---

Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology

Issue 21 - Evidence

---

OTTAWA, Tuesday, June 12, 2001

The Standing Senate Committee on Social Affairs, Science and Technology met this day at 6:35 p.m. to examine the state of the health care system in Canada.

Senator Michael Kirby (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, first, I want to thank our witnesses for getting up in the morning, the beginning of their day and the end of ours, to spend some time with us talking about their health care system. As you know, we are looking at what changes, if any, to the broad federal policy role there ought to be. Any input we can get from you with respect to what has worked or not worked in Australia would be helpful to us.

I know most of you want to make a few opening comments about the part of the system that is your expertise.

Perhaps the best way to begin, Dr. Madden, is to ask you to give sort of a quick thumbnail sketch. Tell us how your program works; but, equally important, what is working well and what is not working. That is, what can we plagiarize and what should we avoid?

Dr. Richard Madden, Director, Australian Institute of Health and Welfare: Do you mean the health system or my organization, Mr. Chairman?

The Chairman: I mean the health care system, which is what we want to focus on.

Dr. Madden: I think I gave your committee details on the book that we produced which I will hold up for you. It is called Australia's Health. My institution produces this book every two years to describe the Australian health system.

By analogy to Canada, we are similar. We have a somewhat smaller percentage of GDP spent on health. It is 8.5 per cent. We have a system that is much more complex in its federal state relation between federal government and state governments, with the federal government running directly reimbursements for medical services and pharmaceuticals and with the states running the hospitals, as in the Canadian provinces. There are large transfers of money from commonwealth government to state governments, unlike your arrangements where the provinces raise their own. We have a much bigger private sector than in Canada, with a strong private health insurance system that has strong government support - both financial and political - underpinning that health insurance system. It finances a wide network of private hospitals in particular.

I think the similarities between us are probably greater than the differences compared with other countries. However, that is a quick thumbnail sketch.

The Chairman: I will direct my question to whomever wishes to answer it. There is a big difference between the role of the public sector and the role of the private sector in the sense that we do not have private sector hospitals. We have private insurance health benefits, but they are really extended benefits. They will pay for a private or semi-private room and that kind of thing, but fundamentally hospital benefits and physicians' services are entirely covered by the state.

It would help us to understand how these two systems live alongside each other. I would like to understand in particular whether the private sector simply has the people on the wealthy end of the income spectrum. Are the waiting line problems the same whether you are in the public sector or the private sector, and so on?

Any comments to help us understand both the interaction and the dividing lines between the two would be helpful.

Mr. Russell Schneider, Chief Executive Officer, Australian Health Insurance Association: There will always be differences of opinion about the relative merits of the private sector and its relationship with the public sector. From our perspective, the two are quite strongly interlinked. I believe the government would say that also because it is now investing about $2 billion each year in providing incentives for people to be privately insured. The private sector provides about one-third of the beds and equally occupies about one-third of them. Therefore, in hospital financing private health insurance is a significant component of the overall budget.

The reason the government supports private insurance, I believe, is because of the financial leverage that it provides. The government provides a 30 per cent rebate on premiums, which yields, obviously, one dollar in total money available to the private health pool. This is intended to take the strain off federal and state budgets. Over recent years the numbers insured have, as a direct result of government stimulatory measures, risen from 30 per cent of the population to 45 per cent of the population.

To answer your question about whether it is only for the wealthier end of the scale, no, it is not. About two million of the people who are insured actually are on incomes below average weekly earnings. Obviously, more people on high incomes are insured because people with high incomes have a lot more things to do with their money. However, there is a very large group of people with lower incomes who are insured. I think that probably reflects a general community desire in Australia for a mixed economy.

The other interesting thing is that health insurance in Australia is fully community rated, which I think reflects its social role as far as governments are concerned. By "fully community rated" I mean that there is no premium discrimination against people by virtue of age, sex, state of health or potential health risk. The only restriction is a 12-month waiting period after joining for pre-existing ailments. At the end of 12 months, benefits are fully payable for pre-existing conditions as well as for conditions that occur after joining. I think you can see from that that there is a very strong social component of the private sector in Australia, and it does link in quite well with the public sector.

The other interesting thing that has happened recently as a result of government stimulatory measures is that there has been a change in the demographics of the insured population. About one-third of people over 65 years of age - who are the highest users of health services - are now insured, but the government has introduced several policies that are aimed at increasing participation by younger people. Therefore, although the overall number of over-65s has increased in the last 12 months they now represent a lower proportion of the total insured population.

We would hope that will lead to premium stability in future years because until the government incentive package was introduced, the insurance system suffered from adverse selection and declining participation. Good risks were leaving and opting to take advantage of their medicare entitlement - that is, free access to public hospitals - while bad risks were remaining insured and, of course, that was driving up the cost of health insurance.

I am happy to tell you about some of the other changes now, if you have the time. Otherwise, we can provide you with further information on those stimulatory measures at your leisure.

The Chairman: You said that people are "premium rated." What do you mean by that?

Mr. Schneider: I said "community rated." By community rating, we mean that everyone pays the same premium for the same level of benefit unlike in the United States, or even in the United Kingdom, where premiums are risk-rated. That is, the insurer will decide what risks to expect from a particular demographic or what risks they might expect from a particular employment group. In our case, premiums must be at the same level for all people according to the level of benefit those people choose to buy.

The Chairman: That is clear.

Senator Morin: Mr. Schneider, what is the public reaction to what is in fact a government-subsidized two-tier system with private health insurance giving earlier access to elective services?

Mr. Schneider: It depends on which side of the political fence you sit. There are many people who strongly support the incentive arrangement.

I am not sure that I quite agree that it is a two-tier system because lower income people are able to take advantage of it. Their premiums are subsidized as are everyone's. Certainly they do have more convenience of access. However, in political terms, the fact that people are able to access private services at a price has meant that some of the problems in relation to funding pressures on the public sector are reduced.

We will always find the public sector, the political level and the industrial level seeking more money - which is not an unnatural thing for them to do. However, if one looked at the system objectively, one would have to say that it does work with reasonable equity. I think at least 45 per cent of the population is taking advantage of it. Everyone likes the system even if they do not actually use it. Some people will not be insured, but they like to know that there is an insurance system in place.

The Chairman: Would anybody in Canberra like to comment on Mr. Schneider's remarks?

Dr. Roger Kilham, Australian Medical Association: There are several points I would like to make reflecting on the things that Mr. Schneider said. One thing that is important to understand when looking at private health insurance in Australia is that it is not really a stable system. We do not have bipartisan political support for the system as it stands. We have a long history of governments of either persuasion pushing the pendulum backwards and forwards; one side of government preferring to emphasize public sector insurance and public sector provision of services, and the other side preferring to emphasize the private sector.

It is also important to understand that the major political parties in Australia fight hard over the middle ground, so this pendulum goes backwards and forwards within a narrow range. We do not completely change the health financing system, but we do regularly change the private insurance system.

Were there to be a change of government at the end of this year, it is almost certain that the subsidies and arrangements that have been put in place during the term of this government would again be altered. The subsidies would be reduced and the level of private health insurance coverage in Australia would begin to decline. We do not have bipartisan political support for this system. It is not stable.

The Australian public likes to be able to game the system. We have the situation where you are entitled to take out private health insurance but not obliged to use it. So our citizens will cheerfully go up and use the public sector when it is free and accessible. If one has a heart attack or cancer or something like that, the public sector provides very good care. Therefore, the tendency is to sign in as a public patient. For selective surgery, there are long queues in the public sector, so people will then choose to use their private health insurance.

There is a lot of ambiguity about the system. Frankly, both the public and the government seem to like that ambiguity. It gives people lots of places to duck, weave, and hide.

Senator Keon: That raises an interesting situation. Have you noticed any difference in intervention rates in the public and private sector, particularly in the grey zone? By that, I mean as it relates to screening tests such as MRIs, or in cardiology interventions or cardiac surgical interventions. Are your rates of intervention per 100,000 people higher in the private sector than in the public sector?

Dr. Kilham: The answer is yes, simply because there is more rationing in the public sector. People do not get access. It is very common to meet someone who has waited five years to get a hip replacement or even longer for a knee replacement. There is a lot of rationing in the public sector. We call private health insurance "queue-jumping insurance." Basically, it buys a place further up the queue. That is the reality and that is why people like it. They can jump queues if they have the money to do so.

Part of the difficulty in answering your question is that the public and private hospital systems do different things. They do not have the same caseload. It is very hard to match the two and to work out whether or not the rates of intervention are different. It is difficult to tell whether they are coming from the same demographic. Studies everywhere show that people who are wealthy and highly educated will have better health status. They know more about how to preserve their health. People at the bottom of the pile - the illiterate and the unemployed - for example, are more likely to smoke or to drink heavily and so to damage to their health.

It is hard to unravel all these different influences. I really do not know if there are any different rates of intervention at all. I will say that there is more rationing now in the private sector than there are used to be.

Dr. Madden: With regard to the two-tier system, the people are not split in two tiers, but there are two systems. If we look at intervention rates, we are not talking about two distinct population groups. People at all levels of income are using both systems.

I wanted to make two comments following on Mr. Schneider's comments. First, we do not yet have data on the changes in the public-private mix since the lifetime health coverage was introduced one year ago. We will not have that data on a national basis for another year, so we do not yet know what has happened to overall demand. We can get an idea of activity in the private sector. We will not know for a while whether overall demand has increased, as we would expect with more money being pumped into the health system with the normal principles of health economics. It is hard to tell what the position is.

Second, in Australia we see a lot of political changes as Dr. Kilham just described. Governments come and go. The system changes a lot but it stays very much the same at the delivery end.

Over a long period, the Commonwealth government has provided about 45 per cent of the funding of the Australian system. The states provide about 22 or 23 per cent. The private sector covers about 30 per cent. That has been the case for about the past 10 years. These numbers move by a couple of percentage points but they seem to come back in cycles. While there is a lot of change and heat in it, it is a remarkably stable system that we have.

Dr. Brian Richards, Health Insurance Commission, Australia: I have two observations on the discussion so far. First, I will look at medical services provided in the community and, second, medical services provided in hospitals.

In the community, private health insurance does not come into play. Medical services are provided by doctors, whether general practitioners, family physicians or specialists. Consulting patients on an outpatient basis is covered by medicare, Australia's universal tax-funded health insurance system. Whether or not a patient has private health insurance makes no difference to the way in which a doctor charges or the rate that is available to the patient. Effectively, the Health Insurance Commission administers medicare, which sets medical service rebates at 85 per cent of a scheduled fee.

A practitioner has a choice - basically complete freedom - to charge whatever fee that practitioner determines to be appropriate in the circumstances, but the rebate is the same for all Australians. For a disadvantaged patient, for example, the practitioner could choose to charge just at the level of the rebate - that is 85 per cent of the government scheduled fee - or they could charge a fee higher than that if they so choose and if the patient chooses to attend them. Private health insurance does not pay the gap between the rebate and the fee charged by the doctor for an out-of-hospital service.

Under medicare, doctors can choose to directly bill, or the patient can choose to assign the benefit directly to the doctor in what is called "direct billing" or colloquially called "bulk billing." In those circumstances, where the doctor agrees to receive the rebate directly from the Health Insurance Commission, the doctor is unable to charge a gap. However, if the doctor chooses to charge a gap payment above the level of the rebate, they must bill the patient first and then the patient is responsible for the gap and claiming the rebate from medicare.

Turning to the hospital system, the medicare system provides free public hospital care to all Australians who are eligible for that service. They must be Australian citizens or visitors from countries with which Australia has a reciprocal health care agreement. When a patient enters a public hospital and elects to be a public patient, no charges are levied. So all medical services and the cost of the hospital visit and any associated tests are paid for by the public system.

A patient entering a public hospital can also elect to be a private patient. Under those arrangements, the private health insurance that we discussed earlier comes into effect. Then the private health insurance pays for the accommodation charges of the hospital up to an amount determined in the benefits schedule of the insurer. For the medical services, medicare still pays 75 per cent of the scheduled fee. The private health insurance for services rendered in hospital to private patients will pay up to 100 per cent of the scheduled fee.

However, doctors treating private patients in public or private hospitals are free to charge a fee above the scheduled fee. In most circumstances, the patients are liable for the gap between the scheduled fee and the fee charged by the doctor.

The Chairman: Mr. Schneider, do you want time for a rebuttal? We are happy to give you a minute, and then we will move on.

Mr. Schneider: Actually, I did not want to rebut anything that was said, but I wanted to make a comment in relation to the fact that private health insurance is restricted to in-hospital services. I come back to an earlier question about intervention rates. One of the difficulties is that all non-hospital medical treatment is funded by a single source, which is the government, and possibly a patient care payment. Health insurance does not apply to non-hospital medical treatment.

That leads to some perverse incentives within the system, because from both the doctor's point of view and the patient's point of view, the level of rebate for a particular service will be greater if that service is performed in an in-hospital setting, than if that same service were performed outside the hospital. That could probably be a criticism of our system.

It also makes it difficult for insurers to exercise effective cost-containment by the support of primary care interventions, or primary care treatment, for their populations. Consequently, there is a defect in the system. This is a very politically controversial statement, but we would achieve a better health care system if we were able to redirect the energies of the private sector and the public sector into primary care interventions, rather than funding high-cost, high-tech hospitalization, which is where insurers are confined at the moment.

That has put both cost pressures and demand pressures on the system. That is the comment I wanted to make - that the insurers are currently locked behind the hospital gate and that is a defect in the system overall.

Senator LeBreton: How is the tax-funded health insurance system funded? Is it levied on individual taxpayers? I read that it was levied on the taxable income of the taxpayer. If that is the case, what is the levy? What happens to people who are unemployed or who have no taxable income?

Dr. Richards: There is a medicare levy that is a surcharge on the tax paid by taxpayers in Australia. It is set at 1.5 per cent of taxable income. First, it is only paid by people who pay tax. People on low incomes, who fall below a specific tax threshold, do not pay the medicare levy but they are entitled to full services under the medicare scheme.

Second, the medicare system is not funded - an understatement - by the medicare levy, but it is supplemented significantly by general tax revenue.

Dr. Kilham: We are looking a bit under $5 billion from the medicare tax levy; about $25 billion federal government expenditure on health; and over $50 billion national expenditure on health. The medicare levy pays for about 8 per cent of the nation's health bill.

Dr. Madden: It is just another tax.

Mr. Russel Schneide: The levy was originally introduced when the medicare system was introduced in 1983. It was intended to fund the additional costs of the program, not the entire costs of the program. It was more a symbol of the existence of medicare and still is really a symbol.

The Chairman: Please, tell us who is speaking, because our Hansard will be difficult to understand.

Mr. Schneider: This is Russell Schneider from the Health Insurance Association.

Senator LeBreton: The 1.5 per cent figure was introduced in 1983 and it has not changed. Is there any chance that it will change, or will it eventually be removed? You used the figures of $5 billion from the tax levy and $25 billion from general tax revenues. Is there any view that that will change?

Dr. Richards: Over a number of years, it has been increased from 1 per cent to 1.5 per cent. Those changes only come every few years. Probably there is no current thinking about changing it, because governments have been more concerned in recent years to deliver tax cuts to people than tax increases. That has only been the practice of our current government.

There is a medicare levy surcharge for high-income earners who do not have private health insurance. Those people pay a rate of 2.5 per cent of taxable income. That is what we call the "sticks and carrots" approach to enticing people to own private health insurance. That is one of the sticks. Another stick is something that Mr. Schneider mentioned earlier: Once you are over the age of 30, you will pay more for your private health insurance. That is a disincentive for people to wait until they are in their 50s to take out private health insurance.

Dr. Tony Adams, Professor of Public Health, National Centre for Epidemiology and Population Health - Australian National University: I should say, on behalf of the Public Health Association that the members have been very concerned about the recent moves in the last year or so, which Russell described, to push people with carrots and sticks into private health insurance. They feel that this may be a political move to undermine the government-supported medicare system. There was quite a vociferous thing about that, at the same time saying that the money being spent pushing people into private health insurance - getting up to 45 per cent - could have been better spent in updating some of the public hospitals around the country.

Senator LeBreton: That sounds familiar.

Dr. Richards: From a government point of view, there are no sticks, only carrots. However, a large carrot can sometimes appear to be a stick.

Senator Graham: Thank you. I would like to talk first about comparative administrative costs. As you probably know, Canada has what we might call a "single pair system" in the sense that publicly insured health services are financed totally by the government. I understand that Australia's system involves several pairs or multiple pairs for health care. There are those who contend that a single pair system in Canada allows for lower administrative costs linked to health care insurance. Can you tell us what proportion of total health care spending in Australia is devoted to administrative costs?

Mr. Schneider: It is roughly 4 per cent of the health insurance commission's total costs, or administrative costs. The Health Insurance Commission can correct me if I am wrong on that figure. Private health insurance is about 9 per cent, depending on the individual fund.

While the Health Insurance Commission's 4 per cent looks very good, the cost of collection is picked up by the taxation office and the cost of administering the public hospital system is picked up by state governments; and those figures tend to be obscured.

In fact, the administrative costs of the states are never mentioned when we talk about the administrative costs from the medicare program. Concentration on administrative costs misses some of the points about health care funding. Even at 10 or 15 per cent of the total cost, administration still represents a far smaller component of your total health bill than, for instance, avoidable injuries in hospital. Rather than concentrate on administration costs alone, we would get a better bang for our buck if we looked at the other areas of cost and payment within the health care system rather than health administration costs per se.

Dr. Richards: I do not dispute anything that Mr. Schneider has just said. The Health Insurance Commission's administrative costs are probably lower than 4 per cent. The administrative budget is just under $400 million per year and we pay out rebates of the order of $13 billion per year.

The advantages of the economy of scale that we have by being sort of a large national government insurer are largely on the transaction costs of the payment of rebates, just simply through economies of scale and through the appropriate leverage of information technologies.

Like Mr. Schneider, I would focus not so much on the administrative costs of the system where there are multiple payers, but on the perverse incentives for cost shifting between the different insurers - even between commonwealth and state governments that has become something of an art form.

Dr. Carmel Martin, Director, Australian Medical Association: I would like to support that. We cannot plan and deliver health care in a continuum because of the constant shifting from program to program. This is a major source of frustration to our doctors. As well, this is a great concern when you look at the relationship between the public hospital sector and the aged care sector. There is gross exhaustion of the way doctors work in public hospitals because we are not well-coordinated with our public hospital sector.

There is a problem in organization in terms of health outcomes, which causes great frustration.

Dr. Richards: It is unfortunate that the Commonwealth Department of Health Aged Care is not here this morning. It would be worth mentioning at this point the coordinated care trials that have been a joint activity between commonwealth and state governments. These trials arose out of what is called the Council of Australian Governments, which is the forum at which the prime minister and the premiers or chief ministers of our states and territories get together, where issues such as this cost shifting are discussed.

Dr. Martin and I, in our former lives, have cooperated in one round of these coordinated care trials. These effectively involve the pooling of funds from a variety of sources, particularly from commonwealth and state programs into a fund pool, with care planning around the needs of individuals and reallocation of funds outside the boundaries of the programs from which the funds originated.

A second round of these coordinated care trials is scheduled to commence later this year to further explore pool funding models to get around some of these issues of cost shifting.

Dr. Martin: While the trials around fund pooling and different models of care in the local community setting are valued, I am not sure that they actually provide an answer to our structural problem. In a sense, what they are doing currently on a trial basis is setting up another layer of administration.

You have money administered from various funded sources, then have you another administration that pools it all together and administers it locally. While trials are developing good models of local care, we still have to overcome our commonwealth-state funding issue through the trials.

Dr. Madden: On your question about administrative costs, I will go back to our databases and tell you what we can.

Senator Graham: That would be wonderful if you could provide us with that information at your earliest convenience.

Dr. Madden: I will also advise what cardio-thoracic surgery costs the public and private sectors, as was mentioned earlier.

Senator Graham: We are very interested in preventive health programs. Could you tell us how much emphasis is placed on preventive health programs in Australia? Perhaps you might also tell us to whom this responsibility is assigned. Is it one level of government or a combination of various levels of government the private sector?

Dr. Adams: A mechanism was developed in 1996 in Australia to coordinate preventive public health programs across the country. It is called the National Public Health Partnership.

I do not know how the provinces in Canada get their act together to have national strategies for the HIV programs, mental health, injury prevention, cardiovascular disease and so forth. Like Canada, states have their different public health acts, legislation, with different training programs, the public health workforce people and varying strategies for these preventive programs.

Over the last 20 years, all states have been doing their own thing in terms of being concerned about the burden of disease that is causing greatest mortality or morbidity with cardiovascular incidence, cancer and so on.

In 1996, we decided to try and get some uniformity into that approach. We set up the National Public Health Partnership, which has its own secretariat. This is a federally funded secretariat. This secretariat reports to all the heads of the state and federal health departments on the strategies that have been developed. That secretariat has been remarkably successful. It has enabled the federal health department to fund more of these national strategies. In any part of the country you know what is happening in terms of survivor cancer screening, breast cancer screening, injury prevention and so on.

In Dr. Madden's excellent book there are many descriptions of the individual programs. As some of these are tackled, there are some national priorities areas built up on the "burden of disease" criteria where diseases or particular problems are added year-by-year. The latest one is the national asthma campaign, for example, and diabetes.

I do not have the figures in front of me about how much money goes into prevention. It is very small in terms of the total health budget. It used to be 2 do 4 per cent, but it is probably more than that. Certainly there is significant concern about doing more on prevention and particularly in an area that we have in common with Canada in the indigenous health area in terms of smoking, accidents and so on.

Dr. Madden: The Australian Institute of Health and Welfare is an observer of that public partnership. I attend their meetings. The point I want to make is that there is good collaboration across commonwealth, state and territory governments in that group.

We talked before about the difficulties in our split system. In areas such as public health and importantly in the information sector, there is good collaboration in Australia with formal agreements across all the governments that have survived many changes of government and administrations to date.

We do have ways of cooperating. It takes work and involves difficulty with travel expense and so on, but we do have national focuses on a whole range of key health issues.

Dr. Martin: We are not spending enough in this area. While we are setting up an excellent infrastructure - the National Public Health Partnership, in coordinating our program - certainly from the perspective of the AMA, we very much underspend, particularly on indigenous health. We have found that we are underfunding indigenous health care by about $245 million annually. We are also not earning enough money on tobacco, alcohol and other drugs. We have the opportunity to increase our taxation revenues and improve our preventive care in this area, which we are not taking the opportunity to do.

Senator Morin: I would like to come back to indigenous or Aboriginal health. As you know, in Canada, this is a serious problem - possibly the most serious health problem we have in our country. It is costing us a lot of money. We have the impression that there are no solutions to it. How do you deal with it? I know you have a similar problem, although I do not know if it is similar in scope. Have you any solutions or any plans to deal with this problem?

Dr. Kilham: Our problem is much worse than yours is. The health indicators are far worse. People die much younger. We are way behind the U.S., Canada and New Zealand in addressing indigenous health. We do not actually spend very much on it. Our indigenous people have very low access to mainstream benefit programs, such as the medicare scheme and the pharmaceutical benefits scheme. The amount we spend on them in no way reflects their very poor health status. I would simply say that our record on indigenous health is a national disgrace. They have Third World health conditions.

However, we are starting at least to understand the nature of the problem. Our current health minister has shown far more commitment than any previous health minister and has significantly increased the funding. We still think it is far short of what is needed; however, he has significantly increased the funding. He started to work to put health services in remote areas where there were none before.

I think it will take us a long time before we start to catch up with you people. We will have to work on this for 20 years or more to make inroads. Aboriginal people have extremely high rates of renal failure and diabetes. In some communities, those rates are more than 20 per cent. It is an appalling feature.

Dr. Madden: I do not want to detract from anything that is being said, but you need to keep in mind that the way we have described it is as though it is a remote area problem. It is a remote area problem in the Northern Territory, northern Western Australia and so on, but Aboriginal health is also very much an urban problem. There are now large concentrations of Aboriginal people in the major cities. The bulk of Aboriginal people live in southeastern Australia, in the urbanized part of Australia. We do not know all that well the health status in those areas, but it seems to be no better than it is in the remote areas.

Even where the services are available - there are plenty of doctors, hospitals and so on - people are not accessing the services. If they are accessing them, they are not having the required effect. It is a very complex set of issues for us.

Senator Morin: There is a similar situation here.

Dr. Richards: I absolutely agree with everything that has just been said. With respect to they way I described the medicare system working, it is essentially a system of rebates on medical services that have been provided. If people are not accessing the services, they are neither getting the rebate nor the benefit of the commonwealth funding that is applied to that area. The Health Insurance Commission has put a lot of effort in the last several years in working with Aboriginal communities to enrol people in the medicare scheme so that they have a medicare card and access to the rebates. They have also been working with Aboriginal communities to explore ways of improving access.

With regard to the coordinated care trials that I mentioned, there are a number of coordinated care trials that have taken place and are continuing to take place in Aboriginal communities. In other coordinated care trials, the calculation of the funding that was pooled for a given population was based on the historical usage of the individuals who consented to participate in the trials. The difference in the Aboriginal coordinated care trials is that the medicare funding was pooled at the national average rather than at the historical usage, which would have perpetuated the inequalities of access that we were just discussing.

The pooling of those funds at the national average utilization has actually injected more funds into services that are available for those communities in ways that those communities determine.

Dr. Adams: I will just add something on the training of Aboriginal health, which may be of interest. We have very few Aboriginal medical graduates. I think we have about 50 in the country now. We have relatively few Aboriginal nurses. The university is currently running an applied epidemiology course for indigenous students. The students actually work in their communities and do some course work back at the university. They are assigned projects that look at the entire health problems of that particular community - largely rural but also urban. They do a particular project on, for example, what the burden of diabetes is on their community and what can be done to ameliorate that situation.

There are some movements, albeit new, to start some innovative training programs in Aboriginal health to look at it from a public health perspective rather than a purely one-on-one medical position.

Dr. Martin: I would like to make a comment about the importance of cross-sectoral work and the movement to look at both health and education collectively because the education level of our Aboriginal children is actually going backwards. Therefore, in terms of the mothers and their children, unless we arrest this vicious cycle, Aboriginal health will go backward whatever else we do with services.

The Chairman: Thank you for your very helpful - and fairly depressing - answer. We thought our situation was bad. I think it is a case of, perhaps, misery loving company.

Senator Robertson: What is the population of Australia?

Mr. Schneider: Nineteen million.

Senator Robertson: What is the approximate split in your population between rural and non-rural?

Dr. Kilham: Eighty-five per cent live in cities or large towns, probably more, 85 to 90 per cent. Our rural areas have been depopulating for a long time.

Senator Robertson: Do you have trouble delivering your medical services to the rural areas?

Dr. Kilham: Great trouble. We have great trouble engaging health professionals, particularly in the more remote areas. We have had government program after government program to try to address that, and none of them seem to work particularly well.

We have a controversial scheme that involves bringing in students from rural areas who are bonded to go back to those areas, and bonded for long periods, which, I must say, is not supported by the medical profession. All sorts of things have been tried.

Realistically, many specialty services cannot be provided in country areas. For example, in the northern territories, they do not have a cardiac surgery unit. It is generally accepted in Australia that you need a population of 200,000 to make a unit like that viable. The whole of the northern territory only has about 90,000 people.

Those people have to be flown in to Adelaide for their surgery. It is very expensive to have units like that in low-populated areas. We are likely to continue to see the situation where country people have to travel to the cities for their major surgical interventions. We have a real problem just getting the primary health care out there and staffing the country hospitals.

Dr. Richards: This problem is exacerbated by the continuing depopulation of the rural areas, which renders even primary care services economically nonviable. As the population shrinks, the ability for a doctor to generate sufficient income in a country town is getting more difficult.

Dr. Kilham: I have some friends who live in a small country town. They say that the doctor only goes there once a week for two hours and they have to go to a city to see the doctor. They have big four-wheel drive vehicles that will not go less than 140 kilometres an hour and they get to the doctor faster than we do. It is a question of expectations. They might have to drive 50 kilometres to get there, but they get there very quickly.

Some of the complaints are ceremonial. They do not like seeing their towns die. In country Australia, the large centres are growing at the expense of the small towns. The small towns are dying and the large towns are getting bigger and bigger. They are becoming regional centres for delivery of many services.

We used to measure the distance between our towns by length of horse ride. In New South Wales, every town was about one day's horse ride away. Now, with people using cars and air transport, the reason to have small towns is disappearing. That is a big social change in the fabric of rural Australia and it is not comfortable. People do not like seeing their little towns die. They do not like to see the shops and bank closing and the lawyer and the dentist leaving.

Senator Robertson: What percentage of your population are seniors?

Mr. Schneider: It is about 2.5 million people.

Dr. Madden: About 12 per cent are now over 65 and that figure is growing quickly. I think we are similar to Canada in that respect.

Senator Robertson: Is your primary and secondary care delivered mostly in the community?

Dr. Martin: Our primary care delivery is in the community.

Dr. Adams: We have about 20,000 family practitioners, most of whom are based in suburban areas.

Dr. Martin: For aged people, community support services are provided in the home. We have some fairly complex arrangements that keep being modified.

Dr. Richards: In terms of access to services, getting back to earlier discussions about medicare, just under 80 per cent of general practitioner or family physician services are directly billed to medicare for the cost of the rebate, with no co-payment by the patient.

Dr. Martin: Most of the older population is not charged a co-payment.

Senator Pépin: I have a question on remuneration of doctors. We know that doctors in public hospitals are salaried. What mode of remuneration is used for doctors in private hospitals for public patients?

Mr. Schneider: There are no public patients in private hospitals. Private patients in private hospitals are charged by both the hospital and the physician. The physician will normally charge on a fee-for-service basis, for which there is reimbursement from medicare of 75 per cent of the fee schedule and for a minimum 25 per cent by the health insurance fund. The fund might pay more than 25 per cent under certain arrangements - which is intended to minimize patient care payments.

Dr. Richards: In public hospitals, there is a mix of remuneration systems for doctors. Some are salaried, particularly in teaching hospitals where the academic positions are salaried. A significant proportion of medical services provided in public hospitals are either remunerated on a sessional payment for working certain sessions at an hourly rate, or on a fee-for-service basis according to a fee schedule.

Dr. Kilham: Many of the doctors who are salaried have a right to private practice in addition to their salary. They have an entitlement to treat private patients in the hospital. When the benefit is paid on that, the hospital takes some of that as a facility fee. Another part is put into a fund for training and equipment and the doctor gets a part of it. The public hospitals, in effect, are selling services to their own employees. It is a complex set of arrangements.

Dr. Richards: Which has its own set of incentives, perverse and otherwise.

Senator Pépin: My second question deals with nursing in health services. In our discussions with other countries such as Germany and the United Kingdom, we have learned that they have a shortage of nurses as we have in Canada.

Are you facing the same problem? If so, what is the cause of that? Is it due to the working environment or salaries? What do you do to correct this situation?

Dr. Madden: We do collect statistics on the health workforce in Australia. When nurses, doctors and other professionals register, they are asked to fill out a survey form, and we get good compliance with that survey. The nursing workforce has been flat for many years and recently has started to decline.

The second tier of nurses, what we call "enrolled nurses" or the less educated ones, have been going down much more rapidly. It is clearly an older workforce and that is dropping away. The overall nursing workforce of both first tier and second tier nurses overall is dropping.

There was a switch in the 1980s to training nurses in universities, away from training in hospitals, and there has been a much more severe fall in nursing trainee numbers. It has reached a plateau now, but it was a severe fall. There is now an inquiry being launched by the federal government in Australia into the way nurses are trained.

My own view is that as options for women have broadened in the community there have been a lot of attractions other than nursing. Nursing is still very much shift work, so it is a much less attractive form of work than women can now get, and it is still a heavily female dominated profession.

I will let others talk about the authority structures and so on in nursing. I am not expert on those, but I do not think they have changed nearly quickly enough to keep up with modern women and other people who might be attracted to nursing. This inquiry will certainly get into that. The state of Victoria, in particular, has a dramatic shortage of nurses and has just provided a very substantial pay increase to nurses in that state. So pay levels are rising in response to the supply and demand issues.

Dr. Kilham: For a long time in this country nurses have been undervalued by the community, as have teachers. We are now seeing the results of that. Large numbers of nurses are doing any other job - even working as shop assistants - rather than nursing because they simply get sick and tired of the poor conditions and the low pay.

That is a decision that we and other countries have made, and now we are seeing the results in the inability to attract nurses. This is just marketing really. If you will not pay the market price, you will not get the people there.

Mr. Schneider: If I can add one further comment, part of the problem is whether we emphasize and direct our resources to primary care prevention or to acute care treatment. Obviously, if a large number of people are going to hospital, more nurses are needed, unless ways can be found to avoid people going to hospital. That may well require reallocating nursing resources into the community to assist in primary care.

We are not handling the problem properly if we simply throw money at it. In Victoria, the nursing unions have succeeded not merely in getting an increase in their rates but also in getting changes to staffing levels per bed. In effect, that means a higher demand for more well trained, higher-skilled and higher-paid nurses. That compounding factor is now taking place within the economy of the state system, which will flow into the private sector.

I do not like to use a crystal ball, but my expectation is that, if that trend continues, the logical response will be - as in any other industry - to look at alternative ways of providing services. It seems to me that the emphasis on primary care would be a very effective way of doing that.

Dr. Martin: The other area where we have a problem is in residential elder care facilities. As our population ages and invariably contracts chronic conditions, we have an ageing and sicker population who needs residential care. They also need appropriate nursing care in these facilities. Our current philosophy is that these are residential and not health-oriented institutions. We have downgraded the levels of nursing support that we are providing there. That is part of the problem that is flowing on to the public hospital sector. That is an area we must address.

Senator Pépin: When do you believe the inquiry will be finished?

Dr. Madden: It is only just getting underway. It was announced about a month ago. The inquiry will be well into the next year before it reports.

Senator Keon: Can I broaden the discussion to the total context of your health professional labour as it relates to hands-on care? You have described a shortage in nursing care, which we are also feeling. You have not commented on whether you are seeing a shift at the primary care level of nurses to replace general practitioners and family physicians. I would like someone to address that.

What is the situation as it relates to your medical work force overall, such as primary care physicians, specialists. Do you have too many, too few? What are your anticipated moves - to adjust or to go with the status quo?

Moving into another entire area of health professionals - physiotherapists, occupational therapists, lab technicians, et cetera - do you have particular manpower problems there, or are you in reasonably good shape?

Dr. Kilham: In regard to the medical workforce, our major problem that we can not get them in the right places; there is a geographical maldistribution. In certain country areas, there is no orthopaedic surgeon, for example. No one is there to patch up the broken legs or the car accident victims. People must be taken by ambulance quite some long distance for those treatments. We certainly have a problem getting people into the right places.

Whether or not there is an overall shortage depends really on the system. Our general practitioners are, by and large, very busy. If we did not have free access for 80 per cent of services, they would not be so busy.

The financing system does not show evidence of either a shortage or an excess of people. Compared with other countries in crude doctor-population ratios, one might say we have too many physicians. Yet, the comparative countries may not have the same free access to services. We have distorted the demand curve on the one side, so we must distort the supply curve as well.

That is a decision we have made in this country. We choose to attach the price barriers to the pharmaceuticals, not to the primary care. You can go and see your doctor for nothing, but if you want a prescription to fix up your problem, you must pay for it. Many countries do that. They attach the price signal to the referred demand. That makes it sort of a quasi-taxation then; it really is a form of taxation.

With the medical specialities, in some areas a pass mark is set and any student who gets through that is in. The numbers are not controlled. That is particularly true of physicians, cardiologists and people like that. With the surgeons, there is more debate about whether the surgeons have sought to control their numbers. I do not know the answer.

Dr. Madden: Australia has a committee called the Australian Medical Workforce Advisory Committee. That is a commonwealth state committee. I am a member of that committee. We have published a report on overall physician numbers concluding there are actually too many general practitioners in Australia. The Australian Medical Association is being very polite here because they do not agree with that conclusion.

As Dr. Kilham said, the overwhelming issue is that there are far too many in the cities - particularly in the wealthy parts of the cities - and too few in the country. Many government policies are set at commonwealth state levels to rectify that to get more country children into training for medical practice and so on. It is a very active program and I think there is some turnaround in that outcome now.

This Medical Workforce Advisory Committee has gone through the specialties one by one and recommended increases in almost all, particularly the surgical ones. Those recommendations have been followed by the learned colleges and the state governments that fund the training positions in the hospitals. We are gradually seeing increasing numbers in the specialities.

Finally, there is currently an inquiry through our competition commission in Australia into the College of Surgeons' practice over training numbers, which is providing a fair bit of controversy in Australia. A bit of heat is being generated as to whether competitive pressures are being restrained unreasonably by the College of Surgeons.

Dr. Richards: I would like to make an observation in the context of our earlier discussion about carrots and sticks in the relation to the maldistribution of the medical workforce.

One characteristic of Australia, which I understand is different from the situation in Canada, is that government has little ability to directly influence the geographic distribution of medical practitioners.

About 50 years ago in the wake of nationalization of health systems in the U.K. and elsewhere, the Australian Medical Association was successful in obtaining an amendment to our federal Constitution, specifically prohibiting the civil conscription of medical practitioners. There is no effective limitation on the ability of a practitioner to practice in a particular area. Therefore, there are natural economic and social tendencies for practitioners to congregate in overpopulated urban areas, for economic reasons primarily, at the expense of rural areas.

Senator Keon: You raised another interesting point when you said that you can see your general practitioner for free. If you want a prescription, you have to pay for it. Most of us - certainly in Canada, the U.S., Britain, and Western Europe - are experiencing a tremendous increase in drug costs. I know this applies to Australia as well, I just do not know the degree. Did you do this to curtail your increase in drug costs, or did this just occur by serendipity?

Dr. Adams: Dr. Kilham will say much about this, but one of my current colleagues, who is known as the "father of medicare," said, when he heard I was doing this today, "Make sure the Canadians understand the benefits of our Pharmaceutical Benefit System," which is a national organization. I believe that in Canada, each province has its own pharmaceutical policy in terms of purchasing and subsidizing pharmaceutical drugs.

The Australian scheme goes back to 1952, where subsidized drugs, which go through a very strict mechanism of approval and cost-benefit analysis before they are eligible, are subsidized. We have a national agreement on drug subsidization, so that in any part of the country, you can receive the same cut-price drugs at the pharmacist.

My colleague suggested that your committee might want to look at a federal system of drug purchasing and pricing, rather than a system that operates province by province. Such a system might save you in the long term.

Dr. Kilham will answer the particular question about restricting or changing the cost.

Dr. Kilham: We are not particularly serious, really, about using the price mechanism, as a way to control pharmaceuticals. We have a concessional element to the pharmaceutical benefits scheme. If you are a pensioner or, in some cases, a self-funded retiree, you are able to obtain a concession card and pay only a small amount - around $3.50 per prescription - whereas, I would pay $22.

Most expenditures are, in fact, under the concessional part of the scheme. The majority of the expense is concessional, and only a relatively small amount attracts the $22 co-payment.

That is a more symbolic than serious use of price to control demand. It is recognized that there are significant benefits in this: People realize that the appropriate use of pharmaceuticals can often save a great deal of money elsewhere in the health care system. It is not just that, but you can save if pharmaceuticals are used well. The scheme has widespread support in the Australian community; it is well understood and it is easy to negotiate. It has many good things going for it.

As Dr. Adams says, there are significant barriers for a drug to get listed. There are some drugs that many believe ought to be listed, but they may never be listed. The government is averse to list some of the very high cost drugs and this has been a hot political issue with the AIDS community, for example. They wanted much cheaper access to some of those expensive drugs listed in the Pharmaceutical Benefits Scheme, or PBS. Most people would say that the system of seeking strong evidence has worked.

Dr. Martin: The general impression is that it has worked well until fairly recently, when some alarm bells started to ring. As community expectations rise, there is a greater demand from the public. There also appears to be, in Australia, a shift to more emphasis on the influence of the pharmaceutical industry.

Our national medicines policy has two sides to it. One is the supply of reliable, affordable and accessible medicine, and quality use of medicines by health providers and consumers; the other is the maintenance of a viable pharmaceutical industry. Because we had a conservative government, the pharmaceutical industry seems to have had more influence, such that we have had pressure to subsidize certain drugs and a big debate about having direct-to-consumer advertising of prescription drugs. We have successfully resisted that up to now, although we have much subtle advertising in the newspaper and on television. However, we have resisted the American and New Zealand models.

There are concerns about the advisory committee that oversees the decision, or gives advice to the government, on which drugs to fund. We now have someone who has worked for the pharmaceutical industry on that advisory board and that has been controversial. There is some perception that the industry is gaining more control of the process. This is part of the national medicines policy, in terms of the viability and profits of the pharmaceutical industry.

We have had some decisions made on certain drugs such as Zyban, a smoking cessation drug, that have really created a large cost blow-out in our current funding. We are now having to seriously think about how we manage to take the PBS further. Certainly, from my perspective, we really value our system and we want to maintain it.

Senator Morin: That is precisely my question. What are the effects for Australia, to be on the watch list of countries judged hostile to the multinational pharmaceutical industry?

Dr. Kilham: The multinational pharmaceutical companies are concerned that other countries will pick up our model and start to run with it. This is a great concern to them, and I am sure they will do everything they can to disquiet you people from following our model. Your system is far easier for them to manipulate.

Dr. Richards: There is no doubt that Australia has been successful in controlling pharmaceutical prices while providing access to the community. In both the medical profession and in the general community, there is almost an imprimatur of safety related to the listing of pharmaceuticals on the PBS. Doctors are reluctant to prescribe, and patients seem reluctant to take medicines that are not listed on the schedule.

As soon as a drug is listed on a schedule - which might have been available on a private, non-subsidized insurance plan - there is a rapid rise in the use of the drug. The benefit to the pharmaceutical industry of having a drug listed on the scheme is economically worthwhile, provided they can negotiate a price that is acceptable to industry and to government.

Senator Morin: What do you think is the biggest challenge facing the Australian system and what do you think is its best feature?

Dr. Richards: Are we talking about pharmaceuticals?

Senator Morin: No, generally, about the health care delivery system in Australia.

Dr. Kilham: I would say the worst feature of our system is what I will call the "federal state health financing imbroglio," meaning a confused and tangled mess which is a huge cost and blame-shifting system.

The Chairman: Is this the Canadian system you are describing or the Australian one? It sounds exactly like we would describe our system.

Dr. Kilham: We tend to think ours is the worst in the world when it comes to federal and state stupidity. It affects the public hospital. We have national schemes for medicare, for the community-funded medical services and to the PBS, and what we really need now is a national scheme for public hospitals that makes sense.

We would like to see the public hospitals funded centrally by the federal government, so there is a clear division of responsibility and accountability. The federal government would be responsible for funding, and the states as the owners and operators, would be the providers. You would have a purchaser-provider split.

We would like to see it go that way rather than stay the way it is. At the moment, there is no accountability. We cannot get decent figures on waiting times, and waiting lists, for example.

Dr. Madden: Our system is one of the best in the world. If I had to say which one was better in the world, I would probably say the Canadian one. We have a system, as you have, of universal accessibility - not always perfect access as we have talked about with indigenous people. We have as system that, at 8.5 per cent of GDP, is affordable by a country like ours as yours is affordable by a country like yours. You only need to look at the Americans, with 14 per cent of GDP, a much larger amount spent on health, to see the alternatives do not work very well and that you fiddle with your own system at your great peril.

As I said earlier, our system - in spite of the political differences and changes we have talked about - has been remarkably stable. It is the polyglot nature of the system that makes it stable. It is so hard to change. The chances of the commonwealth government funding public hospitals is about as likely as it is that you will be swimming on Christmas Day in Ottawa. It will not happen. Hell will freeze over first.

The system is a commonwealth state system. It will go on that way. We have to learn to live with it. We need to learn to enjoy it. We have a good system with a public-private mix - a commonwealth state mix. You can get health care in any form of delivery you want.

Dr. Richards: Mine is not a government view; it is based on 20 years as a general practitioner, family physician and now working in government.

From my point of view, the biggest challenge we have is addressing the commonwealth-state funding dichotomy. I accept that it is constitutionally based and requires substantial goodwill from both sides to address the cost and blame-shifting Dr. Kilham has referred to. That is a major challenge, but one where we have seen some sign of progress.

The indigenous health issue that we discussed earlier is a national disgrace and must rank very high on the list of issues that we need to address.

The increasing burden of chronic disease associated with an ageing population with more successful health interventions in terms of reducing mortality of disease is leading to significant challenges for our health care system.

We have more chronically ill people accessing a wider diversity and plethora of health care services. Our health care system is more complex, with increasing numbers of providers: allied health, nursing and medical. In light of this, a fourth major challenge is that of information flows among providers to facilitate the coordination of the care of individuals across the multitude of providers involved in the management of complex and chronic illness and over time across the care continuum.

Dr. Adams: As Dr. Kilham said, the maintenance of a strong public hospital system is crucial for the future. The impetus is on preventive programs, such as for indigenous health.

The thing we have in common with Canada is a strong anti-tobacco program that is getting more and more successful. There is very interesting litigation on exposure to passive smoking and so on. Australia and Canada, at the World Health Assembly, have always been together in pushing for this upcoming convention on tobacco products. The two countries together have much in common and can lead the world in terms of advanced thinking about preventive programs in the wider social context.

Mr. Schneider: The greatest challenge that we face is the ageing population. Not so much the ageing population, but the change of distribution between workers in the workforce paying tax, and those retired, in most cases not paying tax.

It is not merely a case of meeting their health care needs, it is also a case of meeting their expectations. Baby boomers who will be retiring in the next few years are probably the wealthiest, best-educated and most demanding generation that we have ever had. Their expectations for high quality health care will be increasing and they will be a social and political problem as well as an economic one.

One of the unfortunate aspects of governments all around the world is that they have not really sat down and looked at the infrastructure required to meet the demands of this generation or their expectations.

The credit of our system - and one of things that is not often said - is that in part to address that problem, the government has now moved to encourage the financial leverage that health insurance does provide to secure more funding out of the retired population. This would result in less demand on the decreased numbers in the workforce we will have in a few years time.

That is one of the reasons why our government has actually reduced a very substantial incentive program of carrots and sticks that aims at encouraging participation rates. In effect, this program encourages more people who wish to - and can afford to - put some money out of their own pockets into the health care system to add to the pool of funds that taxation can raise. That is something that has yet to be really recognized and appreciated in Australia.

The second real problem is the political differences of opinion over the value or lack of value of the private health care sector. That does create an element of instability for the future.

Those things are changing and if we can get recognition of the important financial leverage of health insurance, there is well-grounded capacity to deal with that challenge.

The other issues, such as cost shifting and federal state relations, are important. Certainly at the political level, they can be fascinating. I am not sure that they are really more than peripheral compared with the big problems of how do we deal with health demands of older people and technology, which means more things can be done to and for them as part of an increasing process.

Dr. Martin: I certainly support the general direction of the speakers. Dealing with the ageing population is our major challenge. In Australia, we have a universal system, although it can be fragmented and varied. We have this vision of the universal system. With ad hoc exercises in cost containment, moving to a safety net mentality in the guise of looking at national priorities and target groups, we are in danger of moving away from universality. People can fall through the cracks.

The funding of general practice - which has been holistic and universal - is moving increasingly to disease-specific payments, which to a certain degree is good. However, we want to maintain this universality and holistic approach.

My next point about general practice is that we have a demoralized general practice sector. Although it does provide the major amount of family health care, we do not have substitution - we do not even have practice nurses. Most care is provided by our general practitioners.

From my perspective, they are under-remunerated and demoralized. If you want to get the bugs out of your system, you need to optimize the morale of your health work force and the general practice sector because the major provider of care is where you need to direct these resources.

Senator Cordy: It has been a most fascinating discussion. As a follow-up to the questions on nursing shortages, if your study does provide solutions, would you please pass them along to us because we are certainly having the same problems in Canada.

The main component of your health care system appears to be very much doctor-centred with a strong hospital system. I am wondering whether you are moving toward home care in Australia because I have not heard much mention of that today. What would the level of home care be in the communities in Australia?

Dr. Kilham: We have a federally funded program called the Home and Community Care Program, which is primarily designed to try to keep elderly people fit and healthy in their homes and to delay the time they might require institutional care. Within that program is a whole series of activities, which includes programs that are community based. Local churches and all sorts of people have programs; some of them involve supporting people in their home. Others involve getting them out of their home and getting them involved in some kind of community activity to break down the isolation they may be suffering.

I am not sure I am in a position to assess the success of that program. Maybe I will invite someone else to comment on that. The federal government has funded it and the states have implemented it.

Dr. Madden: The Home and Community Care Program provides services to aged people and to people with disabilities. There is a wide range of support services for people under 65 with disabilities. Much emphasis has been on community mental health programs, the closure of the big psychiatric institutions, acute care being provided through the public hospital system, with mental health being moved into the community. Substantial resources have been pushed through a commonwealth state program under the medicare umbrella.

A particular part of our age care program is providing what is called "Community Care Packages" for people who would otherwise be eligible to go to federally funded nursing homes. This program is designed to allow people to stay in their own homes and give them care equivalent to that which they would get in a nursing home. This care would likely be similar to the lower intensity level of patient care, but it would be more than the ordinary two or three hours a week of home care that the Home And Community Care Program provides. The number of those packages has been growing very rapidly in recent years. It has been a very strong government emphasis.

Dr. Richards: In addition to the Home and Community Care Program, the other area being explored is the "hospital-in-the-home," which is more about acute illness intervention to either avoid hospitalization for conditions such as pneumonia, or to promote earlier discharge. One of the significant barriers to the uptake of these programs has been the commonwealth state funding dichotomy and the definitional issues. There has been debate as to whether someone receiving hospital-in-the-home care is a hospital patient, a public patient in a hospital or a private patient in a hospital who would therefore be funded under hospital-type funding arrangements, or whether they are an outpatient in the community and funded through the medicare system.

Although the trials of the hospital-in-the-home system have been successful in terms of outcome and cost-effectiveness, the cost-shifting issues continue to raise barriers to their widespread implementation, and they tend to be local trials.

Dr. Martin: The reason we are focused on doctors is that federal funding predominantly funds the medicare rebates for doctors. It also funds optometrists and provides some funding for dentists. It does not fund nurses and physios. They are all funded through the state system. We have a split. The pharmaceutical benefits scheme funds pharmacists for their dispensing activities.

We have a dichotomy in the way professionals are funded. Some are federally funded, some are state-funded and funded through private insurance, and some are just privately funded.

Senator Pépin: With respect to palliative care, do people get it in a nursing home, or can they have that service at home or from community services? Who pays for it?

Dr. Richards: Palliative care can be provided in a number of ways. In a number of areas of Australia there are hospices - residential hospital-type environments - for people who are in the terminal stages of an illness. These are usually funded by state governments. Medical services provided in those are funded through commonwealth funding arrangements in general. A great deal of palliative care is undertaken in the community, and the medical components are funded through medicare. The attendance of a family physician or even a specialist attending the patient's home would be funded under medicare, whereas the state usually provides the funding for the nursing component.

I might refer to another commonwealth program that has been around for 10 years. This program is administered by the Commonwealth Department of Health and Aged Care, which is the Divisions of General Practice Program. Divisions of General Practice are regional associations of general practitioners, family physicians, which are funded by the commonwealth government to encourage GPs to work together and to work with other parts of the local health sector - particularly state-funded health services to improve the integration of care. There are now 123 Divisions of General Practice covering the entire country. In rural areas they tend to have a large geographical area and a small number of doctors. In urban areas, a larger number of doctors tend to cover a smaller geographical area. They are funded to encourage communication between commonwealth-funded general practice services and state-funded nursing, hospital and other services. Many Divisions Of General Practice have focussed on palliative care as a priority to improve communication and delivery of services.

The Chairman: I wish to ask three questions on three different areas. My first question is with respect to co-payments or user fees. To what extent is there a concern that low-income people will not seek the medical attention they require because of the co-payment for a physician? As well, if they go to a physician and are given a prescription they will not actually fill that prescription because they do not have the money to pay the co-payment on the drug plan. Therefore, to what extent is there concern that low-income people do not truly have access to the system?

Dr. Kilham: Low income people would normally receive a health care card, therefore, most doctors would then not bill them and they would not have a medical co-payment. That card will also entitle them to concessional access to the pharmaceutical benefits scheme.

The primary way in which low-income people fail to get access is that they spend more time in public hospital queues. They will get their access eventually, as long as they do not die before their number comes up.

Mr. Schneider: We should remember also that those low income people do have access to private health insurance, which is subsidized to the tune of 30 cents on the dollar. That does facilitate those who may wish to access private services with a capacity to do so. We now have 40 per cent of the population over 65. Most of those who are on low incomes are privately insured, so 40 per cent of our population who are over 65 actually have the capacity to access private hospitals and not wait in queues.

Dr. Richards: I mentioned earlier that just under 80 per cent of general practitioner physician services are directly billed to medicare at no co-payment to the patient. The rate of direct billing varies according to the amount of competition that exists in an area. In areas that have fewer doctors than are needed, particularly in rural areas, the rate of direct billing is lower. There is a direct market influence on that, and it is always entirely to the discretion of the doctor whether to directly bill a patient or to decide what level of fee is charged.

In general, in most parts of Australia, low income Australians are able to access medical services at no cost and are able to obtain pharmaceutical benefits at a significant concession - between $3 and $4 co-payment per item. However, access to medical services is at the discretion of the doctor in terms of the fee charged, which varies from place to place according to local factors.

Dr. Kilham: The cost of medical practice varies a great deal around the country - yet we have a uniform fee and a uniform rebate. We engineer our system to ensure that where the cost of medical services is high people do not get the same access. That is a choice we have made as a country. You can find in remote areas where the average fee charged is 50 per cent or more above the scheduled fee. You will find people there have very low incomes. There is no willingness on the part of the commonwealth government to recognize that there are cost differentials and to accommodate them within the system.

The other thing that influences the situation is income levels. In Canberra, which is the national capital, because of the structure of employment we have high average weekly incomes compared with the rest of the country, so we have quite a high rate of over-billing by doctors.

Dr. Richards: I would like to make one further comment on that. Traditionally, Australian medical practice has been funded almost exclusively on a fee-for-service basis. Over the last 10 years, there has been a deliberate move by government, in consultation with the profession, to move toward a blended system of remuneration, particularly for general practice. We have a program called the Practice Incentives Program, which provides some additional remuneration to general practices on essentially a capitation basis, and in that practice incentives program there is a significant loading for rurality. Therefore, doctors in remote areas are able to access higher levels of subsidy for their practice costs.

Dr. Martin: While the AMA supports a certain level of blended payments, certainly it has concerns about them going above 10 per cent, I believe, from discussions with the commonwealth. At one stage they had considered figures like 50 per cent. Now they are talking about 10 per cent, which is not a major recompense for this variation in practice.

The other concern is that this bulk billing has actually had some negative incentives on the quality of general practice care delivery. GPs shift to high turnover medicine to maximize income in order to survive, in order to maintain an economically viable practice.

Dr. Kilham: The issues relating to country doctors are very complex. It is not just a question of income or lifestyle that makes it hard to get people out there. The figures done by Dr. Richards' staff show that country people have less access to health services and poorer health status. That is the bottom line really.

Dr. Martin: In my understanding of the figures, it is in fact the Aboriginal population that really shift the status of the rural people to such a low level. In fact, most rural people are comparable to people in the same socio-economic status in urban settings, although often they are in the lower income levels.

Dr. Madden: Just let me clarify that. People in rural areas have difficulty accessing general practitioners. They do not have the hospitals and the specialists on site, but their use of hospital services is pretty much equivalent to the rest of the community. They are transported to the hospitals for those services, but the poorer health status we see - especially in remote Australia - is really an Aboriginal factor.

To the extent we have adequate figures, they are a small population. The non-indigenous population in remote areas has a health status equivalent to people in urban areas. It is not surprising because many people who gather in remote areas do not reside there for the whole of their lives. Nor will they go there or stay there if they have a poorer health status. In some rural areas, there are health problems in relation to injury. There is a very high injury rate and some elevations of cardiovascular disease, but generally, the health status is not all that different.

The Chairman: To what extent are waiting lines or queues a political problem, and to what extent is something being done about that?

I cannot resist coming to my other question because it puzzles me completely. Given the encouragement government is offering for private insurance in hospitals, what conceivable public policy reason would limit it to the hospitals? If you allow a private insurance system - to quote from Mr. Schneider - why do you keep them inside the hospital walls? I cannot conceivably think of a public policy or, frankly, even a political rationale for that. Can someone comment on both of those issues?

Mr. Schneider: I share your difficulty in understanding why this is the case. When medicare was introduced, it was felt that it was essential for some reasons to confine health insurance to the hospital arena. I think this is quite illogical. It should be extended to primary care for the obvious reasons that insurers would be in a much better position to then exercise some support for cost-containment for primary care, for preventive measures. The current government has made some attempts to loosen these constraints, but those have been resisted by the opposition party, which has stopped them taking place.

I would hope that as time goes by, the opposition to having health insurance cover the whole system would go. I think the rationale would be that if that was done, a two-tier system might be created. I think it could be argued that we have a two-tier system now. The only difference is that it is not constructed by insurance. It is really a case of those people who are wealthier and better located get better services, and we could discuss that in relation to rural areas.

Waiting lists at public hospitals are a political problem that varies from time to time. Governments have tried to solve the problem by putting more financial resources into the public sector, but the tendency seems to be the same as it is anywhere else in the world. More money does not reduce waiting lists. All it does is allow those people who were not on the waiting list before to get put on to it.

The Chairman: I am sure someone in Canberra would like equal time.

Dr. Kilham: I will address the question of waiting times. Our experience is every time the state government announces a program to deal with waiting times, the waiting times get longer. Because we have this ability within the system to switch from the public to the private and back again, each time the government says it will spend more money to reduce the waiting lists, expectations of service in the public sector increase and people then rejoin the public sector lists. In reality, programs to reduce waiting times do not work; they only relocate the business in the public sector.

Governments should simply decide how much public hospital funding they are prepared to fund and then just let the system resolve it. If they decide there will be five-year waiting times for some elective procedures, then so be it, that is the rationing. This is a system where the demands are inexhaustible and rationing care cannot be avoided. If you are not going to use prices then you have to use waiting lists.

On the question of why we restrict private health insurance to the hospital sector, the fact is that medicare in Australia has been a very successful program. It has been very stable, it is well understood, it is easy to negotiate, and so it is very popular with the people.

For that reason, it has taken on something of the characteristic of a sacred cow. Governments are forever changing it; but they are changing it surreptitiously and secretly with underground methods. However, they are not ostensibly changing it and there is simply no groundswell of public pressure for it to be changed. That is the reality. It is popular, it is stable, and people want it to stay.

Dr. Richards: My understanding is that when the medicare system was introduced in 1983-1984, it was done by the Labour government in the context of a wage deal with the unions, where free access to medical services under medicare were part of the "social wage" under an accord with the union movement.

Given that access to primary health care services is seen by the general community and by the political parties as the most sensitive political issue, availability of private health insurance I understand was seen as potentially increasing the price. Whereas accessibility and the competitive pressures around bulk billing were seen as reducing the price to individuals and I think the public policy sits in that context.

In terms of waiting lists, the newspapers love stories about public hospital waiting lists and political parties use them to kick each other. The public focus on public hospital waiting lists is one of the major barriers to the commonwealth becoming interested in taking on responsibility of the funding of public hospitals because currently the odium is firmly to the state governments now.

Dr. Madden: Collecting statistics on waiting times is probably the most difficult area across Australia. We do not have national definitions and it is certainly something that gets everyone very sensitive. There are three tiers of waiting time. The most urgent cases - those counted if they wait more than 30 days for treatment - are fairly limited in number. The big waiting times are out in the third category, the lowest need category. It is easy to overstate the issue.

With regard to access to service in the community, it has not been mentioned that there is ancillary health insurance in Australia that does cover dentistry and physiotherapy and other services. This plan is optional. It does not necessarily go with hospital insurance. But the government 30 per cent subsidy covers that ancillary insurance as well.

So there are, in fact, quite large commonwealth subsidies going through the private health insurance system now to people who have this ancillary insurance. The statistics show some odd outcomes in that regard as to who is getting Commonwealth government subsidies, say for dentistry, which is a highly sensitive issue we have not touched on otherwise.

Mr. Schneider: It sounds like the absurd situation where we can pay a podiatrist to cut a diabetic's toenails, but we cannot pay a general practitioner to refer the patient to the podiatrist in the first place. However, we can pay a surgeon in a private hospital to amputate the leg if the diabetic patient develops gangrene because his or her toenails were not cut properly. That is one of the absurdities of not having a link between the primary care and the hospital care.

One of the points is true, that originally it was felt that if private insurance was funding primary care, it would increase the cost of the system because doctors would trade off with government the benefits they were getting from insurance. They would demand higher medicare rebates or otherwise decline to treat medicare patients. I do not think our experience has shown that to be true. The GP market is very competitive.

What we are saying at the moment is not perhaps robbing Peter to pay Paul but collecting from Peter to pay Paul. The patient who is bulk-billed is being subsidized by the co-payment charged to the wealthier person who the doctor may feel can afford to pay. So in a practice you will have low-income people being bulk billed, higher income people being charged co-payments. Now I see no logic why people should not be able to insure for that primary care, but it is a political problem.

The Chairman: I thank you all on behalf of my colleagues for what has not only been very helpful but, as one has learned to expect over the years in dealing with Australians, wonderful candour and a great sense of humour. We thank all of you for taking the time to be with us. It has been an entertaining and helpful finish to our day.

The committee adjourned.

---