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Back in 1992, an economic analyst did an unusual thing. He made a number of predictions, some of which actually proved correct. Several more look like becoming true, especially those predicting how Australia's health system will change, and how this will impact the medical profession and patients
When Dr Ron Williams wrote his book Remission Impossible - The Future of the Australian Health Industry , he thought it was inevitably that health services would be fully commercialised - or more specifically, "rationalised, privatised and Americanised". He said this would be bad news for doctors professionally, although it would be good news for some financially
Like the economic rationalists, Williams believes health is an industry, and should be managed as such. And, like the Marxists, he believes that the professional values and ethics that characterised health services when they were a professional cottage industry will give way as the industry is progressively commercialised
It is not unusual for economic rationalism to mirror Marxism. Both are economistic ideologies. Both believe that the economic organisation of a society determines its value systems. Marxists state clearly what economic rationalists implicitly accept - that value systems, including professionalism, are 'superstructure', dependent on the way in which production is organised. Value systems come and go as production changes. History shows how social revolutions accompany moves from hunter-gatherer to agricultural to industrial economies. Social behaviour changes when the organisation of production swings to or from socialist, capitalist, or welfare-statist economic modes. Williams expects the same to occur as we move into post-modern forms of production in which the focus shifts to globalisation, high-tech workforces, constant re-adaptation to rapid technological turnover and so forth
Health as Industry
The capital, manpower, and knowledge required to maintain today's health services is massive. In William's view, only the modern corporation can cope. Only it can raise the capital, manage the resources, and organise the research and development on the scale required. The task of keeping up with growing demand and rapid technological change is beyond Government and its bureaucracy. This is especially so when the political orthodoxy demands low taxing, low spending, smaller government
When Williams wrote his 1992 book, health services in Australia already involved over 400,000 health professionals, 1000 hospitals, and 1400 nursing homes. Health care activity provided revenue for several hundred Australian and overseas suppliers of pharmaceuticals, equipment and health products. Several thousand health department bureaucrats, health corporation and insurance executives, university academics, medical scientists and others depended on it for their incomes
Williams calculated that in 1990, half a million providers performed 150 million services at a cost of $28 billion. The customer base for the industry was about 17 million. More money was spent on health services than on national defence, and more on pharmaceuticals than on alcohol
The Dead Hand of Government?
Given its geographic size and population scatter, Australia has a ongoing need for big capital investment to maintain the first world standard of living that Australians have come to expect. But Australia's commodity-based economy is precarious. Balance of trade deficits and overseas debt and interest are already high. Williams believes government has no hope of meeting the capital requirements for infrastructure maintenance and development a country like Australia must have. This is especially so in health where expectations are rising and technology developing rapidly. Australians want "effective services, gently delivered immediately, by persons of the patient's choice, in all places, at no cost [at the point of service] to all patients."
Another health economist, Dr Stephen Leeder, one of the leading advocates of Medicare in Australia, thinks government only needs to raise the Medicare levy by one per cent to inject an additional $2 billion into public health care. But even the sell-off of public assets (with consequential loss of revenue) will not keep at bay for long the effects of rising overseas debt, interest payments, balance of payments deficits, and commodity price decline. Superannuation will not meet Australia's hunger for capital while workers savings are invested overseas by fund managers who seek safety in government bonds and real estate. Superannuation scheme managers are largely prohibited from using the funds as risk capital. Risk capital is something the American system provides in abundance
Government has less than Buckley's chance, according to the Williams' viewpoint, of providing the level of access to health services that Australians demand. Only private initiative in a free (deregulated) commercial environment can supply the creativity needed for operations of such magnitude and complexity. In Williams' view, government intervention is nothing but "a dead hand around the throat of a vital and potentially dynamic industry":
"Government has enormous technical control over every part of the industry. Every institution, association, individual, importer, and manufacturer needs some sort of government blessing in order to stay in business. Professionals and hospitals and nursing homes are licensed, accredited, inspected, and computerised; their capital purchases are reviewed and rationed. The drugs they deal in are approved and controlled. Their activities are reported in mandatory summaries, statistics and reviews. At every step, government, through its policy and bureaucracy, is apparent and invasive."
In order to retain electoral popularity while reducing expenditure, government has become counter-productive. It has restricted rather than encouraged innovation in all but cost-cutting and rationing procedures. Due to government's political aims and bureaucratic modus operandi, the health industry has been
"repressed financially and regulated almost beyond belief. The private components of it were repressed most of all, and it was clear that new capital and entrepreneurial activity was not welcome."
This situation cannot continue, according to Williams. In the eleven years to 1987 the average use of medical services rose by 50 per cent and the cost of an average unit of consumption by 30 per cent. He predicted that the march of medical technology and consumer expectation was beyond policy control by government. Background forces would "drive the industry over the brink into a completely new commercial environment". That new environment would not tolerate an autonomous professional workforce. Autonomy and medical professionalism would have to go in order to give the corporations the "flexible workforce" they required to manage the health "industry" in accordance with what they say are rational economic processes:
"Basically, my argument is that the health industry really is an industry... The health industry participants will not be protected from commercialism by a wonderful aura of compassion. Lofty humanitarian goals will not always be compatible with profit, position and survival"
How will it happen?
Williams wrote his book after studying the health system in America. He based his predictions about Australia on the American model at a time when the US health system was implementing its managed care revolution. Re-organisation of the ownership and means of health production in America "changed the values of people in the industry":
"Doctors in particular exemplify this. They saw themselves as scapegoats, threatened financially and politically and socially, and betrayed. As they were bought out, or as they lost their independence, or as they were forced into salaried work, their attitude over ten years hardened, then toughened. The previous balance between personal security and professional compassion was permanently disturbed. They entered the 1980's with the belief that their professional status and their justifiable incomes were consistent with the necessary level of altruism; they left the 1980's with the conviction that they must first and foremost look after themselves by every conceivable business practice in the ever expanding book"
Williams describes in detail how US-style commercialisation changed doctors and the professional value system in America:
"Private practice doctors became businessmen. They formed mini corporations and joint ventures with allied professionals and with hospitals and with pharmacies. They invested in hospital car parks, bought up cleaning services, opened day clinics and 24-hour clinics and day surgery clinics, built five star hospitals, and financed free-standing surgical centres. They set up chains of retirement villages, sold home infusion therapy services, and promoted health education software for the home"
The medical metamorphosis did not stop there. Doctors started to amalgamate into larger business units. They formed partnerships, then medical groups with 50 or so other practitioners. Next, the larger groups associated to develop broker and venture capital networks that provided risk capital for themselves and other health industry borrowers. Doctors built their own medical centres, bought expensive capital equipment, and provided a complete range of diagnostic and treatment services for their own clients as well as others. According to Williams, doctors became "commercial predators, buying into community hospitals, nursing homes, and other large and small practices". But, he warned:
"The process did not stop there. As the decade continued, the early predators became the prey as corporate America realised the profits to be made."
Williams expects the commercialisation process will have a similar effect in Australia. But will the outcome ultimately be a happy one? In answering this question, he shows himself not to be an unredeemed economic rationalist. He thinks professionals' conventional attitude to profit and salaries will dissipate, but, unhappily, it will be replaced by:
"a blatant exploitation of the system, by previously altruistic groups who have been soured and threatened by policies and attitudes that prejudice their livelihood and social position. This will occur right across the industry, and with a depth and perseverance that will haunt government, and society, and the professionals themselves, for decades to come."
Why would patients become disgruntled? Governments are not the only ones with an incentive to ration health care. Privatised hospital, health insurance and various health management corporations will provide high cost care, but only to those who can afford to pay for it. High quality medicine will be for high quality payers. Profit is the bottom line for corporations in the same way that balanced budgets and low taxes are for government. Williams says exploitation of patients through over servicing is higher in America, and more health money is diverted from the actual provision of services into insurance company administrative costs, executive salaries, and shareholder profits
Williams thinks the end result of deregulation will be oligopoly. This is the essence of Americanisation as he sees it
"The system will be designed for big business. The small medical centre of today, with 200 doctors and its own chain of four hospitals and ten nursing homes, simply will not be able to meet the requirements for nationwide provision of every conceivable service. It will need to shed its independence and move further along the path of agglomeration... processes of take-over and merger will take a quantum leap, the forces of free enterprise will be unleashed, and ownership and control of the industry will pass bloodily to an oligopoly of mega corporations
The doctors and specialists and hospitals who now deliver the services will continue to do just that. But they will be managed and financed by the oligopoly and will adopt the policies and marketing strategies dictated by them ... they will stay independent for as long as it serves the oligopolies purposes..."
Williams believes it possible that world health will ultimately be run by the "Seven Saving Sisters", an oligopoly similar to the Seven Sisters group of corporations that dominate the global oil industry. Major national and transnational corporations will "seize the opportunity to buy into the industry that has been opened up to full capitalism for the first time". MacHealth could provide a guaranteed standard of health care world wide, as McDonalds does its hamburgers. But that standard would be determined by bottom line financial criteria, not compassion or social justice. In the US, 35 million citizens lack any form of health insurance. Another 70 million survive with dangerously inadequate cover. Australian pharmaceuticals are already dominated by a dozen or so big corporations some with subsidiaries in Australia. One or two local corporations look like dominating the hospital scene in Australia under the watchful eye of bigger overseas corporations seeking whom they may take over
Under the American model there could be no suggestion of a single insurance carrier such as Australia's Medicare - "health care is a business, and that the cash flow should be handled by business", says Williams. He predicts that major private insurance corporations will perform the same functions that Medicare does in Australia now
"will have already moved a long way from their sole practices, and will be compromised by the financial pressures that their own big businesses put on them. And by the fact that some of their colleagues will be happy to sell out to high priced bidders"
Doctors have become fairly used to battling against government over the post-WWll decades. But government depends on electoral support for its own existence. Now doctors will be pitched against the major corporations. Williams thinks:
"In this climate, the physicians will be no match for their corporate opponents... The corporations will provide them with financial and training incentives to retain and encourage their interest in their job... The reality is, though, that the feelings of neglect among patients will grow rapidly. And, amid all this, and despite the inevitability of defeat by the megacorps, the physicians will fight to maintain their independence. It will take decades to finally subjugate them.
Whatever the details, the industry structure and its locus of power will change. The grand winner will be the megacorps .... the pots of gold are there, and an oligopoly will develop in the American way."
Labor and Coalition Health Policy
Williams predicted that the Labor Party would meet a good deal of resistance to commercialisation from within its ranks. But not enough to hold back the economic orthodoxy emanating from the Treasury and corporate pressure groups and think-tanks. For old-time Labor supporters, hospitals and welfare institutions were outside the bounds of commercial enterprises:
"For these people, it is a basic tenet of Labor's philosophy that everyone has the right to a reasonable level of health care, no matter what the circumstances. Hospitals are places where compassion and care and charity have always been given to the sick. It might be acceptable to sell off banks and airlines, but any move towards commercialisation of hospitals would destroy a very special institution."
Williams predicted in 1992 that if the Coalition won government, the Liberal solution would be based on American-style free enterprise. This would include deregulation, the breaking of the trade unions, the stimulation of business and industry, and incentives for risk taking. But would the Liberal solution work in Australia with its very different cultural and institutional traditions? Williams argued that US policies had succeeded mainly because of America's "strangleholds" over various products and industries, backed up by a " commercial savagery that Australia does not have". Consider, for example, the blatant double standard the US applied to Australian lamb as against American pork
Williams predicted that the Liberals would boost private hospital insurance, privatise some public hospitals and close others, close wards and cut beds, try to reduce the number of doctors, and decrease the funding for community services
"Government and big business will gang up on the unions and remove their dead hands from progress... [Development capital] will come from entrepreneurial activity in the private sector"
But these measures would be "politically perilous tactics", in William's opinion. They amount to trying to suppress demand while, at the same time, gaining extra revenue from extension of the user pays principle:
"The government will in fact claim that it has struck the perfect ideological balance. On the one hand, it [privatisation] will provide the money to allow basic health services for everyone. On the other, it will create a favourable legislative background for the forces of capitalism to run riot ... "
Williams' book is now out of print, but it is available in some State and university libraries. It is stimulating reading, even when one is in disagreement with parts of it. It deserves to be updated and republished. It would help warn the medical profession not to overlook the wood for the trees when rushing to put out spot fires. It is all too easy to miss the big picture and the real forces behind the stream of controversial "single issues" that pre-occupy health care politics. One thing Williams does particularly well is focus readers' attention on identifying the fundamental dynamics of change in the health system and where they are taking us.
Reviews of Bob Brownings books and his recent articles are on his homepage - address http://www.skynet.net.au/~rwb