Cost & effect

Australia lacks informed, consistent processes for policymakers allocating public funds to health services.
By Elizabeth Martin

Rationing in the healthcare system is done all the time by state, territory and federal governments, but it’s not done well. It’s the process of deciding which government health services, equipment, policies and programs will be publicly funded.

Australia does have some well-regarded rationing processes in place; for example, the Pharmaceutical Benefits Advisory Committee incorporates important information such as cost-effectiveness into the assessment process for new drugs the federal government is considering subsidising.

This committee recommends to the health minister whether a new cholesterol-lowering drug, for instance, should be added to the Pharmaceutical Benefits Scheme, making it cheaper for consumers. This recommendation is made after research is conducted to assess whether the new drug is safe and cost-effective. If it delivers good value for money, the federal government will probably subsidise it.

Of course, there are other criteria the committee takes into consideration, such as need; cost-effectiveness is never the sole objective of government. The point is, all stakeholders know what information the committee requires in order to make its recommendation to the federal health minister, and cost-effectiveness is part of that.

Unfortunately, decisions about which health services are funded are not typically made in this way. Rarely do decision-makers know if the funding options in front of them are cost-effective, and rarely do all stakeholders know what decision-makers are looking for when deciding what health services to fund. Do decision-makers even have the best available information? The answer is usually no.

For example, to lower cholesterol levels in the population, it might be better value for money to fund a project to increase fruit and vegetable consumption and physical activity than to subsidise that new drug.

Unfortunately, Australian governments do not often compare the cost-effectiveness or value for money of various funding scenarios. Perhaps the new cholesterol drug shouldn’t be subsidised and existing drugs are sufficient. Maybe the lifestyle intervention is better value for money. There isn’t enough cost-effectiveness research conducted to inform these types of decisions. Waste and inefficiencies are created when ill-informed funding decisions are made in health. Wasted money could be re-allocated to fund more healthcare staff, free vaccinations or more accessible healthcare for rural and remote people.

Governments need to conduct more cost-effectiveness analysis to evaluate the efficiency of new and existing healthcare services where value for money is contested. For example, some hospitals like to install expensive laminar air ventilation systems in operating theatres to reduce infections. However, one of my colleagues has found that this technology does not prevent surgical infections, and it’s a wiser use of hospital resources to get back to basics in infection control, things like administering antibiotic prophylaxis and using antibiotic cement in hip replacements.

For this kind cost-effectiveness information to be available to healthcare staff, hospital administrators, bureaucrats and consumers, we need a national organisation that conducts such research – an entity that responds to the clinical questions of doctors and other service providers and policy decision-makers in all levels of government.

I’m not alone in thinking that this information needs to be generated nationally and in a consistent way.

In fact, the parliamentary library in Canberra came to the same conclusion in 2011 when looking at the sustainability of the health system. The Australian Greens have proposed an Australian Institute of Clinical Excellence to identify areas of wasteful expenditure in health. Having this information will help prevent shifting costs and increasing out-of-pocket expenses for consumers.

I understand some people might question the need for another government agency and more money to be spent on assessing whether health departments are doing the right thing. But in the long run, it will mean wiser spending of government resources.

The way decisions are made in healthcare funding needs to change. It is now time to put cost-effectiveness higher on the agenda of decision-makers. Difficult funding options frontline staff and policymakers are considering can be assessed by a national agency for cost-effectiveness research. This will make the health system more efficient and allow waste to be cut in a careful manner.

Elizabeth Martin is a Queensland University of Technology health researcher. She wrote the brief Rationing in Healthcare for the Deeble Institute for Health Policy Research, which can be found here.

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