Health Care Systems Reform in Insurance vs Tax based System Australia

1. Health Care Systems Reform in Insurance vs Tax based SystemAustralia Florence Kwan Janice Yim Nora Kwok Molin Lin Rita Mak

2. Initiatives • Initiative that was introduced to meet challenges • Health care Expenditure: Case-mix funding • Health care Expenditure: PBS • Viability of PHI: Life time health cover, 30% tax rebate • Strengthening the Medicare: Medicare plus • Workforce shortage: workforce policy

3. Casemix funding Evaluation

4. Casemix funding • Public hospital funding model based on the level and composition of output • Aiming at providing explicit incentives for hospitals to improve efficiency Rationalize health care expenditure

5. Casemix funding • Greater focus on cost and benchmarking • Increased output to address waiting time concerns • Increase shift of resources to efficient hospitals from those less efficient

6. Casemix funding: Evaluation • Efficiency • Reduced length of stay • Output • Increased number of patients treated • Decreased waiting time • Quality • No change in the readmission rate

7. Casemix funding: Evaluation • Northern Territory • Casemix funding implemented in 1996/97 fiscal year

8. Casemix funding: Evaluation • Efficiency • Length of stay is reduced through better scheduling of tests, discharge planning and review of need for hospitalization

9. Casemix funding: Evaluation • Output • Weighted separation • The sum of no of separations x cost weights for AN-DRGs • number of bed days • Product of average length of stay and number of separation

10. Casemix funding: Evaluation • casemix funding has a substantial impact in lifting total casemix-weighted separations • Decreased the total number of bed-days

11. Casemix funding: Evaluation • Quality • Reduced quality = premature discharge lead to higher readmission rate • No impact on readmission rates

12. Casemix funding: Evaluation • Victoria 1992/93 vs 1993/94 (before and after introduction of casemix funding) • No of patients increased 5% • Total expenditure decreased 5% • Number of casemix weighted separations increased by 4.4%

13. Casemix funding: Evaluation • Challenges • Supply-side moral hazard • Supplier induced demand • Clinical diagnosis and procedures

14. Casemix funding: Evaluation Conclusion • Casemix funding reduce inefficiencies among hospitals and seek maximum returns for the health dollar

15. Private Health Insurance Initiatives in 2000 : Lifetime Health Cover : Replace the community rate. Join the PHI < 30 years of age and stay in PHI, pay a lower premium throughout their lives 30% Rebate : Subsidy of 30% for all PHI fund members by Government in 1999

16. Private Health Insurance – initiatives- Evaluation • Membership increased from 30.5% to 42.9% of Australian from 1998-2004 • 27% increase in PHI fund reserves in 12 months • Minimal or no increases in PHI premiums • Decrease in overall claim rate What about the long term effect ?

17. PHI membership

18. Private Health Insurance – initiatives- Evaluation What about the long term effect ? Membership aging increases the overall claim rate – highly affected by the birth rate and the aging population. Is the Low premium rate sustainable ?

19. Private Health Insurance – initiatives- Evaluation • Is 30% rebate a huge cost to Government ? Government fund in total health expenditure: 68.8% in 2001-2002 69.9% in 1990-2000

20. These initiatives support the shift of Public service to Private service Private Health Insurance – initiatives- Evaluation

21. These initiatives support the shift of Public service to Private service : Private Health Insurance – initiatives- Evaluation

22. These initiatives support the shift of Public service to Private service : Private Health Insurance – initiatives- Evaluation

23. Total funding for health service through PHI: ( in million ) Private Health Insurance – initiatives- Evaluation

24. Private Health Insurance – initiatives- Evaluation → →Private Service → → Choices of Service → →Appropriate level of Care

25. Pharmaceutical Benefits Scheme (PBS) –Background • One of the major national subsidy • Cover all Australians on the purchase of medicine • Nearly 2/3 of prescriptions are subsidized • Pay more if want patented / branded drug • Two groups of consumers : general & concessional • Safety net on annual expenses

26. Evaluation • PBS has been successful in suppressing drug prices. • Compare with the OECD countries • Leakage ( prescribing outside PBS condition )

27. Price Ratio compare with OECD countries

28. Pharmaceutical Benefits Scheme (PBS) - Initiatives 12.5% price reduction for new brands after 1 August 2005 : • Generic drug already listed on PBS • Price of medicines are linked in generic drugs • Reduction flow on to all brands of that medicine • Applied to combination medicines on a pro-rata basis • Applied to the first new brand after 1 August 2005 only (Once a patent medicine expires, other manufacturers can produce equivalent products)

29. Evaluation • Newly implemented, no actual figure !! Presumption from Australian Consumers Association : • If competition was allowed to function, it could be expected to reduce prices by 20% - 60% • Proposes tendering for generics.

30. Increase co-payment : Pharmaceutical Benefits Scheme (PBS) - Initiatives

31. Threshold Adjustment : Pharmaceutical Benefits Scheme (PBS) - Initiatives

32. Pharmaceutical Benefits Scheme (PBS) - Initiatives Positive effect in a short run : • Reduce the cost of PBS. Maintain its affordability • Decrease contribution from Government • Increase contribution from customers

33. Pharmaceutical Benefits Scheme (PBS) – Increase co-payment - Evaluation • Intended to deter inappropriate use by patients and raise revenue. • No effect on the those receiving sickness allowance, older long term allowee • Pharmaceutical Allowance (PA) will be granted : $150 per year

34. Pharmaceutical Benefits Scheme (PBS) – Increase co-payment - Evaluation • Will fail to greatly increase the patient copayment because 80% of PBS expenditure is on concession consumers. • The copayment for the remaining 20% would soon become astronomical and would tend to drive people away from necessary medical care. • It would not have changed the total cost of the PBS.

35. Pharmaceutical Benefits Scheme (PBS) – initiatives - Evaluation Average growth of expenditures on pharmaceuticals is 13.9% from 99/00-00/01 Reasons suggested for growth : • Increasingly expensive new drugs being listed. • Over-prescribing and leakage • Consumer expectations • Ageing of the population • Aggressive marketing by the Pharmaceutical Industry

36. Pharmaceutical Benefits Scheme (PBS) – initiatives - Evaluation • Initiatives address the situation ? • Increasingly expensive new drugs being listed (-ve ) • Over-prescribing and leakage (- ve ) • Consumer expectations (-ve ) • Ageing of the population (-ve) • Aggressive marketing by the Pharmaceutical Industry • (-ve)

37. Evaluation • Economic efficiency (cheapness ) • Allocative efficiency ( allocate resources where they are most needed ) • Dynamic efficiency ( flexibility to respond to changing circumstances.

38. MedicarePlus Evaluation

39. MedicarePlus: Background Information • Initiators • Commonwealth Department of the Health and Ageing (federal government) • Funding • Commonwealth Government of Australia • Beginning, expected end and duration: • Announced on 18/11/2003 • Began from 2/2004 • Duration: 4-year package, intended to run indefinitely

40. MedicarePlus:Background Information • Problems driving the reform • Decrease in availability • Primarily an issue for regional and rural areas • Decrease in bulk billing rate • Decline from ~72% in 2000 to ~68% in 2003 • Increase in cost to the user

41. MedicarePlusInitiatives • Bulk Billing incentive increases by 50% for regional, rural and remote Australia – and all of Tasmania • increase in bulk billing rate, and on the other hand, increase availability in RRMA • A more generous safety net will cover all other individuals (threshold:$700) and families (threshold: $1000) • decrease cost from user • Steps taken to increase the supply of doctors, and encourage those overseas trained to work in areas of shortage (regional and rural areas) • Increase in availability of doctors in rural areas

42. MedicarePlus Evaluation Bulk billing rate increase in 2004-2005

43. Percentage of Services Bulk Billed, Australia(Medicare Statistics, 2005)

44. MedicarePlus Evaluation Bulk billing rate increase in rural and remote areas in 2004-05

45. Percentage of Services Bulk Billedby State or Territory(Medicare statistics, 2005)

46. MedicarePlus Evaluation Number of GPs from overseas increase in 2004-2005

47. GPs by place of basic qualification, 2003-04 to 2004-05

48. MedicarePlus Evaluation Increase in availability in RRMA

49. GPs by place of basic qualification and broad RRMA, 2003-04 to 2004-05

50. MedicarePlus Conclusion • Major conditions for success • Bulk billing rate increase • Qualified health care professionals come from overseas to work in regional and rural Australia • Increase in the availability of doctors in regional and rural areas • Safety net is a key structural improvement to Medicare, but still too fast to have statistics to prove it’s result. But since 1/2004, more than 33,000 individuals and families were benefit from this plan