Medicare is not broken, as the author says 80% of private health cover is with 6 funds, 3 are not for profit. If the author was honest he would state that Medibank Private is the largest health insurer with over 30% of the market. The average Australian with health insurance is on a low income and wants to be insured with Medibank Private, these pensioners can barely afford their premiums now and they would be forced to drop health insurance if premiums rose.

The american health care system delivers worse health outcomes for most people. A survey of 65 year old Americans and 65 year old Britons showed that Britons in the lowest quintile had better health than Americans in the upper quintile.
The american health system is also very expensive.

In fact Cubans enjoy better health than americans. Eurpoeans seem to enjoy reasonable health provided by universal health schemes.

Does the author want deregulation which would wipe out the smaller funds or does he want Medibank sold off to overseas for profit interests?

It should be noted that, private firms that deal in for example 'pathology' are positioning themselves to take advantage of the increased health expenditure of the baby boomers.

80-90% of pathology tests conducted in a persons life time occur within the last few years of their life.

There is no doubt that life style choices can have a large influence on a persons health, case in point is smoking. Some people may have quit before permanent damage is done, others the damage is already permanent.

Changes in life style such decreasing rates of smoking will not show up in significant numbers for a generation or two.

The current problems with our health care system are a result of governments listening to the wrong advisers.

Suddenly after a decade or more of squeezng every penny possible from public hospitals, such as closure or downsizing, Australia's increasing population is showing that the razor gang cutting has gone too far.

Part 1 of this piece was too superficial to bother with. But this one provides such a warped and inaccurate view of the problems facing the healthcare industry, that it cries out for a response.

My first impression of this article was that it typifies the “management consultant” approach. My second was that it typifies a lazy management consultant's approach, complete with half-understood concepts and poor research.

Before addressing the conclusions, there are some obvious errors to get out of the way:

>>This has only recently been slightly modified by Lifetime Community Rating meaning that people who take out health insurance before they get to 30 years pay 2 per cent lower premiums.<<

This is a process that adds 2% per year to your premium if you don't start cover until after your 31st birthday. So if you don't take out cover until after your 35th birthday, that's 10% on top. And it goes right up to a 70% uplift. This was in fact one of the most significant steps the government took to make private health insurance attractive to the young, and to some small extent offset the “all pay the same” disincentive inherent in community rating.

>>Australian private insurance tends to be cheap by international comparison ($300 - $3,000 per year<<

For $300 p.a., let me assure you, you do not get much cover, and you will have to agree to pay the first few hundred bucks each time you use it.

But that's not really the point – the comparison itself is meaningless. As the author points out, our system is a combination of Medicare and Private Cover and these do not overlap. It is like comparing petrol prices in Australia ($1.50 a litre) with those in Iran ($0.10 a litre) – the product is identical, but we tax, they subsidise.

An additional fudge factor ignored in the comparison is the presence of ancilliary benefits (“Extras”) that the vast majority of policyholders include with their hospital cover. This covers “known” expenses, such as dentistry and contact lenses, and is primarily a form of savings fund.

...continues

...continued

>>Among the 37 Australian health funds... just three are for profit. <<

The comparison here - “for profit” vs “not for profit” - seems designed to suggest that this is a bad thing. I would suggest the exact opposite.

Private health funds draw income from premiums, and top it up with dividends from their investment of the surplus. If you subtract from that surplus the need to pay external shareholders, you reduce the pool of funds available to pay benefits. This is an essentially simplistic view, but when you are dealing with a commodity as sensitive as health, it is an important one.

To add to the author's misleading picture, there is in fact only one fully “for profit” private health fund in Australia, in the sense of requiring a shareholder dividend to prop up its share price. The confusion might be that there is also one that provides income to bondholders, which is equivalent to debt funding, and one that acts within a member-owned group.

>>One answer is de-mutualisation - underway at Medibank with other big health funds following suit<<

I am sure that this is news to Medibank.

They were at one stage working towards privatization, it is true, but were told by the incoming Rudd government that this would not happen in the short term. Meanwhile, the only fund that did make it to market – NIB – saw its share price savaged after the Roxon budget proposal to increase the Medicare Levy Surcharge. The combination of these two factors effectively takes demutualization off the agenda for the time being.

The problems facing our healthcare system are too important and too complex to allow simplistic solutions. Unfortunately, addressing the article's inaccuracies has left little room to critique the paragraphs of management-speak that the author puts forward as proposals for change.

But one thing is certain, Medicare will continue to form the fundamental underpinning of any future combination of open-to-all care and commercially-operated care structures. Leaving it to the private sector to fight over is simply an ideologically-driven cop-out.

This author makes the suggestion that private health funds need to be competitive and that if a consumer fails to look after their health, that the funds increase the cost of insurance to that consumer.

The American private health care system, people who have the likelihood of a inherited genetic condition or pre existing conditions, pay higher premiums putting the cost of health insurance out of the reach of many people unless they are really wealthy.

In the program aired on SBS on health care around the world, the american correspondent asked the question in countries like Japan, UK and Thialand, "has the cost of health care sent anybody bankrupt."

The answer in these countries was NO!

The American health care system is by far and away the most expensive. Americans rank 38th on health outcomes.

The reality of fully risk-based health insurance is this.

Those who are least likely ever to need it, particularly the young and fit, will pay the lowest premiums.

Those who are most likely to require health care, i.e. those who are older and less fit, will pay the most.

On the surface, this seems appropriate. After all, why should those who take good care of themselves shell out for those who don't?

But as with everything related to our health, it is not always that straightforward. Even the young and fit can be vulnerable - witness the 27 year-old who suffered a heart attack in this year's Sydney City to Surf. Nor are all old people a burden on the system - it's all a matter of actuarial calculation.

Underneath that simple equation is a deeper problem.

Science - particularly genetics – increasingly allows us to more accurately predict potential health vulnerabilities.

http://www.genetics.com.au/factsheet/fs24.html

"Once a gene is isolated and its correct sequence defined, it is possible to determine if a person has the correct copy of the gene or the faulty version that may result in a particular genetic condition. This information may be used to diagnose a condition in an individual or during a pregnancy... or it may be used to test an individual prior to any symptoms being present."

Once you embark upon fully risk-based health insurance, how would you be able to refuse the insurer a copy of your "genome chart"? After all, we already provide information relating to our parents' health.

Makes every bit of sense from the insurer's viewpoint, but its social implications are far wider.

There is unfortunately no halfway house in this situation that is “fair” to all parties. If you allow insurer's to assess risk before assuming financial responsibility for it, why would you stop short of allowing them to collect all relevant data?

As anachronistic and as unbalanced as our present system of community rating may seem, it is a heck of a lot better than the alternative.

There is an interesting study comparing the life expectancy of homeless men in two cities in Canada and the other in America. Both cities have a similar climate.

There are no prizes as to which country's homeless men had a higher life expectancy.

The author suggests that young people pay lower health care premiums,
than people who are older, take this a step further and apply the same principle to young people who have for example diabetes or epilepsy.

Because they will use more health care resources than another person of the equivalent age. However this principle would disadvantage the people with these diseases as they already incur a high burden of cost including medications.

The Pharmaceutical companies would love to see the end of the Australian governments pharmaceutical scheme, which keeps the cost of medications down, by a significant amount when compared with the costs in a competitive deregulated market such as the US.

Competition between health funds in the US keeps people who are high risk from joining health care funds.