Frank,

"Your last couple of sentences are interesting. If the industry were becoming more efficient costs should be coming down. They're not. That's the effect of protection."

Frank there perhaps a perverse, converse paradox at play in relationship to costs.

I have a very simple model that demonstrates that by reducing the average length of stay from 5 to 3 days, costs per patient treatment falls, yet average daily costs increase, but because more people can then be put through that hospital bed the overall costs increase. Simply because more people can be treated.

The first 48-72 hours of admission to hospital are the most expensive period, this is because of number of reasons, such as treatment and investigations.

By reducing the average length of stay by 2 days, the number of admission increase by about 25% and the overall cost in a public hospital increases by around 33%, however if the same thing were to take place in a private hospital it would be an increase in profits by 33%.

So for public hospitals treating more patients, increases costs, for a private hospital it is an increase in profits.

'So for public hospitals treating more patients, increases costs, for a private hospital it is an increase in profits.'

That's very interesting James. My partner was told after having our baby that the Hospital had a deal with the insurance company about a 4 day stay after birth. Luckily she was keen to go home after three, but I still think patient care shouldn't be influenced by some deal between a hospital and an insurance company.

Usual Suspect,

In the US there was a practise where people were discharged early from hospital and the hospital and insurer split the difference.

This meant increased profits for the hospitals and subsequently shareholders.

I do not know if you have seen a corporation flow chart, but in the private health care sector the most important person on the flow chart is the PM, followed by the Health Minister etc I think the CEO makes about third or fourth place. Doctors rate about fifth or sixth place, patients do not begin to rate until level 15.

Oh shareholders are more important than patients.

There is a lot of cynicism flying around on this thread. Perhaps a recap on some fundamentals wouldn't go astray

Health care is not free.

Most of us pay for some level of cover through the tax system. About half of us choose to pay again through private health insurance.

As far as the public system goes, we do pretty well here in Australia. You will always be picked up off the street after a car accident or a heart attack, and taken to a (pretty good, by most standards) hospital to be fixed up.

But if you need surgery that is not of an immediately life-threatening nature, you might have to wait awhile.

Private health insurance isn't a substitute for the public system, it is in addition. Private hospitals are built to take care of patients who are prepared to pay for choice, convenience and timeliness. If you remove this option, or price it out of the market, the full burden falls back on the taxpayer.

At which point, the decisions become significantly more difficult.

The question becomes how long are (we all) prepared to wait for that bypass surgery? or the knee reconstruction? or the vasectomy? And what about cosmetic surgery following that car accident? Does that rate higher or lower on a scale of importance than, say, IVF?

Allocation of taxpayers' funds to the competing needs becomes a nightmare. Whose problems get priority?

Clearly, the more money you throw at it the better the service. But how much will the taxpayer willingly put into the pot?

Here's a hint. With the population aging, two things happen. Firstly, there are fewer taxpayers as a proportion of the population. Secondly, those fewer taxpayers will be required to support the growing legion of old folk, who - by definition - are a bigger per capita drain on the system.

And they all vote.

So you get an increasingly aging population, increasingly voting for the younger folk to pay more taxes to fund the system that changes the bedpans.

Think about it.