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Danny Haynes
B AppFin with B Com – Acc (Hons)
22 September 2009
In its June 2009 final report, the National Health and Hospitals Reform Commission included a proposal for the future of Medicare, called 'Medicare Select'. The report recommended that the Commonwealth Government continue to examine the Medicare Select proposal over the next two years.
This report describes Medicare Select, and then outlines two major problems with Medicare Select.
Description of Medicare Select
Under Medicare Select, the Commonwealth Government would become the sole government funder of health services. The Commonwealth would source funds from general revenue or a specific levy.
The Commonwealth Government would distribute funds to 'health and hospital plans', and operate at least one plan itself. Plans could also be operated by private organisations or by state governments and would compete with each other.
To ensure universal coverage, membership in a 'health and hospital plan' would be compulsory. People would begin as a member of the Commonwealth Government plan but would be free to switch to another plan.
All plans would have to cover health services outlined in the Universal Service Obligation (USO), determined by the Commonwealth Government. The USO would include hospital, dental, general practice, and pharmaceuticals.
Plans would be funded by the Commonwealth Government according to the risk profile of its membership. Plans could offer services in addition to the USO for which members would pay an additional premium.
Plans would negotiate contracts with health service providers to provide USO and additional services to their members. Co?payments for USO services would be limited by regulation.
Problems with Medicare Select
There are two major problems with Medicare Select: the use of managed care and the protection of larger plans from competition.
First, health and hospital plans are likely to employ managed care in delivering USO health services. Since the amount of funding by the Commonwealth Government for health services covered under the USO may not reflect actual costs, and because co?payments for USO services would be limited by regulation, this would apply pressure to plans to limit cost through managed care. In her background note, Dr Anne?marie Boxall says, "it is highly probable that plans would implement some forms of managed care in an effort to control costs under Medicare Select." Because the USO is determined by the Commonwealth Government, the type and extent of coverage required by the USO is likely to expand over time due to political pressure. As the USO expands, the extent of managed care in Australia would also expand.
Second, larger plans are protected from competition. A health and hospital plan must provide the full range of services outlined by the USO as well as negotiate contracts with health care providers across a range of specialties. Given the size of this task, smaller health funds may be unwilling to become a plan. They may decide to merge with a larger plan, or provide insurance for health services not included in the USO.
Therefore Medicare Select would be an advantage to larger health funds who would have the ability to cover the full range of services outlined in the USO, and negotiate contracts with health care providers. Indeed, Medicare Select could be seen as a vehicle for larger health funds to keep their smaller rivals away from competing for their share of guaranteed government funding.
Danny Haynes
B AppFin with B Com – Acc (Hons)
22 September 2009
References
Dr Anne-marie Boxall, What is Medicare Select?, 26 August 2009,
http://www.aph.gov.au/Library/pubs/bn/sp/MedicareSelect.htm
National Health and Hospitals Reform Commission, A Healthier Future For All Australians - Final Report, June 2009,
http://www.yourhealth.gov.au/internet/yourhealth/publishing.nsf/Content/nh hrc?report
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