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Moving on from the Medicare Local muddle


The recent Federal Budget has provoked strong reactions, many of them negative. The proposals in the Budget are, appropriately, concrete – a $7 co-payment and major changes to the extent to which the Commonwealth finances health care more generally.

What has caused so much angst is that the budgetary process is ill-equipped – in part because it is so concrete and allows no space for the contest of ideas – as a platform for social policy debate.

Yet many of the proposed changes represent big shifts in public policy. For example, after a confusing series of pre-budget sound bites equating the $7 co-payment with a rescue package for an unsustainable health system, it appeared on Budget night dressed up as a way to raise money for a Medical Research Future Fund. These two explanations contradict one another and reveal a lack of policy debate and clarity.

The more likely explanation was neither enunciated nor contested – that the Government believes, as part of its ideology, that paying a fee at the point of use of publicly-funded health care ‘sends an important price signal’.  If this had been revealed and not hidden, a policy discussion could have followed (as a functioning democracy deserves) as to why a price signal is considered important, and to whom. The possibility of signalling the price of health care at the time of taxation through the Medicare levy and general revenue was not raised.

In the case of the abolition of the Medicare Locals, also presented as a fait accompli in the Budget, the circumstances were a little, although not much, better. Few people were knowledgeable about contents of the recent review of Medicare Locals or the reasoning that led to the cut to their budget. There was no opportunity to discuss, with evidence and informed opinion, why the new structure proposed for that purpose, with indeterminate budgets, would be likely to work better than the old. That would have been a good place to start.

At their simplest, the recommendations of the review of Medicare Locals were that a few large primary health care networks should replace the 61 regional Medicare Locals.

Although it is said that these should align with the boundaries of local hospital networks, that cannot be easily achieved. There are many more such hospital networks, especially in Victoria, than there are Medicare Locals. It appears that what is intended is that each primary care network would have within it two councils – one clinical and one community – for each hospital network, assuming that each network would serve several groups of hospitals.

The central recommendation regarding these councils is No. 7, which reads:

The government should establish a limited number of high-performing regional [[primary health care networks] whose operational units, comprising pairs of clinical councils and community advisory committees, are aligned to [local hospital networks].

By some indeterminate means, these councils would empower local general practitioners to work with their hospital colleagues. But, as has been seen with Medicare Locals, the financial management of these partnerships is difficult because the hospital networks are funded by the States, and general practitioners by fees and the Commonwealth’s Medicare system. Evidence from studies conducted by McKinsey and Co., a consultancy, reveals that integrated care requires several elements for success, one being that a common budget covers both hospital and community care. This is not possible in Australia at present without substantial changes to health care financial management that goes a long way beyond Medicare Locals or primary care networks.

The financial management of integrated care is already difficult in this country.  But with vague allusions to the management of the new networks being up for tender, private health insurers are circling, apparently considering applying to manage whatever it is that the new networks will do. Were they to be awarded contracts along this line it would introduce a third source of financing into the equation – publicly-subsidised private health insurance – and commercial imperatives, rather than a strictly service motivation.

What then would the new networks actually do?

The report explicitly excludes provision of services – except in defined default circumstances, and so the principal function will be planning, commissioning, coordination and management and, presumably, developing integrated care programs for people with chronic illness.

Continuing education for general practitioners, which was part of Medicare Locals, appears to have suffered the same fate as several other Commonwealth programs agencies in the Budget, including a raft of preventive services – again, untouched by policy and debate.

Several matters deserve speedy resolution, both for the sake of Medicare Locals struggling with demoralised and departing staff and for their successors, and for the sake of democracy.

First, the Commonwealth should effectively communicate what functions it intends the new primary care networks to fill, and invite informed discussion. It should cease using shouts and murmurs via the Budget as a substitute for informed policy debate.

Second, it should explain the financial and management arrangements it proposes for the conduct of the new primary health care organisations – which pays for what.

Third, and most important from the perspective of patient care, the role of these new entities in the provision of integrated care needs urgent attention.

We need clarity of policy to rid us of this unhealthy medimuddle.