Note: this article has also been published on Croakey Health Media
Urgent planning and preparation is sorely needed across some key areas in and around the Australian healthcare and aged care systems. I have no doubt that emergency planners are working hard on some of these, and we know that the health National Incident Centre was activated on 23rd March; but I’m also willing to take a punt that no one is looking at several of the other issues I will identify.
To recap: even before the US/Israeli attack on Iran, Australian economists and policy makers were starting to get nervous about the potential for stagflation – simultaneously rising unemployment and prices.
Then the USA, Israel and Iran between them closed off substantial portions of global supplies of oil, gas, fertiliser and other petrochemical derivatives. While a ceasefire currently still holds, so too does the two-sided “blockade of the blockade”.
Significantly more serious impacts are likely to evolve over coming weeks even if the conflict were to be resolved tomorrow. The key mechanisms are supply chain disruption, physical scarcity, rising prices, macroeconomic effects (for example, global recession and/or stagflation, and financial market crises) and macroeconomic policy choices, such as interest rate rises and austerity budgets.
How can the Australian healthcare system prepare itself to navigate these troubled waters?
Fuel and energy
Let’s get the simplest part out of the way first – physical availability or scarcity of fuel for transportation.
We are currently at Level 2 of the Australian National Fuel Security Plan. Healthcare decision makers need to urgently prepare in advance of any escalation to Level 4: Protecting Critical Services for all Australians, after which point, we will be starting to prioritise (ration) supplies to critical users.
In healthcare, what is a “critical service” from a transport perspective?
Emergency ambulances, duh…sure. But also every truck delivering all your supplies. Home care visits, staff outreach and community care, pathology couriers… Staff getting to and from work (not everyone can get public transport or carpool, especially outside our biggest cities). Which staff – public, private, both, or only for some more “critical” services?
Who is not critical, and who is going to give them the bad news? How will we get fly-in, fly-out (FIFO) locums into and out of the regional and remote areas that depend on them, when we’re short of jet fuel and closing down regional air routes?
And – let’s not forget them – how will patients get to and from appointments if we have to move towards general rationing for the wider community?
We only have a few weeks to work this through, to define who and what is “critical”, to work out the gradations that allow us to scale up or down as the situation changes – and to work with other sectors to develop a viable system that can actually keep our key systems moving effectively at dramatically reduced levels of fuel consumption.
Given that we do not (strictly) need any imported fuel to keep our electricity and gas grids running, we should not face significant problems in literally keeping the lights on for healthcare infrastructure and other essential public services – although some infrastructure in very remote locations may be at risk.
Indeed, if people’s ability to drive is reduced, some key services (especially schools and childcare, but perhaps also primary healthcare) might actually need to run extended hours to compensate.
We and our governments must also be quite clear – if we do start running into gas supply problems domestically, then the time has come to go well beyond endlessly debating “gas reservation” and taxes, and instead to take direct public control of our gas supplies and suppliers.
Supply chain disruption
There is a high likelihood of accelerating absolute scarcity and/or rising prices across the full range of key inputs for healthcare. Fuel shortages will impact international shipping just as severely as they hit domestic haulage.
Australia has thus far been quite successful in spending our way out of trouble (for example, securing diesel supplies). All products will become more expensive because of the global energy “tax” Trump and Netanyahu have levied on the entire world.
But many key healthcare products also risk becoming physically scarce because they can no longer be produced at their previous scales. Global helium supplies (key for imaging and various other medical applications) are already looking dicey.
Key feedstocks for many pharmaceuticals, consumables and their packaging will be at risk of running short in weeks or months, as these are all heavily dependent on petrochemicals. These are just as “critical” for the countries who manufacture them as they are for us – and they will start to limit exports to ensure domestic supply.
Prices will certainly rise, and available quantities will fall. Australia cannot simply rely on being the highest or the most persuasive bidder; we need to be ready to go with concrete and flexible plans to prioritise and directly ration pharmaceuticals, devices, consumables and supplies across the spectrum of all services, public and private.
Healthcare prices and inflation
Let’s be honest. Healthcare price inflation was already a massive problem for Australians long before this conflict began, given our private system’s over-reliance on out-of-pocket payments.
The global crisis will lead many private providers (corporate and individual) to raise their prices because they genuinely face rising input costs – yet they will do so at just the moment that patients face not only rising prices everywhere for everything, but also rising unemployment and growing economic precarity.
At one level, government has significant ability to absorb some of the coming price shock as it is the critical financier of our healthcare system, both public and private. The Pharmaceutical Benefits Scheme, the Medical Benefits Schedule, Aged Care AN-ACC funding, and private health insurance premium increases are all forms of “administered prices”.
Indeed, interest has been growing in an administered National Efficient Price for private hospital care. Recent macroeconomic research points strongly towards the use of price controls by government as having been far more effective historically than reliance on interest rates in periods of supply-side inflationary crisis.
It would be entirely straightforward to place controls on healthcare prices – but only as part of an economy-wide emergency price control regime (if prices rise in other sectors but health prices are suppressed, this would become untenable).
Unfortunately, because our current system reserves the right of doctors to choose the level of co-payment they charge, direct price controls on the MBS would not feed through to patients as desired. Much of our debate on MBS “reform” has involved different measures to reduce co-payments and promote bulk-billing – gaining a certain degree of success in general practice, but with entrenched resistance from specialists to moving away from their very high co-payments.
I recently showed a group of medical students Australian Taxation Office data on
taxable incomes by occupational group, in which certain medical sub-specialties constitute nine of the ten highest-earning groups in the country. Perhaps a risky move – I could see the dollar signs glinting in a few eyes round the room – but most were genuinely shocked.
As we travel into this crisis, I personally suggest that medical and surgical specialists in private practice would be well-advised to take what follows on the chin, as some of the wealthiest professionals in our society.
If amply-rewarded specialists do not take the financial strain over coming months and years, and instead try to push costs onto patients, I think there’s a decent chance that private medical practice will not exist in its current form in a few years’ time.
I have little confidence that such wisdom will prevail, so I will give you my suggested response shortly.
Fragile private healthcare
Put bluntly, those in the corporate private healthcare sector have been trying to tell us that they are in trouble for several years.
Private hospitals – most notably the Healthscope chain – are teetering on the brink (helped along by former private equity ownership in Healthscope’s case), while private health insurance members are ditching unaffordable gold policies.
This is a financially fragile sector, long dependent on various forms of public subsidy, yet which has been slowly bleeding out even as the total costs of private care to patients have risen inexorably.
Our private system lacks coherence, and yields little evidence that it actually relieves pressure on the public system, the primary rationale for the large subsidies it receives.
Private equity and corporate ownership in various key areas – hospitals, imaging, pathology – exposes the sector to international financial markets in a range of unhelpful ways.
So now the corporate private health sector is at great risk in this crisis, not only from cost pressures which will impact everyone, but also because of the real potential for panic in global financial markets that may lie not far around the corner.
National Health Resilience Plan
The whole Australian healthcare system – public and private, from primary healthcare to highly specialised – is vulnerable to these risks.
We therefore need a whole system contingency plan on how to keep the show on the road if the global supply and economic crisis follows more negative trajectories over coming months.
This is not a reform plan to take us hand in hand towards the sunlit uplands; it is an uncomfortable emergency plan for the quite likely scenario that things go very bad in the global and domestic economies.
It has three goals, which operate in a strict hierarchy of precedence:
- To safeguard the health of all Australians through effective economic and social protection measures to target the social determinants of health
- To maintain equitable access to essential healthcare services for all Australians
- To protect the capacity and capabilities of the Australian healthcare system from avoidable degradation, and to maximise optionality for future recovery.
Goal one strictly sits outside the healthcare system, via macroeconomic, employment and welfare policies. However, it is critical for population health. Failing to provide decent economic protections for Australians in a global recession will drive unemployment, poverty and precarity.
This will not only lead directly to harms to individual and population health and increasing healthcare needs; it would also be the shortest route to accelerating the terminal decline of the private healthcare system, as ever more Australians become wholly unable to afford private care.
Goal two is about maintaining equitable population access to essential care. At its crudest, this involves ensuring that austerity economic policies are not adopted and that states and territories can continue to fund their public health systems even under external pressure. This responsibility falls on the Commonwealth Government – because it is they, not state and territory governments, who control Australia’s revenue-raising and money creation powers.
It also means safeguarding access to primary healthcare for all, and having a highly effective national physical rationing mechanism in place and ready to allocate (and ensure delivery of) essential healthcare products equitably and efficiently if supplies become scarce via market mechanisms.
Goal two also involves rapidly minimising the allocation to and consumption of resources by emergency restrictions on low value interventions and procedures across the system.
Goal three is about protecting professional and physical capacity to provide healthcare. It would involve two major programs: a health professions job guarantee scheme, and a public ownership intervention scheme for failing private health providers and facilities.
Australia’s constitutional prohibition on medical “conscription” effectively means the Commonwealth cannot interfere with medical practitioners’ rights to charge co-payments when they are not bulk-billing.
In any likely economic crisis, ever-more patients will not be able to afford co-payments. Yet it would also be unaffordable (and frankly unreasonable) for the Commonwealth to increase MBS fees in the absence of the legal power to control co-payments.
Wiser specialists will drop their fees and trim their sails along with the rest of Australia; but some may not be able to do so, and their practices may no longer be financially viable. For them – and any other health professionals owning or employed by private practices – there will need to be a job guarantee for health professionals currently in the private sector.
This should encompass guaranteed employment by their state and territory health system (but 100 percent funded by the Commonwealth) at whichever is the lower of i) their most recent ATO-assessed taxable income or ii) the standard full-time rate for their professional group (for example, public hospital staff specialist). Part-time employment could be negotiated below the lower of these two rates.
While they remain employed on the job guarantee scheme, their right to claim MBS or PHI fees is temporarily suspended – they are not prevented from conducting strictly private practice, but forfeit rights to receive any government-funded or subsidised payments for the duration.
Individuals could exit the job guarantee program at any time, with minimal (for example, two weeks) notice and return to “normal” MBS billing.
This scheme is not conscription and is not coercive – no one is compelled to join it. It ensures professionals continue to practise, thus maintaining their skills and capabilities, and caring for patients; but they would now provide care to patients through the rapid extension of public health systems.
Where corporate healthcare providers (for example, hospitals, diagnostic imaging, pathology, medical chains etc) were struggling to remain financially viable due to economic circumstances, a different calculus would apply.
The national interest – and the health of the Australian population – requires that the physical infrastructure concerned remains available to the people of Australia. The financial interests of owners and investors are entirely secondary to this goal.
An emergency intervention regime must therefore be urgently established to enable the transfer of distressed or failing private healthcare infrastructure to the public health system at steep discounts, allowing the extinguishing of liabilities to lenders and creditors. All such private owners and creditors should expect to exit the market at a loss, not a profit – but at a controlled and survivable loss, rather than in a rout.
The transfer of these assets to the public system would not be costless to public finances, but would take place at prices far below pre-crisis market valuations. Once transferred to public ownership, previously associated public funding streams (MBS, private health insurance subsidies etc) would be transferred to the appropriate Commonwealth–State funding pools (Activity Based Funding, AN-ACC etc, or MBS benefits for primary care).
Their employees would transition to state and territory standard employment (or the job guarantee as above), and the activities of the transferred assets would continue – but now for community-wide benefit as part of public health systems.
Once again, this is not mandatory for the private sector – if you can stay afloat and remain operational, go for it.
Given the complexities, challenges and powerful interests involved, there is plenty to unpack in future articles, especially on the emergency institutions that would need to be stood up to deliver this.
There is also much more to say on how Australia needs to protect its healthcare sector from inevitable further US assaults on the PBS and other targets of zero-sum “trade” policies, which will become more desperate and ruthless as economic conditions worsen.
What’s Next?
The public hasn’t heard much from the National Incident Centre or the Department of Health, Disability and Ageing on how they are planning for some of the more uncomfortable yet plausible scenarios for coming months. While my suggestions here are entirely unsolicited, I hope they might be of some value; certainly, better communication of what they are considering would be helpful for governments, healthcare providers, professionals and the public alike. I’m keen to hear what others think on this topic – subject to the reminder that I’m talking about an emergency plan, and not a proposal for “peacetime” reform. It’s the very nature of an emergency that many – if not all – stakeholders may have to make some sacrifices, in order to get safely through to the other side. I’d love to hear others’ ideas via comments, social media or directly, and to stimulate a broader debate on how to strengthen the resilience of the Australian health system.
Frontier Futures 
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