Health Oligopsony Not The Answer – 07 April 2005

“Proposals to establish a layer of taxpayer funded regional health care purchasing organisations who will buy health care from providers and supply it to patients won’t deliver important improvements to Australia’s health care system,” Executive Director of the Australian Doctors’ Fund, Mr Stephen Milgate said in Sydney today.

We believe this proposal combines the worst aspects of the British National Health Service and US style managed care.

“The proposals reported as being recommendations of the Podger Committee appear to be identical to those expressed by ACCC Chairman, Mr Graeme Samuel in his paper to the World Bank on 29 February 2000, entitled “Introducing competition in the public delivery of health care services” 1

“The failed concept of managed competition is the basis for the US managed care model”, Mr Milgate said. Much of US healthcare is controlled by commercial middlemen (Health Maintenance Organisations or HMOs) who dictate to doctors what treatment patients get. HMOs dis-empower patients. Choices are limited to what the purchaser, sometimes called the “Big Ugly Buyer” decides is best for you.

Mr Samuel believes his model will differ from US managed care because it will have “a greater reliance on competition and market mechanisms and a better flow of information”

Whilst Australia is looking to import a US model, President Bush, driven by political pressure is attempting to reform the system by encouraging the spread of the Singaporean model of health savings accounts.

There is a case for public hospital financing reform. Like the British NHS, our public hospital system diverts a considerable amount of its funding to bureaucracy. Regional purchasing authorities (big ugly buyers) are not the answer. The answer is the elimination of bureaucracy, not the rearranging of it.

The Commonwealth should consider the concept of direct public hospital insurance which could be claimed by all public patients to pay for their public hospital treatment directly. “This would mean that funding would come through the front with the patient, allowing the bureaucracy to leave through the back door”, Mr Milgate said.

The Collins Dictionary states Oligopsony – a market situation where a commodity is represented by a small number of purchasers