Monday, July 4, 2016

Some thoughts on the Medicare scare campaign

Warning - this is a very Australia specific post and is probably the only thing I will say about the election

Australia has a socialised medical system (called Medicare) that by most objective measures works well. Health outcomes are good. Health expenditure as a percentage of GDP is not outrageous (but is on the high end of the non-USA OECD).

Medicare it is very popular.

Indeed if you polled conservative voters in Australia they would resoundingly vote for socialised medicine.

Medicare has been so well run and is so accepted that it has become a sacred cow in Australia. A politician who even tinkers with it takes considerable risk.

That said, it does not work perfectly.

Many years ago when I was a public servant the then Labor Government introduced a copayment for pharmaceuticals for pensioners. Up until then pensioners could get their scripts filled for free. After that there was a very small (two dollar) copayment introduced.

The then government had an estimate how much money this would save. And they were wrong. It saved more, much more.

It turns out that there were a surprising number of elderly women (and they were mostly women) whose idea of a social life was to go to a different doctor every day, get a different script filled every day and go to a different pharmacist. After all those young doctors really are handsome men.

Adding a trivial copayment drastically reduced these behaviors. It saved money and improved heath outcomes.

To get more rational use of healthcare you did not need to hit these people with the full marginal cost of their services. Just a little bit of market did most the work that market does.

And the lesson was learned, socialised medicine works better with just a little bit of market in it - just to make sure the incentives are lined up. Its a lesson I have held ever since.

I disliked the Abbott (conservative) government in Australia a great deal. But they did try to introduce a general copayment (five dollars) for visiting a doctor in Australia. It was howled down in political protest. Like a lot of Abbott policies it was a bit ham-fisted. The welfare effects could have been ameliorated by introducing for example a maximum number of copayments. But none of that was tried.

Most importantly the government did not sell the policy well. The discussion above was not part of the discourse.

And it also gave the (conservative) government in Australia a reputation for tinkering with Medicare. That reputation for tinkering came back to haunt them.


We just had an election on the weekend. The conservatives were not beaten - but the swing against them and to minor (sometimes extremist) parties was strong.

One element of that result was a the scare campaign about Medicare. That is a great pity because there really are tweaks around the edges that will make it work better.

Some of those involve small copayments. But others are very left-field. For example teaching elderly people to use Facebook and smart-phones probably saves Medicare money. People are just less lonely with Facebook.

I don't know how we have a bipartisan debate on this stuff in Australia. A "Medicare taskforce" requires "scare quotes".

But I think it is also a good idea. Indeed demographic trends for socialised medicine are not pretty - and this sort of tinkering might be necessary to protect the system.



Anonymous said...

My wife worked in the ED at an Adelaide hospital for a while.

People use the ED as a way of getting a free taxi.

They would come in, feign illness, get given the all clear by the doctors and then say that they couldnt get home, and the hospital would hand them a cabcharge!

Anonymous said...

I can personally attest to the market effect you discuss.

About six months before the Abbott government introduced the idea of co-payments for bulk billed visits I visited the doctor to get vaccinated for an overseas vacation. The doc examined me and then the nurse wasn't in to administer the vaccines so I had to return the next day to get the shots. When I returned I really only needed to speak with the nurse, but the doc popped in for 5 seconds to greet me and then leave. That 'popin' was charged to the government as a bulk bill visit. (From memory $37.50 to the govt, no cost to me).

If there was a co-payment I would have probably balked at the charge. I still had to pay a reasonable sum for the vaccines and nurse's time.

However I suspect if there was a co-payment the doctors charge would have never been raised in the first place.

There's definitely some savings to be had by the government here and they have nothing to do with screwing old people or turning the system into a pure user pays system.

Anonymous said...

As an American, I see these as high-class problems to have. If only we didn't have to worry about going broke to get decent healthcare...

Geoff Lamb said...

I think you analysis misses the main point. Before the election Tony Abbott said ‘no cuts to health, no cuts to education, no change to pensions, no new taxes, and no cuts to the ABC and SBS’. With his first budget he tried to introduce the co-payment without warning or without any consultation with ANY relevant stakeholder. So now it is a political football.

I think if the LNP actually did some work on this policy. If they did some research, presented the results, consulted the Medical professions, worked out the issues (like maximum payments) and presented a rational argument and maybe do that before the election then I think it might have got through.

But once you go to an election and say 'no changes to Medicare' then try to change it, you can't cry when the opposition is saying the LNP will change medicare as an election slogan.

John Hempton said...

Geoff, I do not disagree with you. Abbott was ham-fisted. He poisoned this.

GrueBleen said...

Why think small and go for copayments that are punitive to some, at least. Why not just kill Howard's rebate for private health insurance - that'd save about $3 billion per annum, apparently. Way more than any copayment.

But I don't understand why you call Australia's health system "socialised", John. health insurance at the core It is, like most of our economy, a "mixed" system: doctors are still private, there are still many private hospitals, drug companies are still private, and there is still (semi-compulsory) private health insurance at the core - admittedly, as above, partially "socialised" by a taxpayer funded rebate.

Medicare is not the British NHS, you know.

CrocodileChuck said...

An interesting post, and idea.

Reminds one of your epic 2009 post on Australian healthcare, and your point on how Medicare needs to be continually monitored and tweaked, for optimal results.

You've changed my mind on the subject [co-pay]

Anonymous said...

I hold that all contracts must be voluntary and well-informed, except in self-defence. That's the basic rule.

This makes taxation unethical, and as such, where it is paid for by taxation, socialized medicine also unethical.

IME, it seems always to me (or at least so it subjectively seems), when-ever that basic rule is violated, outcomes are non-optimal. I am then in principle, without having *actually investigated*, of the view that socialized medicine, if examined, is probably a great deal less optimal than an ethical alternative - and what this means in practise is either people paying more, or getting less, or both, where "paying more" as an outcome means human suffering in the form of opportunities lost or wants or needs unmet, and where "getting less" is an outcome, this means human suffering in the form of unmet medical need.

Anonymous said...

If you pay almost 100% of your wage in rent and food to be able to live in Sydney. $5 is going to put you off going to the doctor if you have a lump on your skin or an ear infection or shortness or breath or recurring headaches or some other ailment that might be symptomatic of something serious.

The recurring specialist charges that you will have to pay will probably break you anyway - so the $5 "market signal" will stop you even getting the GP's opinion that may make you realize how serious the situation actually is.

The long term impacts of people avoiding their doctor even more than they already do are not easily quantifiable over the short term - but there is a cost.

Anonymous said...

John, Didn't you say once in an unrelated post how introducing a copay dramatically reduces fraud, as well?

How's everything else? Why aren't you writing as much these days? I really do enjoy your work.

dearieme said...

"Medicare is not the British NHS, you know." Indeed; the NHS has required payments for prescriptions since the year .

With exemptions, of course, for children and the old (and perhaps others?).

Philip D'Souza said...

Would like to get to know a bit more about your view on Australian property. AS a financial adviser, I often tend to see clients and fellow advisers tout property. I just find it scary when you hear someone recommend getting into further leverage/negative gearing through their SMSF with 10 years to retire. People just blindly buy into it & I find it frustrating.

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