This article looks sensible at first glance, but only because
there's little that is specific to health care in it.

But to talk about "choice" as though it was like most of the other choices we make is just wrong. When I go to doctors and they say
do this, do that, have this operation, undergo that procedure,
I've no real choice because of my ignorance of medical matters.

Most other choices I make (eg at the present, what sort of garden fence to build), if in an area where I don't know much, I can ask around.
But as for asking other around as to whether I should have an operation - well, don't be silly. So the choice aspect is quite illusory.

As for "competition" - well sure, with a private system, I can find a GP I'm happy with, but when there's only one specialist in town who specializes in a certain condition, and only one surgeon who does that sort of operation - what does "competition" mean?

Hmm.

A large dollop of Austrian school ideology unleavened by facts.

Is there an OECD country that boasts a better health care than Australia, at lower or equal cost, where health care expenditure is growing at a slower rate, AND where the advantage can be clearly shown to be due to greater competition?

According to the 2006 edition of the OECD Factbook, Australian life expectancy at birth is fifth longest out of the 30 countries, although infant mortality rate is pretty ordinary (we come 16th).

Total health expenditure per head rates 13th highest (purchasing power parity-adjusted US dollars/head) with total expenditure at $2700 of which $1800, or 67% is public, and the rest private. (I suspect the private component includes the government subsidy to private health funds.) For comparison, the US total cost per head was more than twice the Australian and the private component was well over 50%. Despite this the US has the fifth worst infant mortality and nineth shortest life expectancy.

Although far more of the US system is in non-government hands than is ours, it delivers worse results at much higher cost.

Mexico and Korea are the only other two countries where the private component of health care cost exceeds 50%. I don't think they offer the kind of model that we are looking for either.

Readers might like to refer to an earlier OLO on our health care system at http://www.onlineopinion.com.au/view.asp?article=4288

The supposition that competition between doctors or between medical orgnanisations will lower costs is false. The classic example was in the great depression, when doctors, faced with declining numbers of patients and a diminution of their lifestyle, increased their fees.

True, many of them did not charge the very poor. But for those who could pay, the fees went up. The problem for eceonomic theory is that the demand for medical services is unlimited. If my life or those of my children are at risk, what would I not pay to have it saved?

I might shop around for cheaper services. But doctors have an idea of what is an appropriate standard of living. The more doctors, and the fewer patients each has, the more they charge.

Economic theory has to be applied with care. Understood crudely, the laws of supply and demand have more exceptions than examples.

ozbib

No, ozbib,

You are bending too far in the other direction. The medical establishment is hidebound and resistant to performance measures of any sort. But if you don't measure you can't improve.

You have stated the key point: "Economic theory has to be applied with care". Comparing GPs' fees as a measure of health system performance makes about as much sense as judging Olympic athletes' performance by the cost of their running shoes.

GPs are important, yes. Athletes' running shoes are important, yes. But they are both small parts of a large and complex system.

Mistakes, inappropriate and unnecessary treatment together with failure to put in place disease prevention strategies and to promote evidence-based health care are arteries through which health care money is hemorrhaging.

Competition OF THE RIGHT SORT can be a powerful tool for improving health care effectiveness and reducing health system cost.

Benchmarking treatment outcomes and costs across hospitals (and indeed across nations) can be a valuable tool in improving both.

As a specific example, doctors at Liverpool Hospital in Western Sydney realised in 1990 (it is difficult to believe this) that treating inpatients at risk of cardiac arrest as soon as disposing factors appeared was preferable to the standard practice: waiting until after a patient is, basically, dead. It stands to reason that medical treatment given to people on the point of inevitable death is a waste of money. The Liverpool team's innovation is now spreading round the world.

There is a clear measure of effectiveness. What proportion of cardiac arrest inpatients survive to discharge: as few as 17% or as many as 68%?

http://www.ethics.org.au/ethics_forum/forum_posts.asp?TID=1333

Do we prefer to subsidise a diabetic to visit a podiatrist at first sign of foot trouble, or to incur the hospital cost of amputating his leg three years later? Would it be even better if he was persuaded earlier still to eat less, exercise more and not develop diabetes in the first place?

The inescapable lesson of life is "you get what you pay for".

I remember reading an article in the SMH last year regarding the pro's and con's of private vs public health spending.

An example they gave of how private hospitals can waste resources was in the use of heart stents. There are 2 types. 1 costs around $7000, the other $20000. Private hospitals pretty much always used the more expensive stent, while public hospitals would use the cheaper stent unless there was a medical reason to go for the more expensive one.

To me this is not an efficient allocation of scarce medial resources by the private system.

I am sceptical that a hospital looking to make a profit can provide a cheaper medical service than a public hospital

MikeM, those statistics don't even paint a fraction of the picture. It's ridiculous to say that Australia's health care quality or prices, let alone life expectancy can be attributed solely to the level of private sector involvement in the health care market. What about the level of regulation, or government granted monpolistic behaviour? The health care market can be entirely private, but if competition is stifled and prices are elevated due to other artificial factors then the level of private sector involvment is irrelevant.

Julie, your brief bio says "Julie Novak is a Brisbane-based economist." Must be pretty hard getting to work in Melbourne each morning. :-)

I am a health consumer and I consume blood pressure medicine. If I do not have it I will probably have a heart attack.

I assume "price signals" for someone like me means that I should pay more for my medicine and because of that I will change my behaviour ?

Now I concede I could stand to lose a few kilos and the fags are not doing me any good, so I can probably get the signal.

But thank God I am not genetically pre disposed to some illness where all price signals will do is give me a stroke because I have no alternatives.

"Apart from the fact that more public funding into health means less money for schools, roads, policing and other services, the possibility that greater consumer choice and provider competition ought to play a role in driving systemic improvement in the health sector has not been sufficiently appreciated."

Interesting the tax on petrol was meant that more money would be spent on maintaining our roads, however in practice only a small portion of the tax collected is spent on maintaining our roads. State governments have resorted to Public/Private programs as a way of funding roadworks, despite the enormous amount of tax collected on petrol.

The Public Private partnerships means that the taxpayer is paying through the use of tolls, another tax on top of the fuel levy surcharge and all the other taxes imposed on motorists.

So it stands to reason that even if governments spent less on health that the money would not necessarily go to other services like education, policing etc.

As many have pointed out price signals at the consumer level often don't apply in health care (or should we say sickness care).

However, price signals could work for insurance companies if they were allowed to exercise them. I am more happy if I pay health insurance and I never use it. I would like my health insurance company to have the ability to encourage my doctor into making me so well that I would never have to visit him nor visit a hospital.

Instead of trying to fix the problem at the consumer level let us give more power to the insurance companies and let them figure out ways to reduce costs by reducing the usage and so gain more income.

The current system tends to encourages consumption. We need a system that discourages consumption.

Mandatory health insurance is socially desirable (with subsidies for those less well off). Many insurance companies are a good idea to bring competition to the market. But we need to remove the shackles of regulation so that the insurance companies can implement ways to reduce demand and reduce costs and increase profits because we will be happier if we do not need health care.

Allowing insurance companies into the Dr-Patient relationship,will create an American template doomed to fail as distort the 2 person process - patient consulting doctor now 3 into the intimate healing/care process

Major TOP DOG American Insurance suit Aus $11.3 million income - 5 thousand Aus$/hour). If I was a lawyer, I would want MORE insurance involvement- a proven madness. Inserting a layer of highly paid insurance Zegna suits surrounded by a posse of complexing protective lawyers just adds more costs. Simple.

Lets go back to the days when Freemasons and the church groups ran charity hospitals and their members made a contribution back to society?

Company Intelligence
2004 Executive Compensation Publicly Traded Managed Care Firms*
May 9, 2005, MANAGED CARE WEEK, news of health plans, PPOs, and POS plans.

Name/Title Annual Salary Bonus Other Annual Compensation

William McGuire, M.D., Chairman/CEO UnitedHealth Group $2,176,923 $5,550,000 $242,386

Stephen Hemsley, President/COO $1,038,462 $2,325,000 $143,447

John Rowe, M.D., Chairman/CEO Aetna, Inc. $1,133,749 $2,500,000 $231,416

Paste link below into browser - the resultant legal turmoil inflicted upon patients, providers and hospitals.

http://www.aishealth.com/ManagedCare/HMOLawsuitWatch.html

Do Aussies want this model?

No, but our MP's are either stabbing each other or snoozing!

MP's don't seem to give a toss, for the insurance lobby can smell profits like a White Pointer, they are circling, as is Coles who has paid $48 million purchase Pharmacy Direct "to have a look". Pull the other one, Uncle Scrooge. Pharmacy direct was owned by API who has on their Board: The Hon Dr Michael Wooldridge (Independent Director, Non Exec. Director). Cute?

God save our grandchildren, for there will be nothing for them to do other than be slaves to the corporates - no Aussie egges, pork, apples, garlic, potatoes, milk, no professional independent practices. The rural communities will become a wasteland of nothing, ruled by highly nurtured corporate gnomes.

How did the madness start? The ACCC (highjacked by Toorak suit Venture Capitalists with MBA's from Harvard) proclaiming that the professions are just a business (therefore we will more in and take the albeit slim profits oh, except radiology and pathology)

The fact that the American implementation of a model fails does not mean that the model is wrong.

The model is to have a group negotiating prices rather than an individual. If profit making insurance companies is not the right implementation perhaps cooperative member based insurance companies is an appropriate way?

The point is that it is almost impossible for a sick person to make a selection on health care facilities. We need to work together in some way to balance the market.

Having a single authority with the power to set prices as in a fully government national health system tends to economic inefficiencies because there is little choice and hence the system will stagnate. We need a system that can evolve and adapt.

For myself I want a system where I am encouraged to stay healthy, where I pay for my regular usage of health services but where I have insurance against the catastrophic situations. (Much like the one we have at the moment:)

We can do it because motor vehicle insurance, home and contents insurance works well for most of us and fulfils their purpose. We should be able to tweak the current system to make it work better. I suspect that the problem of rising health care costs is in our demand for more health care rather than being a problem in health insurance. Certainly giving more so called choice to consumers is not going to contain prices.

What is the priority? care for people or the dollar. The article is long winded and obviously created by someone who has never had hands on experience at the coal face.
With 2 billion dollars going to the private sector every year and a failing public sysem where is this dollar brained person coming from?.
The private system does elective surgery in the main, and it is profit based.
The public system takes all emergencies including road traumas, many of these related to alcohol which the sale of, contributes to government coffers. Violence related traumas are treated in the public system. All acute medical cases are treated in the public system. Acute psychiatric cases are treated in the public system.
Do the dollar heads take these facts into consideration when slicing the dollar cake?.
Where was the author of the article in the 1970s?, when we had the best health system in the world without doubt. Why are we paying high taxes if we cannot expect to have a decent health system?.
Howard's troops being deployed in an illegal invasion and occupation of Iraq, as well as Aphganistan is a huge burden on the taxpayers who did not want Howard to join Bush in what has become new killing fields. The dollar heads cannot make the citizen responsible for their health care in any shape or form, when such irresponsibility is shown by the government of the day.

If we truly had private medicine then Australians could expertly comment on the proposals for privatised health care. But the fact is we don't. Australia has had subsidised health care since in 1947 when PBS was started.

We currently have a private health insurance regime which is

- regulated to the hilt so that insurers must charge a high enough premium for the weaker players to remain viable

- the contributors get a 30% cash rebate from the government

- insurers are not charged the real cost of patient care - in fact no one knows what the cost is

- insurers do not cover the full cost of patient care so patients make GAP payments

In the absence of any better data I compare Australia's health care system to that operating in the United States and conclude that health care outcomes are better in Australia for all but the super rich. As I am not in the top 5% of Australian incomes I do not want the Australian Health Care System privatised.

The federal government has announced its intention to sell Medibank Private which is still the largest health insurer in Australia. The governments mode of sale isn't clear yet but the choices appear to be

1. sell Medibank to an existing insurer
2. sell Medibank shares on the stock market - like Telstra
3. sell Medibank to an investor not yet in the Australian market - an American insurer perhaps?

Clearly we don't want to go down the American health insurance road where
only the seriously rich have health insurance cover.
Health insurers dictate the level of treatment they will pay for.
Health insurance won't cover pre-existing conditions
health insurance cuts out irrespective of whether treatment is completed
The cost of visiting a doctor in the US is extortionate in comparison to the cost of visiting a doctor in Canada for the same condtion.

The most common cause of individual bankruptcy in the US is unpaid medical bills.

It may be your fault if you need a knee reconstruction at 25 because of your aggressive football playing, but its not your fault when you need medical care at age 75 because you are OLD.

Fickle, just click your curser on the little yellow house with the green roof at the foot of this message. or my previous message under the other heading.

Good luck.

What health economists fail to consider is that the private health insurance rebate adds an additional $3 billion dollars the health cost expenditure.

"While most health advocates argue that a greater redistribution of taxpayers’ money into health is required to resolve these issues, the fact remains that our health sector is not starved of resources. Indeed, the growth rate of spending on state-subsidised medical services in recent years has increased by an average of 12 per cent a year. Overall health spending has more than doubled from 1995-96 to $45 billion, and now represents around 10 per cent of gross domestic product."

The private health insurance rebate is just over 6 percent of the 45 billion Australia's health care expenditure. In addition not all the 45 billion is spent on public hospitals.

Public Hospital expenditure is estimated to be 20 billion (2004) which is less than half the total expenditure of 45 billion.

Of course private health care costs more - profits are required - the real problem with health care around the world is the fact that drug companies are privately owned. Lets face it, they are the basis of most health provision these days and it is not by chance that they are amongst the most profitable corporations on the planet.