HEALTHCARE FINANCING REFORM IN AUSTRALIA

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HEALTHCARE FINANCING REFORM IN
AUSTRALIA International Hospital Federation
Congress 2001 Pre Congress Health Summit , Hong
Kong 14 May 2001 Presented by Mark Cormack,
National Director Australian Healthcare
Association
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Healthcare Financing Reform in Australia

• Overview of Government Responsibilities for
  Healthcare
• Finance
• Sources, Growth, Expenditure
• Profile of Hospital Services
• Health Financing Reform
• Health Insurance
• Pharmaceutical Benefits
• Casemix Funding of Acute Hospital Care
• Medical Services Payments

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Government Responsibilities for Healthcare

• Population
• 18.7 Million
• Settlement concentrated in coastal cities
  regions
• Government
• Federal system since 1901
• 3 tiers
• Commonwealth,
• 6 States 2 Territories
• Local, Municipal

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Government Responsibilities for Healthcare The
National Healthcare Package

• Medicare
• Hospital care emergency, elective and
  continuing care from a public
  hospital.
• National, compulsory health insurance scheme, tax
  funded.
• Medical optometric care ambulatory and
  in-hospital
• Other programs
• Pharmaceutical Benefits Scheme
• Aged Care
• Community Allied Healthcare
• Private Health Insurance Subsidy 30

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Government Responsibilities for
Healthcare Commonwealth (National)
Responsibilities

• Leadership in health policy national
  initiatives
• Funding medical services Medical Benefits
  Schedule (MBS) and pharmaceuticals -
  Pharmaceutical Benefits Scheme (PBS)
• Joint funding of public hospital and related
  healthcare services with States / Territories
• Funding of residential and community based aged
  care services.
• Private Health Insurance regulation, subsidy
  program
• Special Health Programs indigenous health,
  veterans services
• Research funding

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Government Responsibilities for Healthcare State
/ Territory Responsibilities

• Joint funding of public hospital and related
  services with Commonwealth
• Purchasing and delivery of public hospital,
  community, allied health and related services.
• Provision of care services for older people
• Public environmental health
• Regulation of health professionals and health
  facilities
• Research

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Private Non-Government Sector Role in Health
Care

• Private Health Insurance
• Private Hospitals
• Aged Community Care
• Medical Practitioners
• Dental and Allied Healthcare
• Diagnostic Laboratory Services
• Pharmaceutical Dispensing

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Financing Healthcare Sources 1998/99 Total
Expenditure A 50.3 BN
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Financing Healthcare
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Financing Healthcare - Growth
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Healthcare Expenditure - Type
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Healthcare Expenditure - Type
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Healthcare Expenditure - Type
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Profile of Hospital Services

• From 1994-95 1998-99
• Private Hospital proportion of total activity
  increased from 29.9 to 32
• Overall utilisation per 1000 persons increased by
  9.7
• Day only admissions increased from 40.2 - 47.9
  of total
• Average stay decreased from 4.3 to 3.9 days
• Beds per 1000 decreased from 3.3 to 2.9
• Structure
• Networks of public hospitals and community based
  services under integrated area / regional
  management.
• Private and not for profit hospitals merging and
  vertical integration.
• Private Hospitals have more restricted range of
  services and lower overall complexity (Cost
  weight0.91 v 0.99 public)

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Health Financing Reforms - Key Drivers

• Management of financial risk associated with
  uncapped national programs Commonwealth
• Pharmaceutical Benefits
• Medical Benefits
• Management of political and social risk
  associated with capped, jointly funded hospital
  programs State Territory.
• Technical Efficiency
• Rationing services
• Differing views on the role of the private
  sector.
• Complementary
• Duplicate System

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Health Financing Reforms Pharmaceutical
Benefits Scheme

• Key Features of PBS
• Co-payments
• Access to a comprehensive range of drugs with
  affordable co-payment dispensed by private sector
  pharmacies
• Control of Drugs on the Schedule
• Clinical and cost effectiveness
• Generic substitution
• Monopsony purchasing arrangements
• Reductions in dispensing overheads
• Low overall cost to government affordable access
  to consumers

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Health Financing Reforms Casemix / episode
funding of acute hospital care

• Key Features
• National casemix development program introduced
  as part of 1988-1992 Commonwealth State Health
  Financing Agreement
• AN DRGs developed and progressively revised
  and updated
• Implemented for the funding of acute hospitals
  progressively from 1993 now in place in all
  States/Territories for most hospitals
• Functions
• National monitor utilisation and performance in
  Commonwealth State hospital funding agreements
• State / Territory Allocation and purchasing of
  hospital services
• Private Insurers Purchasing and Payment
• Providers planning, benchmarking and quality
  improvement

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Health Financing Reforms Casemix / episode
funding of acute hospital care

• Developments
• National Hospital Cost Data Collection
• Sub acute, non acute and rehabilitation
  classification system
• Ambulatory classification system
• Technical efficiency gains in a capped funding
  environment

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Health Financing Reforms Private Health
Insurance

• PHI Coverage
• Private hospital care
• Choice of medical practitioner
• Medical co-payment
• Ancillary / extras cover
• Recent problems and Issues
• High premium cost and annual increases
• High co-payments for medical components
• Competition with a free, good quality public
  system
• Community rating

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Health Financing Reforms Private Health
Insurance

• Consequences
• Decline in membership 50 (1984) to 30.5(1998)
• Selective use of public and private systems due
  to co-payments
• Pressure on the public system
• Financial viability of the PHI funds
• Government Initiatives
• 1 income tax levy for high income earners (1998)
• Subsidy of 30 for all PHI fund members (1999)
• Legislation
• Co-payments price control prudential
  arrangements consumer information
• Abolition of community rating replaced by
  Lifetime Healthcover (2000)

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Health Financing Reforms Private Health
Insurance

• Results so far
• PHI coverage up from 30.5 (1998) to 45.4 (2000)
• Increase in proportion of claims with no
  co-payment from 50 to 65
• 27 increase in the PHI fund reserves in 12
  months
• Minimal or no increases in PHI premiums
• A 2.0 BN cost to government or 5.7 of total
  government sourced health expenditure (0 in 1996)

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Health Financing Reforms Private Health
Insurance

• Criticism
• Impact on public hospital activity
• New PHI fund members are young, low risk
• High cost
• Opportunity Cost
• Range of causal factors
• Subsidy, tax impost, Lifetime Healthcover
• Durability cost effectiveness

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Health Financing Reforms Medical Services
Payments

• Medicare (MBS)
• Patient billing versus Bulk Billing (71.2)
• Cost Containment
• Supply of medical practitioners
• Restrictions on new technology
• Primary care gateways
• Restrictions on level of benefits paid
• Blended payment methods
• Capping agreements
• Results
• 4.9 p.a. average growth since 1989/90

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Health Financing Reforms Next Steps Conclusion

• Gradual, not revolutionary reform
• No change to Medicare as the central policy
  setting
• Trial / pilots to reform Commonwealth State
  issues
• Political dynamics

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For more about Australias Health Care system
..
AHA National Congress 2001 Fremantle, Western
Australia 13 14 September 2001
Mark Cormack National Director Australian
Healthcare Association Email m.cormack_at_aha.asn.au
Web www.aushealthcare.com.au m.