No. 28: Living in the Parallel Universe in Australia: Public Medicare and Private Hospitals

April 2010

Background

A few Canadian Provinces are permitting private funding for medically necessary services, but many Provinces are exploring delivery of publicly funded services in private for-profit facilities, rather than in more traditional not-for-profit hospitals. Some would argue that this has been potentiated by the Chaoulli case in Quebec, which arose, in part, as a result of long waiting times in the public system.

Influence from the United States in favour of private funding (insurance) and for-profit delivery is ever present, though the latest U.S. health care reforms are aimed mostly at regulating the insurance industry. Beyond North America, this month's e-Rounds looks at the impact of parallel private and public systems in Australia. We review a paper written by Australian Dr. Stephen Duckett, who has been this past year the CEO of Alberta Health Services Ð the newly-formed and sole health care delivery entity in Alberta's publicly funded system.

Methodology and Limitations

This opinion essay was written by Dr. Duckett and published well before his move to Canada. The content is supplemented by data from the Australian health care system, though no citation is provided for several key figures. The analysis represents Dr. Duckett's opinion of the public / private influence and impact on health care delivery and financing in Australia. As such, this perspective may not necessarily be widely shared in Australia and may not hold true if subjected to focussed research, with explicit questions and sound methodology. That said, his study represents an interesting and informative perspective.

Analysis

Unlike Canada, Australia has a mixed publicly (through progressive taxation) and privately (through private duplicative and supplemental insurance, and out-of-pocket payment) funded, publicly and privately delivered, universal health care system. Like Canada, it has federal and state (provincial) responsibilities, with administration of the hospital system at the state level. How Canada and Australia sharply differ is that in 2003/04, 40% of all hospital admissions in Australia were to privately owned hospitals (some private for-profit, others private not-for-profit), and about 43% of Australians held voluntary private insurance (i.e. including duplicative insurance for private services delivered at either private or public facilities, and supplemental insurance for services not otherwise covered by the public plan). Unlike in Australia, private duplicative insurance is not allowed in Canada, with the exception of Quebec where it is permitted for some services as a result of the Chaoulli ruling. The high level of private insurance coverage in Australia is directly attributable to Federal Government incentives and subsidies, which began in 1996, and effectively covers approximately 30% of the cost of private insurance. In 1999, the Federal Government introduced Life Time Health Cover, with encouragement for Australians to take out health insurance by age 30 and maintain it lifelong.

Dr Duckett points out that some private hospitals in Australia provide only a "top-up" function, allowing the purchase of additional amenities such as single-occupancy rooms or upgraded meals. But, more relevantly, others act as an alternative to the public sector, allowing queue jumping for a price. This has created more apparent inequity for patients, partly because it has given doctors the option to work in both sectors. Axiomatically, the more time a doctor spends in the private sector, the less time is spent in the public system. He argues that reduced public sector O.R. times and delays, together with greater reimbursement for providers in the private sector, have "forced patients to move to private care." Yet, the greater the proportion of services in the private sector, the longer the public-sector waiting times in any surgical specialty in which it has been examined in Australia.

In terms of case management, private hospitals in Australia focus on elective procedures and avoid the challenges of emergency and highly complex care, all of which is the responsibility of publicly funded facilities. Not surprisingly, private hospital activity has been growing faster than that of public hospitals, particularly since the introduction of the 1999 insurance incentives. Approximately 180,000 patients per year have been shifting from the public to the private systems, with substantial effect on overall costs. Comparing before and after implementation of the private insurance rebate system, the health share of GDP increased a full percentage point to 9.5%, with estimates that half of that increase has been directed to the public sector, and half to the private sector.

Dr. Duckett concludes by suggesting that Australia's experience with the dual system has been "mixed." While on the one hand private hospitals have offered greater choice for both patients and for providers, they have accentuated inequities in care access and provision, such that privately insured patients gain faster access to non-emergency procedures. 

Commentary

Private insurance is now a large and permanent part of Australia's health care system. Yet, it has created inequities based on individual insurance status. The privately insured and politically elite "electorate" are potentiating a move away from (and support for) the public system, despite the fact that it is costing government more to maintain parallel systems.

Despite the fact that Canada is considered by some proponents of private health care financing and for-profit delivery to be backward' and socialist,' and it is regularly berated by its critics for not advancing a private parallel system, the Australian experience gives us serious cause for pause and, hopefully, insight into the future of our own policies: more choice yes, for some but greater inequity and longer waiting times for others, with a more costly system to boot! It will be interesting to watch Dr. Duckett's actions in Alberta, given his perspectives on Australia in 2005.

Stephen J. Duckett. "Living in the Parallel Universe in Australia: Public Medicare and Private Hospitals." CMAJ Sept 27, 2005; 173(7).

Click here to read the pdf of e-Rounds #28.

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