Fiscally attractive health system strategy has no benefits

by Stephen Duckett

Published by The Australian Financial Review, Tuesday 7 January 2014

Federal Health Minister Peter Dutton has told Fairfax Media he fears the cost of Medicare will become “unsustainable” without change. Dutton mentioned the impact of dementia and diabetes as potential areas of concern.

Without change to current policy settings, health costs are set to grow from about 9 per cent of GDP now to 12 per cent in 20 years. This is not necessarily a bad thing. There are many areas of the economy besides health where we choose to spend more as we become wealthier and the economy grows. The critical issue is whether we as a community are benefiting from the increased spending and whether the benefits are being spread fairly. This is the way the debate about cost growth should be phrased, not in terms of sustainability panic.

Mr Dutton’s comments follow the proposal to impose a $6 out-of-pocket fee for visits to general practitioners, a proposal condemned by virtually every health sector group, from the Australian Medical Association to consumers.

It is not just self-interest which has brought out the opposition. The research is pretty clear – such a proposal will impact adversely on poor people (pretty obviously, $6 is more meaningful to the poor than the rich) and the care that will be delayed will include both visits that doctors judge as necessary and those judged unnecessary.

Deferral of necessary visits will increase downstream costs, as problems put off become more expensive to treat later. Care may also be shifted to more expensive emergency departments. If just one in four people decides to go to a hospital emergency department to avoid the $6 fee and the opportunity to read 10-year-old copies of The Australian Women’s Weekly, then the federal government’s savings evaporate because of the higher payments the federal government makes for hospital versus GP visits. But Mr Dutton is right to think about the need to ensure the health system is right for the future.


Take his examples of dementia and diabetes. If you start with thinking about what needs to be done to address the growing incidence of these conditions, the answer is pretty clearly not $6 out-of-pocket on a doctor visit.

Addressing the care needs of a person with dementia starts with thinking about the person who does most of the caring – the spouse, family member or friend.

What can be done to support them in the support they give?

With diabetes, it starts with prevention.

What can be done to reduce the incidence of diabetes; for example, is there a way to make healthy choices easy choices? It also involves thinking about what can be done to support the person with diabetes to manage their own condition better – after all, they live with diabetes 24 hours a day, seven days a week.

Changing care for people with diabetes or dementia is not amenable to a quick fix. It requires careful planning, maybe some experimentation to assess what works and what doesn’t. Adapting the health system to the changed incidence of dementia and diabetes is but one of the changes necessary. We also need to re-examine every area of spending. Is every test ordered necessary? Is best practice care being delivered in every consultation? How much waste is there in the system?

Waste also occurs in the prices we pay. Previous Grattan Institute work has shown Australia pays too much for drugs relative to other countries. Our estimate is there are savings of about $1 billion a year to be made, compared to the about $200 million per annum from a $6 co-payment.

One hits the poor, the other doesn’t.

Mr Dutton is right to say we need to start the change process. Importantly, he hasn’t endorsed the idea of shifting costs to consumers, nor should he.

Changing the health system is hard. It takes time. Although a $6 slap-down of consumers may be fiscally attractive, it does nothing to change the fundamentals of the health system and is a distraction that does more harm than good.

What is needed is open discussion about how to address real health system issues, not quick, fiscally driven strategies which paper over problems for a few years at the expense of the poor.