CEDA Health Reform Forum Sydney, NSW 25 August 2009
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25 August 2009
- Jim Longley, Senior Vice President, Commonwealth Bank – MC;
- Paul McClintock, Chairman, Medibank; Chairman, COAG Reform Council – closing remarks;
- Distinguished speakers (Dr Andrew Pesce, Dr Michael Armitage, Prue Power) and guests.
Thank you for having me here today. It is a pleasure to be a part of today’s Health Reform Forum and to be on the list with such a distinguished line up of speakers. This really is the A-List of health experts – in fact, with such an A-list I was sort of surprised that there was no red carpet for us all to sashay in on!
More seriously, this is a very opportune time to host a forum, knock some intelligent heads together and further the health reform discussion.
We are at one of the rare times in public policy debate where the planets are aligned, where a clear and urgent need for policy reform is backed by a government with the will and mandate to implement serious, inter-generational reform. In other words, it is an exciting time to be Health Minister.
As everyone in the room is aware – and if you aren’t I hope you have a good excuse! – nearly a month ago the Prime Minister and I released the final report of the National Health and Hospitals Reform Commission.
We asked for a comprehensive root and branch review of the health system from Dr Bennett and her team of experts, and we got it.
We now have a blueprint for reform which presents us with the opportunity for the biggest reforms to health since the introduction of Medicare several decades ago.
The report is clear – while the health system has many strengths and still delivers excellent outcomes for patients, it is struggling after a decade of neglect and with changing demographics and burgeoning chronic disease.
Demand and costs are spiralling; there are gaps in services and inequities in outcomes; parts of the system are overly complex and inefficient.
The Report warns that our health system is nearing a ‘tipping point’.
At some of our consultations clinicians and others have commended the Government for its “courageous” consideration of what is needed to fix the system. As the PM has joked, any fan of the “Yes Minister” series would never describe an idea they actually liked as courageous to a Minister!
But the truth here is unavoidable – and the Commission has made clear that the time for business as usual is over. The time to act is now.
The report provides a blueprint for reform – which the Government is now considering and seeking feedback on from people across Australia.
I know you will all be well briefed by now on the issues raised in the Commission’s Report - if you weren’t before today you will be by the end with no less than two of the Commissioners themselves, including the Commission Chair, Dr Bennett, presenting to you.
Therefore, I’d like to focus my speech today on how the Commission’s report fits in the Government’s reform agenda that is already rolling through the health sector, and the choices which lie ahead for implementing reform.
The key directions of the Commission’s report build on and extend many areas of the Government’s health reform agenda so far, in areas like primary care, prevention, better performance and accountability and addressing gaps and inequities. This is no accident. The Commission provided interim advice to us prior to the finalisation of the COAG agreement in November last year. This enabled the Government to not only delver a 50 per cent increase in funding on the previous agreement, but also to use the money to strategically drive reform across workforce, indigenous health, prevention, subacute care and pressure points in our hospitals like emergency departments and sub acute care.
One of the clearest themes from the commission’s report is the emphatic identification of primary care as key to fixing our health system. Pick a page in the report at random, and chances are primary care features prominently.
Primary care needs to be the frontline of the health system. At present, too many roads system lead to the hospital and the emergency department. The pressures this is placing on our hospitals are plain for all to see. A reshaped primary care sector means we can manage and treat patients in the community, closer to home and out of the hospital. As our population ages and our chronic disease burden grows, it is critical we reform the health system to meet the needs of the patient.
The statistics reveal approximately 115 million GP consults every year compared to 7 million hospital presentations – so there is an overwhelming key role for GPs in our system that cannot be left unnoticed. But the media, political and policy debate has often in the past seemed to overlook this. Than can be said no longer – not of our Government, and certainly not of the Commission’s report.
The Commission recommends a more integrated, coordinated approach to primary care. It proposes that the Commonwealth take total funding and policy responsibility for this area, as well as all outpatient services, support a multidisciplinary approach, and invest in infrastructure. Another innovative proposal is to begin voluntary enrolment of patient groups with a single primary care provider – to allow for more long-term management of conditions.
Like our strategic COAG investments, the Rudd Government has also made significant downpayments in this area - investing $275 million to establish 34 GP Superclinics around the country – of which three new Super Clinics were announced in Victoria announced just a week and a half ago.
The Commission’s recommendations take this idea even further – particularly when you factor in their sweeping recommendation in mental health care and advice to takeover outpatient services.
The Commission emphasised the importance of more flexible use of the health workforce, particularly in primary care, so that we use the skills of our scarce health workforce more effectively.
Consistent with this approach, just last week the Government introduced into Parliament legislation that would expand access to Medicare and the Pharmaceutical Benefits Scheme to appropriately qualified Nurse Practitioners and Midwives for the first time. Despite widespread support, to date, the Liberal party has refused to support this sensible change in the expanded utilisation of our workforce.
And on prevention, the Commission rightly identifies it as one of the neglected areas of health system – with less than two percent of health expenditure being spent on preventative health.
This fact demonstrates starkly how out of balance our system is at the moment. We spend 70 cents of one dollar on treating people when they get sick, and only 2 cents on keeping people fit and well so they don’t get sick and end up in hospital. We all know prevention is better – and cheaper – than cure, but not nearly enough has been done in the past to turn the rhetoric into reality. The Commission sets targets and calls on broader community and industry involvement for change to lead healthier lifestyles.
We are already currently rolling out a record $872 million to a National Prevention Partnership agreed with states and territories in November 2008. This is the single largest investment ever made by an Australian Government in prevention.
Under the Partnership, the Commonwealth will invest in preventative health activities, including:
- increased access to services for children to increase physical activity and improved nutrition;
- healthy workers and communities programs; and
- national campaign to increase public awareness of the risks associated with unhealthy lifestyles and their links to chronic disease.
Performance and accountability
A strong thread running through the whole of the Commission’s report is an emphasis on the importance of improving performance and accountability throughout the health system.
This is reflected equally strongly in the new National Healthcare Agreements, which as I mentioned earlier, deliver $64 billion in funding to health and hospitals – an increase of 50 per cent over the previous Agreements.
As much as that funding was needed after the neglect of the Howard Government particularly of public hospitals, the Agreements are also crucially about improving health systems. It is not a blank cheque to the states – we expect real improvements in health outcomes for our increased investment – and are holding the states accountable.
As part of the Agreements, all Governments are required to report on a comprehensive set of performance indicators. This reporting will cover the breadth of the health system, including key problem areas in hospitals like avoidable deaths and infection rates; timely access to primary care services; and the life expectancy gap between Indigenous and non-Indigenous Australians.
Activity based funding is being developed – an idea the Commission takes much further even more ardently as a mechanism for delivering change effectively. The Commission’s quality, research and reporting recommendations also set out further options in this area.
The Commission has also highlighted the need to address gaps and inequities in the health system – both where groups of the community are missing out (like Indigenous Australians or rural communities) and where the system is short. Significant investments have been made in indigenous and rural health – but other gaps like early childhood and palliative care have also been identified.
The choices ahead
I have resisted giving you a full recitation of our virtues – instead I hope this quick overview of the steps the Rudd Government has made to reform the health system to date underscores the level of change already underway.
But clearly the job is not over yet. We have made many early investments and reforms, but the Commission’s report outlines a far wider roadmap ahead.
The reform directions proposed by the Commission are exciting and far reaching – but, taken as a whole, health reform does not come cheap.
The Commission estimates its recommendations could cost more than $5 billion per annum, plus $4 billion a year for a national dental scheme, and system wide capital costs of up to $7 billion. Others have already indicated these costs may be rather low estimates.
Such costs are particularly challenging at a time when we are faced with the deepest global downturn since the Great Depression. As a result of the downturn, there has been reduction in Government revenue over the forward estimates of more than $200 billion. And the long term outlook presents further challenges. Health care costs are expected to rise rapidly. With no policy change, the health and aged care costs are projected to rise from $84 billion in 2003 to a massive $246 billion in 2033. This is equivalent to an increase from around nine per cent of GDP now, to 12.4 per cent of GDP a little over two decades from now.
Given these circumstances, this means that any health reforms we want to implement will need to be balanced by the means to fund them.
We will need to make tough choices about what our priorities are for health reform, and what we will do to fund these reforms.
If we are to reform our health system so that it can meet our needs for the future, we have to target our scarce dollars so that they are used most effectively. We cannot afford to continue to fund waste or duplication.
That’s why, for example, in the last Budget, we introduced measures like better targeting the private health insurance rebate, a policy currently before the Senate. The reason for this change is simple. Spending on the Rebate was projected to double as a proportion of health expenditure by 2046-47. That is clearly unsustainable.
The changes to the rebate will provide a fairer distribution of benefits – with the largest benefits provided to those on the lowest incomes. At the same time, it will have a minimal impact on participation with 99.7 per cent of people projected to maintain their cover.
And we‘ve targeted professionals where there is evidence of overcharging – for example in obstetrics, IVF and ophthalmology.
But in the whole scheme of health reform, these changes that provide savings are relatively minor – yet they are being met with vehement opposition.
We can’t afford to allow this opposition to derail needed change. Think, for example, that the private health changes alone save enough to fund the Commission’s proposed e-health investments – something there is furious agreement is needed. The community and health sector will come to understand that some needed new investments simply will not occur if sensible modest changes are not supported.
If we are to embark on a next stage of health reform – to improve the health system for all of us – we will need to find further savings and efficiencies to fund our priorities. I am sorry to say, but the Health Minister does not get given a special access code to the Treasury after being sworn in. Everything we do has to be sustainable, affordable, and provide maximum benefit to the greatest number of people. We have to be smarter in how we allocate scarce health dollars.
Of course, some efficiencies will come from reforming the health system itself. For example, if we get better at preventing disease, or if we improve the management of diabetes in primary care, this will help reduce pressures and costs for hospitals.
For another example, last week I helped launch a Surgical Checklist with the Royal Australasian College of Surgeons, which can reduce the death rate after surgery. Simple, relatively inexpensive, backed by experts, saving lives, and dollars.
In total, the Commission estimates that reform could help save around $4 billion a year in health costs by 2032 33 and, vitally, they estimate their reforms will free up 2,900 beds or the equivalent of more than 1 million bed days.
But mostly these balance sheets present a current dilemma: A better performing, reformed health system may be more efficient and effective in the future. But the investments required now to get there will require us to make savings and efficiencies at the outset.
This is why we need to have a national conversation on what our priorities are for reforming the health system. We need to identify what are the choices we are prepared to make and what are trade offs we are prepared to accept. And we should be under no illusions that some of these choices will involve hard decisions.
We need to have this conversation at a number of levels: as a community and as patients and consumers; among clinicians; and across health sector organisations, private and public.
Here are some of the choices we might consider.
The Commission recommends the establishment of a national dental health scheme. This would help address one of the big missing links in the health system, that has resulted in deeply uneven, and often shockingly poor, dental health across the country. The Prime Minister refers to dental health as one of the new indicators of social inequality in this country, and he’s right. The Commission estimate the cost of this would be around $4 billion a year.
They also propose expanding a range of youth-targeted, prevention oriented mental health services, so that we can better and earlier meet the needs of the two thirds of people with mental health conditions who currently go untreated. In total, these mental health recommendations cost more than $300 million a year.
Many of us would like to have better dental or mental health services. In fact, I think the community is in pretty strong agreement about the level of need, if not necessarily the particular solutions. But as a community are we prepared to make the trade offs to fix this?
Would we be prepared to accept an increase in the Medicare levy as proposed by the Commission?
Would we be prepared to pay increased patient contributions for services?
What about the proposals around Medicare Select – would we be prepared to accept competing insurers covering all of our health entitlements?
Here is another choice.
Cancer drugs have had many great benefits in saving or extending people’s lives. But they can be very expensive – individual drugs can cost more than $50,000 a patient, or hundreds of millions of dollars in total. We currently spend $8.2 billion a year on the PBS.
And, beneficial though they can be, they aren’t cure alls. Some of them, sadly, can only forestall the progression of disease for relatively brief periods. That relief in the last months of life should not be underestimated. Others, the clinical evidence shows, are only effective and cost effective in the early stages of disease, and become less effective as cancer progresses. Yet many are available, and used, beyond this evidence.
Would the community support looking at mechanisms to better control the use of these medicines, so that they are only used when the evidence shows they are truly effective – balanced by greater investment in palliative care, so we can better meet the needs and preferences of patients at the end of life?
These are highly charged and sensitive discussions – where no government or health minister treads without care and some level of trepidation. But you don’t have to be health minister for long to know that there are worthy causes in this portfolio – the choice is which are the most worthy and most effective?
In boom times, such as the previous Government experienced, these choices are hidden. But they become very real when times are tight and projections of cost growth are so dire – let alone when your vision for lasting and beneficial reform are so extensive!
As well as the choices and trade offs we will need to discuss as a community, there will be some issues that clinicians will need to take the lead on.
In Australia we have so far avoided the possibility of a managed care approach to health. Within the bounds of the Medicare Benefits Schedule for services, the Pharmaceutical Benefits Scheme for medicines, and the Prostheses List for products such as stents or joint replacements, clinicians are broadly free to choose whichever approach they consider most clinically appropriate for their patients, with little consideration of cost.
But with freedom comes responsibility – the responsibility to be mindful of what the clinical evidence shows is effective and cost effective. In some areas, though, current practice falls well short of what the evidence shows is most appropriate.
For example, the Prostheses List includes about 360 hip femoral stems, which private health insurers must subsidise. These range in price from $1,850 to $7,176. But the evidence shows that the reliability of these joints varies widely: the most reliable femoral stem costs only $2,100, while some much more expensive joints have revision rates up to 21 times higher.
Despite this, 99 per cent of patients are provided femoral stems which the National Joint Replacement Registry indicates have higher revision rates and are often more expensive than the most reliable one. While some of these patients may have a specific clinical requirement for these joints, many may not.
Another example: most patients with high cholesterol can be successfully managed with commonly available generic statins, which cost the PBS about $30 to $40 for a typical pack. Only some patients require more expensive medicines which cost up to $80 for a typical pack. In practice, though, about three quarters of prescriptions are for the more expensive medicines, and only a quarter are for the cheaper generic.
Given these examples, the question for our clinicians is how they can exercise clinical leadership so that actual practice is more consistent with best practice? We cannot continue to see this only through the prism of a single patient – but through the prism of ensuring we have the resources for all patients, which means non health dollar can afford to be wasted.
Rest assured, the Rudd Government certainly does not want to intervene in clinical decision making inappropriately. We need the professions to exercise leadership so that clinical practice is based on what is most effective and cost effective. Patients need this so that they can be assured they are receiving the most appropriate care. And as a community, we need to manage our scarce health resources more effectively, if we are to be able to fund reforms to improve our health system for the future. This should include also looking at PBS and MBS funded procedures and medicines to make sure they maintain clinical effectiveness and value for the taxpayer.
As I said earlier, some of the choices we will need to make if we are to improve the health system will be difficult.
If we are to invest in better, more coordinated services, with fewer gaps and inequities, we will all need to consider what we are prepared to pay for this, and how our existing funding can be better targeted.
We need a mature, national conversation on what trade offs, what balance we are prepared to accept.
To kick off this national conversation, the Prime Minister and I have embarked on a round of consultations across the country, to get the first hand the views of people working in the health system. My ministerial colleagues – Justine Elliot, Warren Snowdon and Mark Butler – will also be helping to lead the consultations around the nation.
The consultations we are holding across Australia will be unprecedented as a dialogue between an Australian Government and the people about a single issue.
They will allow doctors, nurses, allied health professionals, families and individuals to talk to us about what priorities they have for the health system and how it might be funded.
We have established a website – www.yourhealth.gov.au – for all Australians to have their say on health reform.
And forums like today’s provide a further opportunity to discuss ideas and opportunities, choices and trade offs. I look forward to a vigorous discussion on these issues in the session which follows my speech.
These consultations will help inform the Australian Government’s approach to health reform.
Toward the end of the year, there will then be a special meeting of the Council of Australian Governments on health and hospitals reform to present the results of the feedback and consider the Commission’s Report. In early 2010, we will present the Commonwealth’s plan for comprehensive reform to the states and territories.
If the states and territories do not sign up to our plan, we will go to the people. Of course, we want to do this in a co-operative way. We’ve been able to achieve a lot already by working with our colleagues in the states and territories. But if they are not prepared to join us on this next step, we will seek a mandate from the people to push ahead with the reforms we need, which may include takeover scenarios. We will not shirk from making tough decisions if they are in the best interest of our health system and if they will improve patient care.
As I said, we are at a rare moment in public policy debate – it is no doubt an exciting time for health in this country. Health impacts on every single member of our community – so we are all stakeholders.
If we get this round of reform right, we can set up the health system to meet the health needs of our children and their children. That is why we are so determined to seize this opportunity and get it right.
And it’s why I hope for energetic and vigorous contributions from all of you here following my speech.
But we will need to discuss, debate and agree on our choices and priorities if we are to make the system better for the long term.
I invite you all to join the conversation.
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