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Birth and Future of the...
Australian
Healthcare System
Dr Bert Boffa Medical Director AXA Health
November 2002
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Overview

• A pluralistic health system
• a public health system that
• promises universal access
• good quality
• no cost to the user - it is free
• invisible rationing
• capitated services

Dr B Boffa AXA HEALTH November 2002
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Overview

• A pluralistic health system
• a private health system that
• must deliver better access
• good or better quality
• no unexpected cost to the user
• no rationing
• fee for service across the board

Dr B Boffa AXA HEALTH November 2002
4
The Art of Contracting

• Contracting Value and Affordability
• Hospitals
• Doctors
• Ancillary
• Prostheses
• Human Tissue

Dr B Boffa AXA HEALTH November 2002
5
The Burden of History

• English Treasury
• accommodation and doctors for convicts and guards
• 1818 New South Wales Asylum
• 20 funded by subscription - free settlers
• indigent sick free private patients charged
• government subsidised non-government
  organisations

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• 1848 Sydney Hospital
• prototype means tested public hospital
• capital funded by voluntary appeals
• maintained by subscriptions, fees and donations
• Private facilities developed separately -
  high income

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• 1830s Friendly Societies or Lodges
• 95 of medical services in 1900
• engaged capitated medical services
• included high income earners and sick
• doctors (BMA) stipulated good health and income
  criteria between 1914 and 1922
• fee for service was introduced for extras
• By 1920, premiums and gaps were high

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• 1920 - 1930
• dramatic fall-out of Society members (80 of 1900
  peak) and surge in public hospital use
• 1930s
• means tested entry relaxed but fees charged per
  income (30)
• 1931
• Metropolitan Hospitals Contribution Fund began to
  help subscribers cover cost of public hospital
  but not medical fees

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• 1940s period of doctor dispute
• private voluntary insurance versus nationalised
  compulsory insurance proposed by Curtin/Chifley
  Governments
• constitutional challenge in 1948 - doctors can
  not be conscripted
• doctors opposed the abolition of the means test
• Pharmaceutical Benefits Act failed

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• 1953 - Earle Page introduced Voluntary Health
  Insurance Plan
• provided subsidy for subscriptions
• Pharmaceutical Benefits Scheme
• Medical Benefits Scheme - FFS
• lasted til late 1960s
• complex so Nimmo Enquiry 1969

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• Two Nimmo recommendations
• doctors had to determine a standard fee
• doctors fees would only be eligible for benefits
  if there had been IFC - First Consultation -
  own fee and common fee
• The common fee became todays MBS

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• 1 July 1975 - Medibank
• Whitlam/Hayden completed what Curtin/Chifley had
  started
• Fraser wrought five changes til 1979
• 1980 - Medibank dead voluntary insurance was
  back a la 1950s
• 1970s - full circle

Dr B Boffa AXA HEALTH November 2002
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The Burden of History

• 1984 - Todays Medicare
• return to compulsory insurance
• health insurers prohibited from insuring medical
  fees above the MBS fee
• premiums were community rated
• ancillary tables (eg. for pharmacy) separated
  from hospital tables

Dr B Boffa AXA HEALTH November 2002
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Fund Membership in Medicare Era
Source AHIA - Private Health Insurance
Statistics
Dr B Boffa AXA HEALTH November 2002
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Fund Membership in Medicare Era
of Over 65s
Source AHIA - Private Health Insurance
Statistics
Dr B Boffa AXA HEALTH November 2002
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Fund Finance in Medicare Era

• In late 1990s
• cost of premiums rising faster than CPI
• each increase - decreased membership
• (each 1 100M public funding)
• premium increase driven by claims cost
• (Productivity Commission)
• 1996/97 in Victoria, for every dollar collected
  97 was paid out in claims

Dr B Boffa AXA HEALTH November 2002
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Fund Finance in Medicare Era

• Hospital Cost Drivers
• range of services covered
• brachytherapy for prostrate ca
• number of services
• dialysis, chemotherapy
• unit cost of services
• expensive drugs, eg. Crohns, cancer

Dr B Boffa AXA HEALTH November 2002
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Fund Finance in Medicare Era

• Range of Services Covered
• product design - driver and governor
• 100 cover vs PEA, BLP, FED, participators
• Government regulation - floor price,
  inflexibility
• prostheses price schedule, second tier,
  reinsurance, medical fee minimum
• PBS controls do not apply to drugs covered by PHI

Dr B Boffa AXA HEALTH November 2002
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Fund Finance in Medicare Era

• Number of Services
• risk profile of members
• adverse selection
• moral hazard
• asymmetry of information
• new technology
• cost shifting
• consumerism
• fraud

Dr B Boffa AXA HEALTH November 2002
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The Art of Hospital Contracting

• Unit Cost of Services
• Government and ACCC - lobbying
• floor prices
• default hospital charges
• MBS listings
• MBS fee
• provider negotiation
• preferred arrangements
• supplier negotiation
• monopsony arrangements

Dr B Boffa AXA HEALTH November 2002
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The Art of Medical Contracting

• Elimination of unexpected gaps
• Elimination of multiple bills
• Elimination of gaps altogether
• Provision for known and reduced gaps

Dr B Boffa AXA HEALTH November 2002
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The Art of Ancillary Contracting

• Same problems to be solved
• cost of premium and poor rebates
• unknown gaps
• provider resistance - ADA, APA
• but ...
• no government legislation
• Poor Value leading to loss of members
• The solution was to Contract

Dr B Boffa AXA HEALTH November 2002
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The Art of Prosthesis Contracting

• Future directions
• there will be contracting
• cost effectiveness and outcome measurements
  to be considered as prerequisites for Schedule
  5 listing
• insurer/supplier unit cost negotiation and
  contracting
• single buyer
• shared information
• insurer/profession utilisation negotiation

Dr B Boffa AXA HEALTH November 2002
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The Art of Pharmaceutical Contracting

• No Plans
• hospital pharmaceuticals are bundled with no
  gap to the member
• ancillary pay either all or proportion of cost
  minus the PBS moiety, (22.40 general, 3.60
  concession)
• may consider preferred arrangement in future

Dr B Boffa AXA HEALTH November 2002
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Electronic Benefits of Direct Billing

• Direct Billing Electronic Data Interchange
  (EDI)
• X400 - pathology and radiology, some clinical
• HiCaps - real time technology
• Internet - not yet
• First catch your rabbit

Dr B Boffa AXA HEALTH November 2002
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Why the 30 Rebate and Lifetime Community Rating
are not enough
What the Government giveth, the Government can
taketh away. Garry Richardson, July 1997 If
you dont want a camel, you are not going to buy
one because it is cheaper. Gerry Carton,
December 1998
Dr B Boffa AXA HEALTH November 2002
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The future of the Australian Healthcare system...

• The current pluralistic system depends on a
  sustainable, stand alone private sector.
• The private sector will depend on value and
  certainty of product for the member.
• The public sector will oscillate between
  compulsory and voluntary insurance in the future.

Dr B Boffa AXA HEALTH November 2002