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Lessons from the Australian system.

While there are important differences between Australia and the United States, particularly in population (Australia approximately 17 million and the United States approximately 280 million), the similarities of geography, history, culture, and language are remarkable. Both countries are vast; it takes longer to fly the 4,000 kilometers across Australia than to fly from northern Australia to Singapore. Both countries were established as British colonies, which has left a legacy of strong democratic institutions and, above all, the English language. Sadly, European domination of both Australia and the United States displaced indigenous peoples who have been left with the adverse consequences of cultural degradation and economic ruin.

America's 1776 independence from Britain directly led to the creation of modern Australia. In 1788, Britain was forced to look elsewhere to export its criminal classes, hence the establishment of Australia as a penal colony. Some current day Australians regard this historical accident as fortunate, because when the time came for Australia's independence and the establishment of a national government in 1901, experience was available of postrevolutionary republican government in the case of the United States and France, and a constitutional monarchy in the case of Britain hence the adoption of a parliamentary form of government that includes a constitutional monarchy and a federation of states based on the U.S. Constitution. Most important, attitudes of the community were heavily influenced by Irish, Scottish, and English migrants radicalized by poverty and by domination of the landed classes at home.

These radicals formed what were to become powerful trade unions, which in the 1890s established their own political party--the socialist in name and partly in deed Australian Labor Party (ALP). The mere existence of ALP has, throughout this century, forced all political parties to seek the middle ground in the auction for votes. Hence the adoption of extensive public welfare systems that offer comparatively generous financial support to families, the sick, the unemployed, and the aged, plus heavy public involvement in Australia's economic infrastructure--railways, power generation, water supplies, and, above all, universal free primary and secondary education.

Because of the migration of British economic refugees, early settlers adopted a policy of refusing entry to low-cost laborers from the Pacific islands. This became the unfortunately named "White Australia Policy," which had the beneficial effect of preventing an Australian slave trade and the establishment of a permanently deprived minority (the "White Australia Policy" has since been abandoned). After the Second World War, immigrants from throughout the world have come to Australia in vast numbers. By 1992, one in four Australians were immigrants.

Thus, Australia has become, in a great many ways, a new United States, but arguably a society that is more community minded, certainly less individualistic and competitive. Again similar to the United States, Australia is economically affluent but has a severe unemployment problem and a serious trade deficit (mainly with the United States--Australia is one of the few nations with a trading surplus with Japan).

Health Status in Australia

Compared with those of OECD countries, the health status of Australians is high. In terms of infant mortality and longevity, Australians have a higher health status than most Americans but slightly less than Japanese. Trends for health status and health expenditure for selected countries are shown in the table below. Perhaps the most important trend is that good health status had been achieved in Australia and the United States by 1960 with less than half current health service expenditures. The factors that lead to health status are complex and only partly depend on health service expenditures. There is sound evidence(3) that the availability of good food, shelter, safe water, immunizations, and education are essential prerequisites for good health. Although there have been improvements in health outcomes in Australia and the United States between 1960 and 1990, they arguably have been due as much to life-style and related factors as to any improvements in health services. Consequently, it can be argued that the vast increase during these three decades, in expenditures on health services cannot be wholly justified. Furthermore, based on the Japanese, Australian, and British experiences, it can also be argued that, to restrict expenditures on health services, 5-6 percent of GDP will achieve as good health outcomes as expenditures of 12-13 percent of GDP, as is the case in the United States.

Australia's Health Care System

There is no need to outline here in any detail the historical antecedents of the current Australian health care system. Because of Australia's federal system of government, administrative arrangements are complex and the details both boring and irrelevant to international readers. For those who have a serious interest, Ann Crichton,(4) a Canadian academic, has outlined in meaningful detail the two-century evolution of the Australian health care system.

The essential features of the Australian health care system are as follows:

* Medical Services. There is one general or family medical practitioner (GP) per 700 of the population. Patients have a free choice of GPs and specialists. There are very strong financial incentives to ensure that patients are seen and assessed by GPs before referral to specialists; in other words, self-referral to specialists is kept low. GPs are predominantly private health care professionals who charge fees for individual services. These fees are largely covered by universal health insurance. There are two main groups of specialist medical practitioners. About half are private practitioners but work part-time in public hospitals. The balance work full-time in the public sector.

* Hospitals. Approximately 80 percent of hospital beds are in the public sector; the remainder are in private or charitable hospitals. For "public" patients, hospital treatment is free. There are substantial costs for care in private hospitals, which can be covered by voluntary private health insurance. There is no choice of doctor in public hospitals unless a patient elects to be a "private" patient, in which case a hospital fee is charged.

* Pharmaceuticals. "Essential" pharmaceuticals are provided at public expense to all citizens through private pharmacies and the hospital system. Patients make a "copayment."

* Community Services. Extensive networks of special services-- maternal and child health, geriatrics, mental health, drug and alcohol treatment--are part of the publicly funded health services. Usually, these services include hospital, nursing home, hostel, and home-based care within a unified organization. These services are in stark contrast to the usual situation in the United States. It is a normal experience for an Australian family to have ready access to a local GP, for babies to be monitored by a nurse at a local early childhood center, and for the sick elderly to be visited by a "Meals on Wheels" service and to be assessed, rehabilitated, and cared for in the district geriatric service, all at little or no direct cost.

* Public Health. Immunization, health promotion, and environmental surveillance are available through the public sector on a universal basis.

* Finance. Expenditures on health care have risen rapidly, from 4 percent of GDP in 1960 to 7 percent in 1980. Expenditures have been stabilized at 8-9 percent of GDP during the past decade.

Approximately 80 percent of capital and recurrent finance for health services is provided by Australian governments, i.e., the taxpayer. The balance is met by a compulsory universal health insurance scheme ("Medicare") and by private payments. "Medicare" has been a political issue for the past 25 years. However, it has very high public acceptance (as judged by formal surveys) and very low administrative costs (3.8 percent compared to 12-15 percent for private health insurance)?

Even though "Medicare" constitutes only one-fifth of total health care expenditures, its introduction in 1975 was a bitter affair. It was vehemently opposed by organized medicine, i.e., the Australian Medical Association, and the conservative political parties. Vigorous and consistent support by a major political party that later became the Government was clearly an essential requirement in this process.(5)

* Quality. Based on anecdotal evidence supported by hospital accreditation surveys, the quality of Australian hospitals is similar to that of accredited U.S. hospitals. Professional standards are high, with medical graduates having high success rates in international examinations and acceptance into professional organizations. Following the British tradition, nursing has been a profession of good status. This is a major advantage, compared to the much lower status accorded to nursing in France and other European countries.

* Organization. Australian health services are largely planned. This planning is accepted as part of the expected and normal role of government. In recent years, in response to the need to rationalize services and develop networks of child health, geriatric, and mental health services, planning and the provision of services have been based on districts comprising populations that have a community of interest? This development has been successful7 and will be extended. Such government control has allowed, with great difficulty, the closing down of hospitals in inner-city areas and redistribution of resources to community services and to the expanding suburbs.


Australia has largely achieved the major goals of universal availability and accessibility. Health services are affordable and of appropriate quality. In addition, health care costs have been capped at 8-9 percent of Australia's GDP during the past decade. This achievement did not come without considerable difficulty, particularly with respect to the provision of universal health insurance. However the historical, cultural, and political characteristics of Australia all were in sympathy with the provision of an equitable health service.

Australia does not offer the perfect model of health services. Perhaps the most important difficulty is the alienation of key parts of the medical profession. This has been a legacy of the battle over "Medicare." There is no doubt that private patients get better attention and have less waiting time than public patients? Australia therefore has a 2-tiered system--a private (but largely publicly funded) sector with choice of doctor and little waiting, and a public sector with no choice of doctor and the likelihood of less experienced medical practitioners plus waiting lists for elective surgery.

Other problems include excess demand compared with available resources, shortages of capital for technical equipment and replacement of old hospitals, and maldistribution of some specialists--too many doctors in some areas, too few in others. These problems are, of course, worldwide and are largely responsible for universal attempts to improve efficiency and effectiveness.

It is appropriate to ask why there has been so much opposition to the creation of a universal health scheme. This question is particularly relevant to the United States at the present time. With respect to private health insurance organizations, opposition to universal, government-dominated health insurance has been understandable. These organizations stood to lose investments and influence and were obliged to act on behalf of their shareholders. The parliamentary opposition balked for presumed political and ideological reasons, but, according to opinion polls, this was an electoral misjudgment.

The vehement opposition of the majority of the medical profession is difficult to understand. The stated purpose of such opposition was to "maintain the doctor-patient relationship" and to prevent a government take-over of the medical profession? The real reason probably included a perceived threat to incomes and professional independence and, above all, fear and mistrust of government. This opposition never considered that there may have been advantages to the community as a whole in capping expenditures and providing universal financial security. Experience of the past two decades has been that few, if any, of the medical professions' fears have been realized. The incomes of specialists (but not GPs) have substantially increased, and there has been no direct interference with professional independence.

The reforms to Australian health services appear to have achieved their objectives without compromising standards or the professional independence of medical practice. Support for universal health insurance by the community is very high. However, elements of the medical profession remain alienated and a two tiered--public and private-- health service has resulted. Based on this Australian experience, reform of health care is difficult and cannot be achieved quickly. However, such reform appears to be beneficial and respected by the community. ~1



1. Evans, R., and others. "Controlling Health Expenditures--The Canadian Reality." New England journal of Medicine 320(9):571-5, 1989.

2. Hofreuter, D., and Mendoza, E. "Study Tour Examines Health Care System in Germany, Holland." Physician Executive 19(4):24-8, July-Aug. 1993.

3. McKeown, T. Medicine in Modern Society. London, England: Allen and Unwin, 1963.

4. Crichton, A. Slowly Taking Control? Australian Governments and Health Care Provision, 1788.1988. Sydney, Australia: Allen and Unwin, 1990.

5. Scotton, R., and MacDonald, C. The Making of Medibank, Australian Studies in Health Service Administration, No. 76. Sydney, Australia: University of New South Wales, 1993.

6. Lawson, J. "Decentralizing Health Services in Australia." World Health Forum 12(1):96-8, 1991.

7. Lawson, J., and Evans, A. "Successful Decentralized Organization of Health Services in Australia." Australian Health Review. 15(3):237-47, 1992.

8. Davis, A., and others. "The Influence of Health Insurance Status on the Organization of Patient Care in Sydney Public Hospitals." Australian Health Review. 14(4):450-68, 1991.

James S. Lawson, MB,BS, MD, MHA, is Professor of Health Services Management, University of New South Wales, Kensington, Australia.
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Author:Lawson, James S.
Publication:Physician Executive
Date:Nov 1, 1993
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