Health Finance and Economics in Australia - Assignment Example

Health Finance and Economics Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission Health Finance and Economics Question 1: Impact of Lifetime Health Cover,the Health Insurance Rebate and the Medicare Levy Surcharge on health system utilization, member numbers and member profiles in Australia Prior to the introduction of Lifetime Health Cover, Hancock (2003) noted that the Private Health Insurance Incentive Scheme (PHIIS) and the Medicare Levy had been instigated on 1st July 1997. PHIIS was key in providing means tested health insurance premium subsidiaries targeting the people on low and middle income scales. In this regard, the Medicare Levy was a tax that was surcharged to the members of the Australian population who had high income rates and not in private health insurance. Nonetheless, this did not prevent the decline of member numbers and member profiles which reduced at an approximated rate of 2.6% per annum in the period between June 1997 and December 1998. This saw the introduction of a 30% rebate of the PHI premium to all those who were into private health on 1st January 1999. This culminated in heightened members numbers and profiles, elevating at a commendable rate of 5.9% between December 1998 and December 1999 (Hancock, 2003). In this regard, it has been pointed out that the synergy between the Medicare Health Levy and the Health Insurance Rebate policies adopted by the Australian government were aimed at encouraging individuals to take out private hospital cover, and in a possible situation, to utilize the private healthcare system which would in turn result in the minimization of the pressure and demand on the public Medicare system. These two incentives played an integral role in heightening the membership numbers and membership profile. According to the Department of Health and Ageing (2011), Lifetime Health Cover can be perceived as an initiative by the Australian government that was instigated on 1st July, 2000 and the major rationale behind this cover was to encourage people to take out hospital insurance at an earlier period of their lives and maintain it henceforth. Colombo and Tapay (2003) determined that private health insurance (PHI) encompasses close to half of the Australian population. It is apparent that the incentives and surcharges by the Australian government encouraging people to take out private health insurance cover pose significant impacts on the healthcare utilization, number of members and their profiles. The instigation of the lifetime health cover was key in elevating the utilization of the healthcare systems among members of the Australian population. In regard to number of members and members’ profile, Hancock (2003) determined that the LHC was an immense success in the provision of a robust boost to the membership numbers and a prudent enhancement of the membership profile. Between January and June 2000, there was widespread publication of the Lifetime Health Cover (LHC) and the presence of a joining amnesty. In this period, there was exploding expansion of the members and members’ profiles reaching a high of 32%. There was a further 6.1% elevation of membership from 30th June-September, 2000. In this regard, the cumulative elevation of membership between March and September 2000 was an exemplary 40% (Hancock, 2003). Nonetheless, it is imperative to be cognizant of the fact that the recent changes on these incentives are bound to pose considerable impacts on the healthcare system. These changes are exemplified by the fact that the Australian government executed the subjection of 30% rebate on the premium payable by the holders of the private health insurance to a means test and instigate corresponding elevations to the Medicare Levy Surcharge (Australian Health Insurance Association, 2011). Colombo and Tapay (2003)revealed that the recent instigation of the carrot and stick policies is controversial in terms of relative effectiveness which is coupled with uncertainties on their long-term impact on the stability of the private health insurance membership. In addition, the Australian Health Insurance Association (2011) determined that these changes on the incentive policies will mean that there will be significant numbers of withdrawal of consumers from their PHC over the next five years (1.6 million) or eventual downgrading to lover levels of PHC in the same period (4.3 Million). Moreover, there has been an alarming withdrawal of consumers from their general treatment cover over the five years since the introduction of these changes (2.8 Million) or alternatively downgrading to lower levels of PHC reaching a high of 5.7 Million in a period of five years following the policy change. Consequently, when increased numbers of people withdraw from the private health insurance, there will be heightened pressure on the publicly provided healthcare. Eventually, it is projected that the costs associated with servicing the elevated demands of for the services in public hospitals will surpass the governmental savings from the means testing of the rebate. Question2: According to Jensen and Meckling (1976), an agency relationship can be defined as a contract under which one or more persons (the principal(s) involve another person (the agent) in the performance of some services on their behalf. This entails the delegation of some authority to make decisions to the agent. These major tenets of agency relationship are analyzed in the subsequent section. Delegation of healthcare service delivery by the state Hall and Savage (2005) cited that in the contemporary era, most of the medical services in Australia is provided by private practitioners, paid by fee-for-service which is supplemented by a fixed reimbursement rate from the commonwealth government through what is commonly referred to as Medicare. In such a case, the practitioners receive 85% of MBS fee which means that the patient is not subjected to any charges. In a situation where the practitioner fails to bulk-bill, the patient is obliged to pay the total fee beforehand and later pursue a Medicare rebate from the government (Hall &Savage, 2005). Healthcare insurance Recent decades have seen elevated delegation of healthcare insurance to the private sector, commonly referred to as Private Health Insurance (PHI). The government has undertaken diverse efforts to promote PHI aimed at reducing the pressure on public healthcare through various incentives as analyzed in the preceding question. Funding Commonwealth Department of Health and Aged Care (2000) determined that the commonwealth is responsible for funding most of the medical services out of the hospital, and also the researches on health. This is supplemented by the consumers, the non-governmental sector and all levels of government who are mandated with some roles in the administration, funding and care provision to the old people. Issues to patients and healthcare workers The delegation of healthcare delivery to the private sector has seen increased access of quality healthcare by the patients. Moreover, Flecher (2000) noted that the asymmetry of information and knowledge between the providers and the consumers insinuate that consumers are rarely endowed with the capacity to make healthcare decisions which are in the best of their interest without assistance In regard to liberalization of funding processes, the healthcare sector in Australia has been able to experience tremendous growth in the recent past, which has continued to expand the accessibility of healthcare among patients in the Australian population. The merits of this growth also spill over to the healthcare workers in the sense that the elevated necessity for human resource has elevated their employment viability in the healthcare system. Question 3: There are several groups of inputs of the production function of health and wellness in Australia. These groups can largely be categorized into either preventive or curative inputs. It is worth noting that the Australian government has been more focused on the provision of curative healthcare as opposed to the preventive function of health and wellness. Lang (2011) noted that in the contemporary times, the Australian government allocates approximately 70% of the federal health budget to diagnosing and managing chronic conditions. The satire in this spending is that approximately 70% of these conditions are as a result of behaviors and lifestyles and thus responsive to strategies aimed at prevention. The major instigating factors of these conditions include poor nutrition, stress which resonates to emotional wellbeing, smoking and excessive inactivity. All these functions are preventable which means that the government spends roughly half of its healthcare budget on conditions which are preventable. However, recent policy developments have seen the elevated popularity of primary healthcare which is embedded in the preventive function of health and wellness. A synergy of strategic approach in these two groups ofinputsofthe productionfunctionofhealthandwellness can be integral in the provision of cost-effective and quality healthcare to the Australian population. Different individuals and collectives are responsible for both of these inputs. This ranges from the NGOs, the federal governments among other groups. In regard to primary healthcare, Hilless and Healy (2001) noted that the general practitioners are responsible for providing extensive Medicare to the Australian population. Majority of these physicians are often self-employed and mode of running their practices is similar to that of small businesses. On the other hand, there are instances whereby the general practitioners enter into contractual arrangements with diverse companies which will be chief in enabling them to conduct regular medical checks on employees. However, the solo practitioners have been on the decline in recent times with the increased popularity of group practices (Australian Department of Health and Aged Care, 1999). The focus on the preventive function of health and wellness directed the aged has also experienced a paradigm shift in the recent decades. This has been prompted by the alarming rate of the ageing members of the Australian population which has resulted from low birth rates and low death rates. According to the Western Australia Department of Health (2004), the proportion of population aged 65 years and above was projected to grow from 11.2% in 2001 to 13.9% by 2016. In this regard, the attention towards the health and wellness of the aging has been a major concern both to the public and the private stakeholders. Immunization is also another feature of preventive health. This has been chiefly been undertaken by private agencies like NGOs as well as the federal government. This has been principal in the prevention of disease outbreaks mostly with the occurrence of natural disasters like cyclones which are responsible for extensive outbreak of diseases. Smith (2005) determined that the aftermath of these natural disasters is usually characterized by the outbreak of infectious diseases which add a heavy toll on the disaster itself and in some instances doubling the number of casualties. Lastly, the Australian Institute of Health and Welfare (1998) revealed that pharmacists are another category of health professional which often plays an integral role in giving extensive wellness and health advice to members of the Australian population. On the other hand, the curative function of health and wellbeing is mostly spearheaded by the government in collaboration with pharmacists and other bodies like World Health Organization (WHO). Impact of these inputs on the production of health in a communityor society A synergy of these inputs have a very imperative role in ensuring the health and wellbeing of members of any given society or community. Firstly, they result in minimized mortality rates among members of the population. This is founded on the fact that provision of timely, quality and accessible healthcare to patients is integral in lowering the death rates in any society. Secondly, the embracing of the preventive function of health and wellness is crucial in reducing the overall healthcare cost by any given governing body. In this regard, the elevated focus on the primary care health services is important in the efforts to combat major maladies as well as promoting the wellness of the members of any society. Lastly, the combined application of both groups’ inputs of production function of health and wellbeing is paramount in molding a holistic healthcare system in any society. Question 4: Given the elevated necessity for economic evidence as a prerequisite to the allocation of resources in any healthcare system, it is imperative to be cognizant of the various key aspects of an economic evaluation to be considered. This is supported by Cunningham (2001) who cited that the method of economic evaluation has in recent times gained acceptance to be put into utility in the appraisal of healthcare programmes. It is worth noting that in a rudimentary sense, an economic evaluation seeks to answer two questions. Firstly, is the health procedure that is being undertaken worth doing when juxtaposed with other things that could be done with the same magnitude of resources? Secondly, is there satisfaction that the healthcare resources ought to be spent in a particular way rather than any other way? (Cunningham, 2001). There are some key aspects that need to be considered in a healthcare economic evaluation which are the costs and benefits of a healthcare system. It is only through the availability of this information that viable decision can be made in regard to the blending of healthcare interventions which ought to be availed aimed at the maximization of benefits from the budget that is available. Against this background, when reviewing a healthcare economic evaluation, the major focus should be on several tenets. Firstly, the health effects of a programme, for instance, the number of lives saved, the number of cases found and prevented. This is founded on the fact that healthcare programmes are primarily instituted to enhance the process of healthcare delivery aimed at curtailing the prevalence of certain diseases as well as saving lives that would have been lost as a result of these diseases. In this regard, the information provided in the economic evaluation in relation to the health effects of the programme should be viable and based on statistical evidence. Secondly, there are the economic benefits of this programme which can either be direct or indirect, for instance the number of people who have recovered and are able to return to productive work or the saving emanating from the programme based on the fact that it made an individual healthier and thus saving the healthcare costs. Lastly, there is the intangible value of the enhancement of an individual’s health both to the patient, the family and the larger society in disregard of the economic consequences. If the information forwarded in the economic evaluation supports these core tenets, then the programme can be dimmed to be economically viable. Question 5: What health service management improvements may be derived from implementing a resource allocation model such as activity based funding into a health service? There are several resource allocation models in healthcare. Most of the often cited models include but not limited to need-based model and the activity based model. However, it has been pointed out that recent reforms in resource allocation have seen a shift from need based to activity based resource allocation model. Gugushvili (2007) noted that the activity based resource allocation model can be perceived as a system of paying the healthcare providers and hospitals based on the work or tasks that they have effectively and efficiently performed as opposed to the previously defined budgets that were put into utility based on the methodology of need assessment. The activity based resource allocation model is endowed with diverse merits which can result in improvement of health service management. Firstly, this model emphasizes the allocation of resources based on the actual performance of a certain institution providing healthcare to the population. Against this background, the resource allocation process is based primarily on the activities that have already been completed or initiated rather than the projected need for certain undertakings. This is epitomized by a phenomenon whereby a certain rural healthcare center has initiated and successfully executed extensive programmes aimed at primary healthcare, for instance, immunization and public sensitization and advice about certain diseases. In this regard, when the healthcare resources are being allocated, this particular healthcare center is liable to get a larger share of resources based on the output of its activities such as the prevalence reduction of certain diseases, reduced infant mortality rate and the general attitude change among members of the public in regard to certain disease-causing behaviors like smoking and poor nutrition. This is when compared to another urban healthcare center which is in need of resources to enhance its infrastructural capacity. Secondly, resource allocation which is based on documented clinical activity is key to the enhancement of quality and accuracy which will eventually culminate into improved communication system between the health professionals. In this regard, activity based resource allocation is chief in heightening the level of cooperation and coordination between various practitioners in the healthcare sector, mostly those who are in the same healthcare projects or undertaking complimentary programmes. In this regard, the activity based resource allocation will improve management practices like documentation, performance appraisal and setting of viable performance indicators among others. This is contrary to other resource allocation models like the need based model which can prompt practitioners to draft outrageous projections and budgetary needs aimed at cultivating higher resource allocation from the principle body which is mandated with this practice. Consequently, these projections have a high likelihood of not been met even after the resources are allocated because the primary aim is to show extreme needs which will reflect the amount of resources that will be allocated. There are several health service management improvements that can be derived from implementing a resource allocation model like activity based funding into a health service. Firstly, this resource allocation model will be integral in performance appraisal. In this regard, the practitioners will be prompted portray exemplary performance in their activities, either individually or collectively in order to be guaranteed of substantial funding during the resource allocation process. Consequently, they will work towards improved programmes management systems which will have a cumulative effect on the improvement of the overall health service management. Secondly, the elevated coordination factor between the practitioners previously mentioned will pose increased improvement of the health service management. This is founded on the background that various practitioners will work towards the success of various tasks under their mandate in order to ensure success and fulfillment which will mean adequate funding during the resource allocation process. The eventual improvement of practices like adequate inter-department communication, viable tasks delegation and frequent meeting to monitor and evaluate performance aimed at cultivating better coordination are key in improving the overall health system management. Activity based funding is principal in identifying gaps that can be evident in the delivery of services to the general population. This is because when the practitioners become proactive in fulfilling their set activities, there is a high likelihood that they will identify loopholes like task duplication in various tasks which will be vital in improving the health system management. In conclusion, it is apparent that activity based funding as a resource allocation model in healthcare is not only prudent in prompting improved performance among various practitioners but also integral in improving the management of health systems in any given country or region in the world. References Australian Institute of Health and Welfare (1998) Australia’s Health 1998. Cat. No. AUS 10, Canberra: Australian Institute of Health and Welfare. Australian Department of Health and Aged Care (1999). Synopsis of the Reports of General Practice Reviews. Canberra, Department of Health and Aged Care. Australian Health Insurance Association (2011). Economic Impact Assessment of the Proposed Reforms to Private Health Insurance. Canberra: Deloitte Touche Tohmatsu. Commonwealth Department of Health and Aged Care (2000). The Australian Health Care System: An Outline. Canberra: Commonwealth Department of Health and Aged Care. Colombo, F. & Tapay, N. (2003). Private Health Insurance in Australia: A Case Study. Paris: Organization for Economic Co-operation and Development. Cunningham, S.J. (2001). An Introduction to Economic Evaluation of Health Care. Retrieved May 06, 2012, from http://jorthod.maneyjournals.org/content/28/3/246.full Department of Health and Ageing (2011). Lifetime Health Cover. Canberra: Department of Health and Ageing. Fletcher, M. (2000). The Quality of Australian Healthcare: Current Issues and Future Direction. Canberra: Commonwealth Department of Health and Aged Care. Gugushvili, A. (2007). The advantages and disadvantages ofneeds-based resource allocation in integrated health systems and marketsystems of health care providerreimbursement. Edinburgh: The University of Edinburgh. Hall, J. & Savage, E. (2005). The Role of the Private Sector in the Australian Healthcare System. In A. Maynard (ed), The Public-private Mix for Health: Plus ça Change, Plus C'est la Même Chose, London: The Nuffield Trust. Hanckock, J. (2003). Review of Lifetime Health Cover Scheme. University of Adelaide: The South Australian Centre for Economic Studies. Jensen, M.C. & Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior,Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360. Lang, J. (2011).Workshop Paper - Prevention and Wellness. Canberra: National Health and Hospitals Reform Commission. Hilless, M. & Healy, J. (2001). Health Care Systems in Transition: Australia. European Observatory on Health Care Systems, 3(13), 1-98. Smith, A.W. (2005). Tsunami in South Asia: What is the Risk of Post-Disaster Infectious Disease Outbreak? Annals Academy of Medicine, 34(10), 625-631. Western Australia Department of Health (2004). A Healthy Future for Western Australians: Report of the Health Reform Committee. Perth: Western Australia Department of Health Read More