Canada should take healthcare lessons from Australia

Stephen Duckett is Director of the health program at Grattan Institute in Melbourne, Australia, and is a former head of the Australian Government Department of Health.

Australia and Canada share many characteristics, but Canadians may not know 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 two countries.

There are indeed a number of areas where Australia’s experience might prove helpful to Canada. The first is the public funding of pharmaceuticals. Australia has had a national Pharmaceutical Benefits Scheme since the late 1940s. It now 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, unemployed) the co-payment is $6.30 ($6.34); for the rest of the population it is $38.80. There is a safety net, which drops the price to zero or $6.30 after about 50-60 prescriptions a year.

The upside of the scheme is obvious: Medication – even the most expensive of the new formulations – becomes affordable to most people. Drugs are listed on the scheme only if they have been shown to be cost-effective. This helps to ensure the costs of the scheme are commensurate with the benefits. The scheme pays more than some other countries for listed drugs – New Zealand and the United Kingdom pay less. But the prices paid in Australia are about one-third 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 on the lowest incomes, that figure 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 (CDC).

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 the 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 other 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 have to pay relatively high out-of-pocket costs, not only for pharmaceuticals as discussed above, but for 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 per cent of the cost of premiums – and there are tax penalties on middle-to-high income earners who do not have private insurance. Contrary to the original political justification for the subsidies, there is 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 – more private care is associated with more public waiting.