• Jeremy Sammut
• The Centre for Independent Studies

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21 March 2011This report traces the evolution of Australian health policy and its consequences across half a century. The public hospital ‘crisis,’ a political nightmare for all Australian governments, is a legacy of the health policy upheavals of the 1970s and early 1980s, which culminated with the start of Medicare in 1984. Long waits for hospital treatment in Australia are caused by the structural funding inefficiencies at the heart of Medicare, which is a ‘reverse insurance’ system that provides ‘inverse care’ for Australians.

Key Points

• In the late 1960s, for every dollar that Australian governments spent subsidising GP and other medical services, they spent $4.83 subsidising hospital care. In 2008–09, for every dollar spent on the Medical Benefits Scheme (MBS), the total government subsidy for hospital care was only $1.99.

• The federal government spent $4.9 billion subsidising more than 116 million GP consultations in 2009–10. The total cost of all Medicare-funded medical services to the Commonwealth budget was $15.5 billion in 2008–09, which was almost double the cost of the private hospital system and half as much as the total state and federal government spending on public hospitals.

• Forty years ago, there were no queues for hospital treatment. Today, one in three emergency patients waits longer than eight hours for admission to a bed, and one in three elective patients waits longer than clinically recommended for surgery.

• High spending on mostly bulk billed medical services highlights the fact that Medicare is a ‘reverse insurance’ scheme that provides ‘inverse care.’ Medicare is inequitable because patients with the greatest health needs queue for treatment at overcrowded public hospitals, while patients with minor or trivial health needs receive ‘free’ or highly subsidised GP visits on demand.

• Fundamental structural reform of Australia’s health care financing arrangements is needed to end the ‘hospital crisis.’ Bulk billing should be scrapped and Medicare should be replaced with a soundly constructed insurance scheme that will properly protect people against the risk of exceptional health events requiring hospital treatment.

• To contain health costs and prevent overuse of medical services, individuals should pay for discretionary services such as occasional doctor’s appointments out of personal Health Savings Accounts. The money saved in these accounts should also pay for deductibles and copayments to control use of non-chronic care and marginal hospital procedures.