Making Medicare: The Politics of Universal Health Care in Australia

By Anne-marie Boxall and James Gillespie

Since the 1980s, Australians have had a system of universal health care that is often taken for granted. But the road there wasn't easy. Making Medicare is a comprehensive account of Australia's long, tortuous, and unconventional path toward universal health care—as it was established, abolished, and introduced again—and of the reforms that brought it into being. With its detailed investigation of the policy debates that have determined the shape of health care in Australia, this book is the most thorough survey of Medicare's history published to date. But it is not just about the past. The authors offer a timely overview of further reforms needed to address the challenges facing our health care system: new technologies, the aging population, and the rising tide of chronic disease.

• Language: English
• Publisher: Independent Publishers Group
• Release date: Oct 1, 2013
• ISBN: 9781742241432

Book preview

Making Medicare

ANNE-MARIE BOXALL is director of the Deeble Institute for Health Policy Research, Australian Healthcare and Hospitals Association. She completed her PhD on the history of Medicare in 2008. Since then, she has worked for the National Health and Hospitals Reform Commission, the Commonwealth Treasury and the Commonwealth Parliamentary Library. Anne-marie has been awarded two fellowships to continue her research on health reform in Australia: the Australian Prime Ministers Centre Fellowship (2011) and the Margaret George Award from the National Archives of Australia (2012).

JAMES A. GILLESPIE is the deputy director of the Menzies Centre for Health Policy and associate professor of health policy in the Sydney School of Public Health at the University of Sydney. James has been researching and writing on the politics of health in Australia and internationally for two decades. He is the author of The Price of Health: Australian Governments and Medical Politics 1910–1960 (1991) and numerous works focusing on current challenges facing the Australian health system.

‘Making Medicare gives an historic overview of the introduction of universal health insurance in Australia. It is an account that exemplifies the vigour of our democratic system as interest groups have robustly battled out the implementation of new policy in pursuit of their self-interest. How far the public interest had the opportunity to participate in these energetic exchanges was another matter. The methods used in this contest were not always elegantly pursued. Some of the participants in this struggle were less than fastidious, and not at all subtle in their tactics. The health scene has been profoundly changed, with all political parties, including once bitterly hostile opponents, now publicly endorsing Medicare universal health insurance. This book, incidentally, convincingly demonstrates that contrary to popular belief Malcolm Fraser, as prime minister, genuinely tried to retain Medibank, the original universal health insurance scheme, with some modifications that would reshape it to conform to his party’s ideology. I recommend this book to potential readers.’

– The Hon. Bill Hayden AC

Making Medicare

THE POLITICS OF UNIVERSAL HEALTH CARE IN AUSTRALIA

Anne-marie Boxall & James A. Gillespie

A UNSW Press book

Published by

NewSouth Publishing

University of New South Wales Press Ltd

University of New South Wales

Sydney NSW 2052

AUSTRALIA

newsouthpublishing.com

© Anne-marie Boxall and James A. Gillespie 2013

First published 2013

10 9 8 7 6 5 4 3 2 1

This book is copyright. Apart from any fair dealing for the purpose of private study, research, criticism or review, as permitted under the Copyright Act, no part of this book may be reproduced by any process without written permission. Inquiries should be addressed to the publisher.

National Library of Australia

Cataloguing-in-Publication entry

Author: Boxall, Anne-marie, author.

Title: Making Medicare: The politics of universal health care in Australia / Anne-marie Boxall and James A. Gillespie.

ISBN: 9781742233437 (pbk)

9781742241432 (epub/mobi)

9781742246574 (ePDF)

Notes: Includes bibliography and index.

Subjects: Medicare (Australia).

Public health – Australia – History.

Medical policy – Australia – History.

Health insurance – Government policy – Australia.

Health planning – Australia – History.

National health services – Australia – History.

Health services administration – Australia – History.

Australia – Politics and government.

Other Authors/Contributors: Gillespie, James A., author.

Dewey Number: 362.10994

Design Di Quick

Cover design Natalie Winter

Cover images Images copyright Maksim Kabakou, 2013. Used under licence from Shutterstock.com

Printer Griffin Press

This book is printed on paper using fibre supplied from plantation or sustainably managed forests.

CONTENTS

Foreword Professor Stephen Leeder

Making Medicare: a timeline

Introduction: Health care and history

1   Health reform efforts to the 1950s

2   Whitlam and health system reform, 1960–74

3   Making Medibank a reality, 1974–75

4   Organised medicine versus Medibank

5   Fraser’s health system reforms, 1976–81

6   Medibank weighed in the balance, 1976–78

7   Why Fraser abolished Medibank

8   Hawke brings Medicare into being

9   The politics of Medicare, 1984–96

10   John Howard, Medicare’s greatest friend?

11   Current issues, future challenges

Notes

References

Acknowledgments

Index

FOREWORD

Medicare is an example of that rare thing in health care policy in Australia: a radical change. Since the scheme’s introduction as Medibank in 1975, no policy change in health in this country has come close to matching its radical break with the past. Most of the time change occurs in health policy in increments and decrements – a cut, a stitch, a fiddle, a twiddle, and a muddle of restructuring. Medicare was different. These little changes are generally quiet, but Medicare was a thunderclap. It was a game-changer, with repercussions and ripples following. It not only changed the way we pay for health care, but challenged us to think about why as a society we provide health care and to whom – the equity question. We found ourselves thinking about health risk not only to us as individuals but as communities, the divide between private and public payment, what it is reasonable to expect from the health care system, our ideas about universality of benefits and payment, and much more besides.

In Making Medicare, Anne-marie Boxall and Jim Gillespie provide a clear, interesting and detailed account of how Medicare came to be, the shape and function of politics at the time of its introduction, the push-back it provoked from the medical profession, and the way in which long-standing tensions between government and doctors were played out on the political stage. The authors provide us with an account of how Medicare developed and what important lessons for health reform we learned from this process. The public attachment to Medicare that led eventually to bipartisan support is analysed and interpreted.

We all know that official records provide one account of historical events while the stories told by those involved in the making of history are frequently different. Think about accounts of battles. This is one reason why oral history can be so fascinating. The dynamics that lead to objective outcomes – in this case the introduction of Medicare – may be very differently perceived and experienced by the various parties. At times it can seem as though the drama unfolding on centre stage is enacted by players who are following different scripts.

What is the likely future of Medicare? Let me offer you an analogy. Westmead Hospital sits in the middle of Sydney and provides tertiary care for about one million people. In 1973 I assisted marginally in its planning and so I have seen it grow from concept to reality and have watched as four decades of history have wrought their changes. While its central functions of patient care have remained steadfast, these have changed as technology has developed, as specialties have grown and as the social meaning of health care has altered. The building, too, has changed – new facades, renovated spaces, reconfigured corridors to accommodate shops, cafes, banks, a post office, new therapies and management spaces. Has Westmead Hospital ‘survived’? Yes, but the changes, albeit incremental, amount to significant redefinition. In considering its future, one must start where it is now, not where it was when the first foundations were laid.

So it is with Medicare’s future. Its current complexity is its reality. In my view the real test of Medicare is its ability to survive as a universal health insurance system – paid for by everyone, accessible by everyone. If the changes and additions and subtractions lead to it being called a safety net, it is lost. If the central purpose can be maintained, then it will continue to be a strong expression of a society that cares for all its members, sick or well, rich or poor. We can but hope.

Stephen Leeder

Professor of Public Health and Community Medicine,

University of Sydney

Editor-in-chief, Medical Journal of Australia

MAKING MEDICARE: A TIMELINE

INTRODUCTION: HEALTH CARE AND HISTORY

The battles to introduce Medicare and its predecessor Medibank, Australia’s universal health insurance schemes, have become a litmus test of political courage – and the measure of policy daring and fidelity to Labor reform traditions in policy areas far removed from health care. When Prime Minister Rudd introduced his health reforms in 2010 he declared (echoed by a chorus of his cabinet colleagues): ‘Today we’re delivering on the most significant reform of Australia’s health and hospital system since the introduction of Medicare almost three decades ago’.¹ The National Disability Insurance Scheme championed by his successor, Julia Gillard, continued this line in hyperbole, with claims that it ‘rivals Medicare as nation-changer’.²

Even critics of these two recent prime ministers have accepted the assumption that Medicare was the highest expression of Labor values. In the heat of the 2010 federal election campaign, the senior Canberra parliamentary press gallery journalist Laurie Oakes rebuked Julia Gillard for having ‘the temerity to compare her approach … with the introduction of Medicare. In fact, the contrast could hardly be greater… Gough Whitlam and social security minister Bill Hayden showed determination and guts in devising a national health insurance scheme and fighting for it until they got it through the Parliament … Agree with them or not, we had real leaders in politics in those days. Not just pygmies’.³

Between 1972 and 1984 Australia went through a dizzying set of health reforms. It became the first developed county to introduce a universal health insurance scheme (Medibank), and then abandon it. During this period Australia tried – five separate times – to find a way of balancing the public and private insurance schemes, with each reform more complicated and confusing than the one before. In 1984, Australia eventually reintroduced a public universal health insurance scheme (the current scheme, Medicare), but this remained under siege. At the same time, it became the model of reform that subsequent Labor governments have been measured against, and a warning to their opponents of the hazards of opposing large entitlement programs in health care.

The fragility of universal health care in Australia during the 1970s and 80s was disturbing for those who saw it as a sign of a civilised society. Once in place, large-spending programs like Medibank normally create their own constituency. As the saying goes, ‘policy creates politics’: so generally, reforms, once implemented, summon forth new constituencies who benefit from them. Even bitterly contested reforms quickly become the norm; in health, doctors and other professionals become accustomed to new methods of being paid and locked into the system under the new conditions. Studies on the attempts by Margaret Thatcher and Ronald Reagan to roll back the welfare state found that groups built around the welfare states in Britain and the United States, especially of middle-class recipients of health care and education, made it difficult, if not impossible, to cut programs, benefits and entitlements.⁴

Looked at through this prism, the Australian case is an anomaly. The normal pattern of policy development is for intense public battles as powerful interest groups resist and then accommodate reform, followed by longer periods of peace. This can be seen in the British National Health Service (NHS). The Labour government’s plans for nationalised health care initially faced open defiance from the British Medical Association (BMA), which voted eight to one to reject all aspects of the NHS Act. Five months later, after achieving concessions over pay, but none over the structure of the new service, the BMA meekly participated in the ‘appointed day’, when the NHS commenced operations in July 1948. Similarly, the Conservative Party argued that the NHS would bankrupt the nation and provide yet one more step towards a totalitarian state. Within three years, the BMA was defending the NHS against attempts to cut services, and the new Conservative government, like Labour, was treating the health system as ‘a secular church’, drawing on the best of British values.⁵

The American Medicare program, despite being restricted to the aged, was also resisted furiously when Lyndon Johnson proposed it in 1965. After it was implemented, it swiftly became a ‘cherished institution’.⁶ And more recently, one of the worst accusations the Republicans could fire at Barack Obama’s program to extend US health cover to the uninsured was that it would undermine Medicare.⁷

The Canadian equivalent, also called Medicare, faced similar hurdles when it was introduced in 1966. Once installed, however, it assumed a central place in the consensus about Canadian identity. In each of these cases, debate continued around the edges but there was never an attempt at wholesale rollback.⁸

In Australia, consensus around health policy took a long time to arrive. There were two periods of intense reform activity. The first began in 1938, when Joe Lyons’ United Australia Party government invited British experts to develop a national health insurance scheme. A system of publicly subsidised private health insurance was introduced in 1954, after sixteen years of tumult, six elections and the defeat of more thoroughgoing Labor schemes. The second reform period began in 1969 – when opposition leader Gough Whitlam first put what was to become Medibank to an election – and only really ended in 2003, when the once hostile Coalition parties begrudgingly accepted Labor’s reforms and announced that they were now Medicare’s ‘greatest friend’.

This contentious history of health insurance reform in Australia is the subject of Making Medicare.

Our aim is not to write a complete history of Medicare, let alone the Australian health system. The problems of access to Medicare-funded health services in Aboriginal communities and the development of distinct, community-controlled alternatives, is a separate, complex story.⁹ Equally, the issue of access and service delivery in rural and remote areas is a large topic, which would require a full account of state and territory initiatives, as well as national responses.¹⁰

We look at several elements of the political history of Medicare and its predecessors, and uncover some of the longer-term forces at work and the themes that recur throughout Australian health policy. We start from the basic principle that there is no single reading, and no simple explanation of complex health reforms over time. Any understanding must bring together at least three levels of analysis: that of ideas, institutions – the longer-term understandings and organisations that hold a society together – and interests.

The history of Medicare in Australia has received remarkably little serious treatment. A leading Canadian health policy analyst, Gregory Marchildon, has complained about the neglect of serious historical analysis of health policy in his own country. His explanations hold equally for Australia. He says that first, ‘public policy occurs within the framework of the state – the history of Medicare is, therefore, political history as well as policy history’. The decision that the state would assume much of the risk of ill health was a political choice, and bitterly contested in both countries; however, a ‘declining interest in political history’ among professional historians has ensured neglect of the story. Second, ‘the history of Medicare has been neglected because of the sheer complexity of researching and writing policy history’. An adequate account requires knowledge of political and administrative systems, financial arrangements, an understanding of policy and how it is translated – and often contested – in law, and ‘knowledge of civil society actors and organizations that ultimately play both a co-ordinating and competitive role with the state in administering and delivering a social policy such as Medicare’. Finally, it requires an understanding of the complexities of federalism, the politics and financial manoeuvrings that make up much of the stuff of Australian as well as Canadian policymaking.¹¹

This study starts the task of picking up Marchildon’s challenge. Making Medicare takes into account the complex interplay of ideas, politics, institutions and interest groups around health care and policy.

IDEAS MATTER

Health is one of the most important issues in Australian politics. Over the 20 years that the Australian Electoral Study has been surveying the reasons why Australians cast their votes, the item ‘health and Medicare’ has been consistently ranked as the most important issue in voters’ minds. Earlier surveys were less consistent and comparable, but when voters were asked their priorities, the results were similar.¹²

This high level of priority has carried over into competition between the political parties. Political divisions in Australia over the acceptable limits of government action in health care have remained fierce, countering claims that ideological and policy differences between the major parties have been flattened by an inexorable process of convergence. The longevity of the conflicts over universal health coverage in Australia suggests that in this sphere, party difference has remained alive and well, until quite recently at least.¹³

What were the health policy issues in dispute? The political scientist Stein Ringen has argued that ‘a modern welfare state should be universal: it should extend social protection to everyone and leave no-one outside, or abandoned in high risk or destitution. But universality means different things to different people’.¹⁴ In Britain, universality under the NHS acquired an almost religious quality. Aneurin Bevan, its main political architect, argued ‘society becomes more wholesome, more serene, and spiritually healthier, if it knows that its citizens have at the back of their consciousness the knowledge that not only themselves, but all their fellows, have access, when ill, to the best that medical skill can provide’.¹⁵ Australian proponents of universal coverage have been less inclined towards rhetorical flights – perhaps because debates have been dominated by economists – but a certain set of values has been at the core of the decision to move towards national health insurance, even if this involved trade-offs with economic efficiency. In 2004 Julia Gillard, the Labor opposition’s shadow health minister, argued that the main value of Medicare was one of social solidarity, with all citizens sharing the same services: ‘Every policy aimed at splitting Australians into ever smaller groups, sharing neither hospitals nor social services, is a policy that weakens our community and our nation’.¹⁶

Other supporters of universal health cover have seen its value more in terms of equal access. The public health physician and health policy expert Stephen Leeder has argued that Medicare ‘has had as one of its two principal foundations a concern for equity – equal access to equal care for equal need for rich and poor alike – in an age of high health care costs. In combination with Medicare’s other foundation – efficiency through control of health care costs – it has allowed Australia to steer a middle course through the minefield of health care financing’. Or in the stronger expression of Bill Hayden, the minister responsible for the introduction of Medibank, universal coverage is a barrier to a ‘two-tiered system of health care, one catering for the ins and the outs, the silver tails and the battlers, the feckless poor and the deserving well off’.¹⁷

Much of the story of Australian health policy has been about establishing the principle of universality. But conflict over its boundaries has been no less severe. What should be included within the scope of subsidised or ‘free’ health care? Should individuals have to contribute? What place is there for a private system duplicating the public one, and often allowing those who can afford private insurance to ‘queue jump’?

The choices a nation makes on funding health care are not simply matters of technical efficiency; they reflect broader societal attitudes on the rights and obligations of citizenship. Medicare, therefore, has provided a focal point for more profound debates over Australian attitudes towards government and its obligations to its citizens. And conflicts over paying for health care – is it an individual or collective responsibility – have reflected deep divides in Australian political culture.

In 1995, facing likely victory in the forthcoming federal election, the Liberal Party leader John Howard launched a series of ‘Headland speeches’ to set out the values that would underpin a Coalition government. He argued, ‘Liberals will always remain committed to restraining the role of government in people’s lives’, and accepted that ‘Australians did not want governments out of their lives’. But this legitimate place for government must be framed by expanding individual liberty and choice with a ‘caring role’ again limited to ‘a fair safety net for those in the community who, through no fault of their own, require special assistance’.¹⁸ Applying these principles to health policy, Howard declared support for a ‘Fair Australia’, reversing almost three decades of Coalition hostility to national health insurance by promising: ‘We will retain Medicare, bulk billing and community rating for private health insurance’. However, this affirmation was again limited to assistance of ‘the genuinely needy and disadvantaged through the provision of a strong and secure social welfare safety net’.¹⁹

Political analyst Judith Brett has highlighted the resilience of the Liberal Party’s core beliefs on these issues. For the last half of the 20th century the party’s popular appeal was based on its ‘appeal to a nation of individuals’ who shared liberal, individualistic ideas of citizenship, and a belief that public policy must be founded on ‘the financial practices of responsible households’. But even within this framework, we shall see, views could range from Robert Menzies and Richard Casey’s early support for National Insurance, through to Howard’s worries about the harmful effects of government expenditure: crowding out the private sector and sapping individual self-reliance.²⁰

Labor’s ideological direction has been more complex. With its origins and allegiances in the trade union movement, it has been more suspicious of liberal individualism. Its policies have veered between declarations of support for a fully nationalised, centrally directed health system through to community-controlled clinics and full-time salaried medical clinics, shifting away from the historic focus on the hospital.²¹ However, even while embracing a vague socialist rhetoric, Labor governments in power have been more interested in using the state to achieve limited objectives, namely improving the wages and conditions of ordinary Australians.²² The conflicts over health policy described in this book demonstrate the intensity of the differences between the two main political parties.

Medibank also marked a considerable shift in the source of reform ideas. Before the late 1960s, plans for major transformations of the Australian health system came largely from the Commonwealth public service, with Treasury and the Department of Health the main architects of change. By the 1960s, the universities were educating a new generation of economists. The Institute of Applied Economic Research at the University of Melbourne (IAER),