Do government handouts work?

Even when designed with the best intentions?

I’m sorry but the answer is always …


Not for left wing causes like ‘free government healthcare for all its my right’

Not for right wing causes like ‘support the private health sector at all costs or the sky will fall’.

Welfare isolates people (and companies) from the harsh but necessary realities of life.

If you don’t have it, you shouldn’t spend it. And if you spend what you don’t have, you are borrowing money, and expecting the next generation to pay the interest.

Take it from Mr Micawber, a character from the novel David Copperfield –

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." Charles Dickens.

This article argues that –

The problem with the western health sector is its been living on welfare since the end of WW 2.

This has led to –

  • Uncontrolled costs and bloated bureaucracies
  • Over servicing, seeing old age being seen as a disease to be ‘cured’ and keeping brain damaged people alive as ‘heroic’
  • Outdated and inefficient work practices
  • Over powerful unions, professional bodies, guilds and health related companies
  • Stressed tax payers
  • Angry patients left with rising out of pocket costs
  • Some (frankly, terrible) clinical standards

Added to this –

  • The ageing population
  • Skyrocketing obesity rates
  • The rise of antibiotic resistant bacteria
  • Rising rates of autoimmune triggered diseases linked to lack of exposure to childhood bacteria, viruses and parasites
  • Sinking fertility and other health conditions linked to plastics, pharmaceuticals and farming chemicals polluting the entire food chain

A crisis is looming that few leaders are willing to face.

No matter what side of politics you sit on, the current trajectory of skyrocketing health bills (public or private) is not sustainable.

Across the western world, it is widely reported that 1/3 of our billion dollar health budgets are being wasted on over servicing, fraud and unnecessary tests.

This amounts to 50 billion a year lost in Australia or 1.3 trillion in the USA.

By comparison, the Italian mafia reportedly only stole 163 billion in 2008.

Watch the Four Corners Show 'Wasted'

The unnecessary testing and treatments choking the health system and making patients ill.
Produced with Norman Swan.

We have to get healthcare right. Like education it is absolutely vital.

But we also have to deal in facts and figures.

Not hashtag hysterics, baby boomer brats and crocodile tears.

The Report

On the 15th July The Grattan Institute published a working paper called The history and purposes of private health insurance.

It looks at the history of private health insurance in Australia, the cost breakdown of funding public versus private healthcare, roughly how these costs are being spent and asks ‘can be do better than this?’.

The answer is – Yes!

First, a brief history of health insurance in Australia

The Menzies era

The majority of Australia’s took out private health insurance from the early 1950s until the mid-1970s.

This reflected the government preference for people taking personal responsibility for their health.

Access to hospital care was means-tested. Free access to public hospitals was restricted to only pensioners.

The rational was to only provide free healthcare to people who would otherwise be unable to pay for it themselves.

At the end of Menzies rein in 1974, approximately 80% of the Australian population held private insurance.

The Whitlam Era

Gough Whitlam was elected in 1972, promising Australians’ universal, compulsory, national health insurance.

Despite strong opposition, the policy was eventually legislated in a joint sitting of parliament in 1974, and implemented under the title of Medibank in 1975.

Under Medibank, all Australians were provided with access to hospital and medical services free of charge and without means-tests.

The universal scheme was funded from taxation revenue on a fee-for-service model.

By 1998 only 30% of Australia’s still held private health insurance.

The Howard Era

John Howard came to power in 1996 and introduced both the tax rebate for people who took out private health insurance, as well as fines for those over a certain income who did not.

He maintained funding of the government Medicare model but committed Australia to a ‘carrot and stick’ approach to get people who could afford it, to take responsibilities for their own health cover.

By 2007 private insurance rates crept up to around 45% of the population.

The modern era

Where do we stand now?

Around 42% of the population has private health insurance. It’s not meeting current needs.

Both premiums and out of pocket costs are rising higher than inflation. A rising number of Australians are raising money for medical procedures that cost them thousands in the private sector, but could have been free in the public system.

Some private hospitals employ a skeleton of casual nurses and allow sub standard doctors to quietly continue with bad practices. The private sector tends to be old fashioned, Doctor centric and paper bound.

In the year 2016-17, there were more than 11 million admissions to hospitals in Australia. More than one third were to private hospitals.

Private hospitals tend to focus on elective procedures, such as knee and hip replacements for people without other chronic diseases (like obesity, heart disease, diabetes).

While only a very small proportion of emergency patients are admitted to private hospitals, the majority of surgery is done in private hospitals.

The majority of cancer treatments (like day procedure chemotherapy and radiotherapy) is done in the private sector.

Due to differences in both the types of public and private patients and their actual treatments is is hard to compare the efficiency of the two sectors.

Chalk versus cheese - private hospitals

Not all hospital admissions are created equal

It is far easier to be admitted to a private hospital if you have private insurance, than to be admitted to a public hospital if you do not have private insurance.

Patients can be admitted to a private hospital if the individual treating doctor thinks is clinically desirable, he or she can legally make a local decision. There is rarely ‘bed block’ in private hospitals.

Private hospitals have been accused in the past of cherry picking. This means selecting only patients whose outcome is likely to be far better and who’s treatment will produce higher profit margins.

In terms of the current case mix funding, this means a high chance of a quick discharge will equal more profit for the hospital.

Higher remuneration in the private sector encourages doctors to allocate more time to private patients. Some specialists are rumoured to receive up to 6 times their public salary, for doing the same procedure in a private hospital, as they do in the public system.

At the same time I have witnessed a number of private patients being denied admission to private hospitals as their condition and treatment is deemed too complex (which mean costly).

Bed and breakfast style hospital admission for patient with anxiety- cheap. Dialysis for renal patient- expensive.

Chalk versus cheese public hospitals

Admission to a public hospital can only occur is patients meet a strict criterion of admission factors set by the state government.

A bed must be actually available at the time of admission and access to beds is far tighter in the public sector.

Public hospitals are forced by legislation to admit and treat every single patient that meets clinical guidelines, no matter how complex their case or how poor their likely outcomes.

Public hospitals face draconian fines if they leave patients in ED for over 4 hours. They means they have to ration services and favour discharges over admissions.

Public patients can be broadly categorised as older, less fit and with more chronic diseases.

The 'Average' Private Patient

Is not what you might expect.

A friend told me this story several years ago. I think it nicely makes a point.

“My mother was in … private emergency on a Friday afternoon. It was filled with elderly ladies, who didn’t seem that sick but were determined to be admitted. As time went on they became more demanding.

My son is a politician representing… constituents they told the attending Doctors. If you don’t admit me, I’ll call him, and you’ll be sorry…”

Jelly and ice cream, friendly nurses, a clean bed and hot meals are a big incentive for lonely older people.

Particularly when they have paid insurance premiums for years and feel they deserve to draw down on them.

Being sick is mostly about needing basic care and good company. Our current system refuses to recognise this need and instead pushes all health services into a ‘disease, diagnosis and treatment’ straight jacket.

And just because you can technically squeeze any one over 60 into a range of admissions and billing codes it doesn’t necessarily mean they are acutely unwell.

My bet is, the biggest way to make money AND take pressure off the public system, would be to offer quality companionship.

In my experience the majority of people in hospitals simply don’t need to be there.

So How does this Affect Health Startups?

Both public and private funding is ‘pay per item’ not ‘pay per outcome’.

This means every tiny thing you do to a patient (irrelevant to its outcome) attracts a small payment. Lots of useless IV insertions, 2 hourly but meaningless blood pressures, CT scans that tell you nothing and hospital admissions that achieve nothing, all add up to a tidy sum.

But keep the same patient at home, help them lose a bit of weight and keep those blood sugars more stable with smart devices and telemedicine = no money at all.

Health startups wonder why they can’t get accepted by governments or private insurers. They blame themselves, their competition, their technology…

Few people really understand how perverse the actual funding of healthcare is.

And this gets back to my first point.


The problem with the modern health sector is it’s got the long term unemployed mentality.

It’s too easy to keep filling out useless forms and claiming your allowances.

But you are punished by losing money if you show initiative and try something new.

Personally I’d like to see private health insurers taken off the tit.

But I’d also like to see all their legislation, regulation and obligations torn up.

Let them set up medi hotels for lonely old people who want company and a nice meal.

And offer every DNA Internet of Things wearable wifi for the younger generation.

Tell private doctors and private hospitals to get out and hustle. Find a service that people are willing to pay for, then compete to offer it better and more cheaply than the next person.

Take risks. Innovate. Be entrepreneurs. Not hand out hounds.

And make governments return to the basics.

Providing a safety net for those who can’t afford healthcare.

Implementing population wide strategies like subsidies for farmers to remove antibiotics from the food chain.

Cut out farming chemicals, ban plastics and remove pharmaceuticals from entering the environment via human waste.

Implement childhood re exposure to bacteria, virus and parasites, in a controlled manner.

Fine people if they don’t tackle their weight problems.

And insure that the next generation actually have the money to fund THEIR health system.

As the count down towards western bankruptcy inches closer, its time for the nanny state to get the heave ho.

Cut passive handouts for both public and private sector.

And be assertive with whinging baby boomers (my pet hate).

For a reminder of just how selfish this group was, just watch Joanna Lumley in uTube runs of ‘Absolutely Fabulous’

I know it sounds conservative. But I honestly believe it is the truth.

Would you want your grandchildren to face a future of government bankruptcy because your generation was too lazy to tackle some tough issues?

What would the silent generation think about that?

© Wikihospitals July 2019


The history and purposes of private health insurance – Grattan Institute

Health costs are unsustainable in advanced countries without reform – OECD

Health bureaucracy: time to rein it in – MJA

Private health insurance makes Australia’s system unfair and muddled – The Guardian