Australia’s world-class health system

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Cross-posted from The Conversation:

There is an old joke about one fish asking another about the state of the water and the other answering “what’s water?” When you’re immersed in something and that is your daily experience, you are not able to step outside it – all you see is what you know.

But with all the talk about Australia’s health system being unsustainable, it’s useful to step back and look at the Australian health system in an international context.

So, how do we perform against our peers? The short answer is pretty well.

Comparing inputs and outcomes

Much of the sustainability talk is about costs, and only about costs. Costs are important, but any reasonable comparison of Australia’s standing also takes into account what we get for the spending. Measuring costs is (relatively) easy. We can compare cost per head spent on health care (standardised across countries into a common monetary unit) or costs as a share of gross domestic product (GDP).

Measuring the benefit side is a bit trickier. The most common comparisons of outcomes are mortality-based measures, partly because measurement is definitive. There are choices here too. Life expectancy and a measure of “early deaths” (deaths before age 70) known as “potential years of life lost” are the two most common.

Using these mortality-based measures to compare health systems has a number of weaknesses. It assumes that the most important contribution of the health system is delaying death, ignoring quality of life. They also assume that the health system is the most important contributor to life expectancy, ignoring broader socioeconomic and environmental factors such as clean water, employment and good nutrition.

Despite these weaknesses, the measures are commonly used, readily available for comparable countries and they’re the best we’ve got.

Better than average

The graph below shows where Australia sits compared to similar OECD countries (countries within 25% of Australian GDP). Countries which are better than the OECD average on life expectancy are on the right hand side. Countries that spend a smaller share of GDP on health care are on the lower part of the graph.

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Australia is in the good quadrant: better than average life expectancy, lower than average share of GDP. The stand-out poor-performing country is the United States, with high costs and poor outcomes.

So we’re OK now, but are we going downhill?

The graph above shows data for the most recent year available. Australia’s historic trends are also good. In 2001, Australia spent 8.2% of GDP on health; ten years later GDP share had increased to 9.1%. Over the same period, the comparable country average had increased faster – from 8.8% to 10.3%.

Our life expectancy improvements essentially mirrored other comparable countries.

This suggests that in addition to being in a good position now, the trend in both inputs and outcomes over the past decade has been a healthy one, comparably.

No cause to be complacent

Australia is performing well against our peers, and has done so over the past few decades. But current life expectancy is the product of past policies. And past good performance doesn’t guarantee we are well positioned for changing health-care needs.

Equity concerns

It’s important to remember that the data above are country averages. In Australia’s case, the average masks very poor performance for our Indigenous populations whose average life expectancy is around ten years shorter than non-Indigenous Australians. Poorer Australians also have worse health outcomes.

There are other equity issues as well. A Grattan Institute submission to a recent Senate Committee inquiry showed that some households face very high levels of out-of-pocket costs. Australian Bureau of Statistics surveys show people are already deferring care because of high out-of-pocket costs.

Access to care for people in rural and remote Australia is much worse than in metropolitan areas, causing problems not only in term of health status but also in increased cost of care.

Future care needs

Repositioning the health system to address the challenges of chronic disease is hard. It seems obvious that a system that pays doctors for seeing patients again and again is probably not suitable to encourage continuity of care and looking after a person for an ongoing illness.

Unfortunately, getting beyond that simplistic statement is complex. The evidence on the best way to pay doctors is quite weak and so moving forward on better payment systems will require experimentation to identify what works in the Australian context.

Structural changes, to improve seamlessness of care to ensure that a person with chronic illnesses has access to all the professional skills needed, will also be required.

Prune waste

Science advances, and with it come new treatments and new demands for funding. The increasing prevalence of chronic illness creates another set of pressures on health spending.

There are a number of potential responses to the challenge of increased costs. The worst is to panic and adopt draconian “quick fixes” which aren’t fixes at all. The $7 co-payment proposal, which shifts costs rather than saves them, is an example of this approach.

The alternate pathway is to attack waste in the health system: there are inefficiencies in hospitals, in the way we use our highly skilled health professionals and in how we pay for pharmaceuticals. Billions of dollars can be freed up in these areas.

Pruning waste is hard as every dollar of health spending is a dollar of someone’s income, profits or revenue. Rent seekers will be out in force to defend the status quo. Paraphrasing another famous saying, political leadership was never meant to be easy but nevertheless, Operation Eliminate Healthcare Waste should surely be a political priority.

Where to from here?

Australia is not alone in facing these challenges: the changing health-care profile is a universal phenomenon. Other countries are addressing these issues and we can potentially learn from those experiences. The Conversation will be publishing five “country studies” over the next week to explore these international lessons.

Article by Stephen Duckett, Director, Health Program at Grattan Institute


  1. Tassie TomMEMBER

    It is very hard to prune back health beaurocracy because – how do you get rid of a job if no-one knows what the hell that job actually does in the first place? It’s like a sword fight with a banshee.

    I heard (unvarified) that 40% of people employed by the NSW Local Health Districts have no patient contact. Most of these jobs would not even be “on-site”.

    • I work in NSW in rural health. Your 40% comment sounds like BS. Either “varify” or verify prior to posting on a blog that prides itself on veracity of posted information.

    • People talk about “pruning back the bureaucracy” but that is simplistic. Doctors and nurses are the first ones to complain if they don’t have enough admin staff.

      Who do you think makes the appointments, types the letters, files the test results, faxes your patient information to your GP or sends the information to your insurance company so you can get paid?

      It is the “admin staff” those demonised workers that everyone appears to “love to hate” that hold the health system together – not the doctors!

      After 15 years in the public health I can tell you that the doctors are only interested in money – not healthcare.

      • They used to be interested in healthcare but became jaded by the continuous random impediments thrust before them as a result of off-site think-tanks comprised of anonymous and therefore blameless bureaucrats.

      • Next time you’re sick, consult your app if you have one. Maybe sooner rather than later. Might have a colonoscopy option.

  2. Australia gets an outstanding deal for its $$$ spent on healthcare. How is this possible?
    Are the doctors making superior and cost conscious decisions in treatment? Are we using cheaper pharmaceuticals and medical devices? Or is it just that Australia grossly underpays its health work force so it can afford the healthcare it demands?
    Looking at the income/cost disparity between public and private healthcare I should think the latter. Doing away with a free health system would open the public’s eyes to what the real market value of services are!

    • GIven your conclusion Australia underpays its health workers, how do you think we manage to do that?

      Are our doctors and nurses naturally more altruistic, or have we found a way to deflate the market by finding cheaper medical help elsewhere?

      Supposing it is the second, what would happen to medical costs if wages in our country were to converge with wages in countries that have traditionally been sources of lower cost labour across a variety of sectors, China and India, for example?

      • Its very simple…$150/hour is the base salary for any specialist in a hospital. Medicare pays $500 for item 30385 “laparotomy control of post-op bleeding”…That’s $500 for stopping someone bleeding to death!,…plenty of examples in the MBS available free online. The rates of medical, nursing and allied health reimbursements are also freely available if yo usearch under respective enterprise bargaining agreements.
        Government.medicare can very easily not pay people.
        Havent you seen the ambulances with slogans written all over…havent you seen the nurses fighting for pay rises?
        We could just import cheaper health work force as we do fruit picking…might not be a bad idea! If you want it but can’t afford it, just enslave someone. No worries.

      • arnold,

        My point was we already do – this is one of the front running areas of our population ponzi/ wage deflation strategy.

        The subtext was if the PTBs achieve their mission of massive wage deflation, we might find that Indian doctors and nurses are suddenly way beyond our means – our strategy may or may not improve our ‘competitiveness’ but it definitely reduces our spending power.

        EDIT: Races to the bottom really aren’t a lot of fun when you’ve hit the bottom.

    • It’s primarily because we are able to benefit from effective collective bargaining for pharmaceuticals made in countries that actually have manufacturing.

      That the US is the outlier is the elephant in the room. Where do you think that devices, pharma and training for Australian specialty doctors comes from? Switzerland?

      • Some of it definitely!

        Premiere: Life-Box on a helicopter!

        The first intensive-transfer with the mini-heart-lung-machine “Life-Box” and IABP on a helicopter in Switzerland

        Transfer from Kreuzlingen to Berne

      • The training for Australian specialists comes from Australia…very few go to the US as having to sit the USMLE is a painful exercise and no income. You live off your own savings.
        Canada, Britain, Ireland are more popular sources for fellowships.
        The same collective bargaining applies to the health work force.
        I for one would be happy to ditch medicare and privatise the entire health system. Sure there will be inequity…but that’s economics and slavery is not the answer to inequity.

      • I work in the medical devices field. I don’t think that I know any cardiac ep or surgeon who hasn’t spent significant time overseas – especially in the US or Canada.

      • My bad the ep is still a MD, maybe not for long, heading to technician like a radiographer…

      • Not for long? A Cardiac Electrophysiologist isn’t a cardiac technician. Cardiac techs don’t put in Pacemakers, Implantable defibs or do catheter ablations. EP is always going to require an MD. It’s one of the most specialized areas out there.

      • I know, I have a friend who switched to ep where he originally trained as a Cardiothoracic surgeon, basically because CTC surgery is old hat (his words not mine).

        You say always, we’ll see.

        EDIT: Im not poo-pooing it – as it were – quite the opposite, medicine is so advanced in that field we do it very well. LVAD, BiVAD etc stay in ICU about a day or two — burns and pulmonary transplants stay months, so…

      • “cardiac ep or surgeon Neither of those are doctors.”

        Always amazed how wacky comments become when medical issues are raised on what is otherwise a fantastic site. I am sorry, but a cardiac surgeon is a doctor, which is what I assume is you mean by an MD

      • Yes yes alright, a ctc surgeon is also a doctor.

        ….I take it back….

        EDIT: In my defense I saw surgeon on its own not linked to cardiac, and I misstook ep for tech… shoot me….

      • “In my defense I saw surgeon on its own not linked to cardiac, and I misstook ep for tech”

        When is a surgeon not a doctor unless we are still in the 1880s and they are also a barber?

      • Oh for crying out loud they don’t really look after patients once they’re off the slab, that’s what doctors/intensivits are for.

      • ” they don’t really look after patients once they’re off the slab, that’s what doctors/intensivits are for”

        Which country/planet/dictionary are you talking about? I would not want a highly strung, coffee bean eating cat looking after me.

      • ‘When is a surgeon not a doctor unless we are still in the 1880s and they are also a barber?’

        Now that was good!

      • “Okay so name me one surgeon that takes active management of the patient post op….”

        Earth to Migtronix: See current membership of RACS. If they don’t attend postoperative management of their patients. they will likely be struck off. Google may not help you any further, even if you get the spelling right.

      • Ooooohhh a morning ward round, or more properly these days, an app I wrote for them that shows them a live chart.

        They can indicate to the doctor taking ACTIVE management, they don’t tell the nurse when to up the dosage of propofol,…

        Did Earth answer you?

      • Something tells me you never wrote an app and haven’t been to a hospital recently. You googled propofol, but it’s rarely used outside of intensive care after surgery. Have a deep sleep.

      • Ummm I write software used in ICUs, was in hospital today, my avatar is the ambulance bay AT SAID HOSPITAL.

        Enjyoy beiing wrong, call doctor if it persists…

        but it’s rarely used outside of intensive care after surgery.

        So I gave you an example of where surgeons DON’T take active management post-op and your conclusion was that I had no idea what I’m talking about? Genius….

      • Lordy Mig, you really do have a problem.

        No-one can possibly be productive at work while spending this much time arguing with everyone about everything at MB.

        10,000 posts a day and no wiser.

  3. Lot a fat around the administration level, start with the MBA’s and work up.

    Skippy… Americas health system is fraught with fraud, one of the most costly line items to any industry.

      • Errr I don’t smoke and I don’t eat maccas, lordy Lecturax you sure like being wrong with your dose of arrogant prick don’t you?

      • Do you see that Hugh? You ask why Australians are pro censorship when the rest of the English speaking world values debate, maybe Lecturax can answer.

        Where I come from if you can debate intelligibly across a variegated stream of topics, and this is just insane from an Australian perspective, it makes you smarter.

        Apparently, if we follow Lecturax’s (a character I’m convinced belongs in the Asterix stable) reasoning you are smart when you have no differentiated opinions and merely post twice a day, in vigorous support of the group think…

    • A world class system and yet outrage at suggestion of $7 copayment capped at $70!!!

      Yes, because that was transparently a first step towards disassembling said world class system.

      (And it wasn’t capped at $70, you need an updated press release. Though in fairness, even Abbot and Hockey got that wrong, and it was their policy – so we shouldn’t be surprised if a mere mouthpiece does as well.)

    • outrage at suggestion of $7 copayment capped at $70!!!

      The issue is not the cost, its the intention behind it. Why punish the poor and the sick with a copayment (that doesn’t even go towards reducing the deficit) when huge rorts available to the wealthy are left untouched?

      I want an explanation, not obfuscation.

      • “outrage at suggestion of $7 co-payment capped at $70!!!”

        A co-payment that:
        – does not go back into funding the health system.
        – does not go to fixing our ‘budget emergency’.

        But will make the overall system ‘worse’ (probably cost more as less preventative medicine) at the expense of the less well off (almost everyone already pays more on top of medicare payment to see a doctor).

        It makes does not make sense on any level besides an IPA ideological driven level. Madness!

  4. ceteris paribusMEMBER

    Congrats MB. Nice article find. More please about health economics, especially about wasteful cost drivers in the system, what areas of health delivery are highly effective and cost efficient, some explanations about the social determinants of good health and wellness, health investments for national economic productivity, workforce and IR issues in health etc. etc.

  5. My family has benefitted much from Australia’s great public health system – we would be very badly off without it. Thanks.

    Sure, it’s not perfect, but it is pretty good.

    • You’re welcome? You’re right the few families that have a family member with a chronic condition, etc, the system works very for them.

      For the infrequent customer, like myself, it’s pretty terrible – long waits standing in line behind regular customers.

      • Don’t go looking at bankruptcy and the health – medical complex in America.

        skippy… E. Warrens “Two Income Trap” put a niggling doubt in that centrist Republicans mind….