Health Care Expenditure Control - Statistics Project Example

Health care expenditure control needs to be a continuous process. Comment on this statement. Critical analyse how health expenditure in Australia can be controlled with particular reference to current policy debates on health expenditure in Australia. Name Institutional Affiliation Table of Contents Table of Contents 2 Introduction 3 Health care expenditure defined 3 Financing of health in Australia 4 Trends in Health care expenditure 5 Reasons for a continuous process of control 7 How to control health care expenditure 8 The points of tension 10 A process of policy review 10 The data use in policy review 11 The socio-economic and political forces in operation 12 Conclusion 13 References 14 Introduction Financing health care systems is one of greatest challenges for governments and policy makers around the globe, especially in the presence of increasing health care spending. It is definite that health care services have costs which are part of the countries expenditure (Melgarejo, 2013). Like other developed countries, Australia continues to experience increase in health care spending due to advances in medical technology, a growing and ageing population and increased awareness by consumers about issues related to health (Eckstein, 2015). In 2013, health care spending was estimated at $ 172 billion, which was equivalent to 11.4% of gross domestic product (GDP) and two-thirds of the total expenditure was from public sources (Eckstein, 2015). Spending on health care increased by nearly 70% in the last decade and is predicted to increase further if something is not done (Duckett, Breadon, Weidmann & Nicola, 2014). This calls for the need to continuously control health care expenditure through appropriate measures. Based on this understanding, this essay will analyze how health care expenditure can be controlled in Australia with reference to literature on health expenditure in Australia. Health care expenditure defined According to Australian Institute of Health and Welfare (2015), health care expenditure is used to refer to funds used to acquire health goods and services. Health spending takes place at different levels of government and non-government organizations. Non-government entities may include individuals and private health insurers among others. Health care funds often pass through a series of entities before it finally gets in the hand of providers, such as general practices, hospitals and pharmacies so that they can use it to provide health goods and services to consumers (AIHW, 2015). In the context of this paper, health care expenditure incorporates funds the state and territory government receive from the government of Australia, including the funds both the state and territory government apportion to providers of health services in Australia. The funds the state and territory governments apportion to public hospital care come from different sources, the Australian Government being part of the sources. The funds given to hospitals are spent on drugs, salaries of health professionals, medical and surgical equipments, and accommodation (AIHW, 2015), to name but a few (AIHW, 2015). Generally, health care expenditure, according to OECD, EuroStat & WHO (2011 as cited in (Melgarejo, 2013, p.90) includes spending on health care by individuals treated in clinics, private hospitals and care homes, by the armed forces, charities and in prisons, including occupational health care cost and the value of the benefits from government paid to people who provide home care for their families and relatives. Financing of health in Australia The majority of health care expenditure to the public in Australia is paid for by the Government. For instance, in 2009-10, health financing by the Government was 69.9% and this financing was mainly achieved by a combination of funding by the states and territory governments from their fiscal resources, and Specific Purpose Payments from the Government of Australia (AIHW & WHO, 2012). Alternatively, the funding for health care by non-government entities was 30.1% of the overall funding. The largest proportion of non-government funding according to AIHW & WHO (2012) comes from out-of-pockets disbursement by individuals. Almost 45% of population in Australia is covered by private insurance schemes implying that private insurance also contribute to health funding. Most of the funding from the government is forwarded to three subsidy schemes in the country; the Pharmaceuticals Benefits Scheme, the Medicare Benefits Scheme and the Private Health Insurance Rebate (AIHW & WHO, 2012). Considerable funding to public hospitals is also provided by the Government. On the other hand, general government taxation and individual contributions are use to fund Medicare. Through reimbursement to health service providers, Medicare often pays the complete fee of Medicare Benefits Scheme for general practice (GP) services. Additionally, it offers free public hospital care residents in Australia in the form of an out-patient, an admitted patient or emergency department patient (AIHW & WHO, 2012). Medicare provides a rebate of 85% to patients receiving out-of-hospital services from a specialist and 75% of specialists; fee is subsidized for patients who are covered by private insurance. Other eligible health professionals are also provided with some reimbursement, which still form part of health expenditure (AIHW & WHO, 2012). Although private sector providers are also funded by the Medicare Benefits Scheme for the services they deliver, they are not bound by the equivalent service obligations as it is for public hospitals, implying they raise most of their revenue through fees. Trends in Health care expenditure Before discussing how health expenditure should be controlled and the need for continuous control, it is important to understand its trends in the past years. In 2013-14, the total health expenditure in Australia was approximated at $154.6 billion, which were 3.1% higher than and nearly 1.6 times more than the total health expenditure in 2012-13 and 2003-04 financial years respectively, in real terms (AIHW, 2015). In respect to the ratio of health expenditure to GDP, spending on health care services accounted for 9.8% of GDP between 2013 and 2014. This was a relatively low growth in health care spending as the 2012-13 expenditure has been 9.7%. There has been a tendency over decades for total health expenditure to grow at a high rate in real terms than GDP (AIHW, 2015). On average, annual real growth of 5.0% has been 2.2 percentage points above the 2.8% for GDP. In the past years, there has been 1.4 percentage points growth in real health expenditure which was lower than growth in the GDP. However, in 2013-14, the rate of growth in real health expenditure relatively declined (AIHW, 2015). The health expenditure by the Government of Australia alone increased to $63.7 billion from $32.1 billion between 2003-04 and 2013-14 financial years. Additionally, the tax revenues for local and state and territory government increase throughout the past years from. In 2003-04 their tax revenues was $102.0 billion and in 2013-14, it had increased to $171.7 billion (AIHW, 2015). The increase in health expenditure was experienced in various jurisdictions including Victoria, South Australia, Victoria and Tasmania. In terms of health expenditure per individual, health expenditure was on average $6,639 in 2013-14. This amount was more by $94 in real terms, per an individual compared to the preceding year, representing a growth of 1.4% (AIHW, 2015). There has also been an increase in the recurrent health expenditure in Australia for the past decades. Normally, recurrent expenditure accounts for nearly 94%-95% of the total health care expenditure. In 2013-14 alone, recurrent expenditure on health spending was 94.1% of the total expenditure on health, amounting to $145.5 billion (AIHW, 2015). According to Appleby (2013), in general, Australia’s total health expenditure is expected to increase by 189% by 2033. This represents a shift from $85 billion to $246 billion and an increase of GDP from 9.3% in 2002-03 to 12.4% in 2032-33. Accounting for this increase according to Appleby (2013) would be increase in amount to service per treatment at 50% and increase in population and population gaining at 21% and 23% respectively. Reasons for a continuous process of control From the above analysis of trends in health care expenditure in Australia, it is early to predict with certainty whether growth in health care spending will remain slow. Therefore, there is need for continuous control of health care expenditure in Australia before the situation becomes unmanageable. According to AIHW (2015) although there has been a relative slow growth in HCE, the ratio of economy represented by health was 9.7% of GDP in 2012-13. However, in 2013-14, this proportion increased to 9.8%, due to relatively low growth in GDP (AIHW, 2015). Why then continue to control health care expenditure? Ideally, continuous improvement in health care provides opportunities for all groups of people in Australia to live better and healthier lives. However, according to American College of Physicians (2009) increase in health care costs beyond the economic growth at an uncontrollable pace prevents the government from achieving this objective. In other words, high rate of growth in health care expenditure is likely to undermine Australia’s fiscal condition in the long-term. According to Blumenthal, Stremikis & Cutler (2013), it is important to reflect on the consequences of increases in the costs of health care as we continue to control them. Increase in health care costs is likely to create a crushing burden at different levels of government. Consequently, the government would be forced to raise revenue or may decide to reduce spending on education, transportation, homeland security, housing, culture, and research and development, hence affecting service provision in these areas (ACP, 2009). Failure to continue controlling health care spending would also affect the private sector. In particular, coverage for private insurance would decline due to increase in the costs of health insurance. This would lead to more Australians seeking subsidized coverage by the government and hence, increase on government spending on health care (Blumenthal et al., 2013). Generally, society’s well-being does not depend only on health care and therefore, the country should not continue to experience growth in health care spending at the expense of the sectors of the economy; health care costs must continually be controlled. As Blumenthal et al. (2013) argue, increase in health care spending imposes strains on the society, which is likely to undermine the social and economic well-being of Australians over a very long time. How to control health care expenditure Before being forced into consequences of increasing health care expenditure, Duckett et al. (2014) state that there is need to remove wasteful spending on health care, since a significant amount of spending is not connected to health needs. According to Duckett et al. (2014), it is not ethical to simply increase taxes, or reduce other spending or fees before eliminating expenditure that does not help people, which is known as spending avoidable cost. Therefore, the government can save money without necessarily reducing the quality or volume of hospital services (Hurley et al., 2009). Example of avoidable costs in hospitals include too much paper work, use of unnecsary resources on clients, paying suppliers or staff too much money, and maintaining patients in hospitals longer than necessary (Street, O'Reilly, Ward & Mason, 2011). Avoidable hospital spending can be handled on two levels; the manner in which the hospital system works and within hospitals and individual networks. At the former level, the state and Commonwealth should reduce the incentives they create for hospital networks while at the later level, Ducket et al. (2014) argues that changes should be made to decision-making and operations to help increase efficiency. Another highly debated issue through which to control health care spending in Australia is activity-based funding as assert Street et al. (2011). The government should continue to pay public hospitals on a basis of the number and types of patients they receive and treat yearly. Relating funding to activity, according to Hurley et al. (2009) has the greatest potential to promote transparency, equity and efficiency in hospitals, especially in public hospitals because they do not encounter strong market forces to reduce costs. However, Council of Australian Governments (2011) proposes that states need to pay for average performance after excluding avoidable costs, also known as the efficient average, in stead of accepting avoidable costs as legitimate and paying for them. Contrary to the current prices, the efficient average approach to pricing will establish a direct connection between funding and efficiency (Council of Australian Governments, 2011). The argument by Ducket et al. (2014) is that the new price would generate achievable reductions in health funding in Australia, without affecting any legitimate costs that are clear and measurable. The points of tension As much as emphasis is on controlling health care expenditure, the initiative must not compromise on the good health outcomes. The idea is that increasing pressure to control spending on health care should necessitate equitable and judicious use of limited healthcare resources as ACP (2009) connotes. There must be a correction between healthcare expenditure and high quality and efficient delivery of services to patients in order to improve health outcomes. This means that policy makers must effectively recognize the major causes of increase in health care expenditure and identify appropriate ways to achieve savings without affecting the quality of health outcomes (ACP, 2009). Another point of worry is the fact Australians are increasingly experiencing chronic illnesses that are related to lifestyle, as well as health risks, health conditions and disability which are increasing health burden (Eckstein, 2015). For example, in 2012-12, around one million Australians were reported to have diabetes, and this trend is worrying given that there is increased focus on reducing health care expenditure. Additionally, Australia’s aging population results into issues of health attendant that increase demand and costs for health care (Eckstein, 2015). Therefore, the health situation in Australia is very challenging and the initiative to make the process of controlling health care costs continuous is likely to be a tough journey. A process of policy review Developing a comprehensive policy framework is important in ensuring effective control of health care expenditure in Australia. The policy should be reviewed to incorporate effective control measures for health care expenditure and all matters relating to sustainable health financing. This would require community debate to increase their understanding to support policy review (Armstrong & Dyson, 2014). The framework for a health care policy would include overall targets for future health care expenditure, such as the level of appropriate and sustainable government spending on health care and health care system’s goals and principles. It would also include how the health funding could be divided between providing incentives for people, funding existing needs for health care, and pre-funding health care costs in future in order to maximize health outcomes (Armstrong & Dyson, 2014). To effectively conduct policy review requires substantial research and scrutiny to understand the dynamics in financing of health care system in Australia. Therefore, Armstrong & Dyson (2014) state that it would be necessary to create an open data regime to facilitate access to and study of essential data held by the government and to use the information to effectively manage health financing risks at macro-level. The data use in policy review According to Duckett et al. (2014) performance data is very important when making reforms in health care. Therefore, in this case, performance data systems would be used as a guide to policy review and in particular, to reveal achievement against targets and to show likely problems that require more investigation. Evidence from manufacturing industries would be used to show the best ways to collect and measure data to help improve the process of policy review and reduce variations in data. Currently, health institutions record and report on their expenditure and this information could also be used in decision-making (Duckett et al., 2014). A part from records kept by hospitals, data on government spending on health care is also useful as decisions on health care changes can be made after analysing the information. The socio-economic and political forces in operation Even after making reforms, the universal healthcare system in Australia is still not sustainable in future. The forces behind the situation are socio-economic and political factors (Committee for Economic Development of Australia, 2013). The socio-economic aspects that impact of health population in Australia include poverty, income distribution and education. Poverty is the main force behind ill health because poor people are high rates of disease and injury, high rates of disability, and poor health (Melgarejo, 2013). The level of inequality and distribution of income reflects the degree of relative inequality in Australia. Education determines the social and economic positions of people and hence, their health (Melgarejo, 2013) and these situations are experienced in Australia and also contributing to increased spending on health care. According to CEDA (2013), one of the challenges to sustainable health funding is the capacity and the willingness of the state and Commonwealth governments to continue to fund the high growth in health care spending. The capacity to maintain a universal health scheme in Australia depends on the willingness of the political front to continue funding the increasing expenditure on health care. This could be achieved through increased taxes, re-allocation with the national budget, or greater co-payments (CEDA, 2013). Tax-funded healthcare system in Australia is predominantly controlled by government which has made the exercises of allocating government’s budgets, improving productivity of healthcare labour and changing healthcare utilization political activities (CEDA, 2013). This situation has made the decisions of health organizations and health professionals to be overshadowed by those of political decision makers. Conclusion In conclusion, it is evident that health care expenditure in Australia has been increasing for decades and it is projected to increase in future. As such, it is necessary to continue to control spending on health care before the situation become unbearable. It is clear from the essay that health spending takes place at different levels of government and non-government organizations. The reason behind a continuous control of health care spending is that high increased heath funding imposes strains on the society, which is likely to undermine the social and economic well-being of Australians over a very long time. To reduce health care expenditure, the government should remove wasteful spending on health care and use activity-based funding approach to price health goods and services. However, even if emphasis is on controlling health care expenditure, the process must not compromise on the good health outcomes and such concerns should be reflected in policy documents for health. References American College Physicians, (2009). Controlling health care costs while promoting the best possible health outcomes, ACP White Paper. Appleby, J. (2013). Spending on Health and Social Care Over the Next 50 Years: Why Think Long Term?. Armstrong, K., & Dyson, S. (2014). Who will fund out health?, Green Paper: Actuaries Institute accessed 7 December 2015, from https://www.actuaries.asn.au/Library/Opinion/2014/WhoWillFundOurHealth.pdf Australian Institute of Health and Welfare & World Health Organization, (2012). Australia Health Service Delivery Profile 2012, accessed 7 December 2015, from http://www.wpro.who.int/health_services/service_delivery_profile_australia.pdf Australian Institute of Health and Welfare, (2015). Health expenditure Australia 2013–14. Health and welfare expenditure series no. 54. Cat. no. HWE 63. Canberra: AIHW. Blumenthal, D., Stremikis, K., & Cutler, D. (2013). Health care spending—a giant slain or sleeping?. New England Journal of Medicine, 369(26), 2551-2557. Committee for Economic Development of Australia. (2013). Healthcare reform: Reform or ration, CEDA: Melbourne, ISBN: 0 85801 286 3 Council of Australian Governments (2011) National Health Reform Agreement, Council of Australian Governments, accessed 7 December 2015, from http://www.publichospitalfunding.gov.au/national-health-reform/agreement Duckett, S.J., Breadon, P., Weidmann, B. and Nicola, I., (2014). Controlling costly care: a billion-dollar hospital opportunity, Grattan Institute, Melbourne, ISBN: 978-1-925015-52-2. Eckstein, A. (2015). 2015 health care outlook Australia, Deloitte Australia. Hurley, E., McRae, I., Bigg, I., Stackhouse, L., Boxall, A. and Broadhead, P. (2009) The Australian health care system: The potential for efficiency gains. A review of the literature, Background paper prepared for the National Health and Hospitals Reform Commission, from http://www.health.gov.au/internet/nhhrc/publishing.nsf/Content/backgroundpapers Melgarejo, L. M. (2013). Determinants of health care expenditure: The Colombian case. 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