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

2. Initiatives Initiative that was introduced to meet challenges –Health care Expenditure: Case-mix funding –Health care Expenditure: PBS –Viability of PHI: Life time health cover, 30% tax rebate –Strengthening the Medicare: Medicare plus –Workforce shortage: workforce policy

3. Casemix funding Evaluation

4. Casemix funding Public hospital funding model based on the level and composition of output Aiming at providing explicit incentives for hospitals to improve efficiency Rationalize health care expenditure

5. Casemix funding Greater focus on cost and benchmarking Increased output to address waiting time concerns Increase shift of resources to efficient hospitals from those less efficient

6. Casemix funding: Evaluation Efficiency –Reduced length of stay Output –Increased number of patients treated –Decreased waiting time Quality –No change in the readmission rate

7. Casemix funding: Evaluation Northern Territory Casemix funding implemented in 1996/97 fiscal year

8. Casemix funding: Evaluation Efficiency –Length of stay is reduced through better scheduling of tests, discharge planning and review of need for hospitalization Fiscal year1993-941994-951995-961996-97 ALOS (days)4.354.284.103.73

9. Casemix funding: Evaluation Output –Weighted separation The sum of no of separations x cost weights for AN-DRGs –number of bed days Product of average length of stay and number of separation

10. Weighted separations

11. No of bed-days

12. Casemix funding: Evaluation casemix funding has a substantial impact in lifting total casemix-weighted separations Decreased the total number of bed-days

13. Casemix funding: Evaluation Quality Reduced quality = premature discharge lead to higher readmission rate No impact on readmission rates

14. Readmission rates

15. Casemix funding: Evaluation Victoria 1992/93 vs 1993/94 (before and after introduction of casemix funding) –No of patients increased 5% –Total expenditure decreased 5% –Number of casemix weighted separations increased by 4.4%

16. Casemix funding: Evaluation Challenges –Supply-side moral hazard Supplier induced demand Clinical diagnosis and procedures

17. Casemix funding: Evaluation Conclusion Casemix funding reduce inefficiencies among hospitals and seek maximum returns for the health dollar

18. Private Health Insurance Initiatives in 2000 : Lifetime Health Cover : Replace the community rate. Join the PHI < 30 years of age and stay in PHI, pay a lower premium throughout their lives 30% Rebate : Subsidy of 30% for all PHI fund members by Government in 1999

19. Private Health Insurance – initiatives- Evaluation Membership increased from 30.5% to 42.9% of Australian from 1998-2004 27% increase in PHI fund reserves in 12 months Minimal or no increases in PHI premiums Decrease in overall claim rate What about the long term effect ?

20. PHI membership

21. Private Health Insurance – initiatives- Evaluation What about the long term effect ? Membership aging increases the overall claim rate – highly affected by the birth rate and the aging population. Is the Low premium rate sustainable ?

22. Private Health Insurance – initiatives- Evaluation Is 30% rebate a huge cost to Government ? Government fund in total health expenditure: 68.8% in 2001-2002 69.9% in 1990-2000

23. Private Health Insurance – initiatives- Evaluation These initiatives support the shift of Public service to Private service No. of Hospitals 97-9898-9999-0000-0101-02 Public760749748749746 Private492 502509537

24. Private Health Insurance – initiatives- Evaluation These initiatives support the shift of Public service to Private service : Beds per 1,000 population 97-9898-9999-0000-0101-02 Public32.92.82.72.6 Private1.3 1.4

25. Private Health Insurance – initiatives- Evaluation These initiatives support the shift of Public service to Private service : Spending on hospital services / total expenditure 97-9898-9999-0000-0101-02 Public Hospital 29.7%29.6%28.5%27.5%27.4% Private Hospital 8.1%8.2%8%7.8%8%

26. Private Health Insurance – initiatives- Evaluation Total funding for health service through PHI: ( in million ) 98-9999-0000-0101-02 Total Benefits paid by members’net premium & Government rebate 4,8435,1866,1917,036 Government Rebate 30% --2,0302,110 Net Benefits paid4,8435,1864,1614,926

27. Private Health Insurance – initiatives- Evaluation → → Private Service → → Choices of Service → → Appropriate level of Care

28. 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

29. Evaluation PBS has been successful in suppressing drug prices. –Compare with the OECD countries Leakage ( prescribing outside PBS condition )

30. Price Ratio compare with OECD countries

31. 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)

32. Evaluation Newly implemented, no actual figure !! Presumption from Australian Consumers Association : If competition was allowed to function, it could be expected to reduce prices by 20% - 60% Proposes tendering for generics.

33. Pharmaceutical Benefits Scheme (PBS) - Initiatives Increase co-payment : Per prescription in 2000 Per prescription in 2006 General consumers AUD 21.90AUD 29.50 Concessional consumers AUD 3.50AUD 4.70

34. Pharmaceutical Benefits Scheme (PBS) - Initiatives Threshold Adjustment : PBS Safety Net Threshold Contribution after reaching Threshold General consumers 2000 : AUD 669.702000 : AUD 3.50 2006 : AUD 960.102006 : AUD 4.70 Concessional consumers 2000 : AUD 182 FREE 2006 : AUD 253.80

35. 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

36. Pharmaceutical Benefits Scheme (PBS) – Increase co-payment - Evaluation Intended to deter inappropriate use by patients and raise revenue. No effect on the those receiving sickness allowance, older long term allowee Pharmaceutical Allowance (PA) will be granted : $150 per year

37. Pharmaceutical Benefits Scheme (PBS) – Increase co-payment - Evaluation Will fail to greatly increase the patient copayment because 80% of PBS expenditure is on concession consumers. The copayment for the remaining 20% would soon become astronomical and would tend to drive people away from necessary medical care. It would not have changed the total cost of the PBS.

38. Pharmaceutical Benefits Scheme (PBS) – initiatives - Evaluation Average growth of expenditures on pharmaceuticals is 13.9% from 99/00-00/01 Reasons suggested for growth : Increasingly expensive new drugs being listed. Over-prescribing and leakage Consumer expectations Ageing of the population Aggressive marketing by the Pharmaceutical Industry

39. Pharmaceutical Benefits Scheme (PBS) – initiatives - Evaluation Initiatives address the situation ? Increasingly expensive new drugs being listed (-ve ) Over-prescribing and leakage (- ve ) Consumer expectations (-ve ) Ageing of the population (-ve) Aggressive marketing by the Pharmaceutical Industry (-ve)

40. Evaluation Economic efficiency (cheapness ) Allocative efficiency ( allocate resources where they are most needed ) Dynamic efficiency ( flexibility to respond to changing circumstances.

41. MedicarePlus Evaluation

42. MedicarePlus: Background Information Initiators –Commonwealth Department of the Health and Ageing (federal government) Funding –Commonwealth Government of Australia Beginning, expected end and duration: –Announced on 18/11/2003 –Began from 2/2004 –Duration: 4-year package, intended to run indefinitely

43. MedicarePlus: Background Information Problems driving the reform –Decrease in availability Primarily an issue for regional and rural areas –Decrease in bulk billing rate Decline from ~72% in 2000 to ~68% in 2003 –Increase in cost to the user

44. MedicarePlus Initiatives Bulk Billing incentive increases by 50% for regional, rural and remote Australia – and all of Tasmania –increase in bulk billing rate, and on the other hand, increase availability in RRMA A more generous safety net will cover all other individuals (threshold:$700) and families (threshold: $1000) –decrease cost from user Steps taken to increase the supply of doctors, and encourage those overseas trained to work in areas of shortage (regional and rural areas) –Increase in availability of doctors in rural areas

45. MedicarePlus Evaluation Bulk billing rate increase in 2004-2005

46. Percentage of Services Bulk Billed, Australia (Medicare Statistics, 2005)

47. MedicarePlus Evaluation Bulk billing rate increase in rural and remote areas in 2004-05

48. Percentage of Services Bulk Billed by State or Territory (Medicare statistics, 2005) Bulk Billed Change in% Points State or TerritoryDecember Quarter, 2005December Qtr 2005 on Dec Qtr 2004 NSW74.90%0.6 VIC69.10%2 QLD69.90%1.7 SA69.70%2.4 WA67.90%0.9 TAS64.40%1.5 NT74.40%0.8 ACT56.10%1.2 Australia Total71%1.3 Australian Government Department of Health and Ageing, February 2006

49. MedicarePlus Evaluation Number of GPs from overseas increase in 2004-2005

50. GPs by place of basic qualification, 2003-04 to 2004-05 AustraliaOverseasGrand Total GPs 2003-200411486538516872 2004-200511661561217273 % change on previous year 2003-2004-0.80%3.60%0.60% 2004-20051.50%4.20%2.40% Australian Government Department of Health and Ageing, February 2006

51. MedicarePlus Evaluation Increase in availability in RRMA

52. GPs by place of basic qualification and broad RRMA, 2003-04 to 2004-05 YearUrban Rural & Remote Australi a Overse as Australia Oversea s GPs 2003- 200 4 8758385027281535 2004- 200 5 8836402028251592 % change on previous year 2003- 200 4 -1.10%1.40%0.40%9.60% 2004- 200 5 0.90%4.40%3.50%3.70% Australian Government Department of Health and Ageing, February 2006

53. MedicarePlus Conclusion Major conditions for success –Bulk billing rate increase –Qualified health care professionals come from overseas to work in regional and rural Australia –Increase in the availability of doctors in regional and rural areas –Safety net is a key structural improvement to Medicare, but still too fast to have statistics to prove it’s result. But since 1/2004, more than 33,000 individuals and families were benefit from this plan

54. Health Workforce - Evaluation

55. Increase in numbers of health workers between 1996 to 2001 Australia’s Health Workforce Productivity Commission Position Paper

56. University intake (1996 – 2004) Medical school commencements of Australain citizens and permanent residents increased by 78% (or more than 700 places) between 1996 – 2004 (AMWAC 2004) Number of specialists training increased by around 700 between 2000 and 2003 (rise in 14%) (AIHW 2005a) Nursing School commencements in 2004 were around 8,800 (10% higher than in 2003)

57. University Intake (2005) Significant boost to university places in 2005 Nursing: 1,494 Allied Health & Health Science: 1,237 Pharmacy: 227 Dentistry: 78 Medical School: increase 246 in 2005 But can’t be seen in the workforce until 2008

58. Immigration on Overseas Trained Doctors (OTDs) In the mid 1990s, No restriction on the no. entering AUS permanently and no control on where they practice. -> OTDs: Maldistribution of workforce Recommended that the number of OTDs entering AUS permanently be limited to 200 per 100,000 population (MWDRC, 1992)

59. To reduce entry of OTDs for permanent stay: Use Skilled migration categories, the points awarded to doctors were reduced Medical qualifications (including from UK, Ireland, South Africa and Canada) were no longer given automatic unconditional registration for general practice -> Required to complete the AMC examination

60. 5-Year Overseas Trained Doctor Scheme (OTDs) Developed in 2003, to provide assistance and incentives to attract doctors to rural and remote locations “Survey of Doctors Working in Rural and Remote Locations Under Australia’s 5-Year Overseas Trained Doctor Recruitment Scheme” No information given on the country of origin of OTDs Survey of Doctors working in rural and remote locations under Australia’s Five- Year Overseas Trained Doctor Recruitment Scheme AMWAC Report 2004.1

61. In 1998, 10,408 (~21.3%) were OTDs; 39% qualified in UK, 28% Asia, 12% New Zealand, 21% Others Of 1,901 rural and remote OTDs; –56% qualified in UK or Ireland, –15.6% Asia, 9.6% New Zealand, 18.8% Others

62. Issue Highlighted Main Reasons for applying : - Dissatisfied with lifestyle and/or medical practitioner in country of origin - To become a permanent resident or citizen of Australia

63. OTD Satisfaction on their working condition

64. Future Career plans of OTDs ? - 52.1% plan to stay at their present location after 5-year contract completed, 34.1% plan to move to another location 13.8% : undecided Reasons for move: - Family considerations (eg. Children’s education, spouse’s career needs) - Isolation and environmental factors (e.g. social isolation, geographic location) - Medical practice issues (e.g. poor location facilities)

65. Suggestions for improving the Scheme - Streaming processes, provide more support to newly arrived doctors and improved communication systems - More educational support, and supervision for gaining fellowships - Financial Considerations, e.g. assistance with early-entry accommodation - Increase program flexibility (e.g. ability to change States within 5-year Contract)

66. Conclusion

67. The Australian health system is widely regarded as being world- class Australians are satisfied with their health care system: - enjoy good health - most have ready access to health services - high quality services - public make fair payments - share the fiscal risks of ill-health Podge and Hagan, 2000 r

68. Conclusion Three basic goals of health care system reform - equity: fair payment, fair access to and use of services and equity of outcomes - efficiency: value for money - quality: high standards and good health outcomes

69. Conclusion (Cont’d) The health care system enjoys both political and public support There is dissatisfaction with particular parts of the health care system and among particular population groups There is no strong demand for radical change

70. Conclusion (cont’d) Health care system evolved slowly and incrementally for several reasons - a federal system of government - a bicameral Parliament - responsibility for health care divided between levels of governments - a pluralist health care field including a large private sector Ongoing process

71. References www.medicareaustralia.gov.au www.aihw.gov.au www.health.gov.au www.healthinsite.gov.au www.aph.gov.au New challenges, new solutions, Australian Consumers Association, July 2002 http://www.reformmonitor.org/ http://www.health.gov.au/internet/wcms/publishing.nsf/Content/medicare+statistics-1 www.buseco.monash.edu.au/centres/che/pubs/wp92.pdf http://www.health.vic.gov.au/discharge/paper.htm Xiao J, et al (2000) ‘An assessment of the effects of casemix funding on hospital utilisation: A Northern Territory perspective’ Australian Health Review 23(1): 122-136.

72. Thank you!