Dr Kerryn Phelps, AMA President, to The National Health Summit 2002, Avillion Hotel, Sydney

First and foremost, the health care system is about people caring for and relating to people.

And how well or how badly we do that is a marker for the humanity, or lack of it, in our society.

Health policy cannot be steered solely by the charts of the economists. It is essential that we have a strong social policy framework, and a strong patient focus.

The problems in the health system cannot be fixed by the rigorous application of competition law.

In our view, the ACCC has exacerbated many problems in health through its inflexible 'ask questions later' approach to issues affecting GP and specialist rostering in rural and metropolitan Australia, the training of the medical workforce, and the role of representative organisations in the delivery of health services in public hospitals.

The ACCC favours soft targets.

While menacing individual doctors and small groups of medical practitioners over things like rostering, they do little about the big and the powerful who really can have an effect on the health system.

As a community, we need to get our priorities right.

Doctors should be able to serve their patients and their communities without fear of prosecution or persecution over rosters or cooperating with other doctors and health workers to provide around-the-clock quality health and medical services.

And, I say it again and again, it is yet to be demonstrated what, if any public benefit the ACCC's strict application of the TPA has in the health sector, particularly in light of the climate of fear they have generated in the medical profession.

Moving on…

Healthcare Financing

In broad terms, the Federal Government has had a stable Medicare in place as the centrepiece of its health policy since 1984.

The previous Labor Government and the current Coalition Government have expressed support for Medicare which provides for MBS rebates subsidising medical services and free public hospital services.

No representative lobby group of any significance has been calling for the outright dismantling of Medicare. It continues to enjoy widespread support.

While it may have fallen short of its core aims of universal access and equity, Australians have enjoyed access to a large number of good quality medical and hospital services for only 8.5% of GDP.

Health spending is not out of control.

And, despite the strictures on them, Australian health professionals continue to provide a quality of service with few peers elsewhere in the world. Things could definitely be worse.

Is the current healthcare financing structure working?

Well, cracks are becoming more numerous, and they are getting deeper and wider. From the AMA perspective, the Medicare Benefits Schedule is seriously under-funded. The public hospitals are seriously under-funded. Aged Care is seriously under-funded.

And the PBS is now under open threat from the Razor Gang because of its recent rapid rate of growth, even though:

by international comparisons, Australia is not a big spender on pharmaceuticals; and

the new drugs that are starting to emerge promise large health benefits and significant tertiary health sector savings.

The AMA recently released a PBS Discussion Paper in which we encouraged a more robust community debate to ensure the Scheme's long term future.

This debate should be about solutions, not apportioning blame.

While drugs such as Celebrex and Zyban pushed the trend of growth for the PBS last year to around 19 per cent - above the more recent 10-11 per cent - our system still rates better than the UK, the US and Japan.

Yet many similar countries spend a higher proportion of GDP on pharmaceuticals than Australia. Why is that so? Is it because they have a more rational framework for identifying the national benefits of well-targeted and well-evidenced drug subsidies?

We should keep our concerns in perspective - domestically and internationally.

And people - including the Government and the Health Department -must look beyond blaming doctor prescribing as the source of cost increases…especially in the context of the May Budget.

The rapid growth of PBS spending frightens Treasury and Finance. But reining in costs for this important scheme requires more than the opinion of a zealous economist.

A second opinion, in this case, is recommended.

PBAC is required by its charter to assess new drugs in a narrow, cost-effectiveness framework.

Australia needs to widen that framework, to take account of not only the budget costs of the subsidies and the cost savings elsewhere in the health system, but also other benefits to the community including the benefits that flow from more years of active and productive life.

On the medical side of healthcare financing, in the first year of Medicare's operation in 1984-85, the aggregate gap between fees charged and rebates paid was $200 million per annum. By 2000-01, this figure had increased to $1.5 billion.

This is the amount now picked up by households because the MBS hasn't kept pace with the cost of producing the services.

The Relative Value Study (RVS) tells us that the MBS is $1.6 billion under-funded. The Government has done nothing to address that.

Let's have a closer look at our public hospitals. You don't have to take my word for it that they are under-funded. Ask anyone who works there or the people on trolleys in the corridors.

The Senate Community Affairs References Committee looked at the public hospitals and said they needed an immediate injection of $900 million over two years plus capital funding to rejuvenate a run-down system. That was last year. More money is needed now.

Neither the States nor the Federal Government have taken up this recommendation and the public hospital system just staggers on in this situation of malignant neglect, with the Government hoping that the best way to fix the problem is to ignore it.

The AMA believes national action on public hospitals is needed now, to provide a solid base to cater for increased demand and increasing costs in the coming years and decades.

This will require commitment and cooperation from and between the Commonwealth and State Governments and the medical profession and other health workers.

Next month, on April 13 and 14, the AMA will host a high-level forum in Canberra to discuss health financing issues, with special emphasis on public hospitals and getting a more responsible, accountable, seamless and transparent approach to funding…something that the general public can understand.

Both the Federal and State Governments will be involved in this forum and we hope to see some progress on the vexed question of public hospital funding.

So we have these major health programs - the PBS, public hospitals, aged care, indigenous health, and others - which most would agree are under-funded relative to the genuine clinical need.

So where to from here?

The upshot of the under-funding is rationing of services through waiting times, large service gaps in some cases (affecting both GP and specialist medical services) or even the virtual absence of some services such as public child disability services in Australia.

Where services are provided to public patients in public hospitals, they must be provided free of charge at the point of delivery.

The shortfall in funding carries no financial risk to patients, but there is a health risk. In the private market, there are financial risks.

Governments are critical of medical practitioners whose charges are above the MBS even though the MBS has not kept pace with the increased cost of running a medical practice.

We all have to accept that there is a scarcity of resources. We have many wants and needs: health care, food, shelter, clothing, education, holidays.

When it comes to spending the taxpayers' dollars, health competes with defence, education, roads and regional services and the list goes on.

However, the Government cannot have it all ways.

It cannot say, on the one hand, that we'll have a universally accessible, equitable, high quality system funded through the taxation system - and provided free of charge at the point of delivery - but, on the other hand, we are not prepared to fund it and we will offer no other solution.

If politicians choose to raise the expectations of the community about what can be achieved with the taxpayers' dollars, then they must also wear the flak from the electorate when they choose not to deliver on their promises.

So the first option is for the Government to find the money. We have seen there is a great reluctance to do that among State and Federal Governments of all political persuasions.

The second option is for the Government to acknowledge that there will be overt rationing, either non-price (gaps in service provision) or price rationing (fee gaps).

This is not the Government's long suit - I am not singling out the current Federal Government but I certainly don't exclude them from the comment. It is not very good at acknowledging that the Government cannot provide everything the electorate wants.

You will note that the Government never accepts that it is its fault that there are fee gaps or waiting lists or service gaps. It is always the public or the providers or, best of all, the doctors who are to blame.

The third option is to say, given we won't fund the system and given we won't acknowledge that fact publicly, can we introduce private financing into the health system?

Can we somehow encourage private contributions to health? The 30% rebate is a significant first step down this track and you would have to admit it has been successful in that limited objective.

We have seen a 50% increase in the level of private health participation and some real prospect in the long term of taking the load off the public system.

While this policy may have some failings - the increasing cost of the taxpayer subsidy, for instance - what are the alternatives?

Detractors can only offer the pie in the sky alternative that the Government should fund everything, otherwise the whole system is rendered inequitable.

The realists know that the Government will not fund everything.

There are risks for the Government in this third (and last) option.

Medicare has been seen as part of the social "accord". In the context of increasing income disparities between the rich and the poor, Medicare has been seen as a way of decreasing those disparities.

There is a political risk that increased private financing will create a potentially inequitable two-tiered Medicare system.

Hence, the introduction of the rebate has evoked the prophets of doom who warn of the slippery slope, the Trojan Horse, the thin end of the wedge, or all of the above.

I think a greater role for private financing is inevitable.

There are very few ways to do it well and these do not enjoy support within the broader community or even the medical community.

Whichever way we go, there will always be a need for a high quality robust public hospital sector providing good care for Australians and also training the next generation of medical practitioners.

We will increasingly need to look to the private sector for training of doctors as the 'brain drain' of senior specialists from the public to the private sector proceeds.

One of the big challenges is to fill the gaps in service provision.

How many CT scanners are needed and where should they be?

How may PET scanners are needed and where should they be?

How many MRIs?

How many radiation oncologists does the community need and where should these specialists be located?

And how many obstetricians should there be and where should they be?

At this point I could go on at length about the current crisis in medical indemnity and its effect on the provision of medical services across the community.

I'll save that for another occasion but I urge you to keep a close eye on this situation over the next days and weeks.

The outcome of this crisis will have a dramatic impact on both health care financing and service provision well into the future.

I'm still not sure that all members of the federal Government are aware of the significance of this situation.

I hope they act before it is too late.

Back to the subject at hand…

Responsibility for public hospitals is distributed between two levels of government.

Links to other health programs such as Aged Care are problematic and provide some inappropriate incentives.

These issues were examined by the National Health Strategy Review conducted by Jenny Macklin, now Deputy Leader of the Opposition, in July 1991.

In an Issues Paper called "The Australian Health Jigsaw", the Review described all the problems of barriers between programs such as public hospitals and Residential Aged Care, cost shifting, dilution of responsibilities, lack of accountability and the like, and proposed six options for improvement.

It is arguable that in the eleven years that have elapsed since that report was published, no real progress has been made in making the health financing system work any better.

One major impediment to progress has been the reluctance by State and Federal Governments to accept change.

We cannot have an efficient seamless system until there is change. And the converse applies. We cannot have fundamental change until there is an efficient seamless system. Therein lies the dilemma.

The fact that all State Governments are now Labor Governments - governments of the same political hue - may make a difference but you need two to tango and the Federal Government may not be inclined to dance.

At the very least, we need transparency in the level of funding of the public hospital system. At the moment, only the Federal Government has to be transparent in its commitment to public hospital funding over the life of the Australian Health Care Agreement.

This needs to be extended to include the State Governments along the lines proposed by the Labor Party at the last election - the Medicare Alliance.

The current Federal Government is now proposing concepts along similar lines.

There must be national standards of reporting and accountability on the key performance indicators for public hospitals - access (more commonly known as waiting lists), quality and efficiency.

Although we have seen some improvement in the quality and timeliness of information on public hospital performance over the past five years, there is still some way to go and we need to get there sooner rather than later.

Hopefully there will be no piking out on the big ticket items for reform.

We need better links between public hospitals and Residential Aged Care for the Aged - and between GPs and hospitals - and these can best be achieved by fundamental change.

These changes are not without threat to the medical profession but the medical profession is prepared to look at them and evaluate their impact on patients and the profession.

My hope is that governments will be prepared to do the same.

The future of General Practice

At the core of any financing plans for the health system are our general practitioners - the public face of medicine in this country.

There are some salutary lessons in the way successive Federal Governments have handled General Practice over the past decade or so.

If you take the rhetoric at face value, policy has been concerned with maintaining access and equity without price barriers and improving the quality of primary care. But actions speak much louder than words.

Let's look at a potted history:

The vocational register was introduced in 1989, and promised higher rebates with a claim of up-skilling GPs;

In the early 1990s, there was a very brief flirtation with patient co-payments, ditched after only four months;

There followed a period of sustained and large real reductions in GP rebates. Between 1992 and 1997, the MBS fee for a standard consultation rose by just 70 cents, a 2.9% increase over the five years or 0.6% a year. In the same period, average weekly ordinary time earnings rose by nearly 4% per annum - over 21%;

At the same time, the Government dribbled money into the blended payments system, creating a sea of red tape and paperwork which diverted resources away from patient care;

The GP MoU was introduced to implement the Government's desire to cap total funding of GP services;

Only when the falling rate of bulk-billing assumed a political dimension did the government start to increase MBS fees by more realistic amounts, but the increases since 1997 have barely kept pace with average earnings;

Money has been spun off into specific disease programs of extraordinary bureaucratic complexity, and siphoned out of there to help an amenable GP organisation speculate in Canberra real estate

The government has run the line that Australia has too many GPs, and then has sought to flood the market by recruiting growing numbers of temporary resident doctors

It has played a spoiling hand in relation to the Relative Value Study, and has simply refused to even open discussions on the outcome of the study

What can we learn from all this?

The resounding lesson is that the Government does not want to pay for a high quality system of primary health care, but that it does not want to tell the electorate that it does not want to pay.

The other lesson that the GP organisations have learnt, and in some cases are still learning, is that the Government has been successful in getting them involved in bureaucratic processes that have no end and no aim other than to dissipate energy and avoid truly open, forthright dialogue.

Such success is inevitably temporary. Eventually, the professional organisations lose patience with the games.

And so do the patients. We are seeing social divides in this country, in terms of access to a GP, like nothing we have seen before. The Government's "conventional wisdom" was that we had too many GPs - far too many in the cities and not enough in the rural and remote areas. All we had to do was to get a few of them to move to the bush and all would be OK.

When I became aware, in late 2000, that the Australian Medical Workforce Advisory Committee (AMWAC) had concluded that there was a large surplus of GPs, I started asking questions because AMWAC' conclusion was counter-intuitive.

The feedback I was getting from AMA members, from community groups and from Members of Parliament, was that GP shortages are endemic and spreading.

I therefore asked Access Economics to conduct a thorough survey of General Practice and to provide the AMA with detailed analysis of the demand for GP services in Australia compared to the actual supply of doctors, now and in the future.

The Study results have been published and are available for you all to examine.

Access Economics is documenting the full methodology and we will make that available also.

The key findings of this investigation are that, contrary to conventional wisdom, there are severe shortages of GPs in rural areas even now, despite almost a decade of policy development, and that there are large and increasing shortages of GPs in outer-metropolitan, often low-income areas.

So now we have an emerging socio-economic divide alongside a city/country divide. And the evidence is that the patients, like the GPs, are losing patience with the Government's stonewalling.

Looking into the future, there will be a large increase in the demand for GP services as the population ages.

Based on current working patterns and assuming current policy settings are maintained, the number of GPs required will rise from 22,000 in 2000 to 33,000 by 2020. Assuming current policy settings, the number of GPs supplied will increase from 20,000 in 2000 to just over 22,000 by 2020.

There is a yawning gap that needs to be addressed by changing the policy settings.

The levers affecting the supply of GPs are firmly in the hands of the Government and include the number of university entries into medical training, the number of GP trainees who are allowed, the supply of overseas trained and temporary resident doctors and remuneration for GPs.

Given there can be a 10-year time lag between a decision to increase university entry and a GP getting to work in a community, the Government must start pulling the levers very soon and very hard.

Otherwise, the future for general practice is very bleak, which means the future for positive community health outcomes is even bleaker.

I've only scratched the surface of both topics - health financing and the future of general practice - but I'm happy to take questions.

Thank you.

CONTACT: John Flannery (02) 6270 5477 / (0419) 494 761

Sarah Crichton (02) 6270 5472 / (0419) 440 076