After challenges, difficulties, proposed solutions and failed attempts over ten years, Australia implemented the provision of universal health cover for Australian citizens in 1984. This was by any measure a remarkable success by a relatively young nation in the creation of a national system of provision. That pride may be tempered somewhat by current circumstances in Australia. It is difficult to imagine that the founding fathers would have anticipated that present-day Australia is second only to the United States in individuals’ contribution to their health care, and at population level a substantial contribution of their share to the GDP percentage contribution to healthcare nationally.
There have been many adjustments and reforms to the scheme over the last ten years. The principle of universal provision is intact but the progressive cost to individuals continues to grow, impacting not only on inequalities, but also on the ability of families to meet the annual cost of their health care.
This paper is a critique of Medicare, and the lessons Scotland can take on board. We are at a point of crisis in our own health service, where we are faced with reforms needed to preserve the founding principles of our health service. I am not advocating we move to an Australian model, but rather seek to learn from international models to clarify what matters most to Scotland.
It is not a criticism of healthcare in Australia.
The Commonwealth Fund, a charitable organisation based in the USA, provides international comparisons of health care systems internationally, including the UK, ten other European countries and Australia. Unfortunately, Scotland is not considered separately. The Fund’s primary objective is to use such analysis to provide definitive evidence of the need for radical reform of the system in the United States. The United States proportion of GDP spent on health is a significant outlier compared with other countries, but its key performance indicators are firmly in the lower quartile. Australia rates highly in several categories, and rates number one in health outcomes, particularly in cancer care. However, they rate poorly in relation to access of the public hospital system. So why would this be the case?
The analysis suggests that the answer is addressed by the difference in universal cover and universal provision. In Scotland, apart from dentistry and eye care, universal cover means free at the point of service in healthcare. This and subsequent papers set out both the imperative, and the ability and capability, of Scotland to preserve that universal system of health care through reform.
In 2013 I resigned as CEO of Tayside Health Board, taking early retirement after over forty years in healthcare. I moved to New South Wales in Australia with my wife who had been recruited to a senior role in one of the health districts in Sydney. My ambitions of a long retirement did not last long and after four months I accepted the role of CEO of Southeast Sydney Local Health District which I held until August 2018. The district was one of the largest in NSW with a budget of circa $2bn. It is important to note that the public health system in Australia is the responsibility of the individual states such as New South Wales. Primary care along with elderly care is funded from the federal government who have jurisdiction of these services.
In Scotland, following the advent of free prescriptions, universal cover means universal provision with no out of pocket expenses from individuals, free at the point of service. That is not the case in many countries with universal cover and Australia is no exception.
The following is the Australian Government analysis of health expenditure. Australia is a member of the 38 countries in the OECD and their accounting of expenditure follows the OECD guidance to provide meaningful comparison. In 2021-22 the proportion of GDP in healthcare was 10.5%. The contribution from government was $176bn, 72.9% of the total. The remaining 27.1%, a total of $65.3bn, was from non-government sources including insurance, individuals and other non-government sources. Individuals contributed $33.7bn, 55% of the total. Put simply this represents the out-of-pocket expenses incurred by individual citizens.
Care in public hospitals is effectively free with some very limited exceptions. General Practice is more complex. In effect if the cost of a standard appointment is at the prescribed Medicare rate the cost to the individual is nil. However, 14% of practices charge more so individuals incur out of pocket expenses as well as prescription charges. The payment system is very complex as are the robust safety net measures in the total health system. There are clear safety net provisions in the Australian Medicare System. It applies to citizens and patients with benefits or concessions where there are no personal expenses. Citizens who require to make some contributions are protected to a maximum out of pocket expense of $770 per annum.
Private insurance is a significant feature in Australian health care. 55% of the population have some form of private insurance but post covid that number is falling. The government provide a variety of incentives to encourage private insurance uptake by individuals and employers. The subsidy from public expenditure is $6.5bn, a politically controversial issue.
In the final analysis, the reality is that it is estimated that individuals contribute 15% of all health expenditure in out-of-pocket expenses, with significant variation based on economic status and other factors. A number of assessments suggest that families out with any concessions can expect to budget for in excess of $2,500 per annum.
What is the impact on ordinary Australians?
Reference has been made to three issues: Cancer, Access and Variation.
The Cancer Council New South Wales provides advice on out-of-pocket expenses that patients with cancer may face. As stated earlier, Australia has an enviable record on outcomes in treatment, but at what cost? The Council lists a set of likely expenses which range from travel, accommodation, childcare or home help to scans or tests, theatre fees and medicines. The range can be between a few hundred dollars to $10,000.
One study from Western Australia concluded that patients treated in private hospitals had a better 5-year survival rate. The study also showed patients treated in private services had a higher rate of socio-economic advantage, a higher index of economic resources and a higher index of education and occupation. The study also concluded that public hospital patients were more likely to have stage 4 disease.
Individuals can choose their care outwith the public system either by insurance or self-funding.
Turning to access, the waiting time guarantee for elective surgery is 365 days. However, the total wait for outpatient appointments and onward referral for surgery are not part of the public reporting requirements. In Scotland the total waiting time guarantee measures the entire journey of care. The target is significantly better than the public system in New South Wales.
My responsibilities as CEO in New South Wales included the Sydney Eye Hospital. Surprised at the exclusion of the total patient journey, I commissioned a study of the total wait for cataract surgery in patients over 75 years. The time from GP referral to surgery was regularly greater than 2 years. Using Queensland public hospital data 20% of non-urgent cardiac patients and 30% of non-urgent respiratory patients had a waiting time of more than 365 days.
Private health care is a significant feature of provision and cost to individuals, either by electing insurance cover or self-funding. Diagnostics, tests and elective surgery are significant part of this but is not restricted to these areas of care.
To put this into perspective, the Local Health District I led included two major teaching hospitals: The Prince of Wales and St George Hospitals. Both have private hospitals on site. St George Private Hospital provides 23 different services in surgery, diagnostics, cancer and maternity. The St George Private Hospital has 246 beds compared with the St George Public Hospital with circa 600 beds. The Prince of Wales Private Hospital in Sydney, is on the same campus, providing a total of twenty services, offering a full range of health services including maternity. Both private hospitals on their web site reference access to comprehensive health care however emergency and ambulance services are the responsibility of the public system. The current target in emergency departments is for 70% of patients to be seen within 4 hours.
The Medical Journal of Australia (2023) noted that only 44% of admissions to private hospitals occurred no out of pocket expenses. Attendance for specialist appointments (outpatients) showed 34% were billed as out of pocket expenses.
In addition, the article makes the point that the Australian Constitution prevents private provider fees being regulated. Anecdotally, I required spinal surgery when living in Australia. The only choice was private care. My excess billed to me was $500 (Our insurance monthly fee was circa $600 monthly!) However, I was able to choose my surgeon and his anaesthetist. Their fee was $12,000.
It is no surprise that this article concludes that out-of-pocket expenses are a major barrier to certain socio-economic groups. Regrettably there is also evidence of individuals choosing to avoid much needed health care due to affordability issues.
It is self-evident that the economic social status of individuals has a clear influence and therefore access to services.
Unwarranted variation is a complex feature in all health care systems with evidence of over and underutilisation of care. The Australian Atlas of Variation is a remarkable analysis, now in its fourth publication. Two of the main topics are over supply and socio-economic impact on access. One striking example is repeat gastroscopy and colonoscopy with the variation at times 12 times higher in higher economic populations. These procedures are almost always private and paid by individuals. The report concludes that there is significant evidence of interventions with the risk of harm or no evidence of benefit. In addition, there was evidence of low rates of intervention in groups with the highest burden of disease. These findings are replicated and evidenced in the work of the Deep End Practices in Scotland.
In addition, there is much commentary on the learnings from social insurance systems in Europe, a proposed solution for the current crisis in England in particular. This subject is comprehensively discussed and debated by reports from The King’s Fund and the Health Foundation. Essential learning in the debate on reform is summarised by the phrase “Be careful what you wish for” as France, Germany and the Netherlands spend more on health but also raise greater revenue from taxation. In France 95% of the population choose to purchase private insurance supplementing their cover from the national social insurance scheme. The Health Foundation report concludes that spending large amounts of resources and changing to a social insurance system would be highly wasteful and a diversion from the sustained investment, innovation and incremental reform the NHS needs.
In the current crisis in health there has been uninformed speculation that the preference of the former Westminster Government was privatisation, a ludicrous notion.
More likely was a preference for an incremental shift in the direction of Medicare in Australia where individuals contribute 15% of the total allocation to health care as a share of GDP.
If the previous Westminster pursued such an approach in England with a system of universal provision rather than cover, a 10% reduction from government sources to health would reduce government’s contribution to the share of GDP in England. Over time a 10% reduction would have saved government £18bn annually per annum.
The recent change of government has negated such an approach. However, the use of self-insurance or self-funding is well established and growing in England. Regrettably that trend is emerging in Scotland, leading to uninformed commentary on the inevitability of such an approach being an essential part of our future health care. With the right approach and real incremental reform nothing could be further from the proof.
Scotland is in unique position. There is virtually a political consensus to preserve the fundamental principles and funding of our health service. Yes, at this point of crisis people are choosing insurance and self-funding care from life savings or other means, just to secure the care needed. This remains at the margins but a worrying trend.
Despite all of this we are well placed given the policy position and the devolution of health and social care to achieve the incremental reform urged by the Health Foundation. We are at a crossroads. We embrace real reform led by our population and our staff, or we perpetuate the mistakes of the last fifteen years, a central bureaucratic control characterised by structural change as the driver of reform.
The evidence points to the failure of structural change as a driver of much needed reform. It also sets out the position in the lead up to the pandemic showing that despite investment, policy intent and attempts at structural reform the NHS was under increasing financial and performance pressures and our ability to recover from the legacy of the global pandemic.
The current proposals on a National Care Service are an act of folly, compounding the waste of opportunity and resources to create meaningful reform. Based on the past being a reliable indicator of future behaviour, its effect will be further deterioration of the will and ambition to support our staff and deliver real improvements in health and social care.
The drift to self-funding is a symptom of failure not an indication of our loss of faith in our system of health care. Our government and our leadership need to acknowledge past failures and embrace a new path to reform and sustainability.
Gerry Marr, is the former Chief Executive of South Eastern Sydney Local Health District, Sydney, Australia taking up the position in February 2014 until he retired in August 2018. Prior to this position, Gerry held Senior Executive roles with the NHS Tayside, firstly as Chief Executive Tayside University Hospitals Trust, then Chief Operating Officer/Deputy Chief Executive Officer, and then Chief Executive from 2010 until 2013. Prior to his work with NHS Tayside, Gerry held senior roles in the areas of system performance and human resources management with the NHS Scotland Department of Health. In his early career, Gerry held senior management roles at major tertiary hospitals, including Yorkhill Hospitals NHS Trust in Glasgow and the Women and Children Services, Greater Glasgow Health Board.
References:
- Australian Institute of Health and Welfare “Health Expenditure” October 2023
- Australian Institute of Health and Welfare “Patients Out of Pocket Spending on Medicare Expenses” August 2018
- The Medical Journal of Australia “Out of Pocket Fees for Healthcare in Australia: Implications for Equity” April 2023
- Cancer Council NSW “Cancer and Your Finances” October 2024
- Kingsfund “Healthcare Funding: Is the Grass Greener on the Other Side” March 2017
- Kingsfund “The NHS in Crisis – Evaluating the Radical Alternatives” July 2023
- Health Foundation “Social Health Insurance: Be Careful What You Wish For” August 2023