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Stephen DuckettA recent conference in Toronto addressed whether Australia has anything to teach Canada about how Canadian medicare might evolve. It’s a useful question to explore.

Australia and Canada share many characteristics, but Canadians may not know that one of them is that Australia’s universal health insurance scheme, Medicare, was modelled on Canada’s – albeit adapted to account for constitutional differences between the countries.

There are a number of areas where Australia’s experience might prove helpful. The first is the public funding of pharmaceuticals.

Australia has had a national Pharmaceutical Benefits Scheme since the late 1940s. It provides comprehensive coverage against the cost of pharmaceuticals for the whole population. The scheme, though, requires patients to make a modest co-payment for each prescription. For people on income support (retirees, the unemployed) the co-payment is $6.30; for the rest of the population, it’s $38.80. There is a safety net, which drops the price to zero or $6.30 after 50 to 60 prescriptions a year.

The upside of the scheme is obvious: medicines – even the most expensive of the new formulations – become affordable to most people.

Drugs are listed on the scheme only if they’ve been shown to be cost-effective. This helps to ensure the costs are commensurate with the benefits. The scheme pays more than some countries for listed drugs – for example, New Zealand and the United Kingdom pay less. But the prices paid in Australia are about one-third of those paid by Canadian provinces.

One downside of the Australian design is the mandatory co-payments. About one in 12 Australians who used medication say they have deferred filling or did not fill a prescription because of cost. Among the 20 percent of Australians with the lowest incomes, that rises to one in 10.

Another area where Canada can learn from Australia is in-home care. Australia has a national home care program that aims to keep people in their own homes as long as possible, and out of more expensive residential aged-care facilities.

The program has grown over the past 50 years, with a major enhancement in the 1980s. It provides funding support for a wide range of services, from low-intensity programs such as meals on wheels through to intensive in-home nursing care. The program is being transformed, so funding will no longer be provided to organizations but rather to individuals who need what is described as “consumer directed care.”

A third area where lessons may be learned is in efficiency. The Australian hospital sector is more efficient than Canada’s, and further efficiency is being driven by national adoption of activity-based or case-mix funding.

Under this arrangement, hospitals are paid for the work they do – up to a cap. The price per patient reflects average national costs, with marginal adjustments for such factors as whether a patient comes from a remote area. Case-mix has replaced a variety of schemes such as area funding, which was problematic in metropolitan areas where a significant number of patients came from outside the local area, and global budgets, which were associated with substantial variations in efficiency between hospitals, with no evidence that higher-cost hospitals were providing higher-quality services.

Canadians should not get the impression, however, that all is rosy in Australia. Australians pay relatively high out-of-pocket costs for pharmaceuticals and medical services. This hits the poor hardest.

Australia also has a mixed public and private system, with physicians permitted to work in both sectors. Private health insurance for private hospital care is subsidized – at about 25 percent of the cost of premiums – and there are tax penalties on middle-to-high-income earners who don’t have private insurance.

Contrary to the original political justification for the subsidies, there’s no evidence that subsidizing private care has had any benefit on the public hospital system. In fact, waiting times for public hospital care and proportion of care in the private system are directly rather than inversely related. In other words, more private care is associated with more public waiting.

Canadians can learn from Australia’s healthcare policies – both in what to adapt and what to avoid.

Stephen Duckett is director of the health program at Grattan Institute, an independent public policy think-tank based in Melbourne, Australia. He’s a former head of the Australian government Department of Health and was the inaugural president and chief executive officer of Alberta Health Services.

Stephen is a Troy Media contributor. Why aren’t you?

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