20 June 2022

Cloudy with a chance of funding reform

Government Technology

Prevention, telehealth, self-managed care – can the Labor government bring us into the 2020s?


Our health sector still relies on funding models developed in the 1960s.

How can Australia reform its archaic health funding models to best serve the sector and support a very different paradigm from the old paper-based fee-for-service direct billing? 

This was one of the more contentious topics discussed at the Inaugural Australasian CXO Healthcare Cloud Summit last month, which you can watch here (skip to around 7 hours in for this panel).  

A panel of industry experts answered these questions as follows: 

Health economist Dr Stephen Duckett is best known as the architect of Medicare. His past roles include health director of the Grattan Institute and Secretary of the Department of Health. He now serves on a range of health boards. 

Dr Duckett points out that when Medibank (later Medicare) was introduced into Australia in 1974, existing medical care was episodic, with standard fees charged for each service.  

“There were no credit cards; doctors would bundle up all the paper fee-for-service bills and send them off in bulk – hence the term “bulk billing,” he said.  

Health care in the 2020s is a completely different environment, with more focus on chronic disease and emphasis on prevention, telehealth, self-determination and self-managed care, and this environment is not well-suited to the 1970s-80s model of Medicare fee-for-service payments, he said. 

He said the big questions that health economists must tackle now: how do we get from here to where we want to be? What is the process? And how will new funding models balance fee-for-service, salaried, capitation and pay-for-performance? 

Dr Duckett said the new Albanese government offered an opportunity for change because the public trusted a Labor government with Medicare more than a Liberal government. 

“Labor went into the election late in the piece signalling a review of general practice payment arrangements,” he said, adding that he was optimistic the timing was right.  

Details of GP payment reform will be determined by an inclusive taskforce with representative bodies such as the AMA, GPs, Consumer Health Forum and others, chaired by a hands-on minister – Mark Butler – and backed by a $250 million per year Commonwealth commitment. 

Dr Stefan Harrar, chief innovation officer at the Digital Health CRC and a former researcher at the IBM Watson Research Centre, was also founder of the brain-inspired computing research program at IBM Research Australia. 

Harrar said digital health must transform data into value that is provided back to consumers in the form of services, and will move us further towards a democratised consumer-centric business model. 

“Consumers will only value and use and support services if they create measurable impact and better outcomes,” he said, warning that health funding reform was an ongoing process that couldn’t be nailed down within a few months.  

Michelle O’Brien is a leader and Board Advisor in digital health with a strong history in commercial data driven technology projects across multiple sectors, including senior leadership roles with MedicalDirector and MediRecords. 

She said Australia has an exciting opportunity to reform our health system and break down the fragmented funding models that have not served our country well, reduce the demand on our hospitals and improve access to health and social care across Australia. 

Primary care has been chronically underfunded via the current fee-for-service model which provides no incentive for primary clinicians to work with hospitals in shared and multidisciplinary care, she said. 

Ms O’Brien said GP practice management systems and electronic medical records evolved around the need to supply information and bill the government.  

“There’s no strategic or financial reason for them to move to the cloud, and commercially it makes no sense for them to do it, so we now have a primary care system committed to outdated technology.” 

Ms O’Brien said the decades-old server-based technology also prevents primary carers from collaborating safely or efficiently. 

Primary care and acute care are different – but patients whose long-term conditions are not well managed are more likely to end up in a hospital, she said.  

“General practice is made up of thousands of small businesses, so this is a public/private partnership and everyone needs to be represented when designing the solution,” she said. 

“Add in the complication of Covid where [patients] have put off important health checks, and a stressed and fatigued workforce, and we have created the perfect storm for our system.” 

Ms O’Brien said consumers had now had a taste of something different and wouldn’t put up with an outdated system that didn’t give them the care they need.  

“If primary care sits back and does nothing, the big overseas health insurance cloud vendors will come into Australia and the consumer will choose to use them.” 

Karman Yan is client and industry lead in corporate and leveraged finance in the business banking section of Macquarie Bank, and says that author Eric Topol explores the phenomenon of health consumer power in his book, The Patient Will See You Now

“Patients are getting more authority and control over what happens with their data,” she said.  

In the US, the 21st Century Cures Act makes it mandatory for providers to make patient data accessible to patients, through common standards, she said. 

“With a foundation like that, adoption of cloud-based, innovative data sharing will follow, and this must be governed in health care, rather than follow the classic Silicon Valley scheme of ‘move fast and break things’ – because if you break things once, you’re out.” 

Ms Yan said policy changes and legislation must be highly regulated and monitored. 

“Not everything that happens in the US is better, and we don’t want a super-commercial, Wild West payment system, where patients can easily be billed 100K for some unforeseen service,” she said. 

When patients realise that their data is valuable, they will want to see that this value is generated into creating these valuable services for them and others.  

There are strong opportunities for fundamental change to happen in coming years, Ms Yan said. “Yes, there’s a window of opportunity – it’s a lengthy window of opportunity, but there is also a mandate to support and drive change.” 

Mirinda O’Gorman, who is chief growth officer at HICAPS, said the government was the largest payer for health care and aged care and disability services, including $20 billion for Medicare and up to $60 billion for the NDIS. 

“The government needs to lead the way in changing the funding system so it is based on value that’s delivered by a provider, rather than the current transactional system,” she said. 

Emily Casey is a health tech community builder, curator and content creator and founder of What the Health

“We have the technology – we just haven’t embraced the technology, or created the pathways for that technology to get into the hospital system – there hasn’t been enough inclusion of all stakeholders, and we’ve been doing ourselves a huge disservice by pushing the same old things and not getting everyone involved,” she said. 

“We don’t want disruption in the healthcare system – we want transformation and innovation.”