Opening remarks by Dr Stephen Duckett, Director, Health Program,  to the Senate Community Affairs References Committee inquiry, Tuesday 31 October

Australia’s mixed public and private health system is unique. It involves a messy interaction where a thriving private sector, underpinned by publicly subsidised private health insurance, competes for staff with the public hospital sector. In contrast to most other countries, where the private sector complements the public sector by providing services or coverage the public sector does not, in Australia the public and private sectors overlap.

We have the most peculiar system of carrots and sticks in the private health insurance market. Tax penalties mean that for me, private health insurance is free. In contrast, for my daughter, private health insurance is expensive, and, despite the recently announced changes, not a sensible way to spend her hard-earned dollars.

Australians love Medicare. They know it is efficient and affordable, despite the doomsayers who claim, without evidence, that it is unsustainable. That does not mean that there is no scope to improve Medicare; there is. It’s just that we have to be careful not to throw the baby out with the bath water.

This committee has very broad terms of reference. It is looking at important issues which affect almost every Australian. You have had many submissions, some seeking bold changes, some more timid. The reality is that we are at a point in the political cycle where bold is probably off the table. But small changes, potentially politically acceptable to both sides of politics, can be identified. These could achieve a Senate majority and thus provide an incremental improvement. I urge you to look for such proposals. I have three such suggestions –and one proposition to avoid.

First, we should be more transparent. We should publish data on complication rates in public and private hospitals, and about the costs that consumers who go into a private hospital might have to pay. For those of you on the conservative side of politics, this is about ensuring that the market works as a market should. That it, is about consumers knowing what they are buying. For the other side, it is about protecting consumers.

Second, we need to build the foundations, to use a title of a previous Grattan Institute report, for a better payment system for general practice.[1] Every galah in every pet shop is talking about primary care payment redesign to reduce the emphasis on fee-for-service payment, the payment system the Productivity Commission recently described as a ‘necessary evil’.[2] But we can’t make significant shifts because we don’t have the data. We know roughly how long a GP consultation is, but we know nothing about the reason for the visit or what happened. We should capture that information, without imposing a red-tape burden, and we should capture it in a way which protects the confidentiality of both patients and practices.

Third, a word about the recent changes to private health insurance. They are essentially benign, will help position private health insurance better, and may be of some benefit to consumers. But they will at best lead to a fractional increase in the proportion of Australians covered by private health insurance. Despite the media hype, they are not transformative.

What I am disappointed about is the proposed changes to mental health coverage. This is a marginal benefit, a patch-up job, which smacks of a deal to provide a veneer of change. Mental health care is not like orthopaedics or obstetrics, which have significantly different needs at different points of the age distribution. Mental illness can strike anyone at any age.[3] We should be ensuring that mental health care is part of every private health insurance package, not an exclusion.

Finally, something to avoid. We should kill off the co-payment zombie for all time. We know three things about co-payments. First, they work. They do indeed reduce utilisation, just as economic theory predicts. Second, they have a bigger impact on the poor, again as you would expect. So they are inequitable. Third, consumers are not good judges of what is essential and what is not. Therefore, visits missed through a patient’s need to avoid a co-payment are equally necessary and unnecessary visits as judged by professionals, a finding yet again confirmed in an article published earlier this month.[4] As a result, preventive opportunities may be missed, and greater costs may be incurred later, including hospital admissions. Co-payments, then, are not even sensible as savings opportunities. Co-payments are not current policy of any party, so now is a good time for a unanimous strong recommendation to kill them for good.

[1] Swerissen, H. and Duckett, S. (2017) Building better foundations for primary care, Grattan Institute

[2] Productivity Commission (2017) Shifting the Dial: 5 Year Productivity Review, Productivity Commission

[3] Whiteford, H. A., Buckingham, W. J., Harris, M. G., Burgess, P. M., Pirkis, J. E., Barendregt, J. J. and Hall, W. D. (2014) ‘Estimating treatment rates for mental disorders in Australia’, Australian Health Review, 38(1), p 80-85

[4] Agarwal, R., Mazurenko, O. and Menachemi, N. (2017) ‘High-Deductible Health Plans Reduce Health Care Cost And Utilization, Including Use Of Needed Preventive Services’, Health Affairs, 36(10), p 1762-1768