European Observatory on Health Care Systems
Australia
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Australia
Health Care Systems in Transition
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The European Observatory on Health Care Systems is a partnership between the World Health Organization Regional Office for Europe, the Government of Greece, the Government of Norway, the Government of Spain, the European Investment Bank, the Open Society Institute, the World Bank, the London School of Economics and Political Science, and the London School of Hygiene & Tropical Medicine.
Australia
Health Care Systems in Transition
2001
Written by Melissa Hilless and Judith Healy
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European Observatory on Health Care Systems
AMS 5012667 (AUS) 2001
Keywords
DELIVERY OF HEALTH CARE EVALUATION STUDIES FINANCING, HEALTH HEALTH CARE REFORM HEALTH SYSTEM PLANS – organization and administration AUSTRALIA
©European Observatory on Health Care Systems 2001
This document may be freely reviewed or abstracted, but not for commercial purposes. For rights of reproduction, in part or in whole, application should be made to the Secretariat of the European Observatory on Health Care Systems, WHO Regional Office for Europe, Scherfigsvej 8, DK-2100 Copenhagen Ø, Denmark. The European Observatory on Health Care Systems welcomes such applications.
The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the European Observatory on Health Care Systems or its participating organizations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The names of countries or areas used in this document are those which were obtained at the time the original language edition of the document was prepared.
The views expressed in this document are those of the contributors and do not necessarily represent the decisions or the stated policy of the European Observatory on Health Care Systems or its participating organizations.
European Observatory on Health Care Systems WHO Regional Office for Europe
Government of Greece Government of Norway Government of Spain
European Investment Bank Open Society Institute
World Bank London School of Economics and Political Science
London School of Hygiene & Tropical Medicine
RESEARCH AND KNOWLEDGE FOR HEALTH By the year 2005, all Member States should have health research, information and communication systems that better support the acquisition, effective utilization, and dissemination of knowledge to support health for all.
ISSN 1020-9077 Volume 3
Number 13
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Foreword ........................................................................................... v Acknowledgements ................................................................ vii Introduction and historical background .......................................... 1
Introductory overview .................................................................... 1 Historical background .................................................................. 12
Organizational structure and management ................................... 17 Organizational structure of the health care system ....................... 17 Planning, regulation and management .......................................... 27 Decentralization of the health care system ................................... 29
Health care financing and expenditure .......................................... 31 Main system of financing and coverage ....................................... 31 Health care benefits and rationing ................................................ 32 Cost containment .......................................................................... 34 Private sources of financing ......................................................... 35 Health care expenditure ................................................................ 37
Health care delivery system ............................................................ 45 Primary health care and public health services ............................ 45 Public health ................................................................................. 49 Secondary and tertiary care .......................................................... 52 Social care .................................................................................... 59 Human resources and training ...................................................... 62 Pharmaceuticals and health care technology assessment ............. 69
Financial resource allocation .......................................................... 73 Third-party budget setting and resource allocation ...................... 73 Payment of hospitals .................................................................... 74 Payment of health care professionals ........................................... 78
Health care reforms ......................................................................... 79 Aims and objectives ..................................................................... 80 Reform implementation ................................................................ 80
Conclusions ....................................................................................... 89 References ......................................................................................... 93
Contents
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Foreword
The Health Care Systems in Transition (HiT) profiles are country-based reports that provide an analytical description of each health care system and of reform initiatives in progress or under development. The HiTs
are a key element that underpins the work of the European Observatory on Health Care Systems.
The Observatory is a unique undertaking that brings together WHO Regional Office for Europe, the Governments of Greece, Norway and Spain, the European Investment Bank, the Open Society Institute, the World Bank, the London School of Economics and Political Science, and the London School of Hygiene & Tropical Medicine. This partnership supports and promotes evidence-based health policy-making through comprehensive and rigorous analysis of the dynamics of health care systems in Europe.
The aim of the HiT initiative is to provide relevant comparative information to support policy-makers and analysts in the development of health care systems and reforms in the countries of Europe and beyond. The HiT profiles are building blocks that can be used to:
• learn in detail about different approaches to the financing, organization and delivery of health care services;
• describe accurately the process and content of health care reform programmes and their implementation;
• highlight common challenges and areas that require more in-depth analysis; • provide a tool for the dissemination of information on health systems and
the exchange of experiences of reform strategies between policy-makers and analysts in the different countries of the European Region. The HiT profiles are produced by country experts in collaboration with the
research directors and staff of the European Observatory on Health Care Systems. In order to maximize comparability between countries, a standard template and questionnaire have been used. These provide detailed guidelines
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and specific questions, definitions and examples to assist in the process of developing a HiT. Quantitative data on health services are based on a number of different sources in particular the WHO Regional Office for Europe health for all database, Organisation for Economic Cooperation and Development (OECD) Health Data and the World Bank.
Compiling the HiT profiles poses a number of methodological problems. In many countries, there is relatively little information available on the health care system and the impact of reforms. Most of the information in the HiTs is based on material submitted by individual experts in the respective countries, which is externally reviewed by experts in the field. Nonetheless, some statements and judgements may be coloured by personal interpretation. In addition, the absence of a single agreed terminology to cover the wide diversity of systems in the European Region means that variations in understanding and interpretation may occur. A set of common definitions has been developed in an attempt to overcome this, but some discrepancies may persist. These problems are inherent in any attempt to study health care systems on a comparative basis.
The HiT profiles provide a source of descriptive, up-to-date and comparative information on health care systems, which it is hoped will enable policy-makers to learn from key experiences relevant to their own national situation. They also constitute a comprehensive information source on which to base more in- depth comparative analysis of reforms. This series is an ongoing initiative. It is being extended to cover all the countries of Europe and material will be updated at regular intervals, allowing reforms to be monitored in the longer term. HiTs are also available on the Observatory’s website at http://www.observatory.dk.
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Acknowledgements
The Health Care Systems in Transition profile on Australia was written by Melissa Hilless, Australian Department of Health and Aged Care, and by Judith Healy, European Observatory on Health Care Systems.
Janet Quigley and Kim Webber of the Australian Department of Health and Aged Care provided further assistance.
The European Observatory on Health Care Systems is grateful to the following reviewers of the report: Professor Tony Andrews and Dr Jim Butler, National Centre for Epidemiology and Population Health, Australian National University; Professor Stephen Duckett, Faculty of Health Sciences, La Trobe University; Assoc. Professor Jane Hall, Centre for Health Economics Research and Evaluation, University of Sydney and John Goss, Australian Institute of Health and Welfare. We are also grateful to the Australian Department of Health and Aged Care for its support and to Bob Eckhardt of the International Section for overseeing the writing of this report.
The current series of Health Care Systems in Transition profiles has been prepared by the research directors and staff of the European Observatory on Health Care Systems.
The European Observatory on Health Care Systems is a partnership between the WHO Regional Office for Europe, the Governments of Greece, Norway and Spain, the European Investment Bank, the Open Society Institute, the World Bank, the London School of Economics and Political Science, and the London School of Hygiene & Tropical Medicine.
The Observatory team working on the HiT profiles is led by Josep Figueras, Head of the Secretariat and the research directors Martin McKee, Elias Mossialos and Richard Saltman. Technical coordination is by Suszy Lessof. The series editors are Reinhard Busse, Anna Dixon, Judith Healy, Laura MacLehose, Ana Rico, Sarah Thomson and Ellie Tragakes.
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Administrative support, design and production of the HiTs has been undertaken by a team led by Myriam Andersen and comprising Anna Maresso, Caroline White, Wendy Wisbaum and Shirley and Johannes Frederiksen.
Special thanks are extended to the WHO Regional Office for Europe health for all database from which data on health services were extracted; to the OECD for the data on health services in western Europe, and to the World Bank for the data on health expenditure in central and eastern European countries. Thanks are also due to national statistical offices that have provided national data.
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Introduction and historical background
Introductory overview
Australia covers a land area of 7 692 000 km2. The mainland spans a distance of 3134 km from north to south, and 3782 km from east to west. Nearly 40% of Australia’s land mass lies within the tropics, with
Cape York the northernmost point, situated 10 degrees south of the Equator (Fig. 1). The climate thus varies across tropical in the north, temperate in the south and east, and hot and arid in the interior. Australia is the smallest continent but the sixth largest country in the world being, for example, about the size of western Europe or the continental United States (excluding Alaska). The six states and two territories in the federal system of government are, in order of population size (and giving their capitals), New South Wales (Sydney), Victoria (Melbourne), Queensland (Brisbane), Western Australia (Perth), South Australia (Adelaide), Tasmania (Hobart), the Australian Capital Territory (Canberra) and the Northern Territory (Darwin). The national capital is Canberra and the two largest cities are Sydney and Melbourne.
Australia’s geography and population demographics present challenges for its health care system. Four factors are highlighted here: population growth, ageing, cultural diversity and urbanisation.
Australia’s population has increased from about four million in 1900 to nearly 19 million by 2000 (18 851 157 in 1999, see Table 1). Population growth in Australia was high in the 1950s and 1960s, about 2.7% growth per year, but slowed to around 1.5% per year in the 1990s (Australian Bureau of Statistics 1999d). The population is expected (medium variant projections) to increase by 22% between 2000 and 2025, a much higher growth rate than European Union countries, but similar to Canada and the United States (United Nations Population Division 1998).
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Fig. 1. Map of Australia1
Source: www.odci.gov/cia/publications/factbook.
1 The maps presented in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the European Observatory on Health Care Systems or its partners concerning the legal status of any country, territory, city or area or of its authorities or concerning the delimitations of its frontiers or boundaries.
Australia is still a young country in population terms with fewer elderly people than many other developed countries. Those aged 65 years and over comprised 12.1% of the population in 2000 but their number is projected to more than double by 2025 (United Nations Population Division 1998), rising to 6 million or 24% of the population by 2051 (Australian Bureau of Statistics 1999c). The working population aged 20–64 years in future will support
Indonesia Papua New Guinea
Indian Ocean
Timor Sea Coral
Sea
Great Barrier Reef
Great Australian
Bight
Indian Ocean Tasman
Sea
Darwin
Alice Springs
Perth Adelaide
Melbourne
Sydney
HobartTasmania
Canberra
Brisbane
Macqarie Island not shown 0 500 km 0 500 miles
Western Australia
Northern Territory
Queensland
South Australia New South Wales
Austalian Capital
Territory Victoria
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increasing numbers of older people but fewer children. In 1995, the dependency ratio was 0.7 dependants for every one worker (Table 1). Australia has a higher proportion of its population aged less than 15 years (21.5% in 1999) than many developed countries. The total fertility rate (children per woman aged 15–49 years) has declined to 1.7 in 1999, and the crude birth rate has declined from 22.4 per 1000 population in 1960 to 13.3 in 1999.
Table 1. Demographic indicators, 1960–1999
1960 1970 1980 1990 1995 1998 1999
Population 10.3 12.5 14.7 17.0 18.0 18.7 18.9 % over 65 years 8.5 8.4 9.6 11.1 11.7 – 12.2 % aged under 15 years 30.1 28.8 25.3 21.9 21.5 – – Total fertility rate 3.45 2.86 1.90 1.91 1.82 – 1.7 Dependency ratio 0.9 0.9 0.8 0.7 0.7 – – Life expectancy at birth (females) 73.9 74.2 78.1 80.1 80.8 81.5 – Life expectancy at birth (males) 67.9 67.4 71.0 73.9 75.0 75.9 – Crude birth rate (per 1000 population) 22.4 20.6 15.3 15.2 14.2 – 13.3 Crude death rate (per 1000 population) 10.9 11.2 8.9 7.2 6.5 – 6.8 Infant mortality rate (deaths per 1000 live births) 20.2 17.9 10.7 8.2 5.7 5.0 5.0
Source: Australian Institute of Health and Welfare 2000; OECD 2000.
Migration has been a key factor in population growth. The population is culturally diverse. Almost one in four Australians were born overseas, more than half of these in a non-English-speaking country, while 40% either were born overseas or had a parent born overseas (Australian Bureau of Statistics 2000). In the late 1990s, 91% of the population was of European descent, 7% Asian, and 2% Aboriginal or other. In the 1990s, the largest groups of permanent migrants came from New Zealand followed by Vietnam and China. Immigration largely has determined the composition of the population and currently contributes between one-third to one-half of annual population growth (Australian Institute of Health and Welfare 1998a). Britain and Ireland have been the largest sources of migrants since the 1950s, followed by Italy, Greece, New Zealand and the former Yugoslavia. The successive waves of migrants mean that the age structure and health needs of these population sub-groups differ. European settlement, dating from 1788, displaced and destroyed many of the indigenous population. People of Aboriginal and Torres Strait Island descent (although they have increased numerically in the last few decades) number less than 2% of the Australian population (Australian Bureau of Statistics 1999). Australia’s indigenous people experience much poorer health across a range of health indicators than the rest of the population (as discussed later).
The population is highly urbanized, with the majority (64%) living in the major urban cities, along the fertile east and southeast coast of the continent,
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and in smaller inland regional centres. Most of the continent is uninhabited or sparsely settled. There are considerable differences in health status and health service access and use between rural and urban populations, although socioeconomic factors must also be taken into account (Mathers 1994; Australian Institute of Health and Welfare 1998c; Glover et al. 1999). A current policy concern is to ensure that people in rural and remote areas obtain better access to health care services.
Health status
Australia’s population enjoys good health relative to other countries, with increasing life expectancy and a low incidence of life-threatening infectious disease. Such good health largely is taken for granted in line with the long- standing Australian image of itself as ‘a lucky country’. In the 1995 National Health Survey, 83% of Australians aged 15 or over reported their overall health as excellent, very good or good (Australian Bureau of Statistics 1997). Average life expectancy for men (76 years) and women (82 years) is high, with women living approximately six years longer than men (Australian Institute of Health and Welfare 2000).
Australia collects detailed data on mortality and morbidity and causes of death are systematically recorded. Morbidity trends are traced partly through the National Health Survey, a regular five-yearly household survey conducted by the Australian Bureau of Statistics, which obtains national information on a range of health-related issues. Regular surveys also are conducted on disability. These show that age-standardized rates for severe handicap generally have remained stable over the last four surveys, although there are some increases at the less severe end of the disability spectrum (Australian Bureau of Statistics 1999a). These trends are the subject of many debates.
In terms of disability adjusted life expectancy (DALE), Australia ranks in second place (after Japan) out of 191 countries (World Health Organization 2000). In 1998, males at birth could expect to live for 63.3 years without experiencing major disability and women could expect to live for 57.5 disability- free years (OECD 2000).
The main improvements in life expectancy over the last few decades have occurred through reduced death rates among older age groups, especially from diseases of the circulatory system, plus a downturn in cardiovascular death rates among older men. As in developed countries generally, most deaths in Australia occur among people aged 70 years and over (69%) and most deaths are due to noncommunicable disease.
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Over 70% of the burden of disease (premature mortality in terms of years of life lost) can be attributed to cardiovascular disease, cancers and injury (Australian Institute of Health and Welfare 2000:51). The seven major causes of death, in terms of disease categories, are ischaemic heart disease, cerebro- vascular disease (stroke), lung cancer, colorectal cancer, breast cancer, prostate cancer, and chronic obstructive pulmonary disease. There are also marked age and sex differences in causes of death. The following summary is drawn mainly from International Health: How Australia Compares (Australian Institute of Health and Welfare 1998a) and from Australia’s Health 2000 (Australian Institute of Health and Welfare 2000).
Diseases of the circulatory system, such as heart attack and stroke, are the major causes of death in Australia (Table 2). Cardiovascular disease accounts for 40% of deaths. The mortality rate from ischaemic heart disease has been declining since the late 1960s, however, especially among males, down from a peak of 503 male deaths per 100 000 in 1966 to 201 in 1995 (OECD 2000). Cerebrovascular disease (stroke) has also declined steadily since the late 1960s, reflecting better blood pressure management through anti-hypertensive drugs, and behavioural changes in response to health promotion messages, such as reductions in smoking.
Smoking is the main risk factor in several diseases, including diseases of the circulatory system (a two-fold increase in risk compared to non-smokers for heart disease), the respiratory system, and cancer (a five-fold increase in risk for lung cancer). Tobacco is the single biggest contributor to the burden of disease. Smoking in males has been falling since the 1970s, whereas the prevalence of female smokers has increased, which trends now are being reflected in mortality rates.
Cancers (malignant neoplasms) account for approximately 186 deaths per 100 000 population. As in other developed countries, lung, breast, colorectal and prostate cancers are major causes of death. The lung cancer mortality rate among men peaked in the early 1980s but is still rising among women. Breast cancer is the most common cause of cancer deaths among women but the rate is declining. Colorectal cancer rates have been falling, attributed to a combination of factors such as improved diet, earlier diagnosis and better clinical management. Prostate cancer rates, a major cause of death among older men, rose in the early 1990s but have declined since. Australia previously recorded the highest death rates for skin cancer (mostly melanomas) in the world. Exposure to sunlight is directly related to the risk of skin cancer, with the incidence higher among fair-skinned people and in those with higher sun exposure.
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Diseases of the respiratory system account for 63 deaths per 100 000 population, with chronic obstructive pulmonary disease the leading cause of death in this category. Deaths among males for bronchitis, emphysema-related conditions and other chronic airway obstructions (not including asthma) have decreased, but remain static among females, again attributed to earlier changes in smoking rates.
External causes of death, such as injury and poisoning, are the leading causes of death among young adults, although the population rate is highest in old age. Death rates from injury and poisoning have been declining in recent decades in Australia as in most developed countries. Suicide, especially among males, has emerged as a major mental health issue. Morbidity and mortality associated with mental disorders also have increased.
Table 2. Causes of death per 100 000 population, 1960–1995
1960 1970 1980 1990 1995
All causes 1092 1121 888 720 653 Diseases of circulatory system 624 637 466 323 267 Malignant neoplasms 161 178 189 188 182 Diseases of respiratory system 71.0 91.0 61.5 53.2 47.8 External causes injury & poison 72.0 77.0 58.8 44.9 37.6 Mental disorders 4.0 7.0 7.6 12.1 15.5 Diseases of nervous system 11.0 10.0 10.2 13.5 15.1 Diseases of digestive system 34.0 26.0 29.9 24.8 20.1 Endocrine/metabolic diseases 23.0 24.0 17.2 19.1 21.3 Genitourinary system diseases 28.0 21.0 13.9 11.3 10.3 Infectious/ parasitic diseases 10.0 8.0 4.2 4.9 5.6 Diseases of the blood 3.4 3.0 2.9 2.8 1.8
Source: OECD 2000. Note: Australian statistics after 1995 so far are not listed on the OECD database.
Communicable diseases were responsible for many deaths and much illness in Australia in earlier centuries, but as in other developed countries, are not now major causes of mortality. Australia has active public health surveillance and immunisation programmes (discussed later under ‘Public health’). By 1996, communicable disease (using ICD codes covering infectious and parasitic diseases together with meningitis, influenza and pneumonia) accounted for only 2.8% of all deaths compared to 18% in 1921 (Australian Institute of Health and Welfare 1998b:116). Despite major reductions in mortality, however, communicable diseases still cause considerable morbidity, since some diseases have returned and new diseases have emerged. As in other countries, HIV/ AIDS has received considerable health policy attention since the early 1980s and is addressed by a nationally coordinated program. Australia ranks in the
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middle of developed countries with 352 AIDS cases per million population, the risk factors in Australia being associated almost entirely with male-to-male sexual activity. The annual number of HIV diagnoses peaked at 2500 in 1985 and declined to 660 in 1998, while AIDS diagnoses peaked in 1994 and then have declined as have AIDS deaths (Australian Institute of Health and Welfare 2000:113).
Blood-borne diseases remain a cause for concern, including the various forms of hepatitis, with the incidence of hepatitis B infections falling but hepatitis C rising. Gastrointestinal infections generally have continued to rise and are under- reported. The incidence of sexually transmitted diseases such as syphilis has declined but other infections such as chlamydia and gonorrhea have continued to rise (Australian Institute of Health and Welfare 2000:30). Vaccine-preventable diseases remain at low levels. For example, the WHO Western Pacific area, including Australia, was declared polio-free in October 2000. Vector-borne diseases are receiving more attention, such as Ross River virus and encephalitis, although Australia is malaria-free except for cases in returning travellers. Tuber- culosis rates are very low except among some recent migrant groups and among Indigenous Australians.
Australia has identified six national health priority areas for special attention: cardiovascular disease, cancers, injuries, mental problems, diabetes and asthma (Australian Institute of Health and Welfare 1998a:55), as discussed later under “Health for all policy”.
Low family income is generally linked to poor health, although the risk factors affecting health inequalities are complex (Australian Institute of Health and Welfare 2000:218). The groups that have been identified at risk of poverty include sole parent families, very large families, the homeless and unemployed, and Aboriginal and Torres Strait Islander people.
Aboriginal and Torres Strait Islander health status
Australia’s Aboriginal and Torres Strait Islander people experience much worse health across a range of measures although the precise extent of the health disadvantage is hard to measure, partly because indigenous people are not fully identified in the census or in routine health data collections. The general picture, however, is closer to a third-world health profile compared to the good health measures for the rest of the population (Australian Bureau of Statistics 1999; Australian Bureau of Statistics and Australian Institute of Health and Welfare 1999; Australian Institute of Health and Welfare 2000; Australian Institute of Health and Welfare 2001). Life expectancy and age-specific mortality rates are much worse than for the general population. For example, life expectancy
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at birth for indigenous men is 56 years and for women 63 years, compared to the Australian average of 76 years for men and 82 years for women. Indig- enous people thus live 15–20 years less than the rest of the Australian popula- tion. Mortality rates are higher in all age groups but particularly in infancy and in later life. Infant mortality rates in some states are 2–4 times higher than the national average. Most ‘excess’ deaths relative to other Australians were due to circulatory diseases (including ischaemic heart disease), respiratory diseases (such as pneumonia), injuries (such as road accidents) and endocrine diseases (such as diabetes). Although the majority of Australia’s indigenous people now live in cities and towns, they account for a high proportion of the population in some rural and remote areas: access to appropriate health services therefore is an important issue (Glover et al. 1999).
Economy
Australia is a prosperous country with a well-established capitalist mixed economy. Per capita GDP is higher than in European Union member states (controlling for purchasing power parity). GDP per capita in 1999 in Australia was PPP US $25 141 (Table 3) compared to, for example, PPP US $23 456 in Germany (the most prosperous EU member state). Australia, like other OECD countries, experienced low economic growth and high unemployment in the early 1990s but the economy expanded in the late 1990s. The GNP growth rate in fiscal year 1998–1999 was 3.8% (World Bank 2000), while real GDP grew by 4.5%, despite the east Asian currency and banking crises of 1997. The robustness of domestic demand during the Asian economic crisis was an important factor in assisting the Australian economy to overcome the negative impacts of the crisis.
Australia with its abundant natural resources is a major exporter of agricultural products, minerals, metals, and fossil fuels. A downturn in world commodity prices, however, has a large negative impact on the economy. Government economic policy for the last few decades has aimed to reduce the traditional reliance upon the export of primary products and to increase the export of manufactured products and services while diversifying the economy and strengthening the domestic market. Macroeconomic reforms since the 1980s have opened Australia to international competition.
Although Australia suffered from the low growth and high unemployment experienced by most OECD countries in the early 1990s, the economy has expanded at a steady rate in recent years. By mid-1999 the current expansion of the economy had entered its ninth year, making this the longest upswing since the 1960s. The average growth rate of the economy over the last 30 years
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has been 3.5%, which compares favourably to average growth in OECD countries (OECD 2000a). A mix of macroeconomic and structural policies are credited with bringing inflation under control in recent years, which included reducing public sector borrowing and promoting increased productivity growth. The effects of the new goods and services tax (GST) introduced in July 2000 upon inflation are as yet unknown. The coalition government (Liberal and National) from the mid-1990s embarked on a programme of fiscal consolidation to reduce the budget deficit (although not high compared to other developed countries), which included containing government spending. Unemployment has been reduced from over 9% to 7%. Further, there are considerable regional variations in economic activity an unemployment with rural areas of particular concern.
Table 3. Economic indicators, 1960–1999
1960 1970 1980 1990 1995 1998 1999
GDP per capita (US $PPP) 2 041 3 955 9 434 16 744 21 795 23 998 25 141 GPD per capita (AUS $ 1995 prices) – – 21 321 24 417 28 116 30 838 31 766 GDP price index (1995=100) – – 46.5 95.3 100 102.7 103.7 Real GDP – – – 4.9 1.5 0.3 – Gross public debt, % GDP – – – 22.4 40.9 37.5 – Average weekly earnings, all employees (1997=100) – – – 80.2 92.8 101.3 – Unemployment rate (among labour force) (b) 1.4 1.4 5.9 7.0 9.7 8.0 –
Source: OECD 2000.
Government and politics
Australia has a three-tier political system. The first tier is the national government or Commonwealth, the next tier is the six state and two territory governments, and the third is local government (municipal and shire councils). A defining feature of the Australian federal system is the degree of cooperation required between levels of government. The critical division for the health care system is that the Commonwealth collects most taxes but the states administer or deliver most public services; in other words, fiscal and functional responsibilities are divided. The term ‘vertical fiscal imbalance’ refers to the disparity between the taxing capacity and the revenue needs of the two tiers of government. The Commonwealth distributes revenue to the states and territories via revenue sharing and specific purpose grants. Intergovernmental relations involve ongoing negotiations both over funding and respective functional responsibilities. Further, the division of intergovernmental responsibilities is not permanently
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fixed: the Commonwealth has assumed considerably more responsibility for health and social services since federation in 1901.
After 1788 and the arrival of Governor Phillip in Botany Bay with ship- loads of convicts and their guards, six colonies gradually were established around Australia. The widely-separated colonies functioned under a limited form of self-government under the British crown until 1901, when the Australian Constitution established a federal system of government, with the six former colonies becoming states within the Commonwealth of Australia.
The national (Commonwealth) parliament was established under the 1901 Constitution. Each of the states and territories (mainly referred to as states for convenience in this report) also has its own parliament. The Commonwealth and state governments all operate on the Westminster system, whereby the political party or coalition with the majority of elected members in the Lower House of Parliament forms the government. (All, except Queensland, the Northern Territory and the Australian Capital Territory, have two legislative chambers). Voting is compulsory (except in local government elections) making Australian citizens arguably the most active voters in the world. Given the relatively short political cycles (generally three years), each year is an election year in one or other of the Australian states or nationally.
The Commonwealth of Australia is governed under the doctrine of separation of legislative, executive and judicial powers. Legislative power is vested in the bicameral parliament, which consists of the Senate (the Upper House of Parlia- ment) and the House of Representatives (the Lower House). Members of the House of Representatives from approximately equal-sized electorates (one person, one vote) are elected for three-year terms. The party, or coalition of parties, with the majority of seats in the House of Representatives forms the government and provides the Prime Minister. Ministers with executive powers are drawn from these elected members from either the Lower or Upper House.
The Senate has 76 members, 12 are elected from each of the six states, and two for each of the territories. Senators are elected for six-year terms. Historically, the Senate is regarded as a chamber of review, which safeguards against hasty action or legislative excess by the Lower House. It is also regarded as ‘the States’ House’ since the Senate has equal representation from all states regardless of their population.
The Constitution gives legislative powers to the six state and two territory governments to make laws for peace, order and good government within their territorial limits. State and territory governments also are referred to as having ‘residual’ powers; that is, they have powers in all areas not specifically referred to as Commonwealth powers under the Constitution.
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The executive power is vested in the monarch (the Queen) and is exercisable by the Governor-General as the Queen’s representative. The question as to whether Australia should remain a titular monarchy or become a republic remains controversial. In a referendum in 1999, the Australian electorate voted no to a republican model, which would allow a two-thirds majority of Federal Parliament to elect an Australian head of state (President). The High Court of Australia, the Federal Court of Australia, and State Courts exercise judicial powers.
Two major and two minor political parties dominate Australian politics. The Liberal and National Parties form the Federal coalition government under Prime Minister John Howard. The last elections for the House of Representatives and half of the Senate were held in November 2001
The Liberal Party, the main conservative party, was founded in 1944 and represents political views ranging from the centre to the conservative right. The party’s principles are based on individual initiative and free enterprise, lean government, and competition. The Liberal Party in November 2001 was elected to its third consecutive term of office as part of a Coalition government (being elected to its first term in 1996).
The National Party (the coalition partner) originally was established as the Country Party in the early 1900s. The party has conservative views and believes in the maximum development of private enterprise, is concerned with issues faced by rural Australians, and promotes family values and national security. The Liberal and National parties (and their predecessors) first formed a coalition government in 1923 and have a long history as allies in opposition to labour governments.
The Australian Labor Party (ALP) has been in opposition since 1996, which concluded five consecutive terms in office (1982–1996) under Prime Ministers Robert Hawke and then Paul Keating. A democratic socialist party, the ALP is Australia’s oldest national political party, founded in 1901 as the political arm of the trade union movement. The party represents political views from the centre to the left. Its principles are based on promotion of social equality, economic security, protection of individual rights and support for minority rights.
The Australian Democrats were founded in 1977 as an independent ‘reformist’ party. The Democrats pursue an issue-driven agenda, which distinguishes them from the other parties who traditionally are linked with powerful interest groups. They support participatory democracy and open government, which is reflected in their formulation of policy and election of office bearers. Democrat priorities include sustainable development, the protection of the environment, civil liberty and social justice. The party is
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opposed to privatization and deregulation and supports a role for government in assisting the disadvantaged through education, welfare support and poverty reduction. Although not currently represented in the House of Representatives, the Democrats have exercised a significant influence in the Senate since 1980, including holding the balance of power for some periods. This minor party thus often wields considerable power over the passage of Commonwealth legislation.
Intergovernmental relations on social programmes have varied with political swings over the last few decades (Healy 1998). The hallmarks of the Common- wealth government in the Labor years of Prime Minister Whitlam (1972–1975) were increased central intervention, competitive federalism (some overlapping functions) between the Commonwealth and the states, the pursuit of national goals, increased social expenditure and more use of tied grants to the states. The Fraser Liberal government (1975–1981) pursued coordinated federalism with the states (separate functions), devolved social responsibilities, reined back public sector spending, and reinstated more revenue sharing. The Hawke Labor government (1982–1991) increased funds for social programmes, sought co- operative federalism, and consolidated social programmes into cost-sharing arrangements with the states. The Keating Labor government (1991–1996) was more centralist but engaged in microeconomic reform and in joint reviews of intergovernmental areas. The Howard Liberal government has sought to achieve a more equitable distribution of revenue to the states and territories, better- targeted social expenditures and an increased role for the private sector in activities traditionally undertaken by government.
Historical background
The colonial governments subsidized hospitals to cater for the needs of the poor, while during the nineteenth century, public hospitals mainly were charitable institutions in which doctors provided care on an honorary basis. Private hospitals (run by religious organizations or private entrepreneurs) emerged to cater for more affluent patients, while community-based medical care by doctors was provided on a fee-for-service basis.
The 1901 Constitution regarded health care as the responsibility of the states and granted powers to the Federal Government only on quarantine matters in order to prevent diseases entering Australia. The Commonwealth played a minor role in the health field over the next four decades apart from some public health and professional functions (Kewley 1973). The need for a public health coordination role for the Commonwealth only became evident during the
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influenza outbreak around 1918 and, accordingly, the Commonwealth Department of Health was established with the agreement of the states in 1921. The Commonwealth also became involved in health research via the Federal Health Council that was established in 1926 to provide expert professional advice, and was expanded in 1937 to become the National Health and Medical Research Council.
Until the mid-twentieth century, individuals had to pay for their own health care services, apart from some free treatment in public and charitable hospitals, and except for those who took out insurance in sickness funds. From the late nineteenth century to the mid-1940s, the friendly society movement was a driving force behind the health care system. These funds offered members a range of benefits including unemployment benefits and sick pay, and through negotiated capitation payments, purchased medical services from doctors on behalf of members.
Post-war welfare state
The Commonwealth began to play a significant role in health matters only after the Second World War (Kewley 1973). This was a continuation of the stronger role the national government had assumed during the war years, as well as fulfilling its mandate to build a country ‘fit for heroes’, and in line with international developments in post-war ‘welfare states’. First, under the Commonwealth’s defence power, a Repatriation Commission was established to care for returned soldiers. Doctors were paid to treat returned servicemen and women, and Commonwealth repatriation hospitals in each state offered comprehensive health care. Second, the Labor government again tried to establish a national health care system and again partially failed. Third, broader Commonwealth powers in health and social care (such as the payment of pensions) were achieved in a constitutional amendment that eventually led to an unforeseen and much expanded role for the Commonwealth.
The Labor government (1941–1949) made repeated efforts to radically reform the health care system. These proposals met strong resistance from doctors, conservative political parties, and the voluntary insurance funds, foreshadowing continuing contests for the rest of the century and beyond among political and medical stakeholders (Sax 1984). A national health insurance proposal had failed in 1938, and the next proposal, free medicines, was introduced in the short-lived 1945 Pharmaceuticals Benefits Act. This act, seen as the first step towards ‘socialized medicine’, was challenged by the Australian Medical Association in the High Court of Australia, which found that the parliament had exceeded its constitutional power.
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The Government then successfully put the issue to the voters in a referendum. In 1946 the Constitution was amended (Section 51, xxiiia) to enable the Commonwealth to make laws with respect to a wide range of pensions and benefits. These were ‘the provision of maternity allowances, widows pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorize any form of civil conscription), benefits to students and family allowances’. The Common- wealth introduced subsidized pharmaceuticals in its second attempt at legislation, the 1950 Pharmaceutical Benefits Act, which legislation remains largely unchanged.
The 1946 constitutional amendment prohibited any form of civil conscription, thus medical practitioners essentially are self-employed and cannot be compelled to work for the government, and nor can they be made to provide medical services for a prescribed fee. No agreement was arrived at, as in the United Kingdom, whereby general practitioners became ‘independent contractors’ under a National Health Service. The resistance by the Australian medical profession to any government control, and their support for a fee-for-service payment system, have been key ideological themes in health policy debates.
Under the Hospital Benefits Act 1946 the Commonwealth entered into agreements with the states to subsidise public hospital beds on condition that there was no charge for patients in public wards, the intention being to reduce financial barriers to hospital access by patients. This has remained the basis of subsequent hospital financing agreements between the Commonwealth and the states. The states continue to administer their hospital sectors, which are characterised by a mix of public and private funding and provision.
The Liberal Coalition government under Prime Minister Menzies and his successors (1949–1972) introduced the National Health Act 1953, which consolidated the four main pillars of the Australian post-war health care system: the pharmaceuticals benefits scheme, the hospital benefits scheme (Common- wealth funding for state hospitals), pensioner medical services enacted in 1951 (which subsidized health care for pensioners), and the medical benefits scheme (which subsidized medical costs for members of non-profit health insurance schemes). The National Health Act 1953 remains in force although with many amendments.
National health insurance
The Labor government under Prime Minister Whitlam (1972–1975) resumed the Chifley Government’s efforts to introduce a national health insurance scheme. Medibank met with strong opposition from the medical profession,
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private health insurers and opposition political parties, and was rejected by the Senate in 1973 and 1974. The scheme aimed to provide universal health insurance, administered by a Commonwealth authority, and funded entirely from taxation. The legislation was not passed until after dissolution of both Houses of Parliament, an election in which health was a major issue, and a special sitting of both Houses of Parliament to gain agreement on this and other problematic legislation. Medibank finally was introduced in 1975 and the Health Insurance Commission established to administer the scheme. Patients could be billed the schedule fee for a medical service and claim 85% back from the Health Insurance Commission, or doctors could bill the Health Insurance Commission directly for their patients (‘bulk billing’) and accept 85% of the schedule fee as full payment. In relation to hospital care, the Commonwealth government negotiated relatively generous hospital cost-sharing arrangements with the states, provided that patients were guaranteed universal and free access to public hospitals (Duckett 1998).
The Liberal Coalition government (1975–1982) made a series of changes to Medibank. The Liberal Party, in its election promises, undertook to maintain Medibank but also supported private health insurance. The most important changes were that individuals could opt out of Medibank and purchase private health insurance, while a levy of 2.5% of taxable income was introduced for those people who chose to remain in the scheme. By 1981, a significant proportion of the population was effectively uninsured in relation to hospital treatment. Public funding for health care, principally for public hospitals, continued to be negotiated periodically between the Commonwealth and the states.
The Hawke and Keating Labor governments (1983–1996) re-established a universal, tax-funded health insurance system, Medicare, which remains in place today. The initial 1% mandatory levy on income was raised to 1.5%. The national health insurance system has bipartisan political support since the current Liberal government supports Medicare. Medicare thus provides the entire population with subsidized access to the doctor of their choice for out-of-hospital care, free public hospital care, and subsidized pharmaceuticals. Although private insurance remains voluntary, the Commonwealth now offers financial incentives for people to take out private cover (as explained under Private sources of finance).
Economic rationalism
International health care reforms from the late 1980s were characterized by efforts to contain rising health costs, by concerns with structural efficiency, by
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attempts to promote the private sector, and by new forms of public sector management. In Australia, such strategies, dubbed economic rationalism (Pusey 1991), to varying extents were adopted with bipartisan enthusiasm by Common- wealth and state governments. At the national level, for example, the National Competition Policy from 1995 has extended competitive conduct rules to all businesses including Government business enterprises, and the Productivity Commission, an independent statutory body, advises governments on aspects of microeconomic reform. Health sector reform (as part of wider public sector reform) concentrated during the 1990s upon microeconomic reform and upon efforts to improve technical and allocative efficiency. Australia undertook these reforms in a series of incremental changes, given the many checks and balances in the Australian political system, rather than in the ‘big bang’ approach favoured in New Zealand in the early 1990s (Bloom 2000).
Some commentators have identified phases in the health sector reform in OECD countries (Ham 1998; Davis 1999). These include an early focus on hospital payment systems and management; the introduction of market-like mechanisms and budgetary incentives; the separation of purchasers and providers; a focus on micro-efficiency; and more emphasis upon customer relations. These were all key themes in health sector reform in Australia over the last decade. The aims were to contain costs, shift the public/private bal- ance, and achieve greater efficiency and effectiveness. Australia additionally engaged in ongoing debates over functional overlap and fiscal imbalances, which are features of federal forms of government.
This section has presented an historical overview of the Australian health care system. The next sections go on to describe recent developments in the health care system.
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Organizational structure and management
Organizational structure of the health care system
Australia has a complex health care system with many types of services and many providers, and a range of funding and regulatory mechanisms. Both the public and private sectors fund and provide health care and
all levels of government are involved. The Commonwealth funds rather than provides health services, funding the bulk of the health system, and subsidizing pharmaceuticals and aged residential care. The six state and two territory governments, with Commonwealth financial assistance, primarily are responsible for funding and administering public hospitals, mental health services, and community health services, as well as for regulating health workers. Private practitioners provide most community-based medical and dental treatment; there is a large private hospital sector and a large private insurance sector. The main points are that, first, the pluralist health care field involves many stakeholders; second, there is considerable overlap between Commonwealth and state governments; and third, there is a substantial private sector.
A key principle underlying Australia’s health system is universal access to most health care regardless of ability to pay. Revenue for the health care system comes mainly from taxation. Health services are funded through two national subsidy schemes, Medicare and the Pharmaceutical Benefits Scheme, while public hospitals and public health are funded partly through joint Commonwealth and State funding agreements. Thus primary medical care is funded primarily through national health insurance, with mixed funding arrangements for secondary and tertiary health care and public health programmes. Primary medical care is provided mostly by private practitioners, hospital care by both
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public and private hospitals, and most long-term care by the private and voluntary sectors.
Fig. 2 shows the main organizations involved in the health sector. The health care field, with its plethora of stakeholders, has become increasingly complex. Further, the boundary line between levels of government is blurred, as is the boundary line between public and private sectors, with corporatist organisa- tions (such as statutory authorities) set up partly to bridge such divisions. The main bodies and their functions are discussed in turn in the following sections.
Federal level
The Commonwealth has assumed a leadership role in health policy-making and financing given its constitutional mandate as well as its ‘power of the purse’. The amendment to Section 51 (xxiiia) of the Constitution has been interpreted broadly in relation to health. Also, Section 81 allows the Commonwealth to allocate funds ‘for the purposes of the Commonwealth’ under the appropriate legislation. In addition, Section 96 allows the Commonwealth to make grants to the States for specific purposes. Since the Constitution does not strictly prescribe the roles of each level of government in relation to health care, some degree of overlap exists. Continual changes in intergovernmental relations mean that ‘dynamic tension’ between the Commonwealth and the states is a characteristic feature of the Australian health care system.
The Commonwealth funds and administers the Medicare Benefits Schedule (payments to practitioners), the Pharmaceutical Benefits Schedule (subsidized drug purchases), and the Australian Health Care Agreements (formerly known as the Medicare Agreements that contribute funds to the states to run public hospitals). The Commonwealth makes Goods and Services (GST) Revenue Grants for general budget revenue to the states and territories, makes direct grants to nongovernment organizations for health services, and has negotiated Public Health Outcome Funding Agreements with the states to ensure that certain public health activities are undertaken.
Two Ministers of Parliament are appointed to the Health and Aged Care portfolio. The Minister for Health and Aged Care takes an overview role for the whole portfolio, while the Minister for Aged Care is responsible for aged care and hearing services. Each state and territory also has a minister responsible for the health portfolio in its government.
The Department of Health and Aged Care is the principal national agency in the health care field (www.health.gov.au). As well as national policy and funding, the department is concerned with public health, research and information management. It has been renamed several times over the last decade
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Fig. 2. Organizational chart of health care system
or so, with functions shifted between departments; for example, aged and community care and Aboriginal health were moved into the Department of Health and Aged Care. In addition to the Canberra head office, a Commonwealth office is located in each state and territory. Nine portfolio outcomes currently are pursued in conjunction with other agencies: population health and safety, access to Medicare, enhanced quality of life for older Australians, quality health care, rural health services, hearing services, Aboriginal and Torres Strait Islander health, choice through private health care, and health investment. The department (in 2000) consisted of several divisions: portfolio strategies, corporate services, population health, health access and financing, health services, therapeutic goods administration, aged and community care, health industry and investment, the Office for Aboriginal and Torres Strait Islander Health, and the Office of the National Health and Medical Research Council.
The Office for Aboriginal and Torres Strait Islander Health (www.health.gov.au/hfs/oatsih) funds special programmes for Indigenous Australians and funds community-controlled health services to deliver additional primary health care.
Commonwealth
States
Private Insurance funds
Private hospitals Public hospitals
Aged care homes
Specialists
General practitioners
Pharmacists
Local government
Community health services
Public health services
Ancillary health services
Funding
Management
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The National Health and Medical Research Council (NHMRC) is the Australian government’s main funding body for health and medical research (www.health.gov.au/hfs/nhmrc). In addition to providing advice to the govern- ment on health, health ethics and medical research, and administering research funds, the NHMRC also publishes guidelines and information relating to health ethics and health care. The Council comprises nominees of government, pro- fessional associations, unions, universities, and business and consumer groups.
A number of organizations play an important role in the development of health policy, including government departments, statutory authorities and other interested groups. Several other federal-level bodies with direct or indirect involvement with healthcare are listed below.
The Health Insurance Commission is a Commonwealth statutory authority established in 1974 to administer the government universal health insurance scheme (www.hic.gov/au). It processes and pays claims and benefits, and records relevant data on the Medicare and the Pharmaceutical Benefits Scheme. It also prevents and detects fraud and inappropriate servicing. The Commission operates a global consultancy service that provides advice on health, health insurance, large-scale claims processing systems and related matters. In 1997 Medibank Private, a registered private health insurance fund previously administered by the Commission, separated to become an independent govern- ment business enterprise.
The Australian and New Zealand Food Authority (ANZFA) is a partnership between the Commonwealth and state governments and the New Zealand government (www.hic.gov/au). ANZFA is responsible for developing, varying and reviewing standards for food available in Australia and New Zealand, and for other functions including coordinating national food surveillance and recall systems, conducting research, assessing policies about imported food, and developing codes of practice with industry.
The Australian Radiation Protection and Nuclear Safety Agency (ARPANSA) has responsibility for protecting the health and safety of people and the environment from the harmful effects of ionising and non-ionizing radiation (www.arpansa.gov.au).
The Department of Veterans’ Affairs pays compensation and income support, and funds hospital services, allied health and counselling and community support programmes for war veterans, widows and their dependants (www.dva.gov.au). The Commonwealth ran a parallel health system for veterans but over the last decade has moved from being a provider to a purchaser of health care (Lyon 2000). Although the number of veterans is falling, their increasing age means that they need more health care. The department’s twelve large repatriation hospitals (some dating from the 1920s) have been transferred to the states (six
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hospitals), closed or privatized over the last decade. The department now has contracts with over 40 000 healthcare providers.
The Department of Family and Children’s Services was created in late 1998 bringing together income support (previously the Department of Social Security) and a range of community services into a single department. It also provides income support as well as other services for people with a significant disability (www.facs.gov.au). Disability services are discussed later under Social care.
The Australian Bureau of Statistics undertakes the five-yearly census of the Australian population as well as surveys of health and health services, while many of its other surveys provide health data. ABS publishes regular reports on many aspects of Australian society and the economy (www.abs.gov.au).
The Australian Institute of Health and Welfare (AIHW) is an independent statistics and research agency within the health portfolio (www.aihw.gov.au). Government agencies transmit selected data to AIHW that is incorporated into national data sets. AIHW publishes a large number of regular and occasional reports (some of which are cited in this report) and provides information and analyses on the health and welfare of Australians and their health and welfare services.
The Australian Health Ministers’ Conference of Commonwealth and state and territory Ministers is an annual forum intended to promote a coordinated national approach to health policy development and implementation. The associated Australian Health Ministers’ Advisory Council consists of senior Commonwealth, state and territory health officials, who consider health matters referred by the Conference or any of the health ministers and report on these matters to the annual meeting.
The Council of Australian Governments (COAG), set up in the early 1990s, coordinates the activities of Commonwealth, state and territory governments at the highest level. It deals with broad policy on the operations of governments and also their regulation of the private sector. It was set up in response to tensions in intergovernmental relations and respective functional responsibilities in the federal system, being particularly concerned with overlaps and duplication.
State level
The six State and two Territory governments (hereafter mainly referred to as States) both fund and provide health care services. The health portfolio is important in state government administration in political and fiscal terms, typically accounting for around one third of state recurrent budgets. The states are essentially autonomous in administering health services.
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The tradition of ‘federalism’ in Australia means that the health care field has developed somewhat differently in each state, with variations in policies, organizational structures, per capita expenditure, resource distribution and utilization rates. Arguably, health service structures and patterns in the states and territories are converging, given the common pressures for cost containment and quality control.
State health departments undertake policy-making, budgeting and financial control, plan, set standards of performance, undertake programme and budget reviews, negotiate industrial and personnel matters, undertake major capital works and administer public hospitals. Other state health-related services include mental health services; dental health services; child, adolescent and family health services; women’s health programmes; health promotion; rehabilitation services; home and community care; and the regulation, inspection, licensing and monitoring of premises and personnel.
The state health administrations have been renamed and reorganized many times, as departments or commissions, while some have amalgamated with welfare departments (with human services or family services being popular labels). Each of these health administrations is identified below as well as some distinctive characteristics.
The Australian Capital Territory (ACT) was granted self-government in 1988 and the ACT Department of Health, Housing and Community Care administers these services for the residents of Canberra and its surrounding territory (www.health.act.gov.au).
Territory Health Services administer health services for people across the vast geographic area of the Northern Territory (www.nt.gov.au/nths). Of particular note are Aboriginal health services, remote area services and community care centres. The latter house a range of health and welfare services: primary health care, visiting health professionals, public health programmes such as immunization, and domiciliary and community care services.
The NSW Health Department decentralized delivery in the mid-1980s and currently has nine metropolitan and eight rural health service boards (www.health.nsw.gov.au). ‘Its mission is to enable the people of NSW to have the best health in the world by providing public health services and prevention and promotion programmes, and by licensing private sector agencies’. The department’s strategic health plan for 2000–2005 sets out four key goals: healthier people, fairer access, quality health care and better value. The department has a strong emphasis upon population health and upon allocative efficiency, with health funds distributed partly on a population-based formula to area health boards (Stoelwinder and Viney 2000).
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Queensland Health has decentralized health delivery to 38 health service districts (www.health.qld.gov.au). Its strategic plan emphasises prevention, health promotion and early intervention; evidence-based clinical practice; partnership with all health care providers (including private sector and non- government bodies); and managing the public health risks to Queenslanders. This department has implemented various microeconomic reforms over the last decade.
The South Australian Department of Human Services has amalgamated health and welfare services in one department (www.health.sa.gov.au).The socially inclusive categories on its Healthy SA website include Aboriginal health, babies and children, disability, environmental health, families, gay and lesbian health conditions, healthy living, men, mental health, multicultural health, older people, public health, women, workplace health and youth. During the 1990s, the Liberal government has restructured many public sector health services to undertake more a purchaser role.
The Department of Health and Human Services in Tasmania accounts for nearly 30% of the state government budget and is one of the state’s largest employers (www.dchs.tas.gov.au). Tasmania thus illustrates ‘the significance of the states’ in public administration and also the importance of the health portfolio in state politics and administration.
The Department of Human Services in Victoria was the result of merging health and welfare services into one department in 1996 (www.dhs.vic.gov.au). This state was the most committed during the 1990s to strengthening efficiency incentives for hospitals through casemix funding (Stoelwinder and Viney 2000). This department takes 40% of the state budget and hence has considerable political and fiscal importance. The department has become a purchaser rather than provider of health services over the last decade, and purchasing health care from public hospitals currently takes half the department’s budget. The department is divided into the following divisions: policy, development and planning; resources; acute health; public health; aged, community and mental health; community care; disability services; rural health; youth and family; and the Office of Housing.
The Health Department of Western Australia, one of the state’s largest departments, takes one third of the state budget (www.health.gov.au). The state delivers health services to a sparse but diverse population across huge distances. The friendly rivalry between the States is illustrated by the Western Australian claim that it ‘enjoys the lowest mortality rate of any Australian State’.
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Local government
Local government consists of nearly 700 municipal or shire councils, which vary considerably in geographic and population size as well as revenue capacity. Local government has no independent constitutional status and has been described as ‘a creature of the states’. Local government is characterized as being responsible for the four Rs (roads, rates, rubbish and recreation) and has fewer functions than in the United States federal system or in a unitary system such as Britain. Local governments are responsible for some public health services and for public health surveillance, but not for clinical medical services. They undertake local environmental health activities such as collecting rubbish and monitoring food standards; for example, local government health surveyors undertake surveillance of environmental hygiene and sanitation practices to ensure compliance with state and territory public health laws. Local governments also are involved in disease prevention such as immunization programmes, and support maternal and child health screening centres, and some also undertake health promotion activities. Statutory authorities may be responsible, across several local government areas, for the quality of piped water and for sewage disposal and drainage, for waste disposal, and for regulating air quality. The role of local government varies across the states; for example, Victorian local government is the most active in health and welfare services including community services for older people.
Private sector
The private sector plays a major role in providing and to a lesser extent in funding health services. In the late 1990s, private sector funding accounted for approximately one third of all health expenditure, including private health insurance expenditure (10%) and out-of-pocket payments by individuals (16%) (Australian Institute of Health and Welfare 2001a). The main private sector players in the health care field are outlined below.
Physicians The majority of physicians in Australia are engaged in private practice, which is notable since the medical profession is the core institution of a modern health care system (Scotton 1998). Private general practitioners provide most primary care, and private medical specialists provide most ambulatory secondary health care, while many senior public hospital specialists also run private consulting practices. Private medical practice is regulated through Medicare and through statutory and professional codes of conduct. The extent of regulation and
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monitoring, however, remains a contentious issue. Private physicians are key stakeholders, therefore, and over the years have considerably influenced health care policies.
Private hospitals Private hospitals are significant players in the hospital field. In 1998, 30% of acute care hospitals were private, providing 30% of the bed stock (Australian Institute of Health and Welfare 2000:266). The number of private hospitals grew after the introduction of Medicare in 1984, remained fairly constant in terms of hospitals and beds in the first half of the 1990s, but in the late 1990s, more private hospitals have been built, as discussed later under Hospitals. Private hospitals (317 hospitals with around 50–100 beds) are smaller than public hospitals and generally deal with a more limited range of cases. The growth of larger corporate players has given the private hospital sector greater negotiating power. Ownership now is more concentrated with over two thirds of all private hospital beds owned by four large for-profit chains and the Catholic Church: Mayne Health (over 50 hospitals), Ramsay Health Care, Benchmark, and Healthscope. Most stays in private hospitals are paid with private insurance making the private hospital sector and the private health insurance industry highly interdependent.
Diagnostic services The diagnostic services industry expanded considerably during the 1990s with the expansion of pathology services and diagnostic imaging, and in 1997/1998 had a turnover of more than $1.3 billion. Corporatization increased during the 1990s with mergers between companies (Foley 2000).
Private health insurance Private health insurance is a significant component of the Australian health care system. The proportion of the population covered by health insurance, however, decreased from 50% in 1984 (when Medicare was introduced) to 32% in 1997 (Australian Institute of Health and Welfare 1998b:176). The current Commonwealth policy is to shore up private health insurance membership. As at 30 June 1998 there were 44 registered health benefits organizations of which 28 were open to the public and 16 were restricted membership organizations (Private Health Insurance Administration Council 1998). The largest three funds cover nearly two thirds of the market: Medibank Private (which separated from the Health Insurance Commission in 1997 to become a government business enterprise), Medical Benefits Fund of Australia, and National Mutual Health
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Insurance (Owens 1998). The private health insurance industry is heavily regulated, principally under the regulatory framework set out in the National Health Act 1953 and the Health Insurance Act 1973, and is administered by a statutory authority, the Private Health Insurance Administration Council. A private insurance fund must be a Registered Health Benefit Organisation and their activities are tightly controlled; for example, insurers must accept all applicants and must not discriminate in setting premiums and paying benefits (known as community rating). Private insurance is discussed further under Voluntary private health insurance.
Professional associations, unions and consumer groups
The numerous associations and consumer groups that influence policy-making at federal and state level, are represented on many statutory authorities and policy committees, make submissions to inquiries, are involved in certification of professionals, and in quality assurance through training programmes. The main groups have peak bodies at the national level. Some examples of professional associations include the Royal Australasian College of Surgeons, the Royal Australian College of Medical Administrators and the Royal College of Nursing, while broader professional and advocacy groups include the Public Health Association.
The Australian Medical Association (AMA) is an important actor in the policy process. Membership is voluntary with about 40% of all practising physicians being members at 30 May 2001. The AMA supports fee-for-service payments, patient choice of doctor, and the primacy of the doctor-patient relationship. The resistance to government intrusion into medical practice led the profession to oppose national insurance and subsidized medicines in the 1940s and to oppose universal compulsory health insurance in the 1970s (Sax 1984). Physicians have swung from opponents to supporters of national health insurance, however, and from critics to collaborators in many government health programmes. The government always consults the medical profession on matters that may affect clinical practice and the medical workforce.
Nurse associations are well organized in Australia, the peak body being the Australian Nursing Federation (ANF). Australian nurses buried their Florence Nightingale image in the 1980s when they went on strike to secure a better career structure (Gardner and McCoppin 1989).
Consumer groups are numerous in the health care field, and are active in research, prevention and treatment and in policy advocacy, such as through the Australian Consumers’ Association and Consumers’ Health Forum. Consumers
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groups are most active in relation to chronic illnesses (such as the Stroke, Heart and Diabetes Foundations), HIV/AIDS, and reproductive rights. The consumer movement has changed the terminology used in the health sector, preferring the terms ‘consumer’ or ‘user’ rather than the more passive ‘patient’. The consumer movement has helped bring about significant changes in attitudes on the part of health providers, who now are expected to improve patient/customer relations, conduct patient satisfaction surveys, draw up patient ‘bill of rights’ or charters, and set up informal and formal grievance procedures.
Planning, regulation and management
Governments exert considerable leverage over the health system in that they fund over 70% of total health expenditure. The Commonwealth government is a major funder, (48% of total health expenditure) (Australian Institute of Health and Welfare 2001a), policy-maker, planner and regulator, with many regulatory powers set out in legislation. The Commonwealth is responsible specifically for the safety and quality of drugs and therapeutic goods, and for public and private health insurance, and has implemented a series of national health strategies.
In the pluralist Australian health system, and given the division of powers and responsibilities within the federal system of government, the ability of any one sector to plan and regulate is limited. Most major policies require agreement between the Commonwealth and the States. Over the last few decades, therefore, increasing use has been made of intergovernmental programmes, such as the Australian Health Care Agreements and the National Health Priority Areas. In addition, the Australian Health Ministers’ Conference provides an annual mechanism for agreeing upon collaborative action.
The state and territory health departments all produce regular strategic plans for their health services. State governments administer much of the health care system, particularly public hospitals and public health. They also license private hospitals, although the extent of regulation varies con- siderably, with the more market-oriented governments preferring lighter regulation. The states also are responsible for registering and regulating health professionals (discussed below).
Despite the winding back of regulatory controls in other areas of the economy during the 1990s, the health sector remains heavily regulated. Some of the main planning and regulatory mechanisms are outlined below.
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Commonwealth funding agreements
The Commonwealth funds four key health areas: medical benefits, pharma- ceutical benefits, public hospitals and aged care. The Commonwealth has some influence over private general practitioners and ambulatory care specialists deriving from its payments to physicians under the Medicare Benefits Schedule. This sets out the schedule fee for a range of services for which the Common- wealth will pay medical benefits. The Commonwealth Pharmaceuticals Benefits Scheme gives it considerable power over the pharmaceutical industry and consumer patterns, as discussed under Pharmaceuticals and health care technology assessment. The Australian Health Care Agreements are negotiated every five years, whereby the Commonwealth provides prospective block grants to the States for public hospitals.
Accreditation
Hospital accreditation is offered by the Australian Council on Health Care Standards (www.medeserv.com.au), established as an autonomous body in 1974, which also advises health facilities on quality assurance procedures. Accredi- tation is voluntary, being awarded for 1–5 years depending upon how well the criteria are met. Only about 40% of hospitals are accredited (and 740 organi- zations in total) although this includes most large public hospitals (Australian Institute of Health and Welfare 1998b:210). There are financial incentives to seek accreditation since private insurers pay higher reimbursement rates to ac- credited facilities. Hospitals seeking accreditation must, as well as meeting other criteria, show that they undertake clinical review procedures. As with hospital accreditation in other countries, standards now are set for quality out- comes not just for physical facilities. The states license private hospitals under their legislative arrangements.
Professional accreditation is the responsibility of statutory registration boards in each State. The various pieces of legislation cover general practitioners, medical specialists and most allied health professionals, as discussed under Human resources and training.
Performance measurement and management
The measurement and assessment of health sector performance is carried out by several national bodies, such as the Australian Institute of Health and Welfare, the National Health Performance Committee and the Australian Council on Health Care Standards. In addition, many Commonwealth and state programmes include performance and outcomes indicators, and most government
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departments use programme budgeting systems and performance indicators. Considerable progress has been made in Australia in developing performance indicators but, as in other OECD countries, the measurement of health out- comes remains much more difficult (Hurst and Jee-Hughes 2000).
Most public hospitals (apart from in New South Wales) are self-managed autonomous organizations. Many hospitals have ‘re-engineered’ patient manage- ment and have implemented quality assurance programmes including ‘con- tinuous quality improvement’ (CQI) and ‘total quality management’ (TQM). Considerable effort has gone into efforts to improve the technical efficiency of hospitals, as discussed under Payment of hospitals. Management thus has con- centrated upon micro-economic reforms, with so far less attention to setting standards for clinical practice or outcomes, a controversial area that is closely guarded by clinicians.
Decentralization of the health care system
The health care system in Australia is decentralized and pluralist. The states administer and deliver many health services (principally public health and public hospital services), while local government has only limited health care functions. In the Australian federal system, the states ceded some powers to the national government at Federation in 1901, and the Commonwealth (as already explained) has continued to expand its policy, funding and regulatory roles in the health care field.
State health departments in the 1980s decentralized to regional health administrations, which have been retained in New South Wales, but largely abolished in other states who found these an expensive layer of mini-head offices. Those States covering huge areas with dispersed populations, however, such as Queensland and Western Australia, administer health services through large numbers of district offices.
The management of public hospitals mostly was devolved from state health departments to autonomous hospital boards in the mid-1980s, but arrangements vary between the states and territories. For example, in New South Wales, Area Health Service Boards are responsible for health services across a geographic area that typically includes more than one hospital.
The Australia health care system includes a large private sector. Privati- zation has advanced over the last decade but this covers a range of strategies, ranging from selling public facilities to private providers, to delivering public services in a more ‘business-like’ fashion. The policy thrust in most states has
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been to change the mix of public–private responsibilities by reducing the role of government in service delivery and by increasing reliance on the nongovernment and private sectors. Outsourcing is common whereby non-core services (such as laundering, catering, cleaning and pathology services) are contracted out to the private sector, or in some cases the entire management of publicly funded hospitals. A small number of public hospitals have been sold to private owners (such as some Veterans’ Affairs hospitals). Governments also have promoted private sector competition in health service areas that previously operated as public sector monopolies; an example is the corporatization of the Australian Hearing Services (Australian Department of Health and Aged Care 1999).
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Health care financing and expenditure
Main system of financing and coverage
Australia has a mainly tax-funded health care system financed through general taxation and compulsory tax-based health insurance. In 1999– 2000 71% of total revenue came from public sources, mainly from
taxation (Table 4). The Commonwealth collects the bulk of revenue, being empowered under the constitution to collect income taxes. The states, and to a minor extent local governments, are responsible for the bulk of outlays. The balance between public and private sector sources of funds has changed sub- stantially since 1960 when nearly 50% of health funds came from the private sector. Apart from recent policy initiatives intended to increase the private in- surance share, there is no move to radically change the sources of health sector revenue. The ongoing debate concerns three types of questions: how much money should be raised; how should contributions be shared; and what meth- ods should be used to obtain contributions (Hindle and Perkins 2000).
The universal health insurance system, Medicare, is financed mainly through general taxation. There is a health levy upon individual taxpayers (the Medicare levy), which is equivalent to 1.5% of taxable income above certain income thresholds, or 2.5% for higher income earners with no private health insurance. In recent years, revenue raised by the Medicare levy has been equal to about 20% of total Commonwealth health expenditure and about 8.5% of total national health expenditure (Australian Bureau of Statistics 2000).
From 1 July 2000, Australia implemented a new tax system that abolished many current taxes and replaced them with a 10% goods and services tax (GST). The states and territories now receive all GST revenue to assist them in providing essential services including health care.
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Table 4. Main sources of health finance (%), current prices, 1979–1980 to 1999–2000
Source of finance 1980 1985 1990 1995 1998 2000
Public Taxes (incl. statutory insurance) 60.6 72.0 68.3 66.7 68.9 71.2 Private
Out-of-pocket 17.0 15.5 16.5 18.0 17.0 16.2 Private insurance 18.5 9.5 11.6 11.5 9.8 7.1
Other 3.6 3.0 3.5 3.8 4.3 5.5
Sources: Australian Institute of Health and Welfare 1999 and selected years; Australian Institute of Health and Welfare 2001a. Note: Figures are for recurrent expenditure only, and end of financial year, e.g. 1999–2000.
Health care benefits and rationing
Medical treatment is largely free and its use largely unlimited. Treatment in public hospitals is free to the user, treatment by general practitioners and specialists is free (if the doctor is prepared to bulk-bill), while essential pharmaceuticals are subsidized. Medical service subsidies are limited to those items listed on the Medical Benefits Schedules and pharmaceutical subsidies for items on the Pharmaceutical Benefits Schedule. Pensioners are entitled to substantial concessions or to free treatment. There is no limit upon the amount of medical services that an individual may use. Health care benefits are not rationed and there is little public debate on whether or how to ration services. Public hospital services, however, in effect are prioritized (arguably a form of rationing) through waiting lists.
Medicare Benefits Schedule
Medicare is available to people who reside in Australia, who hold Australian citizenship, have been issued with a permanent visa, or hold New Zealand citizenship. The Commonwealth government has also signed reciprocal health care agreements with other countries (namely, Finland, Italy, Malta, the Netherlands, New Zealand, Sweden, the United Kingdom and the Republic of Ireland). Under these arrangements, residents of these countries have restricted access to health cover while visiting Australia.
The Medical Services Advisory Committee makes recommendations to the Minister of Health as to which new medical services and technologies should be included on the Medicare Benefits Schedule, using an evidence-based approach. The Medicare Benefits Schedule sets out a schedule fee for medical services for which the Commonwealth government will pay medical benefits.
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Items covered by Medicare include consultation fees for doctors and specialists, radiology and pathology tests, eye tests by optometrists, and surgical and therapeutic procedures performed by doctors. The majority of Medicare expenditure is for general practice services, pathology and diagnostic imaging tests, and specialist consultations. Medicare does not cover dental treatment, ambulance services, home nursing, physiotherapy, occupational therapy, speech therapy, chiropractic and podiatry services, treatment by psychologists, visual and hearing aids and prostheses, medical services that are not clinically necessary, or cosmetic surgery. Physicians thus have secured a virtual monopoly over public sector payments for medical services and associated tests.
Medicare offers a rebate of 85% of the schedule fee for out-of-hospital medical services, and a rebate of 75% of the schedule fee for medical services provided to private patients in public or private hospitals. Where a person or family’s gap payments (the difference between the Medicare rebate and the schedule fee) exceed a certain amount in a year, all further benefits in that year are paid up to 100% of the schedule fee. Doctors may choose to charge no more than the schedule fee, in which case Medicare will pay the benefit directly to the doctor (nearly 80% of services are bulk-billed). Doctors are entitled, however, to charge more than the schedule fee, in which case their patients must pay the gap between the schedule fee and the Medicare benefit. Bulk billing is more prevalent for general practitioner services, with most consumers facing out-of-pocket costs for visits to private specialists.
Individuals eligible for Medicare can elect to have free accommodation and medical, nursing and other care as public patients in State-funded hospitals. (Outpatient treatment is free of charge in public hospitals.) Alternatively, they may choose treatment as private patients in public or private hospitals, with some assistance from Medicare. Under Medicare, treatment is free of charge in a public hospital as a public patient by doctors and specialists nominated by the hospital. Treatment as a private patient in a public or private hospital allows a choice of doctor. For private patients in private hospitals, Medicare will meet 75% of the schedule fee for medical services with part or all of the balance being claimable from private health insurers, subject to the doctors having a contract with the insurer. The costs of hospital accommodation are not reimbursable by Medicare when treated as a private patient, but may be claimed through private health insurance.
Pharmaceutical Benefits Scheme
The Pharmaceutical Benefits Scheme (PBS) subsidizes the purchase of pharmaceuticals on its approved list for two groups: general beneficiaries, and concessional beneficiaries (holders of pensioner and other entitlement cards).
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A generic drug is dispensed and consumers must pay more if they want a premium brand. About three quarters of prescriptions dispensed through community pharmacies qualify for PBS benefits (Australian Institute of Health and Welfare 1998b:225). The PBS sets the cost of pharmaceuticals for consumers (indexed to movements in the Cost Price Index). General consumers make a co-payment of the first AUS $21.90 on each prescription, and concessional consumers a co-payment of AUS $3.50 per prescription (as at January 2000). The scheme also includes a patient/family safety net to limit their annual expenses on pharmaceuticals covered under the PBS. After reaching the threshold (currently AUS $669.70 in a calendar year for general consumers, AUS $182 for concessional beneficiaries), general consumers pay for further prescriptions at the concessional co-payment rate, while concession cardholders receive all further prescriptions free.
Health services for indigenous people
Commonwealth and state governments also fund alternative services for indigenous people in order to offer more accessible and responsive services and to empower local communities: thus community-controlled agencies offer primary health care in some areas. Physicians working for indigenous agencies generally bulk-bill Medicare plus the agencies receive money for special programmes. The Commonwealth funds community-based services through the Office for Aboriginal and Torres Strait Islander Health, which in 1998– 1999 provided AUS $141 million for services from 210 primary service sites and 64 secondary sites including outreach services (Australian Institute of Health and Welfare 2000:269). According to an analysis of health expenditure in 1995– 1996, about AUS $2320, per capita, was spent on health services to indigenous people, compared with AUS $2163 for services to non-indigenous people (Deeble et al. 1998). However, this difference in expenditure (8%) is much smaller than the difference in many health status measures (Mooney 1998: 218; Australian Institute of Health and Welfare 2000) .
Cost containment
Cost containment has been a major concern of both Commonwealth and state health policy-makers in recent decades given rising health expenditures (although costs are comparable to other industrialized countries). Expenditure on the health care system has continued to grow in Australia but at a slower rate during the 1990s. Since the late 1980s, many European Union governments have introduced cost containment measures with some success (Mossialos and
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Le Grand 1999). Three of the main areas where cost containment strategies have been applied in Australia are medical and pharmaceutical benefits, hospital casemix funding, and price/volume agreements with providers.
The Pharmaceuticals Benefit Scheme has kept drug prices low by world standards, although the cost of the scheme to government has continued to grow as consumption has increased and since the Commonwealth does not cap total PBS expenditure (Salkeld et al. 1998). Co-payments have been increased progressively as a demand-side cost containment strategy. The co-payment strategy is intended to deter inappropriate use by patients and raise revenue, although the counter argument is that co-payments are relatively ineffective and generally only deter the poor and the sick (Scotton 1998:87). Co-payments also apply to medical services where patients visit doctors who do not bulk bill. Patients make a 15% gap payment to a general practitioner between the schedule fee and the Medicare rebate unless the doctor bulk-bills Medicare, and also pay charges if above the schedule fee. In 1991, the government introduced a AUS $2.50 co-payment for general practitioner services but this was quickly dropped after a public outcry. There are no fiscal incentives for physicians to limit treatments or prescriptions.
With hospital funding, the Commonwealth caps its expenditure for a 5-year period, while the States have sought cost-efficiencies through negotiated prospective budgets and casemix funding. Casemix funding is a key cost containment strategy as discussed under Payment of hospitals.
Price/volume agreements have been reached with pathologists and radiologists. Fee adjustments include a new schedule of fees and remove the right of pathologists to claim Medicare benefits for tests they order themselves. Supplier restrictions were applied by reducing the number of collection centres for pathology. An episode cap was introduced whereby Medicare benefits are paid only for the three most expensive tests ordered per episode. The Common- wealth now has capped total expenditure at an agreed growth rate in three-year agreements with the Royal College of Pathologists and also with the Royal College of Radiologists. These cover an average growth rate of 6% for pathology tests while diagnostic tests are capped at 7% in the first year and 6% and 5% in the following years respectively (Australian Department of Health and Aged Care 1999a).
Private sources of financing
Out-of-pocket payments and private insurance mainly account for about one third of revenue for the health care system (Table 4).
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Out-of-pocket payments
Out-of-pocket payments accounted for 17% of total health expenditure in 1998 and this proportion has ranged between 15–19% over the last two decades. The main consumer payments are for pharmaceuticals not covered under the Pharmaceutical Benefits Scheme, dental treatment, the gap between the Medicare benefit and the schedule fee charged by physicians (up to 25%), payments to other health care professionals and co-payments for pharma- ceuticals.
Voluntary private health insurance
Members of private health insurance funds can insure against the costs of treatment and accommodation as private patients in hospitals, the gap between the Medicare benefit and fees charged for inpatients, and for ancillary services. Legislation, since 1995, ha