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The Milbank Memorial Fund is an endowed operating foundation that publishes The Milbank Quarterly, commissions projects, and convenes state health policy decision makers on issues they identify as important to population health.
March 12, 2015
Christopher F. Koller, President
Back to President’s Blog: The View from Here
Along the coast of Australia, every community has its own Surf Life-Saving Club (SLSC), a voluntary club that trains and certifies residents to patrol the beaches. Most have their own building overlooking the surf—and get some support from the local municipality, akin to our voluntary fire departments.
SLSCs are ubiquitous—especially on crowded suburban beaches. SLSC members walk around the shoreline in bright yellow and red swim suits with matching caps, toting life preservers. They monitor currents, marking dangerous riptides with flags. They scan the horizon for sharks and surfers in trouble. They zip around in the water on surfboards or rubber rafts, patrolling swimmers. They try to inculcate responsibility in the beach crowd. On early morning weekends they teach children in matching swimsuits color-coded by age to swim in the surf and minimize drowning risk—preventative health at work.
SLSCs are good safety nets, but they’re not perfect. Beach safety depends on cooperation between public agencies, volunteer clubs, and individuals. In the end, swimmers and surfers exercise their own judgment. A very rough analogy can be made to Australia’s health care system, which I observed on a recent brief visit.
Health Care in Australia
Everyone in Australia is guaranteed medical treatment. Local health districts, answerable to state health departments and similar to public/private authorities in the United States, run hospitals and certain ancillary services. Anyone can receive care at those facilities, free at the point of service. Money flows from the state to the districts on a fee-for-service basis, based on a nationally agreed “efficient” price. A private hospital sector runs alongside this system but for more routine and lower acuity services. All academic training and tertiary and quaternary services are provided through the health districts.
Unless employed by a district, physicians are considered private businesses. Access to their services, as well as to pharmaceuticals, is provided by Australia’s Medicare program, run by the federal government. For each service, Medicare pays a federal government-determined amount to the patient, who can assign it directly to the doctor. A doctor who accepts this “bulk billing” may not charge the patient any balance.
Individuals are incented to buy private insurance—like our Medicare supplemental policies—with public subsidies up to 30 percent, guaranteed rates when purchased under age thirty, and tax penalties at higher incomes. About 45 percent of Australians do this—and receive coverage for certain doctor’s fees in excess of Medicare, private hospital services, and some non-Medicare-covered benefits. Private insurance is community-rated, and prices vary only by the age of the insured.
Like the SLSCs, the delivery and financing of health care in Australia is a good safety net that depends on private and public sector interaction and personal responsibility. It also is not perfect.
In discussions, state officials complained of local health districts that game the fee-for-service system and resist payment reforms. Federal officials are seen as bureaucratic and unsympathetic to the differences between running a health system in frontier western Australia versus metropolitan Sydney. Federal officials have seen Medicare costs double in the last 10 years and complain of cost shifting by the states and the inability of local authorities to integrate care between physicians and institutions. Policy analysts bemoan the lack of incentives for needed care coordination for high-cost patients and a medical care and financing system that is increasingly focused on technically oriented procedures. Debates are currently underway about the appropriate level of patient cost sharing and how to improve care integration.
This critique could be lifted straight from one regarding the US health system, but the numbers tell a different story:
Australia’s health system design differs from that of the United States in fundamental ways: local, public responsibility for the provision of basic health services; the lack of an employer-based financing system, and fixed budgeting for the cost of care for the majority of citizens. These differences could result in the performance discrepancies noted in the chart above.
We should not turn our backs, however, on effective programs Australia has put in place that are readily transferrable to the United States. For example:
Postnatal family assessment: New South Wales has learned from US-produced evidence on nurse family partnerships. The state government pays for family assessments after every birth and for follow-up home visits for mother and child on a means-tested basis.
Elder Care Services: In a second example that blurs the distinction between social and medical expenses, private nonprofits are contracted by the federal government to formally assess the support services needed to allow elderly people to remain in their homes and out of expensive long-term care facilities. These recommendations are paid for by the government.
Health District Performance Measurement: States run a comprehensive public process to select, prioritize, define, and provide risk-adjusted measures for financial, clinical and population health performance for each health district. These are then compiled from government-administered databases, publicly disseminated and reviewed with each health district on a routine basis.
Pharmaceuticals Management: No drug is paid for by the federal government until its safety and efficacy are demonstrated, as with our FDA. In addition, the cost effectiveness of each new drug compared to alternatives must be determined, prior to the new drug becoming available.
Civil Service: State and federal agencies pay leaders what they would command if they were in the private sector. The result is a cadre of competent public sector administrators, not a two-class system of permanently underpaid middle management and leaders who rotate into the private sector and consulting, trading on experience and connections.
These innovations, and others, that will improve our health care syste m in the United States require changing our expectations: of providers in the system, of what government can and should do, and of our own roles as patients, caregivers, and citizens. These practices require our participation and our cooperation. Like the Surf Life-Saving Clubs, they are imperfect but collective efforts to protect all of us from dangers—both known and unforeseen.
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