That’s No Way to Treat Patients

13 October 2009

The Australian

By Katie Lahey

Chief Executive, Business Council of Australia

On September 23, The Australian ran three seemingly unconnected stories. The first reported ophthalmologists’ reaction to the government’s intention to reduce the Medicare rebate for cataract operations, the second referred to alleged gouging by airlines on credit card fees, and the third was about the rights of tertiary students to information on the performance of higher education institutions.

The articles highlight how the health sector is treated differently from other sectors of the economy. They show Australia’s failure to appreciate the importance of health as a microeconomic reform area, which has potentially disastrous consequences for patients and health service consumers.

But first some background. This year’s federal budget halved the Medicare rebates payable to ophthalmologists for cataract operations. Health Minister Nicola Roxon said the change was a result of new technology and would recoup some of the benefits for taxpayers: not unreasonable in the light of the financial challenges in health care facing the government during the next 20 years. Government spending on health in Australia is already the fastest growing area of expenditure, accounting for 15 per cent of the budget.

Ophthalmologists are independent businesspeople supplying services to patients. They invest in technology and expertise, expecting returns on that investment. But if, as the government argues, their cost structures have been dramatically reduced yet their prices are maintained, then their profits are significantly inflated. Other sectors with arguably far greater exposure to market competition and less certain revenue flows are frequently confronted by accusations of unfair pricing, as evidenced by the story on airlines’ credit card fees.

Patients supposedly have choice because they can pay the stated fee, move to the public system, look for a cheaper alternative or not have the operation. On September 23, The Australian reported that 97 per cent of ophthalmologists would maintain their fees despite the rebate cut. Nearly one-third of patients were expected to find the extra out-of-pocket expense too much and to transfer to the public system.

But many ophthalmologists will reportedly reduce services to the public system, thereby extending the already long waiting times for public patients. Shopping around for a cheaper alternative is made difficult by the dearth of readily accessible information on prices, success rates and safety records for providers.

Not having the operation ultimately impairs the person concerned and significantly reduces their capacity to live independently when demand for aged-care services is also rising dramatically.

The health minister subsequently announced that a compromise had been reached: lower rebates would be payable for simpler procedures and higher rebates for the more complex. Notwithstanding this change, the tussle over the proposed reduction in Medicare’s cataract operation rebates provides important insight into the way in which healthcare reform is being pursued.

Far from having informed and appropriate choice, the patient sits between two warring giants (government funders and providers), with little capacity to influence the outcome. On the one hand, the government wants a dividend for taxpayers from efficiencies flowing from new technology, while those who bought the technology are seeking additional returns from their investment in technology and their training.

In reality, both can probably achieve their goal. Government cuts expenditure; providers keep higher fees. The patient loses by paying more, waiting longer or losing sight. The taxpayer also loses by higher costs for aged care as individuals lose their capacity for independent living.

This story highlights the structural dynamics of the healthcare sector and the relative disempowerment of patients and health consumers as they face increasing responsibility for their health care and higher financial contributions.

The Business Council of Australia argues the government is doing little, if anything, to restructure the healthcare market to empower the consumer. The health consumer is woefully lacking in power compared with health consumers in other countries and with consumers in most other sectors of the Australian economy. This includes education, where the minister, Julia Gillard, defends the government’s role in providing good information on prices and outcomes to consumers (‘Home-Grown Rankings Gain Support’, The Australian, September 23.)

The BCA believes strongly that government responses to the National Health and Hospitals Reform Commission report on healthcare reform should place the patient at the centre of their consideration. Healthcare reform is not just about cutting expenditure, transferring cost or forcing limited competition in the supply of services.

The importance of this sector demands as rigorous an approach to microeconomic reform as applied to every other sector, including education. The BCA reiterates its previous calls for joined-up thinking, with proposals seamlessly crossing jurisdictional and portfolio boundaries.

Because the effectiveness of this sector so affects Australia’s future economic and social prosperity, the stakes are too high to leave the debate about policy options to the battling stakeholders. To quote the government’s reports: Health is everybody’s business.



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