Medicare needs a shot in the arm

Structural reform of Australian healthcare financing can cut inequity and promote universal choice as well as universal service delivery.

In a society as wealthy as ours it's understandable that Australians support universal access to healthcare.

But accepting this principle and the current one-size-fits-all structure of Medicare are different.  Under the current structure only those who can voluntarily afford to opt out of the system have real choice.

For the rest of us, the government predominantly picks up the tab through wholly taxpayer-funded visits to local GPs and hospitals with restricted choices.

With only some services requiring co-payment most Australians have no real understanding of how much healthcare costs, armed only with anecdotal stories of nightmare scenarios faced by travellers in the United States' messy pseudo-public/private system.

But healthcare in Australia is expensive as well.  And it's going to become more so.

According to the latest Treasury Intergenerational report based on 2009/10 dollars the government's expenditure on total healthcare provision is set to increase three and a half times by the middle of the century.

Considering research consistently finds health expenditure is concentrated in the final months and years of life the looming acute pressure on taxpayers with a dramatically ageing population is quite horrifying.

Today's taxpayers are paying for the managed departure of their grandparents, and there's about to be a lot more of the latter proportionate to the former.

Without reform universal healthcare cannot continue to enjoy funding consistent with current levels of care.  As a consequence individuals will either have to pay more or there will be rationing of services universally enjoyed.

It's essentially the same challenge government faced with the pension resulting in the introduction of compulsory superannuation.

Instead of continuing to provide universal health financing through a top-down government-knows-all-model the government should use the opportunity of this temporary resources boom to restructure our health system toward a bottom-up individual health account system.

Put simply every Australian would have an individual health account that they contribute to on a periodic basis from their income, like superannuation.  That savings account would then be used to pay for healthcare services as required throughout their lifetime.

As outlined earlier, considering the bulk of people's health expenditure occurs at the end of their life people should easily be able to accumulate savings for their final health bill over a lifetime.

The scheme would also need to be complemented with progressive tax cuts as the transfer of the health financing burden shifted from government to individuals.

Healthcare financing accounts for children would need to remain wholly government subsidised since they will not have had the chance to contribute to their own accounts. 

Equalisation subsidies would also be needed for welfare recipients, low-income earners and people with specific diseases to ensure universality and that no one is disadvantaged because of socio-economic status or because they were born with a particular disease.

According to Monash University Academic Just Stoelwinder's research the Dutch system has working equalisation subsidies supporting their compulsory health insurance scheme.

While the intent of health accounts is for individual management through appropriately regulated financial products, the scheme could be designed to allow Australians the choice to take up an insurance alternative to increase service access and pool risk.

The benefits of restructuring Medicare around individual health accounts are manifest.