Medicare Market in Australia - Case Study Example

Topic: Brand Analysis Project Name: Institution: Date: Introduction In 2005/2006 Australia had (on average) 1 doctor per 322 people and 1 hospital bed per 244 people. At the 2011 Australian Census 70,200 medical practitioners (including doctors and specialist medical practitioners) and 257,200 nurses were recorded as currently working. In a sample of 13 developed countries Australia was eighth in its population weighted usage of medication in 14 classes in 2009 and also in 2013. The drugs studied were selected on the basis that the conditions treated had high incidence, prevalence and/or mortality, caused significant long-term morbidity and incurred high levels of expenditure and significant developments in prevention or treatment had been made in the last 10 years. The study noted considerable difficulties in cross border comparison of medication use. Australia's health expenditure to GDP ratio (~9.5%) in 2011-2012, was slightly above average compared with other OCED countries. Australia has a universal health care structure, with the federal government paying a large part of the cost of health services, including those in public hospitals. The amount paid by the federal government includes: 1. patient health costs based on the Medicare benefits schedule. Typically, Medicare covers 75% of general practitioner, 85% of specialist and 100% of public in-hospital costs. 2. patients may be entitled to other concessions or benefits[8] 3. patients may be entitled to further benefits once they have crossed a so-called safety net threshold, based on total health expenditure for the year.[8] Government expenditure on healthcare is about 67% of the total, below the OECD average of 72%.[9] The remainder of health costs (called out of pocket costs or the copayment) are paid by the patient, unless the provider of the service chooses to use bulk billing, charging only the scheduled fee, leaving the patient with no out of pocket costs. Where a particular service is not covered, such as dentistry, optometry, and ambulance transport,[10] patients must pay the full amount, unless they hold a Health Care card, which may entitle them to subsidised access. Individuals can take out private health insurance to cover out-of-pocket costs, with either a plan that covers just selected services, to a full coverage plan. In practice, a person with private insurance may still be left with out-of-pocket payments, as services in private hospitals often cost more than the insurance payment. The government encourages individuals with income above a set level to privately insure. This is done by charging these (higher income) individuals a surcharge of 1% to 1.5% of income if they do not take out private health insurance, and a means-tested rebate. This is to encourage individuals who are perceived as able to afford private insurance not to resort to the public health system,[11] even though people with valid private health insurance may still elect to use the public system if they wish. Medicare Market in Australia Medicare is Australia's publicly funded universal health care system. Funding of the health system in Australia is a combination of government funding and private health insurance. Government funding is through the Medicare scheme, which subsidises out-of-hospital medical treatment and funds free universal access to hospital treatment. Medicare is funded by a 2% tax levy on taxpayers with incomes above a threshold amount, with an extra 1% levy on high income earners without private health insurance, and the balance being provided by the government from general revenue.[12] Private health insurance, funds private health and is provided by a number of private health insurance organisations, called health funds. The largest health fund with a 30% market share is Medibank. Medibank was set up to provide competition to private "for-profit" health funds. Although government owned, the fund has operated as a government business enterprise since 2009, operating as a fully commercialised business paying tax and dividends under the same regulatory regime as do all other registered private health funds. Highly regulated regarding the premiums it can set, the fund was designed to put pressure on other health funds to keep premiums at a reasonable level.[13][14] The Coalition Howard Government had announced that Medibank would be sold in a public float if it won the 2007 election,[15] however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that it would remain in government ownership. The Coalition under Tony Abbott made the same pledge to privatise Medibank if it won the 2010 election but was again defeated by Labor. Privatisation was again a Coalition policy for the 2013 election, which the Coalition won. However, public perception that privatisation would lead to reduced services and increased costs makes privatising Medibank a "political hard sell."[14] Some private health insurers are "for profit" enterprises, and some are non-profit organisations such as HCF Health Insurance and CBHS Health Fund. Some have membership restricted to particular groups, some focus on specific regions – like HBF which centres on Western Australia, but the majority have open membership as set out in the PHIAC annual report.[16] Membership to most of these funds is also accessible using a comparison websites or the decision assistance sites. These sites operate on a commission-basis by agreement with their participating health funds and allow consumers to compare policies before joining online. Most aspects of private health insurance in Australia are regulated by the Private Health Insurance Act 2007. Complaints and reporting of the private health industry is carried out by an independent government agency, the Private Health Insurance Ombudsman.[17]The ombudsman publishes an annual report that outlines the number and nature of complaints per health fund compared to their market share.[18] The private health system in Australia operates on a "community rating" basis, whereby premiums do not vary solely because of a person's previous medical history, current state of health, or (generally speaking) their age (but see Lifetime Health Cover below).[19]Balancing this are waiting periods, in particular for pre-existing conditions (usually referred to within the industry as PEA, which stands for "pre-existing ailment"). Funds are entitled to impose a waiting period of up to 12 months on benefits for any medical condition the signs and symptoms of which existed during the six months ending on the day the person first took out insurance. They are also entitled to impose a 12-month waiting period for benefits for treatment relating to an obstetric condition, and a 2-month waiting period for all other benefits when a person first takes out private insurance.[19] Funds have the discretion to reduce or remove such waiting periods in individual cases. They are also free not to impose them to begin with, but this would place such a fund at risk of "adverse selection", attracting a disproportionate number of members from other funds, or from the pool of intending members who might otherwise have joined other funds. It would also attract people with existing medical conditions, who might not otherwise have taken out insurance at all because of the denial of benefits for 12 months due to the PEA Rule. The benefits paid out for these conditions would create pressure on premiums for all the fund's members, causing some to drop their membership, which would lead to further rises, and a vicious cycle would ensue. There are a number of other matters about which funds are not permitted to discriminate between members in terms of premiums, benefits or membership – these include racial origin, religion, sex, sexual orientation, nature of employment, and leisure activities. Premiums for a fund's product that is sold in more than one state can vary from state to state, but not within the same state. The Australian government has introduced a number of incentives to encourage adults to take out private hospital insurance. These include: Lifetime Health Cover: If a person has not taken out private hospital cover by 1 July after their 31st birthday, then when (and if) they do so after this time, their premiums must include a loading of 2% per annum. Thus, a person taking out private cover for the first time at age 40 will pay a 20 per cent loading. The loading continues for 10 years. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover. Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (in the 2011/12 financial year $80,000 for singles and $168,000 for couples[20]) and who do not have an adequate level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The rationale is that if the people in this income group are forced to pay more money one way or another, most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event that they need private hospital treatment – rather than pay it in the form of extra tax as well as having to meet their own private hospital costs. The Australian government announced in May 2008 that it proposes to increase the thresholds, to $100,000 for singles and $150,000 for families. These changes require legislative approval. A bill to change the law has been introduced but was not passed by the Senate. A changed version was passed on 16 October 2008. There have been criticisms that the changes will cause many people to drop their private health insurance, causing a further burden on the public hospital system, and a rise in premiums for those who stay with the private system. Other commentators believe the effect will be minimal.[21] Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 10%, 20% or 30%. In May 2009, The Labor Government under Kevin Rudd announced that as of June 2010, the Rebate would become means-tested and offered on a sliding scale. Health and medical care Over the past decade, Australia’s health and medical industry has grown dramatically in size and reputation for its world leading technology, innovation, high professional skills, advanced research, development and robust health system. It is characterised by a small number of global multinational companies (approximately 20 per cent of the industry) and a large number of small and medium-sized enterprises (80 per cent of the industry). The health and medical industry is represented by manufacturers, specialised in niche applications in the fields of cardiovascular, diagnostic, hearing, orthopaedic, respiratory devices, as well as health IT, health infrastructure, services and clinical trials. The industry is also expected to advance rapidly into new fields of science, engineering, and nanotechnology to facilitate new innovations in the biomedical sphere and an increasing convergence of physical and biological technology platforms. Australian innovation in this sector is showcased each year at key international events such as Medica Germany, Arab Health, HOSPIMedica Asia, Bio USA, HIMSS USA and HIMSS Asia-Pacific. The key growth areas are: Medical and surgical equipment and devices Health IT Health infrastructure and services Clinical trials Medical and surgical equipment and devices Imaging/monitoring equipment Biomedical devices and implants Surgical equipment, general hospital supplies Diagnostic devices Laboratory equipment Dental equipment Health-related software Drug delivery Medical devices in Australia are regulated by the Therapeutic Goods Administration (TGA). The TGA uses a risk-based approach to assess devices before they are entered onto the Australian Register of Therapeutic Goods. Australia’s medical device industry can list among its distinct competitive advantages its reduced time to market compared with drug discovery, its comparatively highly skilled workforce and its geographic position within the Asia Pacific region. The medical device industry is supported by Australia's entrepreneurial and globally competitive Precision Engineering Industry (PEI) which has critical links to Australia's automotive industry. The PEI researches, designs, develops, manufactures and verifies high-accuracy components, high-precision machines and systems. PEI enterprise is practised in a variety of technical areas, from engineering – mechanical, electrical, optical, and industrial - to medical devices, ergonomics, human support technology, materials science, physics, chemistry, mathematics, and computer science. Health IT Health messaging Electronic health record Hospital management and patient administration systems Tele-health Clinical information systems, eg. pharmacy, pathology Asset management and supply chain management Health payment solutions The health information technology and informatics field is a rapidly expanding sector both in Australia and internationally. Australia’s large geographic size has driven advancement in technology for delivering health services across diverse areas making Australia a global leader in areas such as health messaging and electronic health record architecture. Hospital spending on health IT initiatives also drives the industry and innovative technologies have emerged in electronic information sharing with general practice and specialised physicians, community, mental health and aged care providers. Australian healthcare agencies have provided their support behind a global push to unite the medical software industry though a deal linking similar government e-health development efforts in the UK, Canada and the US. The Open Health Tools consortium, which has already secured the backing of IBM and Oracle in addition to a raft of smaller operators, said Australia would be represented by the National e-Health Transition Authority, along with the US Veterans Health Administration and the National Health Service in the UK. Health infrastructure and services Specialist and alternative health services such as acupuncture, homoeopathy and naturopathy Hospital and health facilities design, architecture and interiors Hospital management Delivery of turnkey hospital solutions via a HealthTeam Australia consortium Health consultancies (including hospital accreditation), particularly in developing economies Tele-health services such as tele-radiology or outsourced back office support Medical staff recruitment services Healthcare professional training and education Aged care services Pathology/diagnostic services/DNA testing Medical tourism Clinical trials for multinational drug companies on the multi-million dollar scale are now managed by specialised outsourcers - known as contract research organisations (CROs) – with Australian firms in this sector winning a bigger proportion of these projects because of greater efficiency, speed and open regulatory (Clinical Trial Notification/Exemption) system. Australia is internationally recognised for its work in niche areas of the pre-clinical phase, such as ICN Firefly, and emerging strengths in biomedicine clinical trials. Early innovative drug trials are also becoming a sizeable niche. The domestic Australian natural (complementary) healthcare industry is robust and significant . Market research shows that the popularity of natural healthcare products is increasing with a growth rate of seven per cent year on year. Three-quarters of Australians, including 92 per cent of women aged 20-24; take at least one dietary supplement and a quarter of the population visit complementary healthcare practitioners each year. The Australian industry continues to grow to meet these requirements. Already attuned to alternative approaches to health, discerning baby boomers (Australia’s largest population group) increasingly demand greater choice and adopt a preventative healthcare approach to maintaining healthier lives. In Australia, the fastest growth areas are nutritional oils, men’s health and eye health. The local natural healthcare industry benefits from Australia’s unrivalled biodiversity. Whilst still being an advanced industrialised economy, Australia is home to nearly 10 per cent of the earth’s plant and animal life. Many of these species unique to Australia underpin a wide variety of highly distinctive natural healthcare products. The Australian industry is also enriched through the influences of local indigenous culture and generations of migrants from all over the world. Products are manufactured to some of the highest standards in the world based on GMP validation and stringent therapeutic regulations. These standards are maintained by the Therapeutic Goods Administration (TGA) through a transparent approval process, strict manufacturing compliance guidelines and effective post-market monitoring. The TGA register also supports the natural healthcare products industry with evidence-based research, monitoring and safety data. These elements combine to allow Australian manufacturers to supply world-class products at globally competitive prices. The Australian natural healthcare industry (which is fully integrated into our national health system), presents a wealth of business opportunities at every level – from suppliers of raw materials and ingredients through to manufacturers, distributors, wholesalers, sponsors, consultants and retailers, many of whom are listed in the Australian Natural Health and Wellness Directory. This directory introduces many of Australia’s innovative natural healthcare companies. It will enable you to tap into our diverse industry and establish relationships with Australian suppliers of interesting and innovative products. Blackmores brand and its rivals For many years, Australia has voiced their thoughts on what makes a truly trustworthy brand. From quality, innovation and business stability to products owned and made in Australia, traits of a trusted brand have pointed towards Blackmores time and time again.  This year, Blackmores, Australia’s leading natural health brand, has been awarded the Reader’s Digest Most Trusted Brand in the Vitamins & Supplements category for 2016; making it the eighth consecutive year they have received this esteemed accolade.  The Trusted Brands Survey, commissioned by Reader’s Digest has a long-established reputation as a measure of brand preference in Australia. The survey polled a representative sample of Australians, with over 2,410 respondents ranking brands on consumer trust levels. “We are delighted to be the number one vitamin and supplement brand for 15 years running*, which gives an indication to the number of Australians we’ve helped improve the health and wellbeing of. As a thought leader in the health and wellbeing industry, we pride ourselves in empowering the nation to feel their best and ‘Be a Well Being’,” said Dave Fenlon, Blackmores Managing Director Australia & New Zealand. “Blackmores’ strong commitment to quality ensures that our products consistently meet or exceed the expectations of our customers as well as comply with Australia’s high regulatory standards and requirements. Our rigorous standards guarantee high quality natural healthcare products and services you can trust.”  “The trust we have built with our community has been developed from a strong heritage in Australia from consistency, reliability and dependability. Our services, programs and products are always created with our consumers and quality as our number one priorities,” he said.  For over 80 years, Blackmores has been enriching people’s lives by delivering trusted natural health solutions. The brand is committed to discovery and innovation through their dedicated research arm, the Blackmores Institute. They continue to minimise their impact on the environment with award-winning improvements to packaging and sustainability and support the community through numerous social activities and contributions. “On behalf of Blackmores, I would like to acknowledge and thank Australian consumers, pharmacists, retailers and healthcare professionals who choose us to accompany them on their path to better health. We are devoted to delivering new, quality products, trusted and reliable health information and fun and engaging experiences for Australia’s journey to wellbeing,” said Mr Fenlon. Whether you want to eat a more nutritious diet, stress less, move more or commit to a healthier mindset, we can help you with: FREE personalised advice from our team of naturopaths Find out your Wellbeing score with the two minute Wellbeing Check Action plans tailored to your health The latest news in natural health Expert tips & advice on our Health hub Blackmores is Australia’s leading natural health company. Based on the vision of naturopath and founder Maurice Blackmore (1906-1977), we are passionate about natural health and inspiring people to take control of and invest in their wellbeing. We develop products and services that deliver a more natural approach to health, based on our expertise in vitamins, minerals, herbs and nutrients. Conclusion In 2011, Health Care and Social Assistance was Australia’s largest industry, employing 1,167,000 of Australia’s 10 million workers nationwide (11.6% of all workers). This was up by 211,000 in 5 years to be more than 100,000 higher than Retail Trade, the next largest, which was the largest industry in 2006. It had just overtaken Manufacturing in the previous Census. Manufacturing continued to slide, losing another 50,000 workers, to employ 9.0% of the workforce.  This is interesting given the media focus on job losses in manufacturing as a recent phenomenon, but in fact this trend has existed for some time and is no doubt related to larger structural shifts in the economy. The massive increase in employment in Health Care is quite a profound change and represents the continuing shift from primary and secondary industries to the service industry sector, and also the ageing of the population. While it’s true that Medicare provides a safety net for all Australians, there are distinct benefits to having private health insurance that the public health services cannot offer. One of the most compelling reasons why you should consider private health insurance is the fact you will no longer be required to pay certain government levies and taxes. Just by joining a health fund, you’ll get a rebate to help with the costs of your health premium if you earn less than $84,000 as a single or $168,000 as a couple per year. For those earning more than this, you’ll be able to avoid having to pay the Medicare Levy Surcharge. This is most commonly deducted from your actual health premium. Also, by joining a health fund before age 31 you’ll be able to lock down the lowest base rate on your premium under the Lifetime Health Cover scheme. That’s because if you don’t get in by July 1 following your 31st birthday, you’ll pay an additional 2% on top of your hospital premium from the age of 30. So plan ahead, and save for life! MI View: Drugmakers operating in Australia will face an increasingly challenging business environment as the Sixth Pharmacy Community Agreement's measures come into effect. This includes a 5% price cut to medicines listed on the F1 formulary for more than five years, as well as changes to the calculation used in the price disclosure cycle. Critically, we highlight that biosimilar substitutability and naming will be a growing area of contention between originator firms and authorities who seek to curtail spending due to the exponential increase in biologics expenditure over the past few years. Headline Expenditure Projections Pharmaceuticals : AUD14.0bn (USD10.5bn) in 2015 to AUD14.5bn (USD9.6bn) in 2016; +3.4% in local currency terms and -8.6% in US dollar terms, due to significant exchange rate fluctuations. Healthcare: AUD162bn (USD121bn) in 2015 to AUD169bn (USD112bn) in 2016; +4.2% in local currency terms and -7.7% in US dollar terms, due to exchange rate fluctuations. Bibliography Ahlström, G. and Wadensten, B. (2011). Family members’ experiences of personal assistance given to a relative with disabilities. Health & Social Care in the Community, 19(6), pp.645-652. Australia - Australia improves its health ranking. (2006). International Journal of Health Care Quality Assurance, 19(7). Blackmore, M. (1980). Mineral deficiencies in human cells. Balgowlah, Australia: Blackmores Communication Service. Blackmore, M. (n.d.). The missing links in the treatment of human ailments. [Balgowlah, N.S.W.]: Blackmores Laboratories. Hall, J. (2001). Health services research in Australia. Aust. Health Review, 24(3), p.35. Harvey, A. (2005). Blackmores denies claim of prevention or treatment of AMD. Clinical and Experimental Optometry, 88(5), pp.352-353. Reeve, C., Humphreys, J., Wakerman, J., Carter, M., Carroll, V. and Reeve, D. (2015). Strengthening primary health care: achieving health gains in a remote region of Australia. Med J Aust, 202(9), pp.483-487. Whittaker, B. (2014). Transforming Australia. Sexual Health. Read More