Jeff Richardson calls for solidarity on health values

Jeff Richardson calls for solidarity on health values

by Professor Jeff Richardson

Special address to launch the Whitlam Institute Health Forum series

University Of Western Sydney, Parramatta Campus Sydney on 15 July 2003

The powerpoint slides referred to in this speech can be accessed through the Whitlam Institute's new Health Policy page on this website

Thank you to the Whitlam Institute for the honour of asking me to speak at this inaugural forum and particularly for the honour of speaking before one of Australian history's towering figures - Gough Whitlam.

I will be speaking to powerpoint overheads - but first I am of course giving a complementary talk to John Deeble and I have chosen to define Medicare in the popular, broader sense of the health system. So in effect my talk is going to be on the present state of the health system, our social values and efficiency.

Powerpoint presentation, 15 July 2003
Slide two title: Social Values, Efficiency and Medicare

While there is constant conflict, and accusations at the political level it is surprising how little research has actually been carried out to determine what it is that the Australian population really wishes to have in its health system.

How healthy is Medicare? I am really talking about small and large questions and will talk very briefly on some of the options for reform.

An alternative title for the paper could have been 'Medicare problems - real and constructed.'

The first question is what are our objectives?

Slide three title: Objectives - what do we want?

As I say this has received remarkably little attention - that we do have, as a community, a multiplicity of objectives. This question came to the fore only with the publication of a World Health Organisation assessment of different health schemes. There they listed five different criteria for evaluation.

I think that was the first time it was recognised that - where we are to go in the future and what is to happen has got to be a reflection of social values.

And this was put very neatly by a famed methodologist, Lewis Carroll in his famous book on methodology, Alice in Wonderland. And I quote;

'Would you tell me, please, which way I should go from here?' Alice asked the Cheshire Cat.

'That depends a good deal on where you want to get to,' said the Cat.

'I don't much care where...' said Alice.

'Then it doesn't matter which way you go', said the Cat.

'...so long as I get somewhere', Alice added as an explanation.

'Oh, you're sure to do that,' said the Cat, 'if you only walk long enough'.

So the key theme is that where we are going should be guided by what we want.

Now, at the micro-level of the assessment of health schemes - where we have a particular project, or a particular technology - there are in fact a raft of social values which could be looked at but which have scarcely been recognized by the economics profession when they do their assessments of medical services.

At the national level I think the options probably narrow down to two sets of ideals.

Slide six title: Social Values

One of them associated with liberalism, libertarianism. That is a system that maximizes the responsibility, the freedoms of the individual. This is a coherent, sensible system which is dominant in most parts of the economy without question. In this system if the individual cannot look after themselves you have a safety net. This is the archetypal system of the small 'l' liberal and the Liberal Party in Australia.

Contrasting with it is the system known as communitarianism or solidarity. Something which people may not be particularly aware of by title - but which probably captures the alternative view in Australia. It was articulated most clearly by one of the Canadian inquiries into Canada's Medicare. In that context it was quoted that Canadian Medicare is -

'far more than just an administrative mechanism for paying medical bills, it is widely regarded as an important symbol of community, a concrete representation of mutual support and concern ... it expresses a fundamental equality of Canadian citizens in the face of death and disease ... As the Premier of Ottawa pointed out ... 'there is no social program that we have that more defines Canadianism'.'

Evans, R and Law, M. 'The Canadian Healthcare System. Where are we and how did we get here', in Dunlop and Martens, An International Assessment of Healthcare Financing, Economic Development Institute of the World Bank, Seminar Series 1995.

Why is it that this value system is so difficult to articulate? The British at one stage talked about this value system as being what you get if you choose to take health care out of the economic rewards system. A similar statement to the attempt by the Canadian commissioner to articulate this value.

I suspect for many people the term 'solidarity' would not be familiar. I only came across it myself, half a dozen years ago in the context of the OECD talking about values in Europe. Similarly the term communitarianism is probably not well known to people. So why is it that we don't have these terms? It is a very important, very powerful objective. Anglo-Saxon countries appear to be particularly unique in not having a term to describe this important concept.

When we come to micro-economic evaluation many of the goals and issues of social justice are very difficult to debate because we do not have the vocabulary. And the lack of such a vocabulary is extremely coercive. It drives people to those areas where there is a vocabulary. So it is that a totalitarian regime removes the vocabulary. And I could talk here about the totalitarianism of orthodox economics - we don't have words, we don't have concepts - we can't debate values unless we have those words.

This was very interestingly articulated by George Orwell in what I think was his most brilliant insights in his famous book, 1984. In an appendix to the book he writes about language and how it can be used to bully and coerce. And he writes as follows;

Slide eight title: Orwell 1984, The principles of Newspeak

(How to inhibit subversive thoughts)

'The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees... but to make all other modes of thought impossible. It was intended that when Newspeak had been adopted once and for all... a heretical thought... should be literally unthinkable, at least so far as thought is dependent on words... This was done... chiefly by eliminating undesirable words... Countless other words such as honour, justice, morality, internationalism, democracy, science and religion had simply ceased to exist. A few blanket words covered them, and in covering them, abolished them. What was required in a Party member was an outlook similar to that of the ancient Hebrew who knew, without knowing much else, that all nations other than his own worshipped 'false gods'. He did not need to know that these gods were called Baal, Osiris, Moloch, Ashtaroth and the like: probably the less he knew about them the better for his orthodoxy. He knew Jehovah and the commandments of Jehovah: he knew, therefore, that all gods with other names or other attributes were false gods.'
Orwell, G 1949, 'The Principles of Newspeak' in Nineteen Eighty Four, pp317-319.

Replace 'gods' with value systems and we have the problem we presently encounter in orthodox economics. We do not even have a vocabulary for the discussion of social objectives.

Fairly clearly from the survey work which is done from time to time, the value system described as solidarity prevails in a very large part of the population. But it is very difficult to articulate in debate.

Slide 10 title: Social values and efficiency

We are often told there is a trade-off between social values and efficiency. I would argue this is not necessarily the case. Achieving wrong objectives is not efficient.

The . . . quickest and cheapest route from san Francisco to New York is not necessarily the most efficient route if you want to go to Australia. The point being that efficiency is the achievement of your targets. If your targets are to do with social wellbeing and social justice then it is simply not efficient if you are doing something else superbly well.

So, coming back to values and efficiency in the health sector.

Having private sector diversity, the economists' model of perfect competition (even if we achieve it at very low cost) does not equal efficiency if the objectives are solidarity. Efficiency may involve equal access and health outcomes. It need not just be efficiency as defined by economic orthodoxy, and one particular world view.

Likewise, we must accept that universal uniformity (which we move towards with Medicare) even with low cost, is not efficient if the objective is choice of one sort or other.

So it is not efficient unless you are meeting social objectives and we must first know what those social objectives are. This has received remarkably little debate and less analysis and research. Our objectives are usually hurled in abusive terms at those who don't share them.

Now we will look at the relationship between our objectives and social values I have got a very simplified example of what I mean here.

Slide 11 title: Economics, Options and Social Values

If our objective is to equalise access to equalise outcomes, issues of social justice and equality are the primary objectives then probably we are going to be looking at a public service to carry out this task. The public system does it very efficiently.

On the other hand if we want to maximise choice, the small 'l' liberal ideal, then we would probably would be turning to a purely private system. In the health sector we might be looking at a mixed public private system. So enough said, I am again in summary saying we must know our social objectives to guide the kind of health scheme that we have.

Slide 12 title: How Efficient is Medicare?

Is Medicare efficient? I will be looking at three sets of issues. Firstly the outcomes, some small, non-issues and larger problems.

Slide 13 title: Outcomes

Outcomes - how well do we achieve at the global level. Is Australia healthy relative to other countries? What is the cost structure like relative to other countries? The WHO in recent publications states that Australia ranks second in the world as judged by this particular entity, DALES (disability adjusted life expectancies). We rank second after Japan.

If we look at cost Australia is almost exactly where you would expect us to be with respect to our gross domestic product. As GDP rises so does the cost of health systems. If you predict statistically where Australia ought to be given its GDP then you would find that Australia was almost exactly where predicted.

Does this imply we are performing well? There is a very compelling argument that does imply we have a very good system. It means that we are not doing badly relative to others. However, this is a necessary but not sufficient condition for saying that our system is good. A much more important criteria is (pretty self-evidently), if we cannot find large order problems which could be solved and if we do not find inefficiencies within our country.

When we do that in Australia there is a suggestion of a large number of problems. I am going to go through some of those problems real and imagined, small and large.

One 'problem' is claimed to be private health insurance. It has received by far the greatest attention through time and in the last few years. So do we really have a problem with private health insurance? Does it show that something is seriously wrong with the structure of Medicare?

The story that has been told to the Australian public for almost 15 years now - and John touched upon a fair bit of this - was what I call, private health insurance, the myth. And the argument ran like this.

Slide 16 title: PHI: The Myth

Private health insurance was declining for a number of reasons, that meant that there was pressure on private hospitals. Admissions would fall (in private) and the pressure would raise on public hospitals. That explained the reason for queuing.

Therefore the policy objective we have been told for 15 years was to reverse this process - take the pressure off the public hospitals. This story is quite logically consistent. It is plausible but wrong. The fact that it has been wrong, astonishingly, has not meant that it has not been believed and preserved for many years. I won't go through the evidence because John has already done that.

Slide 17 title: Private Hospital Services

It is flatly contradicted - there is no argument - that story is wrong. Because we take the use of hospitals - the percentage of the total that went to private hospitals has risen not fallen. So it certainly is not the case that the pressure on public hospitals has come from the private sector. It has come because public hospital budgets have been capped for a variety of reasons. So that story is wrong.

It was argued that we had to keep the private sector alive because of I suspect the underlying value system, the liberal value system.

An economist should not turn around and say to the government 'your values are wrong, you should not be promoting private health insurance'. That particular value judgement is a social one. As economists we can comment on whether or not it has been done well. Have we preserved private health insurance in an intelligent and efficient way?

Slide 18 title: PHI Policies

I won't go through the policies, John has done that. But we had changes - I don't like the word reform it is so abused - we had changes in 1997, 98 and 99. So we ask - did those policies work?

Slide 19 title: Percent population covered by hospital insurance table, Australia June 1984 to June 2001

Well we had a decline in private health insurance (Slide 19 is a graph from Jim Butler at the ANU). It shows that the subsidy did not seem to do much, it was only when we brought in the lifetime tables, the lifetime community ratings that we got a jump in the number of insured persons. But, yes you could say that the policies were successful - it did increase the membership of private health insurance. But it resulted in an industry which allows me to put up my favourite overhead which is headed - The Echidna, the Platypus and PHI: Australia's entries into the World 'Strange but True' contest.

Slide 21 title: The Echidna, the Platypus and PHI: Australia's entries into the World 'Strange but True' contest

Now you could actually take away the Echidna and the Platypus and without any doubt we would still win. Let's look at the various reasons why I say that. First, if incomes are greater than $50,000 for a single or $100,000 for a family then you don't have to pay the surcharge. Now that means effectively that the price paid for your private health insurance is negative. Your better off you have more money in your pocket at the end of a year if you buy the product than if you don't. You are paid to have the product. I do not know of any other products, I suspect anywhere else in the world, where you are paid to have them. It would be an analogy to try and support the automobile industry in Australia by putting a surcharge on the incomes of wealthy families who fail to buy an Australian car. Now that sounds absurd but that is exactly what we have done in the health sector - we have paid people to take insurance.

But that is OK, there is a degree of equity here - you pay people to take out their insurance but if they use it then they are out of pocket. Because you go to a private hospital or doctor and instead of having free Medicare you actually pay a private doctor and as John demonstrated you have very significant out of pocket expenses. So we have an industry in which first of all you are paid for the product and secondly if you use the product you are out of product. So this is probably unique in the world.

The third anomaly and some ways the strangest, it is slightly more difficult to explain. The purpose of insurance is normally to reduce risk. Why is it that people in the past take out health insurance? Answer - it was because they were afraid of what might happen to them in the next 2-3 years. It was a financial risk - because you could always pay to go to a private hospital - but you were uncertain about what was going to happen in a fairly short time frame.

What the lifetime community rating has done is to change that time frame from 2-3 years to 20 or 30 years. So the uncertainty is the uncertainty associated not with 2 or three years into the future but 20 or 30 years into the future. So that the risk, the uncertainty you face, is greater. You have to worry about what is going to happen over a much larger time frame. So in order to encourage insurance we have increased the very thing that insurance is supposed to help you with - risk. It is a very odd outcome.

The analogy here would be that if we wished to encourage people to take out fire insurance for their houses we could achieve that by sending out a team of arsonists to burn down houses at random. This would increase risk and people would take out the fire insurance. Nevertheless the end point is, you would have to say, is that this is a very odd industry.

The sensible option is not to have this extraordinarily distorted industry which operates the way that I have just described - but to give it some sort of integrated role within the system.

Slide 24 title: Sensible Options

It either has to be enlarged to some sort of comprehensive health cover, the sort of thing that I will mention very briefly at the end of this speech with reference to Dick Scotton's managed competition. Where the health fund isn't simply a passive funds agent.

Traditionally, health insurance has been a passive conduit of funds from the premiums across to the providers. It has never perceived itself to have a role in the much more important task of giving good health services to the country.

So either that task has to be undertaken by the funds - they have to be enlarged to give comprehensive cover. Or they ought to be allowed to erode as in Britain and other countries to a very small task of helping those people who want to jump queues on a very small range of procedures. In that case it doesn't matter if then the health funds were inefficient because they would be very small.

A second problem is pharmaceuticals, I will speak only briefly on this.

Slide 26 title: Pharmaceuticals and Other Medical Non-Durables

If you can see this rather difficult overhead (number 26) there are two points to make about it. At the moment we perceive a crisis in pharmaceuticals. In 1998 we were spending 11.5 per cent of our health budget on pharmaceuticals - if you go back to 1960 you see it was 22 per cent. So we have actually had a massive drop in the importance of pharmaceuticals so even if it rises quite dramatically there is no particular concern.

If we take pharmaceuticals and compare it with all other countries we have an extraordinarily low pharmaceutical bill - in fact of all the countries listed on this overhead we come seventh from the bottomout of 25. In fact if you take the swings of pharmaceutical expenditures through time it has bounced backwards and forwards depending on a whole series of factors.

Basically we get very cheap pharmaceuticals in Australia because of the exercise of a government monopsony buying power as one of the spectacular examples of regulatory failure which we don't hear discussed very often. So there is no particular failure if you look at either history or what other countries are paying.

But a far more important point is that change to pharmaceuticals should bnoit be ad hoc. We should not simply be increasing co-payments, that simply shifts the problem from the government to the population. Rather what we do must be part of a coherent health plan.

Cost of pharmaceuticals per se is probably irrelevant - it is quite easy to imagine (and it may even be true but we have not done the research) - that if pharmaceutical expenditures led to a reduction in hospitalisation then it would be highly desirable for pharmaceutical expenditures to rise.

If we could substitute relatively cheap pharmaceuticals for relatively expensive hospitalisation the system would be very much better off. And as John has pointed out today, we use our hospitals at a suspiciously high rate. I could add to what John said in this way. It is particularly surprising to see our level of use of hospitals because we are a young country. You would expect us to be well below the average, not well above it.

Slide 28 title: Long Run Non-Problem 1- Cost

So the question is whether or not we want to spend more on our health; not, can we? The United States of America spends twice as much as we do, and it was budgeting at one stage (and it may still happen) for a doubling of its own expenditures. That is, the US is anticipating that its expenditures could rise to a level four times greater than Australia.

Is this desirable? That's the chief question. Would we rationally choose that? The implied answer by most commentators is, no. That's not a good answer.

The real answer is, if you got value for your expenditures, if the expenditures were cost effective.

For example, if future technologies were going to give us the option of living to the age of 110, and that was going to take 30 per cent of the GDP - would that be a desirable use of funds? Most people would say yes.

So the question becomes: are we getting value for money? There's no technical limit at all to how much we can spend.

A second non?problem is, can governments afford to pay? Again the answer is unambiguous: yes, it can.

Australia has low taxation. The government participates in the health sector to a smaller extent in Australian than most other countries. There is no limit in the immediate future (or for a very very long time) to how much the government can spend. The question is, do we want to finance through the government sector or through the private sector? This is entirely a matter of choice. It's simply false that there's some technical imperative.

If we move to some of the larger problems: how healthy is Medicare - and remember I'm talking about Medicare now in the very general sense of the entire health system. Are there problems? Firstly, quality of care: yes, there is a major problem.

Slide 32 title: Problem 1 Quality of Care

You can see that, as most dramatically advertised or brought to the public notice in the Quality of Australian Hospitals study. Originally, 16.6 per cent of hospital episodes, it was claimed, were associated with an adverse event. Subsequent revision on a more conservative set of criteria resulted in the estimate of 10.6 per cent of our hospital admissions are associated with an adverse event.

It's suggested that perhaps 2 to 3 thousand Australian were dying each year because of errors. This was a rate dramatically above the results that were obtained in a similar study in the United States of America, carried out by Harvard. So, yes, there's one major problem.

Slide 34 title: Problem 2 Cost Effectiveness

Second: cost effectiveness. If we look at the different services that are being delivered, they vary enormously in how effective they are per dollar. So we have here examples of where drugs are costing anywhere from $5 to save a life year, unit of output, up to 40 to 70 thousand. We have no mechanism, and not a very efficient one, of ensuring substitution of one for the other.

Slide 35 title: Cost-effectiveness of selected health programs Australia 1992 to 1998

Look at the following data here. The same problems as were being treated by drugs, could be treated by behavioural programs at a cost of $2000 per life year. Or, for primary prevention programs constructed to deal with diabetes, the cost was $4,000 to $12,000; and comprehensive diabetes care actually saved money. So we don't have a mechanism for screening out the most cost-effective services.

Slide 36 title: Problem 3 Variations in Treatments

Variation: this perhaps the most dramatic example of where our health system is not operating.

Slide 37 title: Standardised Rate Ratios for Various Operations in the Statistical Local Areas in Victoria, Compared to the Rate Ratios for all Victoria

This rather complicated diagram takes a number of well?defined hospital procedures and looks at the rate at which they're provided across Victoria for a two?year period. After you standardise for age and sex and overall state average utilisation, if each of the statistical subdivisions was receiving just what you expected, what would be predicted, given their population size, their age and sex, we would have an index number of 100.

In other words, we're comparing against predicted use, expected use of 100. For each of these procedures you actually get enormous variation between the small areas. Variation which is in some cases tenfold from bottom to top. It can't be explained by random variation in small population size. Statistically, that can be rejected. It implies that different populations in Australia are receiving dramatically different health care. It's a problem that has scarcely been acknowledged.

Slide 38 title: Ratio of likelihood of public patients to private patients in private and public hospitals 1995/97

Another example is of a study we did of people who had a heart attack, acute myocardial infarction; what happened when they were carried into public and private hospitals. So this study starts with a level playing field because people are wheeled in on a level stretcher; and our question was, did you have the same outcome in the public hospital or the private?

Here we've taken the ratio of your likelihood of getting angiography in the private system, divided by the likelihood of getting it in the public system. So if your chances of getting angiography were exactly the same in a private hospital and a public hospital, this figure would be 1. In fact it's 2.2. You were 2.2 times more likely to have angiography if you were a man and put into a private hospital than if you were put into a public hospital.

Revascularisation - that's a stent, angioplasty, bypass surgery. You are 3.4 times more likely to receive it in a private hospital than a public: 3.8 times - 386 per cent greater was the rate in private hospitals than public hospitals. These are staggering results. They're not documented, but they nevertheless demonstrate something deeply unsatisfactory; either one group of patients are receiving too much or another group of patients is receiving too little.

Slide 39 title: Problem 4 Silo based system (funding)

The fourth problem, call it silo based system. Our funds go through channels. You get funded if that channel is well-funded, not if it is not well-funded. In general what it means is that dollars are following providers. You go to a particular provider and that determines the treatment you're going to get. Those programs, however, are fragmented. In diabetes, if you go to one doctor, you get one regime; another doctor, another regime. If you enter the system somewhere differently, a different regime. As I've just shown, there's enormous fragmentation geographically. This is also of course inequity.

Slide 41 title: Case Studies: What we would expect to see in a Health System

A series of case studies, some of which I might have to abbreviate a little bit. This is a sort of rather scatter-gun approach to what would we expect, what do we observe.

The first two examples though, what we would expect if we had the ideal health system. And the first little vignette came from somebody who was in charge of a managed care organisation in the United States. In fact this group, called Ethics, was a Seattle based managed care organisation. What had happened was that they were asked to set up a health scheme in a small town outside Seattle. They had done so, and as part of this health scheme they had set up surveillance. They set up data systems to observe what was happening.

What they found after a couple of years' operation, was that there was an unexpectedly high level of spinal injuries in youths. When they inquired into what was happening, they found out that just outside their town there was a toboggan run which was very popular. Kids were tearing down this run, going smack bang into a tree stump in the middle of the toboggan, and this was being solved by going in and having spinal surgery. The punch line of this was that the health plan set up by Ethics paid for a bulldozer to remove the tree stump. Bulldozer services are not covered by Medicare. For an efficient health service, they would be, if that was what was required to get the best health at the lowest cost. We have no mechanism for actually doing that in our system at the moment.

Key factors here is it points to a flexibility of the use of funds. It's the reason why we call for a single payer, not to having funds coming through half a dozen different channels, but through one payer who has discretion to spend them in the area where you get the greatest benefits. And of course we need information systems.

Slide 42 title: Vignette 1

'Ethix, a Seattle based Managed Care organisation was asked to establish a health plan for a nearby country town. The scheme included, inter alia, detailed utilisation review. Shortly after commencement this detected an unexpectedly high level of spinal injury in youths. Investigation established that the reason for this was a tree stump which had been left in the middle of a popular toboggan run. Young people were crashing into this and injuring their backs. The health plan paid for a bulldozer to remove the tree stump.'
(Summary from a public address, Richardson et al 1999)

The second vignette, I'll read that one out. It's a little small for those in the back. This comes from a book by Stephen Duckett, in which he's describing what you would expect in the ideal health system.

'A woman with dizziness is concerned about her health. She rings the state call centre - there is a call centre - which advises her to visit her local health team. She's able to see the GP quickly, who asks her a series of questions about the relevant research from the research based protocol, and undertakes a clinical examination. The GP emails the results to a local specialist who orders some further investigations consistent with the state research based care path.

Advice of an impending admission is automatically conveyed electronically to the GP and the social worker and the referring health team. The social worker contacts the hospital to discuss discharge planning. The specialist suggests a number of sources of information for the patient. The patient contacts the call centre for further information. The case is randomly selected by a hospital audit committee for quality review. The committee suggests some slight changes to the statewide protocol committee.'

(Duckett 2000 p241)

Slide 45 title: Key elements

I've emphasised the elements in the system which would generate efficiency. What you'd be expecting in the ideal health system is integrated provider system, evidence based medicine, and learning from our errors, review and adaptation. Of course, we've got to have financial access as well.

Slide 46 title: QA Procedures

Quality assurance procedures. I mentioned the Australian hospital study which indicated our quality had a lot to be concerned about. Now, the question here is, how did we respond to that. It should have sent a shockwave through the country. You would have expected alarm and outrage. You would have expected permanent ongoing random checks - it's not that expensive to do these sorts of surveys - and why are they not being carried out every year on a random basis to monitor, to ensure whether or not we are eliminating these adverse effects. Can you imagine a situation in which hygiene in restaurants was found to be defective but nothing much was being done about it apart from some research programs?

So what we observe, I'm not up to date with the progress of the various committees set up, but we certainly don't observe the dramatic effects that you would have expected after those problems came to light.

Slide 47 title: Hospital Records

Hospital records. Within hospitals we'd have minimally expected everyone to have a local network. So you would expect, for quality purpose, mandatory recording of all treatment. In fact, coverage in hospitals by electronic databases is highly random. A large number of hospitals do not still have such systems.

Can I head towards my conclusion? We'll jump a few of these overheads.

Slide 50 title: Organisation

Organisation has not changed. We still have a cottage industry.

Slide 51 title: Response to Problems (Generally)

Response to problems: queuing - you would expect there would have been a rapid-response task force to find out who was queuing, exactly what the problems were, rather what we've observed, is political accusations and assertions.

Small area variation that I was pointing to earlier, what you would expect is vigorous follow-up. How widespread is this problem? What's the impact of health? The actual response was silence. We tried for two years to get interest to fund an extension of that particular study. The heart attack study, you'd expect vigorous follow-up. Is it just heart attacks? Which is the better procedure, having the intensive or have the less intense treatment? What we got was silence.

Slide 52 title: Use of Data

Use of data, you'd expect ongoing analysis of our wonderful databases to actually follow through what happens to patients. Who lives? Who dies? Can we get from those patterns, advice on how we should treat patients? What we observe is relative inaccessibility to databases. There is a paranoia over confidentiality which prevents us of finding out who lives, who dies. So for confidentiality reasons, people die.

Slide 53 title: Health Services Research

We'd expect larger-scale funding. That's getting close to home, you can see now. In the United States, I was told recently that the National Institute of Health spends an astonishing $1.5 billion a year, not on medical research, but a health services research. That's $A2.5 billion. Allowing for the GDP differences, that would be about 100 million in Australia. We don't spend anything like that, but we haven't got data but it's probably in the order of 1 or 2 million. We're not serious about our research in Australia.

Slide 55 title: Options for Reform

I think I'll move on. Options reform. In the no time I've got left, I won't be able to talk about this comprehensively. I'll just mention that there are alternatives and they may come up during discussion. The principles behind system change is that, as I mentioned earlier, you would expect there to be, you would hope there would be a single fund holder, and there ought to be incentives for reform.

Here I do disagree with John to an extent. I think there are plenty of examples of where funding has aided reform. Some quite dramatic examples in fact. But I think where I would agree with John, is that you have to have the funding complementing other measures rather than it being a stand alone reform.

Slide 57 title: Scotton/Enthoven Managed Competition

Okay, Dick Scotton's managed competition; most people have come across this. I think this is the only scheme which is on the table for serious reform - large-scale reform in Australia. It's a scheme that's been taken up by the Productivity Commission and has been promoted because it involves competition.

Its key feature is that you have equity because you have premiums paid by the Health Insurance Commission. So nobody is going to be left out. They're essential regulation to ensure equity, but then you have competition in order to attract customers, patients. You have competition between health schemes and providers. I suspect most people are familiar with this.

This is an idea that has caught on in the world, it has been tried in a large number of countries, and there is no definitive evidence; and there are definite risks associated with going down that path, the greatest of which, I think, is one that John highlighted. While in principle you would hope that there would a coherent core set of services, through time the quality of regulation may differ, especially with a government that was not sympathetic to communal funding - through time you could see an erosion of the default Medicare option for those who did not move into a private scheme.

Nevertheless, I think that is probably a scheme that we will hear more about. It probably is the only coherent scheme on the books that could be considered. There are, as I say, significant uncertainties.

Slide 58 title: Managed Competition

Perhaps another watered-down form of managed care competition is to knock out some of the competition and start with a regional health scheme. This was discussed in 1992 but there was no continuation of this discussion. A regional budget holding scheme has the advantage that it overcomes the chief problem of Medicare, the federal state split. It does lead to a single budget. It does lead to flexibility. It doesn't have the down sides of managed competition.

Slide 63 title: Conclude

Reforms should

• Address identified 'problems',( ie unmet achievable objectives)

• Be evidence based

There's no excuse for us having mid 20th century information systems within hospitals.

Can you imagine going to a airline company, and what your response would be if they could not tell you the schedules of the aeroplanes because they did not have a computerised system? Yet, in the health system, which is far more important, we don't do that.

So we certainly should be addressing those problems.

We must be evidenced based. The overwhelming majority of procedures carried out in the health system are not based upon well-conducted trials of efficacy, let alone cost effectiveness.

Priorities should depend upon potential benefit divided by risk. That's a fancy way of saying that there is risk, and the riskier options, we should be more cautious with.

Slide 66 title: Importance Ordering of Issues

The importance ordering, I'd suggest, of our reforms ought to be as shown on this overhead. If we don't know what our objectives are, we're going blind. We'll just have rhetorical accusation backwards and forwards and noone is too sure about our definition of equity. This is how we get into the sort of political mudslinging that we see now.

We must do some work to pin down what our objectives are. We can't leave it to the World Health Organisation. We do need systematic inquiry into that. It's not a big job, but it's absolutely essential, as Lewis Carroll said.

Secondly, the delivery system. The highest on the agenda for reform has got to be quality monitoring, a quality improvement. How could we still have a system which is killing 3, 4 thousand people a year, and not know it, and not to be acting with enormous energy, when the system evidence based medicine suggested that something like 70 to 80 per cent of what's done is not based upon good clinical trials.

We must be moving as fast as possible towards that. We don't have incentives at the moment for not only doctors, but for our managers, our government authorities, to be pushing this. We should be using our databases. It's a scandal that we're able to say who lives, who dies, and yet we don't bother to ask that question or follow through.

Author*: Peter Ackerman Richard Ah Mat Alison AndersonLastly, it would be good to have all of these services carried out in a cost-effective way; that is, to minimise cost. I wouldn't put that as a particularly high priority. If we're technically efficient and we save money, yes, there will be other commodities, people will be able to spend that saving on television sets and more theatre?going. The evidence suggests that that's not going to improve the quality of people's life, social wellbeing a great deal. Nevertheless, it would be desirable to be cost-effective. These other issues, though, are the really big order questions.

Funding, I won't talk about except to say that we have to get the funding right so that there is access and fairness in the health system. So the order of priority, I believe, should be one, two, three, four. If we actually take the public debate, what we see being discussed, the order is in fact four, three, two, one. Driven by money, then to the system. Objectors hasn't got a look in yet.

Slide 67 title: Conclusions

Conclusions. Medicare has undoubtedly served the community very, very well. It clearly was a landmark social reform. It gave universality in a way that we had not had. It was efficient to administer. Almost certainly it is consistent with Australian values at the macro level, even though these have not been properly documented, and the nuances of values have not been properly documented.

Nevertheless, I do think, as in Britain, there has been complacency. We've had a very good system, so apart from the frills, we haven't really been deeply critical. I call the UK national health scheme disease. After the Second World War, the UK's NHS was held up as the model health scheme in the world. For decades there was a complacency. Nothing much happened until suddenly they found that they were left behind the rest of the world with systems that were delivering poor health care, and not particularly efficiently.

So I've argued that we have been somewhat complacent. Medicare defined as a funding system, only a funding system - the narrow definition that John spoke to - may survive. That depends upon our values. If we want to first and foremost have communitarian solidarity objectives - and that is a very powerful objective - we probably would keep the existing funding system.

If diversity and choice was more important - and there's a lot of evidence to say that Australians do want diversity and choice - then we would alter the system by altering the funding to support this diversity, always keeping of course a safety net at a very very high level.

When you define Medicare is the whole system, then there are very important changes. We should not be complacent, because we can make patients within the system, Australians, very much healthier than we achieve at the moment. Thank you.

Ends