The crisis of Australia’s healthcare system 
The crisis of Australia’s healthcare system 

The COVID-19 pandemic has put healthcare around the world in the spotlight. In Australia, it has revealed a system breaking at the seams. Our hospitals were shown to have no surge capacity to accommodate an anticipated influx of intensive care patients, no stockpiles of personal protective equipment for carers and no effective strategy to protect front-line healthcare workers from contracting the virus. Without the lockdowns that kept COVID-19 cases low, Australia’s health system could easily have been plunged into a situation of outright collapse like we’ve seen in countries such as Italy, India and Brazil.

The failure of Australia’s healthcare system isn’t just in being ill prepared for pandemics. In a 9 June speech at the National Press Club, Australian Medical Association (AMA) President Dr Omar Khorshid described every part of the system as in crisis. He said that waiting times in our hospital emergency departments are the longest they’ve been since 2013, and ambulances are rushing patients to hospital only to have them wait for hours outside the doors. He spoke of the failures of primary healthcare services (the GPs, pharmacists and so on that are usually people’s first contact point with the health system), which are contributing to billions being spent in hospitals to treat patients with preventable conditions.

Khorshid warned that “avoidable deaths will result” from the strains the system is operating under. “Avoidable deaths have resulted. This is not new. But it’s worse now than it’s been in a long, long time.”

Australia’s system is supposed to among the world’s poster children of universal healthcare, yet the situation Khorshid and others have described sounds more like what one would expect from healthcare in the United States. Australia’s system is, for now, very different from the costly, mostly privatised US model. If we’re not careful though, our system could easily morph into something similar. Many Australian politicians and healthcare bosses look at the US model with admiration, tempted by the immense profits being made. They have an interest in allowing our public system to degrade.

It’s a development we should fight to avoid. According to a 2009 study published in the American Journal of Public Health, an estimated 45,000 Americans die each year due to a lack of health insurance. The US healthcare system, we should remember, is the one that produced the kind of horror stories featured in Michael Moore’s 2007 film Sicko, such as the man who—after a sawing accident—chose to re-attach his ring finger but not his middle finger because the surgery for the middle finger was US$60,000, while the ring finger was only $12,000. 

When Australia’s most recent public health insurance scheme, Medicare, was introduced in 1984, then Prime Minister Bob Hawke proclaimed, “No Australian need now fear that treatment of sickness will have crippling financial consequences”. However, Medicare has never been funded enough to achieve that. Indexation of the scheme hasn’t matched the rising costs of health services, and both sides of the political aisle have dug into Medicare funds when they wanted to find savings at budget time. In 2013 Labor froze Medicare rebate increases altogether. This was supposed to be a temporary measure, but it was continued by the Coalition following its election in 2014. 

The long-term underfunding of Medicare has meant basic medical services that many could once access for free now come with significant out-of-pocket costs. According to the 2020 General Practice: Health of the Nation report by the Royal Australian College of General Practitioners, the average cost for a standard GP consultation is now twice that of the Medicare rebate. Doctors are increasingly unwilling to bulk bill—the same report found that only four out of ten GPs bulk bill at least 75 percent of their patients. 

The impact of these out-of-pocket costs was highlighted in a December 2020 study published in Health Affairs. It found that 21 percent of Australian adults had recently skipped basic medical care, tests or filling their prescription medication because they couldn’t afford it.  

The situation with funding for our public hospitals is similarly dire. Funding increases in recent decades haven’t been anywhere near adequate to keep up with a growing and ageing population. The AMA’s Public Hospital Report Card 2020 found that public hospital beds per 1,000 people over 65 decreased from around 20 in 2008 to 16 in 2018. The report also showed that the average waiting time for elective surgery is now around 41 days—eight days longer than a decade ago. 

More telling than the statistics, the stories emerging from hospitals demonstrate the horrifying impact of underfunding. In emergency departments, understaffing, a lack of beds and the associated long waiting times are costing lives—such as that of 7-year-old Aishwarya Aswath, who died at Perth Children’s Hospital on 10 April. Aishwayra's mother tried desperately to get someone to treat her daughter for over two hours while in the emergency waiting area. She died 15 minutes after she was finally seen by a doctor.

Other departments are also stretched. Sarah,* a social worker at one of Victoria’s major public hospitals, described the situation in the maternity department:

“We are constantly out of beds in the birth centre. Women are giving birth in emergency or the car park. Women are being told to come to hospital and get induced for a high-risk pregnancy, only to wait three days in another ward. Midwives are burnt out and leaving the industry in droves, while the rest are left to do double shifts. In that environment, you simply can't provide people with the level of care they need.”

Marlon,* a nurse in a psychiatric ward, painted a similar picture. “Understaffing creates the most cruel conditions” for patients, he said. “The last few years have seen clinical psychologists, social workers and occupational therapists disappear from our ward. My patients have been admitted involuntarily because they apparently can’t make decisions to help themselves, but our hospitals don’t have the resources to properly help them either.”

Australia’s politicians have been happy to scrimp on spending on the public system, but they’ve meanwhile been handing increasing amounts to the private healthcare industry. Medicare was never intended to replace private health insurance completely. In 1996, the year the Liberal government under John Howard was elected, membership rates for private health insurance were still at 34 percent. This, however, was a marked decline from 48 percent in 1985, and Howard introduced the Medicare Levy Surcharge and subsidies in an attempt to reverse the trend. Today, these initiatives equate to the federal government handing over a staggering $11 billion of taxpayer funds a year to private health insurers.

The current private insurance model in Australia isn’t as bad as its US counterpart, but it does share some features. Insurance premiums are rising rapidly, and the growing complexity of insurance plans highlights the basic irrationality (and inhumanity) of for-profit healthcare. 

Navigating the 31 plans offered by Medibank Private in Victoria, for example, requires difficult decisions on how to balance affordability with the worth of particular body parts. The basic plans suffice only if you want coverage for car crashes, having your appendix out or getting a hernia. Five more dollars a week will cover more organs, but not your heart—that requires the “silver” plan. Having a baby requires “gold” coverage, starting at a minimum of $43.18 a week. And then there are extra fees on top of that for services such as dental—because according to the private health industry, having teeth is an optional luxury. 

There has been some debate in recent years about whether the current private insurance model will remain viable. Rising premiums and inadequate services have turned many people off. The take-up of private health insurance is declining once again. Much to the displeasure of the insurance bosses, it’s young people who are ditching their insurance—leaving an increasingly older customer base who are more likely to access the services they’re paying for. And the industry received another blow in 2020, when elective surgeries were cancelled under COVID-19 restrictions. 

These factors have hurt the profits of private health insurers. Medibank, for example, reported a 28 percent decrease in net profits for the 2020 fiscal year. However, claims that the industry is facing a “death spiral”—as a recent report from the Grattan Institute put it—are premature. Even after Medibank’s terrible year in 2020, the company recorded a profit of $315.6 million. Bupa—another major private insurer—had a profit of $211 million. These companies are far from being at death’s door. Their concern is merely that they’re not making the kind of excessive profits that insurers enjoy in places like the US.

The insurers are doing what they can to rectify this. Private Healthcare Australia—an industry lobby group—has been calling on the government to give tax breaks to employers who take out private health insurance for their workers, similar to the workplace insurance schemes that are common in the US. Proposals like this are likely to get a sympathetic hearing in parliament. Minister for Health Greg Hunt used part of his 2002 maiden speech to advocate “employer incentives for the inclusion of healthcare in workplace arrangements”, as the key element in the “next expansion in private health coverage” in Australia.

This would be a horrible development for workers and the poor. It would provide a further boost to the private system at the cost of public healthcare. It would, if taken to the extremes that we see in the US today, prevent many unemployed or underemployed workers from accessing decent healthcare. And even for those lucky to gain insurance via their employer, we can be sure that bosses will find a way for premiums to be taken out of workers’ wages.

Some private insurers are also moving towards the “managed care” model used in the US—in which insurance companies contract specific healthcare providers to deliver services to their members. In August 2020 Medibank bought a 49 percent stake in East Sydney Private Hospital. Then in January, the company bought Myhealth, a chain of 80 shopping centre GP practices across three Australian states. These arrangements allow insurers to control the types of services offered by the providers their members are directed to access. For example, Medibank's media release announcing the East Sydney Private Hospital deal says the company will use its investment to expand a “short stay model of care”.

These changes won’t transform our system into an Americanised version overnight, but any step in that direction should be aggressively opposed. Nothing good can come from private health companies having more control over health services and pushing our health system further towards the for-profit model. If we’re going to fix the crisis in Australia’s health system, sending the private industry into a real death spiral would be a good start. The billions of dollars currently handed over to the industry each year could be used to build a genuinely universal and adequately resourced public health system instead.


*Names have been changed.

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