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Funding and Rationing in Australia

This page speculates on government funding, the medicare levy, taxation, rationing and the adverse impact of market competition for government funds.


The medicare levy was set up to fund services provided by medicare. Political parties keep promising not to increase this levy. Instead they make lavish promises and give assurances about maintaining care amid rising costs. Once in power health care is funded more from taxes than from the levy. It competes with every other demand on the government. The original intention to set a protected sum aside for health separate from other demands is not honoured. Because of this government cuts to health care are not always apparent to the ordinary person unless he or she goes looking. The public is encouraged to expect more than it ever gets or than government is prepared to give. When they do not get what they expect then they become disillusioned, angry, cynical and distrustful. Much of this would fall away if the medicare levy was adjusted in amount and the way it is levied to fully meet the needs. The amount spent on medicare can then be debated in real terms during elections and the public can indicate what it is prepared to spend.

Government Funding in Australia

We have in Australia a sort of double funder system. The federal government takes the taxes and then funds the states to provide the services. Every few years we are subjected to a demeaning spectacle of immature grandstanding and public brawling as state governments and the minister of health "negotiate" the spoils and divide up the dollars for health care. The states, which have no role in raising taxes become the actual funder of public hospital services. Other services such as medical fees and drugs are still paid by the commonwealth. There is continuous friction because of the inevitable cost shifting between the two systems.

The funding of public hospital services which the majority of the population use is deficient principally because the electoral backlash is on the states which provide the services. The federal government which pays gets much less flack. This arrangement protects them.

Hospital Funding

There is ongoing friction between government and the hospital staff who provide care. Highly skilled staff leave for private medicine and the remainder create a series of crises in order to alert the electorate to the problems and put pressure on government. Staff in the hospitals are unhappy and this is not a good environment in which to care for people. This situation of political underfunding is replicated wherever there is a National Health System. It is not so much the fault of the system but of the political processes behind it. Staff are pressured to provide the services government has promised but not funded. As the UK experience reveals it is still the cheapest and most efficient way to provide care.


If Australia is, as our treasurer assures us undergoing an economic boom and if we are so much better off, yet still cannot afford to care for our sick then we have the problem of allocating scarce resources and rationing. There is something strange about the logic of all this but lets accept it anyway. We elected the treasurer so can't complain. I hope that no one seriously accepts that the current way of doing things creates an environment where it is easy to make difficult moral decisions and ration care. The electorate have been promised care and quite reasonably expect to get it.

Government policy is to contract care to corporations whose prime interest in care is the profit which can be generated by providing it. We are faced with the prospect of care being rationed by companies like Tenet/NME, Columbia/HCA, Sun Healthcare etc. Corporate executives ration in order to make profits for shareholders, mount takeover bids, and award themselves vast salaries. Not only is the morality questionable but the discontent will be compounded.

Can we do better

I do not want to prescribe a new system but simply show that there are other options. Lets go to a hypothetical future which might be only a year or two away. What are the possibilities?

With almost everyone on the www public opinion can be rapidly determined. Information and arguments can be rapidly disseminated. Informed votes can be taken and opinions given. There is a more participatory democracy.

Some activities currently run by government are handled by representative groups in the community outside the main political process. We have a situation where some of society's activities are unbundled from the all or nothing policy decisions which citizens make in a two party political system. An integrated health and aged care service run by the community fully supported by the professions has access to all the information about costs and needed care.

Continuously aware of community views because of its surveys and input from its representation across the country the health service makes decisions in regard to the medicare level, the extent of medical savings accounts and the use of insurance to meet procedures it does not believe the community should be responsible for - such as more luxurious accommodation. It is not fragmented by competing roles and profit interests which compromise its objectivity. It can get on with the job. It makes its representations to government. Any government electing to alter the recommendations of this representative group would eventually have to justify their actions to the electorate.

Such a cooperative system would allow the needs for rationing to be balanced against the willingness and ability of the community to pay. Because this community service provides the care rationing can be introduced fairly by the same people who decided it was necessary. Each doctor still advocates and acts for her patient when dealing with the service but at other times she is part of that service deciding where costs can be cut or rationed with minimum harm. Objectivity in serving patients is not compromised.

This is of course very similar to the way in which the rationing of organs already takes place. It works and there are few complaints. We are simply adding community involvement and oversight. I suggest that a cooperative system of which we are all part and with which we all identify can ration care much more fairly. A situation where a self interested group in the community decides who dies and who lives is a recipe for suspicion, anger, and law suits. This will be doubly so when this is done to generate profit for distant shareholders and bonuses for those doing the rationing.

Can the Market do this?

If we continue on the corporate path and develop a competitive health care marketplace we will be faced with a decision about rationing based on profits. We will be constantly concerned that we will be allowed to die because the company treating us needs profits to fund expansion, to fend off a takeover or avert bankruptcy? The pressure generated by strong competition in the marketplace renders the whole idea untenable. We cannot risk Sun Healthcare, IHS, Vencor, Columbia/HCA or Tenet/NME all over again.

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This page created April 2000 by Michael Wynne