With the UK healthcare system under constant scrutiny, Mike Williams asks if there is anything to learn from the Australian model
The UK health system continues to generate headlines and while much attention is focused on the NHS, some is also focused on public-private interaction and the degree to which it is acceptable or desirable.
Meanwhile, private medical insurance (PMI) continues to make slow progress.
But how do other countries fare? Australia has a 43% penetration of PMI and a government that not only acknowledges the private sector, but actively encourages it, so what can the UK learn? Firstly, there is the system.
Since 1984, the Australian federal government has operated a 'Medicare' system, which constitutes the major part of the national health care system.
Medicare is designed to be affordable and accessible to all Australians, often providing free health care at the point of delivery.
The Medicare system provides subsidies for prescribed medicines and free or subsidised treatment by doctors, dentists and participating optometrists, albeit with restrictions.
For instance, dental examinations and treatment are usually not covered.
All people eligible for Medicare (Australian citizens, New Zealand citizens living in Australia and permanent visa holders) are entitled to a choice of free accommodation and care in State/Territory owned or contracted hospitals, or treatment as a private patient in a public or private hospital with some government assistance.
Medicare uses a schedule of fees to calculate benefit entitlement.
Although Medicare patients in public hospitals will generally have all their costs covered, private patients will only have 75% of the Medicare Benefits Schedule fee covered and out-of-hospital medical services, such as visits to a doctor, are paid at a minimum of 85% of the schedule for all.
Escalating costs Where the doctor accepts Medicare payments as full reimbursement for service, bulk billing (direct settlement) straight to Medicare is used.
If this is not the case, the patient must pay and reclaim the appropriate allowance.
Medicare is funded largely from general taxation, which includes a levy at a basic rate of 1.
5% of taxable income above certain thresholds.
In some respects, the introduction of Medicare in 1984 was a great success.
The public welcomed the initiative and now strongly supports the system.
As a result, private health insurance, which in 1983 had a penetration of over 60%, went into steady decline, falling to around 30% by late 1998 - a drop of some 3.
8 million people over 15 years.
The consequence was greater reliance on Medicare and escalating costs to the government.
Following the election of a Liberal coalition in 1996, measures were introduced the following year to arrest the decline in private insurance.
An additional 1% of income levy was placed on high earners who did not hold private insurance and a subsidy made available to lower income families.
However, the measures led to an increase in membership for only one quarter before the decline resumed, albeit at a slower pace.
The step change came in January 1999 with the introduction of a 30% rebate on premiums, followed in the same year by Lifetime Health Cover.
While the former laid the foundations, it is probably the latter measure that forced the pace, growing the insured population by 50% in just two years.
To understand the impact of Lifetime Health Cover, it is necessary to explain how the Australian health insurance system differs significantly from the UK, but has much in common with other countries such as South Africa and Ireland.
Health insurance in Australia is community rated.
This means everyone is charged the same premium regardless of age, sex or health status (current or anticipated).
In theory, therefore, the young subsidise the old and the healthy subsidise the sick.
In practice, people could hold off joining until sickness was more likely and then join at the same rate as others who had been contributing for years.
Further, once treatment had been received, they could leave only to rejoin again when further need was anticipated.
Lifetime Health Cover mitigates the risk of selection by setting 30 as the 'base age'.
Anyone joining after 30 pays a permanent loading of 2% for each year over that age.
The loading peaks at age 65.
The scheme was announced in 1999, but an amnesty allowed Australians over 30 to enrol without the loading until July 2000.
The resulting rush pushed penetration over the 40% mark.
In order to maintain community rating, a system of 'reinsurance' operates, which redistributes the high cost of treatment incurred by the elderly and long-term hospitalised across all private health insurance funds.
This ensures that those funds with a higher proportion of costly members are not disadvantaged and that there is little incentive for funds to 'cherry pick' healthier members.
The most recent change to Australia's private health insurance system came in April this year with the introduction of enhanced premium rebates for the elderly.
The basic level of 30% is increased to 35% for those aged 65- 69 and 40% for those of 70 and over.
The aim is to keep private healthcare affordable for the one million plus Australians in this age group.
So does this all add up to a better system overall? On the face of it, the system appears attractive.
The public and private sectors co-exist and complement each other, with just over half of all surgery performed in private hospitals.
Of course the cost of premiums are significantly subsidised, but supporters are quick to point out that those covered pay for private insurance on top of their Medicare supporting taxes.
Pressures But it's no bed of roses.
In common with the rest of the developed world, there are pressures on healthcare delivery and funding.
Australia's 20 million inhabitants are supported by a health system which has nine departments of health, consumes 9.
5% of GDP and employs over 6,000 people.
Two recent reports by the Commonwealth Fund sought to compare facets of the healthcare systems in Australia, Canada, New Zealand, the UK and the US.
The first, a consumer based survey, asked whether a complete rebuild of the system was necessary.
With 23% supporting this option, only the US was seen as having greater need, while the UK came in 10 points better at 13%.
When asked if only minor change was required, Australia fared better with 21% supporting this route, level with Canada and better than the US or New Zealand.
The UK, however, scored the best at 26%.
A second survey among hospital executives in the same five countries found that while patients in Australia were less likely to wait six months or more for elective surgery than those in the UK, Canada or New Zealand, the overall satisfaction with the system in Australia was marginally lower than these other countries.
There is a drive for reform, with the Australian Healthcare Reform Alliance - a group composed of 40 consumer and health professional organisations - believing it knows what consumers want.
The group is calling for action on health workforce shortages, preventive healthcare, electronic health records, state and commonwealth integration of primary care services and public consultation over the type of health system Australian people want.
The Government, however, does not seem supportive and chose instead to focus June's meeting of the Council of Australian Governments (COAG) on four areas: the elderly who remain in hospital due to lack of care home places; young people in nursing homes; the disabled and a national telephone triage service.
Combining the two agendas gives a feel for the issues faced in Australia, many of which do seem familiar to us in the UK.
On the insurance side, the pressure for premium increases arising from general measures of medical cost inflation are compounded by an ageing population (those aged 60+ accounted for 16% of the population in 2000, but are projected to rise to 25% by 2025 and 30% by 2050).
This effect is evident in insured statistics, with the 60 years and over membership growing by 12% between 2001 and 2004, while those under 60 fell by 3%, resulting in the older age group accounting for 2% more of the insured population overall by December 2004.
Older people represent a higher cost for insurers, but in a community rated environment, costs increase for all insured.
With the enhanced premium rebates, older members gain some respite, but as in other countries, all members are seeing premiums rise faster than general measures of inflation (7.
96% in2005 against a consumer price index of 2.6% for the previous year).
This may explain the fact that penetration is showing a slow decline from its recent peak in 2001.
Are there lessons here for the UK? Health systems do vary considerably around the world.
The insurance mechanism itself is fundamentally different from the UK in terms of community rating and associated features, these help to encourage take up and, crucially, retention into old age.
Australia has demonstrated how a step change can be achieved by a government prepared to take decisive action and recognise the potentially complementary roles of public and private sectors, but it also shows that there is no easy escape from the cost and resource pressures facing healthcare systems around the world, including the UK.
Mike Williams is a senior consultant at Watson Wyatt's Insurance & Financial Services
COVER notes
• 43% of the Australian population have medical insurance.
• Health insurance in Australia is community rated which means everyone is charged the same regardless of age, sex or health.
