The political economy of Medicare

I always say that political economy is the best (or least worst) lens through which to examine how health systems work. This goes for Medicare, which is far more than a service delivery model  and has massive institutional and political import. 

 The recently established ‘Strengthening Medicare Taskforce’ reminded me how out-of-whack the approach to developing health policy is in Australia. We’re not unique in this, of course, but my assessment (having worked with the OECD for several years) is that power is more concentrated among the supply side here than elsewhere.

Below is a slightly edited piece about this that was published in Crikey a few weeks ago. Since publication, it struck me how well-suited deliberations on ‘Strengthening Medicare’ would be to a citizens’ jury. An opportunity missed …


To understand who holds sway in Australian health policy, take a look at the federal government’s new taskforce to improve the quality of primary healthcare. Well over half of the Strengthening Medicare Taskforce members are practitioners and providers. One solitary member represents patients and consumers (and therefore the general public).

The idea behind the taskforce is sound. Considering the eye-popping levels of medical practice variation, that about 40% of Australian patients don’t receive evidence-based care, and rising out-of-pocket costs, improving the quality of primary healthcare is an urgent priority.

But what solutions can we expect from a panel representing predominantly the supply side of this equation? What is the doctors’ trade union — the Australian Medical Association (AMA) — which has two former presidents at the table, likely to say?

How much clout will the one solitary consumer representative have at that table? Leanne Wells, former CEO of the Consumers Health Forum, is formidable and highly respected. But who will have the real power — the one consumer or the cadre of stethoscopes? Where’s the back-up to even the playing field: the representatives of patients with mental health problems and chronic diseases who most need affordable, integrated care? One hopes that the other non-providers (academics and public servants) will balance things out.

This isn’t about optics or symbolism. It’s about setting the taskforce up to drive real change in a broken system.

At least Aboriginal Community Controlled Health Organisation (ACCHOs) are represented by deputy CEO Dawn Casey.

In fact, Dr Casey could probably teach the chaps from the AMA a thing or two, because the community-led ACCHOs are recognised as the gold standard in delivering comprehensive and high-quality primary health care to vulnerable and complex patients. They’re highly effective and deliver value for money.

As if on cue, the final evaluation of the “Health Care Home” (HCH) trial (which ended in 2021) was recently published. It provides some insights into the challenges in primary care. In essence, the HCH aimed to deliver more coordinated and patient-centred services, and reduce unneeded hospital admissions, through two main levers: the voluntary enrolment of patients to a general practice — their health care home — and a bundled payment for every enrolled patient based on their clinical complexity (as opposed to a fee for each individual consultation or service). It represented a radical departure from the way primary care is currently provided in Australia: patient “choice” and, more significantly, fee-for-service (FFS).

The HCH was a laudable initiative. But the evaluation found “no significant change in patient experience, health care use outside of primary care or health outcomes”.

The assessment of the bundled payments is telling. ACCHOs found the payment “viable and appropriate” — unsurprising, given these organisations already offer a team-based approach that involves several health professions and disciplines. ACCHOs already are de facto HCHs and consequently achieve great results.

Elsewhere, however, this payment model (and the HCH more broadly) was a flop. Payments were either “insufficient to cover the additional work”, difficult to distribute between the GP and other practitioners, or both.

This is about as surprising as learning that pubs continue to serve customers who have had too much to drink.

The key problem is that a HCH is an all-or-nothing proposition. It requires not only radically different clinical but also administrative processes to succeed. Running part of a practice on this model and the rest on FFS would be difficult if not impossible. For providers, every minute spent on a HCH patient was a minute not spent churning other patients through on FFS, which is more efficient and therefore more profitable.

This is not to say that GPs and primary care providers shouldn’t be paid more, especially relative to other specialties.


It’s how providers are paid and what they are paid for that’s the issue. And in the end, it’s actually not about cost per se but about the health outcomes (the value) we, as a society, get from what we invest in Medicare.

OK, but what does all of this have to do with the taskforce?

Well, considering that (a) health needs and costs are growing, (b) Medicare and the healthcare system exists to serve patients and the public, and (c) evidence from here and abroad suggests (aside from a few exceptions like vaccination) that models incentivising volume and throughput are not compatible with better health outcomes, the taskforce may well conclude that instead of tinkering with a model that’s fundamentally ill-suited to modern demands, it might be better to build a new one.

The idea behind this taskforce is actually tailor made for a participatory democracy model (Nicholas Gruen has written a lot about it). Rather than a skewed panel of experts, why not let a panel of citizens — advised by the experts — deliberate on these questions, consider the trade-offs involved, and provide recommendations to the Minister. What’s good about this approach is that patients are one of the experts, and present their needs and preferences to the citizen panel on equal terms with the doctors and policy makers.

With such a set up we may get sensible outcomes. For example, that the ACCHO model is the most suitable option to achieve the aims of the review, and recommend a network of similarly structured and funded community-controlled health organisations throughout the country to provide better access to high-quality, integrated and affordable primary care. Now that would be reform!

Of course it’ll never happen because, as illustrated by the taskforce composition, we have institutionalised a political economy that creates a healthcare system designed around the needs of providers and not patients, especially not the most vulnerable and needy. Unless we tackle this power asymmetry, I doubt the goal of “highest priority improvements to primary care” can be achieved.



About Luke Slawomirski

Health economist, formerly OECD, policy wonk. @LukeSlawomirski on Twitter
This entry was posted in Democracy, Economics and public policy, Health, Medical, Uncategorized. Bookmark the permalink.
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1 year ago

First, I don’t doubt there is a lot of dirty politics in healthcare. However, I would dispute the last clause in your statement: “we have institutionalised a political economy that creates a healthcare system designed around the needs of providers and not patients, especially not the most vulnerable and needy”
The biggest costs in the hospital system at least (and I assume healthcare in general) come from old people, many of whom have little money. Given this, it seems reasonable to say many of the most vulnerable and needy are getting help. This is one of the reasons Australians have a very high life expectancy in the world, despite high levels of obesity which must knock a few years off the average.
Also, if you look at the worst group in Australia for life expectancy — Indigenous Australians, then their life expectancy has increased markedly over the last few decades, so something is going right in this area. It’s still down a fair bit compared to the Oz average (a quick search gives me 71.6 for males and 75.6 for females), but the the trend is clearly up for what was a very hard problem. As a comparison with a more dysfunctional system, those numbers are pretty similar to low SES whites and African Americans in the US — so our worst group is similar to a fair of chunk of the population in the US. We are clearly doing something right for the most vulnerable in comparison.
There are also aspects of health that are simply hard to solve — like, for example, mental health. The government has poured money into this in lots of different ways in the last decade or so, and as far as I am aware, it hasn’t made much difference. Indeed, I am not aware of any country that has any great solution in this area.

Chris Lloyd
Chris Lloyd
1 year ago

Could you give your understanding of why/how ACCMO’s seem to be successful and whether the same system would operate as well for non-remote multicultural communities.