25/11/2003 - 21:00

Health reform: no turning back

25/11/2003 - 21:00


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Health reform is one of the major financial and political issues facing the State Government. WA Business News brought together a group of key players last week to discuss the reform challenge. Mark Beyer reports.

Health reform: no turning back

THE nine health industry experts who gathered in WA Business News’ boardroom last week cover a wide political spectrum, yet they all agree on one critical thing.

Western Australia’s health system needs urgent reform and the pressure for change will only get more acute.

Even the AMA, sometimes seen as a barrier to change, recognises the need to move forward.

“Things have to change, given the current trends in healthcare and ageing,” State AMA president Brent Donovan told the forum.

“I can’t personally see how there can be any debate about that.”

The person charged with fixing the State’s health woes, Mick Reid, is aiming for fundamental reform.

“We are mapping out a vision over the next 15 or 20 years as to what we think the health system should look like,” said Mr Reid, who chairs the State Government’s health reform committee.

“If there is not a vision, things will change incrementally around the same parameters and that’s a disaster.”

Mr Reid is hopeful of gaining bipartisan political support from the opposition parties.

“The reason, I hope, they have gone somewhat muted to date is that they also feel fundamental reform is needed,” he said.

The need for health reform is all too apparent.

Spending in the State health system has been growing at around 7 per cent per annum in recent years, compared with growth in State revenue of about 3 per cent per annum.

In 2003-04, State Government spending on health will be $2.65 billion, up nearly 10 per cent.

Australia has the highest hospitalisation rate of all OECD countries.

At its current growth rate, health spending will rise from 25 per cent of the State budget to 35 per cent.

Key drivers of increasing healthcare costs include the ageing population, technological advances and rising public expectations.

After working on the health review for nearly nine months, Mr Reid has mixed feelings about reform prospects.

“I think people should be cynical and sceptical, to some degree, because the history of health reviews in WA and Australia has not been particularly good in terms of carrying through to implementation,” he said.

“My words of encouragement to people are – please speak out if you think reform is needed.

“The history in health is the lone voice tends to win out.”

Simon Towler, a former State president of the AMA, believes the medical profession has had too much influence in the past.

“Western Australia has had a structure in health where tertiary hospitals have had direct access to ministers,” Dr Towler said.

“As one of the defenders of the cause in the early days, I thought that was a great thing. Now I think it’s fundamentally flawed.

“The missing element still is the community interface into this debate.”

St John of God Subiaco chief executive Neale Fong said the “perverse incentives” in the health system were part of the problem.

“Health is such a complex industry, with the business side of it and the emotions of patient-doctor relationships, that we are all driven by our own interest,” he said.

“Sometimes we try to have enlightened self interest, the greater community good, but it’s jolly hard.

“I mean, doctors like to make money, they like to make a lot of it, some of them, that’s what drives them.

“Health care organisations like ours are perversely incentivised – the more people are sick, the better we do. And that’s not right.”

Dr Donovan added that the lack of price signals for health consumers added to the problem.

“At the moment you say: ‘You can have free this and free that, do you want it’?

“Who wouldn’t say yes?

“But deep down the people know it can’t last and therefore we have to have reform, and we have to get the community on board.”

HBF chief executive Mike Gurry agreed the lack of price signals was critical.

“To my mind that is the basic problem with the health system,” Mr Gurry said.

“We have an insatiable desire to want more and more but we don’t pay for it.”

He proposed novel reforms, based on practices in Canada, to address the problem.

“You need to give people a signal,” Mr Gurry said.

“We are able to do that in the private arena because we can say to someone: ‘If you want this set of services, this is how much it will cost you’.

“If you can’t afford that, you have to choose a different set of services.

“I believe that can be translated into the public system.

“The money allocated to health should be quarantined; in fact I think it should be added to the GST because GST is under the control of the States.

“And then the community can decide how much they want to put into health.

“If you do that properly, then people can say: ‘We are totally dissatisfied with our public health system, we want to spend more money’.”

Dr Towler said the current structure of Federal-State financial

relations could stand in the way of good reforms.

“There is already a problem in Western Australia because we don’t get our fair share of the Federal take,” he said.

“If you make it based on GST, you shift more money to the east coast.

“We have this bizarre scenario where the States have no real taxing rights, where they can’t go to the people of WA and say we need to raise State taxes in order to improve the State health system. That’s where the problem is.”

Mr Reid agreed that Federal-State relations were a problem, and commented that he was “pessimistic” about achieving improvements in that area.

However, he was optimistic that he could achieve acceptable reform proposals that would fit within the State Government’s budget.

“I have a strong view … that it is not mutually incompatible to get a financially sustainable health system and a clinically appropriate system, and that is what the committee is about,” Mr Reid said. “We report to two ministers. There are tensions between those ministers because clearly the health budget won’t go to 35 per cent [of State Government spending]. That is unsustainable. It will have to be kept around one in four [dollars].”

“I’m much more optimistic than I was in March that the agenda we deliver will be reasonably acceptable.

“I’m not yet convinced there is an implementation process, we need to marry that through.”


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