Health Care Systems Reform in Insurance vs Tax based System Australia Florence Kwan Janice Yim Nora Kwok Molin Lin Rita Mak

What are the measures and policies adopted ? - Financing - Private Insurance - PBS - Medicare - Workforce

Hospital Funding Model

INITIATIVE Casemix funding

Hospital funding Traditional funding of acute hospital Historical budgets –Hospital budgets may have been approved on an input or ‘line-item’ basis –Renegotiated when the hospital had a major redevelopment or additional services approved.

Hospital funding Negotiated budget –Contract between state and the hospital –Include negotiated goals covering a range of aspects of hospital administration Including broad targets –Specification of the funds in that year

Hospital funding Inefficient and inequitable output based funding system

Hospital funding Casemix funding –Monies are provided on the basis of services actually delivered –Make more informed decisions on the best and most appropriate use of hospital resources –Provides incentive such that hospital can treat additional patients up to the point at which marginal treatment cost equals marginal revenue

Casemix funding National casemix development program introduced as part of Commonwealth: State Health Financing Agreement Aims: –encourage more efficient patient treatment –Recognizes the costs associated with different procedures

Casemix funding The budget for a hospital is based on the number and patients treated in the hospital AN-DRGs: Australian National Diagnostic Related Groups were developed as clinical and resource homogeneous categories for inpatients grouping for payment purposes

Casemix Funding Casemix development program Substantial funding for establishing the first Australian DRG classification year No of group

Casemix Funding Funding of each hospital are based on relative weights (cost weight) estimated using cost modelling approach Cost modelling approach: –Specific prices of each DRG is calculated uses general ledger data and patient activity data

Casemix Funding The Casemix Development Program, funded the development of Australian service weights to be used in calculating DRG relative weights for hospital as state and national level. Annual update by the National Hospital data collection

Casemix Funding Casemix funding –Victoria: –South Australia: –Western Australian and Tasmania Using casemix to inform the budget setting process –New South Wales 2000 –Queensland –Northern Territory –Australian Capital Territory

Casemix Funding Model State: Victoria Hospital Funding = fixed + variable grant

Victoria Casemix funding model Fixed grant: to cover hospital overhead costs Variable: –based on the payment units of the DRG system

Private Health Insurance - Background Coverage : Provides choice of doctor, hospital, timing of procedure Scope of coverage > Medicare eg. Dental, optical, physiotherapy and podiatry Premium : Community rate – everyone the same, regardless of health status, claims history, age

Private Health Insurance - initiatives Lifetime Health Cover : Replaced community rate in 2000.Join the PHI < 30 years of age and stay in PHI : pay a lower premium throughout their lives. People > 30 pay 2% more every year delay. Discourage “hit and run” behavior. Overall claim rate ↓

Private Health Insurance - initiatives 30% rebate : Subsidy of 30% for all PHI fund members by Government in 1999

Private Health Insurance - initiatives Positive effect in a short run : Membership increased from 30.5% to 42.9% of Australian from % increase in PHI fund reserves in 12 months Minimal or no increases in PHI premiums Decrease in overall claim rate

Pharmaceutical Benefits Scheme (PBS) – Background One of the major national subsidy Cover all Australians on the purchase of medicine Nearly 2/3 of prescriptions are subsidized Pay more if want patented / branded drug Two groups of consumers : general & concessional Safety net on annual expenses

Pharmaceutical Benefits Scheme (PBS) - Initiatives 12.5% price reduction for new brands after 1 August 2005 : Generic drug already listed on PBS Price of medicines are linked in generic drugs Reduction flow on to all brands of that medicine Applied to combination medicines on a pro-rata basis Applied to the first new brand after 1 August 2005 only (Once a patent medicine expires, other manufacturers can produce equivalent products)

Pharmaceutical Benefits Scheme (PBS) - Initiatives Increase co-payment : Per prescription in 2000 Per prescription in 2006 General consumers AUD 21.90AUD Concessional consumers AUD 3.50AUD 4.70

Pharmaceutical Benefits Scheme (PBS) - Initiatives Threshold Adjustment : PBS Safety Net Threshold Contribution after reaching Threshold General consumers2000 : AUD : AUD : AUD : AUD 4.70 Concessional consumers 2000 : AUD 182 FREE 2006 : AUD

Pharmaceutical Benefits Scheme (PBS) - Initiatives Positive effect in a short run : Reduce the cost of PBS. Maintain its affordability Decrease contribution from Government Increase contribution from customers

Medicare: Initiatives Universal access to medical services What is Medicare? Social insurance scheme by Government Tax funded 85% of schedule fee for outpatient services

Medicare: Initiatives (Bulk Billing) What is bulk billing? GPs bill Medicare directly, accepting the Medicare rebate as full payment No out of pocket cost to patient No bulk billing----  GPs charge more

Medicare: Initiatives (Bulk Billing) What is so good about bulk billing? No co-payment for patients -> no cost-shifting to patients Minimize govt. administration fee No costs shifting to the state

Medicare: Initiatives (Bulk billing)

Medicare In April, 2003, Fairer Medicare was proposed: introduce a participating practice scheme Concessional patients –GPs bulk bill  increased Medicare rebates –$1 for metropolitan city –$2.95 for non-metropolitan city –$5.3 in rural centre –$6.3 in outer rural and remote area

Medicare Non-concessional patients – if GPs chose not to bulk billing these patients, still able to charge the patient the co-payment and claim Medicare rebate via HIC online –Avoiding the transaction costs

Medicare In November 2003, another policy MedicarePlus was passed: no participating practice scheme Concessional patients –$5 in metropolitan areas –$7.5 in remote, rural and regional areas Children under 16 –Extended the increase rebate to children under 16 Safety net –80% rebate above $300 thresholds

Overall of Healthcare Workforce 798,201 people are employed in health and community services industries (9.7% of total workforce ; 17.1% of total female workforce)

What major problems they are facing ? Shortage of healthcare workforce - Growth of demand for medical services - Ageing workforce (31% of the workforce is aged <35 yrs ; 12% is aged >55 or above) - Changes in participation (as measured by hours worked per week) (~34% of workforce is part-time, with 38.6% working < 35 hours/week)

Initiatives to address workforce shortage Australian Health Workforce Advisory Committee (AHWAC) Australian Medical Workforce Advisory Committee (AMWAC) National Nursing and Nursing Education Taskforce Major Initiatives: Workforce Supply: Adjust the training intake number Maximise the working life of the current health workforce Workforce Flexibility: Avoid Overspecialization -> Substitution Workforce Planning Align education and training supply Australia and New Zealand Health Policy 2005, 2:14

InitiativeDescription Assessing Demand Issue relating to the demand for health services and workforce Extending workforce participation Address to ageing workforce and issues around retirement Reviewing Fast tract to qualification Streamline health education courses -> Fast entry to workforce Focusing Long-Run Health workforce Future challenges and emerging issues Medical Careers Survey Gather information about factors influencing career choice Recruitment and retention An assessment of best practice Substitution Nurse Anesthetists -> Anesthetists 27June2005 (

Rural Health Practice 1996 Census: 17.9 million Australian; ~27% live in regional & rural area & 3% live in remote area Work related injury is common e.g. Mining Forestry Lack of funding and infrastructure Rural Health Services: GP are on call much more GP providing hospital-based services and emergency medicine

Initiatives for Rural Health Services Short-term solution: overseas trained doctors (30.6% of doctors in remote practice) Nurse-led Strategy e.g. nurse anesthestist Promotion of “e-health” (telecommunication) Financial support (scholarships), personal support and mentoring and student clubs, for rural student

Reference and Bibliography Duckett, S.J. (2004) The Australian Health Care System. 2nd edition. South Melbourne, Vic., ; New York : Oxford University Press Duckett, S.J. (1998) ‘Casemix funding for acute hospital inpatient services in Australia.’ MJA. 169:S17-S21 Casemix Funding for Acute Hospital Care in Victoria, Australia in Duckett, S.J (2000) ‘ The development of australian refined diagnosis related groups: The Australian inpatient casemix classification’ CASEMIX, volume 2, no 4: 115 to New challenges, new solution. Australian Consumers Association, July 2002 Health Care System in eight countries, trends and challenges, European Observatory on Health Care System, April 2002