Last chance for Australia's health

Where the reform movement is now
John Dwyer

Together with a number of like minded colleagues I have, since 2003, been proposing structural changes for our health care system. I wish to present here a summary of my approach and recent thinking based on what I consider to be the likely political responses to suggestions for reform.


We share the wish to have in Australia a health system wherein all Australians have timely access to safe, high-quality health care, based on need not personal financial wellbeing. Such a vision requires that our health system is patient, focussed with all aspects of care integrated, indeed, seamless. It is the wretched jurisdictional inefficiencies associated with the division of health related responsibilities between the Commonwealth and the States that provides the biggest obstacle to integration. Political intransigence (poor leadership, to be honest) has robbed us time and time again of the chance to reform the system.

It is almost thirty years since the paper edited by Shane Solomon and endorsed by all health ministers (State and Federal) promised to fix this great divide. Many of us feel that the new Labor government offers a 'last best chance' for achieving this goal in the foreseeable future. But what of the political realities today?

Real politics

Even the Howard government recognised that, if we were designing a health system from scratch, we would have the Commonwealth responsible for a system that would be implemented by Regional Health Authorities (RHAs). In February 2008, the Rudd government established the National Health and Hospitals Reform Commission (the Commission) to provide a 'blueprint' for reforms to the Australian health system. On 16 February 2009, the Commission released its interim report, A healthier future for all Australians. The Commission's "Option B" comes close to a 'lets start again' approach. In my opinion we need a variation on Option B, the most attractive of the three options, for two reasons.

(1) After discussions with a number of health ministers and two premiers, I am convinced that the States will not give up their responsibility for hospital care despite the public utterances to the contrary by some leaders. The Rudd government has made it clear that if the States don't meet benchmarks that clearly indicate that their hospitals are performing better by the middle of 2009, Canberra will take over financing and therefore control of public hospitals. Under such circumstances, States surrendering their hospitals would be deemed to have failed their constituents even though the benchmarks in question are very poorly defined.

At the Commonwealth end, I do not believe the government wants to ask Australians to approve the necessary constitutional changes required for federal government control of the health system (not just financing). No federal health minister would willingly wish to become embroiled in almost daily newspaper reports of hospital dramas across the whole nation! My fear is that, by calling for such a restructuring, we are likely to make a very major challenge just too hard. A compromise that solves these problems but achieves our major goals is required.

(2) It has become ever clearer across the globe that any quality health system must pay much more attention than heretofore to the full breadth of issues that determine the health of individuals and the community; the 'social determinants of health'. For this to occur, States and Territories need a 'Health Minister' with a small department to promote the networking of health initiatives across all major policy plans. (Education, workplace, urban design, transport, industrial laws etc). We do NOT want this health minister or his/her department involved in the day-to-day delivery of health services. How can we keep States and the Commonwealth involved but still have an integrated health system controlled by one bureaucracy?

The answer involves the creation of a new entity responsible for providing Australians with an integrated, equitable, cost-effective health system, second to none in the world. Let's call this new entity 'The Australian Health Commission' (AHC) to give us a working title. Many names have been suggested, but I am in favour of not having the word 'care' attached, as our new entity will place major emphasis on prevention. I had always imagined that the entity I am describing would grow from the National Health and Hospitals Reform Commission. I presented this concept to health ministers at an AHMC in 2005 and the ideas were well received by all the State ministers, and thoroughly 'rubbished' by the federal minister, Tony Abbott.

The crucial features of the AHC I envisage include:

An entity created as a statutory authority by all Australian governments. Neither the States nor the Commonwealth own the AHC. This is necessary for support from all politicians; the AHC would not be created by a Rudd government frustrated with poor State management of hospitals; no, this is a positive move, a product of 'Collaborative Federalism' in which all responsible politicians have recognised the need to end the divisions that plague our health system. The public would applaud this long overdue example of real leadership.

For all the many champions of a Commonwealth takeover, as in Option B, a perfectly reasonable goal but politically unachievable in my opinion, the AHC provides all the major benefits they would have envisaged. No constitutional amendment is required.

The AHC would have responsibility for all current health programs and operate initially with the pooled funds currently spent on the programs. These would become the responsibility of the new entity, more than $40 billion from the federal government and $25 billion from the States. Initial Commonwealth funding should be increased, as the current NHCA will see Canberra's contribution to the NHCA falling to 40 per cent of the funding required to run public hospitals in the last year of the agreement.

The AHC would provide the operating budget for all public hospitals, administer the PBS and MBS schemes, finance the DVA program, purchase and/or provide primary care and community health services. I would suggest that crucial initiatives to improve the health of our Indigenous population be conducted by a separate department with protected funding within the AHC, rather than by an independent agency working autonomously. Integration sooner rather than later has many advantages.

As the AHC comes online, a new NHCA would be negotiated. Political arguments re Commonwealth contributions to help States run hospitals would disappear and the AHC itself would put forward its business case for five-year funding programs. Agreed levels of funding would be distributed to support: (a) the central functions of the AHC; and, (b) the regional functions that it would establish. A sophisticated evidence based Resource Distribution Formula would be developed with a major emphasis on regional needs to ensure the equity that is not guaranteed with per capita financing. State representatives on the board of the AHC would pay particular attention to the formula's fairness in terms of the State's citizens who are cared for within a regional health program. Eventually, all operating expenses for the AHC would come from federal tax revenue.

As opposed to operational funding, infrastructure funding would remain the responsibility of States and Territories. It would be possible for the States to sell all their health infrastructure (e.g. hospitals) to the AHC for a nominal figure, but this again is far too politically hard. The real value of land, for example, could not be recovered from the Commonwealth or AHC. All hospitals would remain the property of their current owners, but the operating budget would come from the AHC. This is similar to the current situation wherein a number of schedule-three hospitals receive operating funds from government. The States and Territories would be 'landlords' and would agree, through the new NHCA, to provide maintenance funds and a capital works program for facility construction and refurbishment. Infrastructure development provides major growth and job opportunities for States. States would answer to their constituents at election time if they let them down in this area.

It is obvious that the board of the AHC would have State and Commonwealth representatives and one imagines that the board chairman would be the incumbent federal health minister. Perhaps all State and Territory ministers would want a seat at the table. They would certainly want to be represented. The AHC would have an executive committee (quasi board) with a chairman and CEO appointed by the board, members with appropriate expertise as well as community representation.

Even more bureaucracy?

One of the 'knee jerk' reactions to the idea of an AHC is criticism of creating yet another and indeed very large bureaucracy. The truth is that the AHC would be a new institution, but largely serviced by the best bureaucrats currently employed at the national and sub-national levels. If a Commonwealth takeover of our health system were to occur, new talent would be required for the federal department, which has no experience running hospitals. There are more than 4000 people working for the Commonwealth department in Canberra and the States have hundreds more employed. In Sydney, the department has 650 employees at headquarters! Duplication is costing us billions of dollars a year and preventing integration.

An AHC would develop with fewer bureaucrats populating its central offices and regional authorities saving billions of dollars and the jobs of the most talented and enthusiastic members of the current bureaucracy. No reform program would envisage either sacking all the existing health departments' personnel or retaining the entire current bureaucratic workforce. Another advantage of governments setting up this statutory authority involves the ease of continuation of accrued benefits while changing employer. Current government employers would guarantee the availability of accrued benefits up to the point of transfer to the new entity. Public sector unions would negotiate with the AHC for conditions of employment that would see no one disadvantaged by earning less for similar work. An AHC is the sensible way forward.

The AHC would set up Regional Health Authorities much like the UK and NZ Trusts. We have good data in Australia for community morbidity and mortality statistics, as well as good projections for changes in demographics. A Resource Allocation Formula would be developed by the AHC during its commissioning and transition phase for presentation to its board for approval. Acceptance would be followed by the distribution of funds to RHAs.

These organisations would be both purchasers and commissioners of services for the people of the area. They would be implementing central policies that specify the model of care to be offered to all Australians. They would provide the operating budgets for hospitals in their area and orchestrate both networking and role delineation of these institutions. The AHC may wish to purchase services from private hospital for non-insured patients.

Most with whom I have discussed the issue wish to see a healthy private sector continue to be partners in the delivery of health services, but would prefer the $3.2 billion dollars spent on private health insurance subsidies be made available to RHAs to purchase services from private hospitals for non-insured patients. This is clearly not politically achievable and is therefore not worth pursuing by the commission, unfortunately.

While RHAs should never in private run 'for profit' corporations, numerous models for establishing these authorities could be explored my opinion. I favour the approach of setting them up as subsidiary companies owned by the AHC and limited by guarantee. In this way, they could have oversight from local boards and much needed community participation in their operation.

The AHC & primary care

Perhaps the major change to the current model of care that the AHC would implement involves the development of integrated primary care (IPC). The Commission has rightly recognised the importance of size in the efficient operation of IPC centres. Many primary health care organisations (PHOs) in NZ have 50 or more doctors employed, with even more nurses and allied health professionals involved. The importance of 'team' medicine, electronic health records, the capacity in mega-clinics to actually offer secondary services (acute care and 23 hour wards) which take much of the triage 4/5 pressures away from Emergency Departments, an emphasis on prevention through personalised health plans and continuity of support, are all explored in the Commonwealth's working paper.

Over the next decade, IPC delivered through large 'one stop shops' should become the 'norm', rather than something 'super' available only to a few. Inevitably and desirably, this model will introduce the need for 'enrolment' and therefore 'capitation'. This will see a cap placed on both the MBS and PBS schemes within a given NHCA. RHAs will need incentive payments in their budgets for health professionals who help create IPC units. Separate commonwealth funding should be provided for building 'proof of concept' Mega-clinics offering the required model of care. (Very different from the current 'Super GP Clinic ' model which is doctor-centric, and does not provide for MBS payments for the IPC team).

IPC must provide advantages for the community, but also health professionals. The latter should benefit from being able to provide a higher quality of care with improved remuneration, but also from the opportunity to be involved in the financing of these new centres. There is a great opportunity for the private sector to construct these 'one stop shops' across Australia, with the professionals working in the centres having the opportunity to develop equity in the business. Most GPs, for example, at the end of their working life have no equity in their business or its infrastructure. There is much more to be discussed about winning the hearts and minds of both the public and health professionals to this model, but that can be for another time. Fortunately there is much overseas experience that can give us guidance on how to effect such changes.

The concept of the reform "journey"

Useful reform of our health system to make it responsive to contemporary needs, equitable, and cost-effective and therefore sustainable, requires major structural reform. There is nothing easy about introducing these changes. For years, the perceived complexity of the changes championed have seen reform efforts placed in the 'too hard basket'. This must not happen this time.

Avoiding this catastrophe involves the strategies outlined above, plus the development of the plan for the transition to the new system. Having discussed health reform with very many professional, political and community groups over the last few years, I am convinced that the models of care we must see implemented when we reach our 'destination' are now evident and no compromising of the major elements of the vision should be acceptable. To reach our destination, however, we must embark on a somewhat difficult journey with clearly marked milestones to guide us. Inevitably, there will be some obstacles on the path that will need to be overcome.

The task will be much easier if the public understands and endorses the journey because the destination is so desirable. Concepts such as enrolment, what prevention programs will involve for both the individual and the health professionals providing the service, the rationale for role-delineation in our hospitals, for 'centre of excellence initiatives (fewer trauma centres etc), and end of life decision-making are but some of the things that an active professional program for community consultation must embrace. Centres such as the "Health Issues' centre at Monash University have already generated major plans for community engagement in the reform program. The utilisation of proven methods such as 'citizen juries' needs to be encouraged.

I have for the last three years been helping NSW Health with its HealthOne program. I managed to interest Morris Iemma when he was health minister in the NZ model of IPC. $52 million dollars was made available for capital works to build 25 or so 'proof of concept' IPC centres. The concept involves a RFP seeking doctors willing to amalgamte their practices in a given area with NSW Health, then funding the rest of the team required to work in the HealthOne clinic by providing nursing and allied health personnel from NSW community health facilities. NSW Health will also fund the electronic records required. The model is not perfect, as community health nurses and allied health professionals may not have the skills necessary for the model of care required. As has been found elsewhere, however, what has become clear is the need to create change through 'bottom up modelling'. By advertising for expressions of interest, GPs interested in the program have been able to CHOSE to become involved. In NZ, after 6 years of trying to build IPC as the 'norm' 80 per cent of GPs have willingly embraced the program, which in fact was led from day one by health professionals.

In our reform program no doctor would be forced to change his or her current arrangements, with one exception. They would be put on notice that, after three or four years, capitation payments would be applied to their practice. Their patients would be required to enrol in their program. MBS payments would move from uncapped fee-for-service arrangements to a more flexible system, wherein capitation payments and outcome bonuses would be available. Maximum Medicare benefits would only be available to patients seeing the practice professionals within the program in which they had enrolled (as in NZ). Doctors would be free to charge a co-payment if they wished. So intense would be the pressure on GPs to offer IPC services that we can expect most to willingly change their clinical and business model. The AHC would offer incentives for GPs to work within the mega-clinics. In NZ, more than 80 per cent of GPs have elected to work in IPC centres and move away from strictly fee-for-service remuneration. In other words, the journey allows time for the development of a 'coalition of the willing' and the progressive conversion of the initial doubters to IPC. Interestingly, the majority of young GPs would much prefer a contract or salaried position to escape from the 'turnstile medicine' forced on so many working with socially disadvantaged communities.

The model of care offered by the primary care corporate sector is exactly want we do not want to see flourish in Australia, yet in many places GPs are choosing to join corporate practices to receive a guaranteed income. Seldom do such programs offer after-hours services or home visits, both of which would feature strongly in the IPC centres commissioned by Regional Health Authorities.

Usinng the 'journey" approach, the National Commission's Option A would be acceptable as a first step, providing it was clear that this was an interim step and further integration was programmed. Fusing community and primary care dollars and services would be a good introduction to integration and would be organised by the AHC.

Key messages

Neither the National Commission's Option B nor C is achievable as described. Option A is unacceptable. A variation of Option B is politically achievable and meets the Commission's goals An AHC receiving the pool of funds currently available for health services from governments could be the instrument for reforming our health system.

An AHC would have major central functions that would benefit all Australians, setting standards for the models of care to be offered, quality, safety, performance criteria, public health strategies, budget preparation etc, etc. An AHC would create RHAs to implement locally uniform policies for prevention and care.

An AHC would be a semi-independent statutory authority, an instrument of government with an executive committee overseeing the fulfilment of its mandate. The board of the AHC would be constituted with representatives of all States and Territories. Through the board, the AHC would report to the nation's parliaments and the people of Australia. The work of the Nnational Commission should continue on after government decisions re the recommended models, becoming a transition authority establishing the new agency that will implement the reform program.

For the planned reforms to be realised, it will be essential for COAG to commit to both the 'journey' and the 'destination' before the next federal election. The AHC must be established as a statutory authority before the election. All champions of the changes required should be publicly and privately trying to achieve bi-partisan support for the reform initiatives.

We must all keep expectations high for genuine reforms. Unless we do, there is obviously a real danger that yet again the States and Commonwealth will tell us what a great system we have and all parties committing themselves to work more co-operatively can address all the minor problems within the current scheme. The National Commission's stewardship of this major opportunity for significant reform, which is widely appreciated, offers the last chance in the foreseeable future for achieving the reforms we so badly need.

Professor John Dwyer AO PhD FRACP, FRCPI, Doc (Hon) ACU is Emeritus Professor UNSW and founding President of the Australian Health Care Reform Alliance. This is the text of his address to the conference of Australia's leading think-tanks, Crunch Time, held in the Sydney Trades Hall on 22-23 April 2009.

By clicking here you can read John Dwyer's earlier paper on "The journey to better health care" from the Evatt Foundation's book, The state of the public sector: the state of the states 2006.

Suggested citation
Dwyer, John, 'Last chance for Australia's health', Evatt Journal, Vol. 9, No. 3, June 2009.<>