Dos and don’ts for the new government

About the author

Stephen Duckett Image

Stephen Duckett

Stephen Duckett is the director of the Health Program at the Grattan Institute and has produced numerous analytical reports proposing how we can improve the health system, in areas ranging from pathology costs to ill-health ‘hot spots’. See He has held numerous academic and administrative positions, including as Secretary of the Federal Department of Health.

This is a guest blog from Stephen Duckett, the director of the Health Program at the Grattan Institute. See more of his work here.

The new Coalition government will find health policy difficult as it balances the need to address budget deficits with establishing its credentials as a friend of Medicare. It has a legacy on both sides of that ledger. The Abbott-led government shrilly decried a ‘debt and deficit disaster’ before initiating massive increases in budget deficits. It also reneged on a ‘no cuts to Medicare’ promise with a 2014 Budget that made swingeing cuts to public hospitals and attempted a compulsory co-payment.

With that background, here are three dos and three don’ts for the new government.

1. Do keep the core promise

As the election showed, the public puts a high value on Medicare. Importantly, it has a good understanding of what Medicare means, and that includes bulk billing and access to public hospitals without a co-payment. Since the government has promised to protect Medicare, it must not play with those core elements. It must give up on ideologically-driven changes that are not consistent with the public’s conception of what Medicare is.

2. Do negotiate a good public hospital deal with the states

The current funding agreement with the States for public hospitals runs out in 2020. The government needs to negotiate a long term deal that gives funding certainty. It also needs to ensure that States can afford to ensure that public hospitals meet growing needs for care. Under the current agreement the Commonwealth taxpayer meets 45 per cent of the costs of growth in hospital activity. Although less generous than the Labor deal, which met 50 per cent of the costs of growth, it’s not bad. Why not extend that into the long term?

But the government also needs to ensure that States can find the money to meet their 55 per cent of the costs of growth. That will be hard and require whole-of-government thinking about how taxes are raised and divided among the States. GST is off the table, but what are the other options? Hospital costs are eating up an increasing proportion of State budgets, and if State public services – not only hospitals but schools and public transport as well - are to keep pace with needs, there will need to be additional State revenue sources.

3. Do keep up the good work on primary care reform

In the 2016 Budget the government embarked on primary care reform with a toe in the water, announcing “health care homes”, a still evolving term for strengthening general practice to improve coordination, management and support for primary care patients. It was a good, but small, start on what needs to be done in primary care. The prevalence of chronic disease is increasing, and the primary care system needs to adapt. The problem is that the evidence of what works is pretty thin, as Grattan Institute’s 2016 report, Chronic failure in primary care, shows. This means government needs to tread cautiously, testing ideas and evaluating the results. But because the pilots and evaluations need to be big enough to find the bugs that need to be fixed, the announcements in the 2016 Budget will probably need to be scaled up.

And now the don’ts.

1. Don’t give up on reform altogether

Health care doesn’t stand still – it evolves, and policy must evolve with it. New items need to be added to the Medicare Schedule, old ones need to be dropped. There is a review into possibly inappropriate items under way. Provided its findings are well founded, the government should run with that, and not listen to the loud voice of those medical specialties which might lose money.

The same is true in other areas. The government should not just sit on its hands, but lead evidence-based change to the system.

Bi-partisan support may be achievable for well-founded proposals.

Remember, there is money to be saved in health care. The system cannot be immune from the need to pursue efficiencies. But cost shifting on to consumers or the States is not the road to greater efficiency. The government needs to be more sophisticated than that. It needs to set the right prices for what it is paying for. It needs to be more careful about what is paid for. Change will occupy a fair amount of government time, but the payoff will be well worth the effort.

2. Don’t confuse restructuring with progress

The health system is sick of ‘badge engineering’ – in other words, playing with organisational arrangements and pretending that the game somehow improves care for the average Australian. Replacing Medicare Locals with Primary Health Networks, to give the worst recent example, cost millions of dollars and slowed real reform by a few years. Don’t do another reshuffle of the Canberra-based agencies; just let them get on with the jobs they are supposed to do.

3. Don’t forget the have nots

We often think about averages. The average cost of care. The average benefit from a new drug. The average out-of-pocket cost. But each of these measures is just the centre of a distribution that has a spread or range. Government needs to remember that some on low incomes can’t afford any out-of-pocket. There are groups, especially Aboriginal and Torres Strait Islander people, who have much worse health outcomes than the rest of the population. When new policies are proposed, government must consider the impact of the policy on the most disadvantaged.

Where to next?

The last three years have been very rocky for health policy. In one six- week period we had three different co-payment policies. Now we need policies that aren’t based on whim and ideology, but on evidence. Moving in that direction will lead to more stability, better policy processes and hopefully better outcomes for all of us.