to allocating funding across the system.

To fill those gaps, we should allocate health budgets according to the needs of the populations in different areas.

To start, governments should draw a line in the sand and set a minimum acceptable level of care, then allocate money to fill the gap in areas that miss out year after year.

Increasing productivity is the enduring economic challenge for Australia, and for the health system.

There is a lot to do, from making sure healthcare workers use all their skills, to harnessing AI to improve care and make it more accessible, to pivoting to prevention policies to keep people healthier. But making the health system fairer is a productivity fix that rarely gets mentioned.

Linking health funding to the needs of people and populations is something many other countries do much better than Australia. It represents both good values and a good investment, so it’s time to take the blindfold off.