How to Afford the Healthcare System of Our Dreams | Health Economics

[00:00:05]and uh on behalf of the hunter branch of the Royal Society of New South Wales a very warm welcome to this uh I think the last in our series of lectures for 2024 there will be more in 2025 but this is the last one in the 2024 series and I should begin by uh acknowledging the traditional owners of the lands on which we meet and pay our respects to Elders past present and emerging so uh tonight we have a great privilege of welcoming uh Franchesco paluchi to uh the podium so Franchesco is a professor of Health economics and policy at the University of Newcastle and he also holds a chair at the University of Bologna in Italy he is associate Dean International of the College of human and social Futures and coordinator of value and health economics policy group he was formerly head of uh Health policy at the Sir Walter Murdoch School of public policy and international Affairs at Murdoch University in Western Australia uh he was also formerly an adviser to uh the health minister in Chile and a member of the Italian technical committee for allocation of the National Health budget uh his work includes a large number of uh public Publications over 100 Publications and uh he has also um authored a single single has authored a single author book uh on health economics he's won many prestigious Awards and uh holds Arc NH nhmrc and EU grants and that tells you something about his International standing in the field of Health economics so um we are now I think all of us many of us in this room entering a stage of Our Lives when we are having to make demands on the Health Service and as a society uh we all indeed uh most advanced societies are aging and making demands on the Health Service so as we Face our dotage and think about uh uh the kind of Health Service that we need I think we all recognize that providing Health Care is a very expensive thing and U the question that we've put to Franchesco is how can uh we afford the Health Service of our dreams so Franchesco to answer that very difficult question the floor is [Music] yours so thank you uh all for being here tonight thank you John for the wonderful uh presentation and of course George uh for working together um on the theme as well as uh a little bit the logistics now when I discussed and looked at the title the first time um you know you can think uh in many ways about this question as an economist you can think about this in at least three ways um mainstream econom economists would answer this question as in very simple terms you just can't it's impossible uh to actually achieve that um other economists I would say more uh Progressive that you know are uh called extra welfarist they would say we can do this only considering Healthcare as a pure public good and we have done that for many many years then there is a third breed of economists I would say I belong to that group that actually believes that we can uh dream big and maybe try something Innovative by combining uh the lessons of History which I believe in social science in public policy it's really the only science that we can rely on now when you ask uh that question which has dream in it um I warn you I'm an economist so typically we are very capable of transforming dreams in everyone else's nightmares uh uh but um I'll try my best to bring you in the economics World um and of course telling what a dream could look like uh at the very least uh in in the way I see it so a look at Healthcare System uh as they are currently major Trends uh and of course come at any point in time with questions and I will uh briefly discuss whether how this dream or nightmare looks like where we are at right now then I will look at history I think it's really the biggest lesson uh for us uh if we are to make any reasonable um long-term decision which is the hardest one in public policy uh that can really produce uh really a public policy change that it in fact could be achieving the goals that um I consider the dream goals of a healthcare system and finally I will look at what I call a model of convergence this is more um literature uh that I'm thinking of and I'll talk to it a little bit uh and I will discuss it of course in the Australian context and see uh whether we can actually start working actively on it I mean not that we haven't been doing that but of course when there is economic policy there is also politics uh which is an an interesting um beast in itself now the first point to look at uh as an economist is always costs um it's clear that when we look at healthare and we look at the developed countries or ACD countries there is no good news uh this is only Healthcare I actually took out what we referred to as long-term care because otherwise the graph would just be exponentially shooting up uh this means that when we C when it comes to healthcare and it may be a very good thing you know a finance person will look at this graph and be horrified and you know in politics typically we have more Finance people than Economist and Economist would come home with this graph and say yeah we're spending more which means that perhaps we are spending Less on things that we actually consider less important um you for you to choose right on the other hand uh this pending is concerning because we do have important competitive uh objective as Society climate change challenges uh defense security safety and so on the other big macro trend is of course aging and you know John clearly put it um and this is a function of the success Healthcare System have had uh not only the production F function of health is very complex it relates and talks to education also quite undermined in public policy these days it also is a function of wealth in and in itself uh in some contexts and countries in fact where there is no healthcare system like the developing World an improvement in income conditions can actually yield great health outcomes but we are in the OCD we are really deal with an aging population um Trend some consider it a problem some are trying to in fact consider it in a productive uh useful uh way that depends as well on how you organize uh society and actually you can uh find returns from aging societies this is the third microt Trend the transition um which interests more and more are developed and developing countries away from communicable diseases to non-communicable diseases the key element here is that that transition imposes an organized Healthcare System so we're not only working in prevention in U control of disease in vaccination campaigns and uh so on but we're also working on treatment of chronic long-term conditions uh which can in fact last many many years before becoming uh death threatening in some cases decades and in fact uh they may uh be compatible with very productive lifestyle which also puts pressure on the healthcare system and finally this is the most critical and under discussed theme although sometimes you hear about it but I don't think we have ever experienced as a global Community a healthcare War Workforce crisis that is the current one after Co um at times this shock in particular was asymmetric so some countries experien experienced it some countries didn't so export and import of professionals with huge you know ethical dilemma especially if the import comes from lowincome countries was the solution for oacd countries now every single country is facing this the solutions are not easy uh you know you need to train individuals you have to people able to train um uh the new Workforce um and also you need to do that at a global scale this is a supply side problem that at present in a global sense is the F first probably most important pressure point in terms of a affordability of any Healthcare System now a little bit of the nightmare that continues I would say but it's important because then we can have a dream or at least I tried now the Australian Healthcare System is very special uh its history is fascinating it's the only system in the world that had a universal coverage and act during Whitland go government in 75 and it lasted only one year that was called Med Bank uh that government in fact uh there is a beautiful book called The dismissal uh you know was removed uh and with that also M bank for us as Australians to achieve Universal coverage we had to wait uh another 10 years in 1984 but that was just a tax levy in fact it produces only a support to medical and pharmaceutical uh Services now the underlying structure of the Australian system because of its Constitution is equally complex uh it's a federation uh services are offered and funded in a complex web of public and private mix many have described it for many years in the literature as a fragmented system uh some economists really like fragmentation they call it vertical competition um that assumes a lot of things uh but one of the outcomes of vertical competition in fact is that you have what now many economists are referring to a disintegrated system so A system that has very little connectivity uh between for example the common Well Services Primary Care GP care and Hospital Services uh like the ones offered by every state and private insurance and outof pocket payments and I think there is clear signs that support that connotation the deficits that the states are facing these days are really um uh scary I would say uh from an economics perspective the technical word is really uh in the debate with the states that I have it's really about how do we get uh around the current budget crisis uh how can we impose a new tax and of course all these things are in the Press you might have seen it uh in the last few days about uh our own uh New South Wales uh Health government proposing to increase a levy that it's the ambulance Levy to fund hospital care why because in the law they're not allowed to actually enforce for all private insurers to pay any Hospital Levy but they can enforce and ambulance l so this describes the complexity and the level of um indirectness that we have in our instruments to actually do public policy now very alarming is the outof pocket expenditures uh this is a very strangely hard statistic is normally quite easy to find but in for many reason in Australia it's very hard to measure um and uh uh there are estimates that range between 22 and 27% of outof pocket spending on Total Healthcare spending this is very alarming the next country uh that you can think of uh in terms of similar outof pocket spending it's actually Chile and Botswana these These are countries that they are in the Chile is in usacd one of the last entrance botsuana is is clearly a developing country so these are levels that start to alarm it mean means that there is inequality it means that people do not get access to care to basic entitlements and I'm sure all of you have seen this this is also reflected in the political debate um and uh with waiting times that are um clearly increasing um uh to highest level uh ever closures of private hospitals which has been historically an instrument for the public sector to rely on Under Pressure it's not doing that anymore over 60 hospitals have closed around Australia some in our proximity in fact um and also the Private health insurance premiums are going up so we are we're really in a an inflationary uh inflammatory phase uh so not the dream situation of course there is a bit of a good news uh about the level of Technology technological innov ation which is very important it needs to be part of the dream but now it's really mettech and Innovation that only few can really access on a consistent basis now let's look at history first of all how does an economist think about the Health Care system of your dream uh The Economist of my type think about a healthcare system that has fundamentally three five characteristics first of all it needs to achieve universality in coverage that is a basic economic concept it's about externalities if I know that my neighbor or my far remote neighbor from Queensland cannot access a service that it's readily available at a relatively low cost that will decrease my well-being I will be affected negatively and that will manifest in many ways including for example voting for another party okay now that is despite the fact that Healthcare is a private good you know if I consume it you can't H so there is rivalry there is competition for the services so if we think about these as uh Goods as economists think about them well then universal access needs to be supported by government intervention because markets otherwise would wouldn't do the trick the second important element is that in healthcare and that is thanks to technology which is big part of the dream you need Choice people have different preferences I'm sure you've all had your encounters with the Healthcare System some of you uh want to play tennis when you are uh like me almost 50 and all full of inflammatory points well you got to go and do surgery hips knees and so on so there is a old part of the healthcare system that has clear election in fact we call it elective Services other parts of course uh that pertain to Public Health and emergency that is where choice is more limited uh it's basically we do what we're told but if you think about the prevention space the elective type of care and so on you have a lot of options choice is critical in the economics uh thinking about uh the um characteristic of a dream outcare system then there is a word that has a clear connotation in the public debate econom economists think about it slightly differently it's a word that it's that word there efficiency so we don't really have to think of it although it's important as Cost Containment but rather value for money and that is a clear clear intimate connection with the idea of quality of life so economy spend a lot of time to look at care how it's funded how it's delivered in such a way that actually it yields a good return of that investment in terms of quality of life measurements and that of course includes a number of Dimension Innovation productivity and also importantly incentive because ultimately what we want is a system with good quality care now how have we done as a society so far if we look back now I take you briefly on an historical Journey uh which I think it's quite important uh to understand because I think uh the only uh element that is missing in the way we have approached this problem that's why it's so complex is the ability to consider all these goals at once at design CH Healthcare System of our dreams that is capable to produce tools and instruments from the public policy uh areas to actually achieve them at once so I think it's possible we are we have been working on the solution which is the latter part of the the later the later part of the conversation but so far Healthcare Systems have been really working looking at one objective at a time now the this is a body of literature that I really like a lot it's you know economic history in healthcare David catler is the arvor professor that started this um stream uh and together with a colleague from bologa federo tot and others Kara barardi from LSC who was a student of ours here they worked on this idea of Reform waves now the very first wave is the postwar reform wave and that's where you learn that we never had Healthcare Systems until the British introduced the beverage NHS in 48 for reasons that I believe reading the books had nothing to do with Healthcare but rather with reconstructing a country that was devastated um a country that needed social cohesion they chose as an instrument of public policy Healthcare I think it's a beautiful idea um others have invested in education uh you name it but the introduction of the national Health Service has been the critical uh uh and foundational uh element of that rebirth now what was at the heart of that reform universal access everybody is entitled to Public Services they didn't even have hospitals you know the day in which this reform was introduced not in the way that we know that the hospital system now a number of other countries so not the UK they have built their Healthcare System uh already for quite several years countries that were under the bismar in influence so we're talking about Mutual social insurance type of systems that you saw in Germany in Belgium in the Netherlands in Switzerland and then now you can see them everywhere but fundamentally the only difference between the beverage and the social insurance models was the um fact that one collected revenues from taxations the others from employment and premiums and the NHS doesn't have Choice the others do have choice of purchasers of care so in that third years all OCD countries uh apart from Australia achieved Universal coverage so everybody had access to some care quite generous I would say now Italy of course my own country was late uh as usual so we introduced that in 1978 which you will see how counterintuitive it is because in the 70s uh many of you will remember towards the end we experienced a terrible oil crisis uh conflicts you know similar to some extent to what we're leing today also in terms of inflationary pressures um and Italy really in the middle of it decided to introduce the NHS which was probably something that we're still paying in terms of our budgets these days country that has a huge dat now the introduction of universal coverage what it has produced it has answered demands of individuals before these individuals were uh accessing Health Care as a privilege really if you had resources you could Access Healthcare Services the moment you introduce the NHS the moment you introduce Universal mandate to buy insurance for everybody in society the it's when people start consuming Healthcare what does that mean it means that basically you have an increase in demand and an increasing prices overall coping uh coping with that in the middle of the oil crisis is hardly impossible so after the 70s for a good couple of decades we had an incredibly uh harsh response to that expansionist era and that was a very much a proe efficiency uh Cost Containment cut uh budget cuts uh supply side mostly restrictions uh waiting times started to appear uh if you look at the service in this Le literature around satisfaction the satisfaction until the 70s was excellent in towards the end of the 80s the '90s the satisfaction um uh towards the healthcare system in all ACD really really went down uh massively so in these two waves interestingly uh two objectives were Tred to be um achieved equity and efficiency but efficiency only in terms of cost containment in the third uh wave uh some economies started to take interest this is a relatively new area of Economics uh uh interests and in fact uh around the '90s in particular in the Netherlands and in the UK uh two individuals Alan enoven uh V van Dean in the Netherlands and Julian Leon or Le gr I don't know uh is actually British but the name is French uh uh they worked and thought about how we how can we start thinking about achieving these two objectives of efficiency and universality um Al together and from that moment on and some of you would remember several reforms occurred from Margaret tcher to Tony Blair in the UK uh some reforms happen here we introduced Universal coverage uh a lot of tensions uh uh everywhere on how to do this of course because we and master the tools so that's our uh history what do what have we learned from that history if is what we have learned is that if we take each objective independently from each other we clearly have adverse consequences or unintended consequences if you look for um universality uh of course you have cost Rising uh if you try to curb your cost pressures you start having more cost sharing you start Outsourcing you start seeing the growth in public in private insurance it's something until the 70s the OCD has never seen some countries only Canada doesn't have private practice but the rest of the world has this Duality now all these issues um are temporary adoc solutions rationing on the one side to save money on the other other side to grow the private sector if you do that you decrease equality automatically there is no way around it how can you prevent that well then you introduce regulations sometimes but they are not well aligned and they perpetuate the situations in which we are in at the moment obviously what you also have and this is important to point out when a system is around for a long period of time you create power bases and typically in healthcare that's in the hands of supplier because we as patients or consumers we don't really fully know what we're being offered to consume so it's quite important to realize and this is hard you know this is hard for individuals to really uh look at where the power base is in this complex interaction because we tend to look at insurers at pay the purchasers but really the owners of information and decisions are providers of care so we have to balance the power structure um over time otherwise we have a lot of adverse consequences now let's look ahead how can we do this how can we dream to actually combine uh these uh features to achieve these multiple goals at the same time I mean sometimes the solution really needs a very simple um recipe of ingredients right to kind of come uh to a good outcome the basic idea of this concept uh of regulated competition on which several of us are working on in a number of different institutional context basically refuses the idea that markets can do it all but recognizes their value if they are markets so where power is diluted decentralized not concentrated and effective efficient regulatory intervention in an integrated way so without competition between jurisdictions without competition between public and private finding and provision so with an integrated care and finding approach why is this important because with the structure that combines these two features we can also be flexible in our Solutions instead of delaying uh which is typically our natural response to crisis so we identifi the number of prerequisites um I'll guide you through some of them I think it's interesting uh to uh also uh be part of a debate that I I think it's uh becoming more and more important in the Australian context uh we identified several of these preconditions some are really to improve efficiency some are really to improve uh Equity the ones I will summarize them for you um uh the ones that really are proe efficiency in the Healthcare System they all speak about the protection of choice to have that we need a number of things all regulated transparency in the information we need protection of competition uh rules uh we need to have accountability and and responsibility of those who actually offer provide the care and also pay for the care in most system this basic concept is absent if I ask you who do you think buys care in the Australian context um I'm sure that I would get at least four responses but none of them would be right cuz the Commonwealth doesn't buy care pays for care part of care the states don't bu don't buy care they pay for some care through taxation ultimately the the insurers Ed them they don't really buy care they pay parts of the care that you actually you as an individual purchase when you need it you have to find your surgeon your anesthesis and so on and so forth so the only one ultimately who buys the care is the one that has the least ability to do it which is the individual and when out of pocket go up that becomes a problem now so we need a set of rules uh that we have been able to create in other markets so it's not impossible telecommunication is one of them where you basically also have clarity about who buys and who provides care and there is no conflict of interest between these two parties now for Equity it's equally important we all pay the Medicare Levy we all take a rebate or the Medicare Levy sear charge uh lifted if we buy private insurance do we use it do we don't you know there are million of ways of looking at this problem but the truth is that we really don't know how many times we are paying for the same thing and how many times we're paying for others to use that service that means basically that we have no idea about the concept that you know it's sounds really terribly which is cross subsid which is basically something that should be explicit because it's a transaction from Rich to poor from low risk to high risk that transaction is the most intransparent uh when you apply to the healthcare Market that you could possibly imagine so that needs to be clarified we also need clarity about our contract what is it that we're paying for um you know we have a rough idea about some of the subsidies in the IBS and the PBS if I ask you about private insurance I'm pretty sure we won't know exactly what we're buying when we buy those products we'll Discover it when we need it without these basic concepts these basic characteristics we really can't uh hope to come out of the crisis and clearly we need affordable uh the dream to be a dream needs to be affordable uh and I call that affordable out of pocket payments which is key how do we do this from now now you can do it in several ways basically you need to integrate the the several systems that we currently see that's an immediate efficiency Improvement uh some countries have done it the Dutch they decided to go fully private in the Dutch they have regulated private insurance buying care from regulated private providers obviously I'm no one to say that this should be the model for any country uh this is political societal uh preference of the people maybe you don't trust the private sector maybe some do uh so that is clearly a choice um and of course there is the other option because in fact public and private in all this don't matter the type of the entity uh legally defined really doesn't matter it's important what they actually what their functions actually are and how we ensure they perform them so I'm pretty comfortable with the Dutch model for example what you need in this model is of course identify on the constellation of potential purchasers who is the best place to buy care efficiently effectively at an affordable rate you know the UK model uh in the '90s started to go in the direction of identifying GP they called them GP fund holding they became them primary care trusts now now they're called Hospital trusts these are effective conglomerates of providers that have a risk bearing function so they act like providers SL insurers uh integrated as far as primary careing concern is concerned that could be a model some other countries think should be the state some others think is the employers the US employment based model uh some others think it should be pure insurers like the Dutch this is clear but what needs to be ACC companying that is a separation between the purchasing function on our behalf on behalf of the consumers and the provision function we need to have somebody that buys cares for us and that buys that care that is deemed to be accessible and affordable for all we are unequipped to buy care uh literally think about the level of Technologies we we I can't keep up honestly and I really spend a lot of time trying to keep up the important element that I was referring to before Market power you can only really deal with it if you are clear about the contractual relationships between parties the truth is that we don't know everything is very implicit in the healthcare sector now the good news and this is was to my surprise I was you know some people of course everybody was terrified during Co and we had a terrible experience but the one good news during Co was that actually for two years or three we were able in many countries to realize this dream all of the sudden private and private mix didn't exist the the boundaries blurred we had a purchaser the state the Comm they did everything from vaccine to provision of vaccines you might remember that time so this is this SL is just to tell you that we're perfectly capable of actually doing this now Australia I asked my question whether this is a global recipe that we can adapt broadly uh to different countries I asked myself Al also whether all these preconditions are met in Australia this is a very difficult exercise yeah sorry short for regulated competition I did very well cuz normally I use a lot of acronyms but uh uh so Phi stands for private insurance so the system as I described it before it's a real Maze of public private uh uh provision of public private funding a lot of duplication a lot of overlaps uh at the same time a lot of fragmentation a lot of disparity between urban and remotes even within um urban communities now um all the problems that I described before I just put them there to refresh you uh there really urgent issues waiting times are going up Workforce is in trouble out of pocket payments uh on the rise Etc all at the detriment of quality of care ultimately access efficiency and so on this is very long I mean I just tell you I just put it there uh because I think uh it's an it's a way for me to indicate how difficult it is to actually look at our institutional settings and actually score it uh so we have been running this exercises a number of countries in terms of the institutional settings the preconditions to actually create an integrated system Australia is well placed in terms of how we do in protecting choice in guaranteeing and being explicit about what we get for uh the money we pay and also the value in terms of quality of of life we're not really very close close to perfection in fact we're quite far but we have the building blocks that's the good news the clear issue the most sensible uh way to address it and the one that causes most problems is the absence of this purchasing entity however we want to Define it that should be really the discussion in the political uh Spectrum now what does integration mean and I'm really close to conclude um is really bringing together the the various pieces of the puzzle as a very first pragmatic step how can we do that there needs to be a clear investment in this integration uh all we see instead is really what we call the blame game I mean I'm sure all of you have heard about this uh the investment in integration uh between providers between uh payers is fundamental um uh without that we can't hope to achieve any sensible purchasing of Healthcare in an affordable way that requires the strengthening of our governance structures which has a political difficulty because we are a federation uh however if you want universal access you can't have differences across states to the way the extent that we do have at the moment um and uh uh obviously you need to strengthen our regulatory oversight I give you an example we have a private insurance Market with 38 insurers competing since I don't know what year the a c as which is the authority that looks at competition in all markets has hardly ever looked at practices in private insurance this for me is a mystery um and the reality is that they don't have the resources to look at everything so we need to build the infrastructure in the regulatory space of course that also means that we have to re-engineer how we perceive the MBS and the PBS and maybe even challenge them uh obviously we're paying far more for each item uh uh hardly anybody bugs Bill uh you saw it in particular in this region in the last six months we're not doing great in terms of buk building so we really need to re-engineer that con ccept and create an idea of prepayment so that we know how much out of pocket we will end up paying when we actually cover for public entitlements finally we need a system that is more explicit flexible that allows Innovation to be absorbed not only by the top tier individuals now to do all this our as economist talk about this Healthcare System transformation actually Brandon is here is leading one of our groups at hmri that uh is really talking a lot about this topic is very important so I think in the hunter we are uh collectively uh in the business school Brandon and I and others really working hard in trying to understand this um and uh all we're really trying to achieve is create the opportunity for a dream system that is capable of providing opportunities in healthare for everyone but also absorb the shocks that seem to be so complex to deal with thank you well thank you very much indeed Franchesca that was amazing and took us on a journey I think from uh where we began and uh all the complexities of trying to organize a Health Service that fits our needs to where we're trying to go in the future um you'll be prepared to answer a few questions I hope so if anybody's got any questions please uh put up your hands and we have one immediately okay off you go so um thank you very much for your talk it was very informative and I have a very like Layman ignorant question and that is um one of the main issues I see in health care at least from my ignorant perspective is that uh there was a huge cost in the material that is incurred for example insulin or like other Pharmaceuticals or or things that we essentially spend um like equipment that gets used and it's a very large profit margin for the like let's say a pharmaceutical company like I think insulin like it takes a few tens of dollars to synthesize but it costs up to 200 or something like that um wouldn't it allow a great I guess help in in budgeting if if the government could repress these companies in some way to to stop them from the massive profit margins yeah so the answer is yes uh the answer is very long but to make it brief I think I was uh alony to um in a broad sense supply side interventions to try and really keep costs down that's the most ineffective way you can actually do that so we tend to believe and I don't know um necessarily why but that government can really come in and uh stop everything uh the truth is that uh the best way is to actually have the priz come out from a contestable setting of course governed by government so in the specific case that you are describing the degree of Market power of the insulin producers is probably one of the most uh pronounced in the in in let's say in the area of materials uh these are Quasi monopolies duopolies in some cases depending on the countries that they actually decide to intervene this has to this is truly something that um is is is an enormous pressure Australia is doing quite well by comparison if you look at uh the price margin in the US context You' be uh shocked um but uh long story short is that the market regulated market mechanisms in that particular segment uh should be you know when you start applying the model in the microw worlds should follow the same principle so uh you can't have one or two uh manufacturers uh only in the market are far more uh you have make the process uh uh contestable which is not at present because licenses are actually uh prolonged year on year if you have one you know and you performing fine you don't have any health issues uh this type of of products keep persisting and having and creating more power uh year on year so um yeah I think I I answered uh by saying two things uh government top down interventions don't necessarily work you would scare off industry um and at the same time you're not guaranteed the supply that you would want you might remember the vaccine story uh that's easier than insulin for most uh but also you have to have the structures to allow contestability to occur in a fair way and Australia I have to say in this is doing comparatively better than other countries we pay less in this specific but also other areas uh than certainly the US and in some this is the European thank you very much my pleasure question um I my question was does the separation of um management of hospitals by State versus the Commonwealth managing the sort of primary care does that impose a an additional cost to society as a whole and would it be better that the whole thing was integrated yeah this is the exact point I uh I I I was making I agree um with with that statement uh in terms of empirics and studies done on the topic countries that have a clear funding and provision of primary general practice and secondary and tertiary care and these are the countries that I was referring to the Netherlands the Germans and so on they have certainly a much more efficient in an economic sense not necessarily you know the economics of efficiency is interesting because if I'm willing to pay a lot for something that is good that's efficient the problem that we have here is that there is complete disconnection and no clear cost saving I mean our costs in healthcare are quite High you know we look always good in the OCD because we take out age care but if you add it we're up at 14% you know the US is 18 we're third or fourth globally okay so this is very important Point you're making when you integrate the different components of the Continuum of Care and you actually collapse them into you can call it a package that is managed by by someone that actually purchase for you at risk to some extent you have an immediate efficiency gain this this is theoretically proven empirically tested um yeah then the question is why are we not doing it and the answer is clearly political uh I I can see that very clearly these are Big um vested interest you know the states would like to take over the or you know if you look at the Federation history that's the Takeover where it's it's kind of an interesting question in itself the Commonwealth would like to take over so that tension has delayed a long overdue reform which is in the sense of integration but the answer is yes it's empirically and theoretically proven someone over here I but I'll ask you hello um my my specialty is in aging and I just wanted to clarify um because I did hear a lot of speaking around that you know aging is really an advanced Society problem but you know we do have come 2050 2third of the population aged over 65 will be in Low Middle income countries so it is a global issue not just an advanced issue but my main concern is being a country girl is short markets when it comes to healthare and and I'm I'm kind of going well how is how is this system going to improve the issues that we already have around access and quality medicine in country areas that I I I I don't see how it's going to make that jump into improving Healthcare out there that's a beautiful question I I actually uh you know at the time when I first uh came here in 2007 uh some of you may recall the National Health and Hospital Reform Commission by cevin Rod uh so I had the privilege to work on one of the proposals uh you know made to to that group um and you know we gave it a name we called it Medicare Choice um well in The Proposal it got it very bad name in my view they called it Medicare select uh which has for me it's like the worst marketing uh choice you could make if you want to launch uh a new idea which was essentially uh you know the initial ideas on on what we we discussed integration Etc now a critical issue that you're alluding to is the issue of regional differences now so that issue has uh you can look at it in many ways but the truth of the problem is that from an economic standpoint uh Healthcare Providers will not really go there if you are the pure Market approach so the model that we currently have which is largely a public model of delivery of care uh mixed because we actually send a lot of Physicians the Locum you know you might know this terminology uh to keep the hospitals open you need to have the um fifo um you know fly in fly out type of of uh um of services as well to compl but large hospitals for the problems that may occur once a year uh in those areas are not uh possible they wouldn't exist in a pure Market setting so the public solution is what we have found but of course we ration it because it's part of the public system so we can only go to some extent and then we find some solutions like the remote the digital care the uh fire and so so what how does this model um uh address the issue directly so when you build cross subsidies um in economics in any areas basically you're building a payment that goes to a provider that goes to a payer that goes even to an individual in a voucher type of of scheme that payment carries information typically on your risk and your risk can include your Regional uh connotation so your risk profile where you live where you develop where you work where you basically decide to live can carry a risk code you know typically you can measure this very simply now this is technical a little bit but I can adjust my subsidy my payment and this is a political decision according to that particular Regional adjuster so that Services which are an expression of health risks would be matching the risk of those population if that is a political decision now I give you an example of where this exists it exists in Holland it exists in Germany it exists in Switzerland it exists even in the US also in Israel to give you a sense of the political tension of this so in Israel the risk adjustment model for many many years was only based on age because if you add for example uh region which could be at the level of the zip code you know Arabs and Israeli don't live in the same neighbors or you could add uh uh other factors for example gender uh uh Arab women make make more babies than isra so to give you a sense of how political this can become so if you put it in the Australian context where we don't have you know an ethnicity um um issue at the level you can think about what are the needs of these people which we know and well well we we we do in terms of well we do in terms of burden of disease that's a start well it's a good start because you know if you have prevalence of diabetes if you have prevalence of addiction or consumption over consumption of alcohol you you you start this is dynamic it's not you know it's thought that we're going to get there at once we're going to have to work on it and understand it this is also a good way to understand this data better I hope I explained this is a yeah thanks this is a beautiful question very technical this is amazing topic um so much to it and so many aspects to consider um given that you talked about one of the ideas s for a good system would be to deliver value for money and quality of life what do you think about the idea of financially incentivizing individuals say to adopt Lifestyles that in turn minimize the health risk their own health risks so you know they're being held accountable in some ways for how they live um obviously got to have a floor to all of this but interested in your thoughts yes all right this we need another uh I wrote a book about this uh in fact no not a book a full chapter I call it consume the financials and economics of consumers responsibility now this is a huge topic it's fascinating um it's a beautiful topic for an economist because you have clearly on the one hand and on the other hand type of conversations now um I think there is um a lot that we can learn from behavioral economics masin is a guru in this is one of our researchers there who just joined us um that really you can become very clever in a constructive incentives both financial and non-financial to actually make people choose what they want you know this is a clear example of what you eat at a Mansa or in a cafe at work right so if you display sausages and burgers uh like in the front row I guarantee you uh you know we're going to go for them if you put salads so the question really is is that we have a lot of knowledge on how to design incentives now uh the actual policy aspect uh becomes extremely tricky mostly from a legal side I give you an example why does Australia have one of the harest smoking incentive aggregate policies in the world if not the AR hardest and as one of the lightest policies when it comes to alcohol access and consumption so I'm not I'm not expressing an opinion I love wine I'm Italian I mean you know there is no discussion about that but the complexity of policymaking so long story short your spot on that would be a massive achievement uh in a generation of policymaking you know to have a set of incentives compatible schemes we can do it uh for uh incentivizing individuals to eat better to drink better uh uh to move better and even subsidize because then the other issue is the price uh and also uh you can believe on this I'm far more skeptical because the evidence is not there that the apps uh that we have to Mak us exercise that is a far more complex equation the the change in lifestyle and in movement in physical activity also because it can be very dangerous you know to shift from zero to something physical activity so the the literature there is more complex but on the on the other hand uh to answer yes it's a great idea you delay care if not maybe even never need care um and then I give you also the other hand if you allow me there is a study from the Netherlands that actually built in a simulation the actual costs uh increase that you would have for people leaving very long which is is uh an interesting study I say it in a paradox because we're coming uh you know close to the end but it's interesting how you think about these things because of course the longer you leave the more degenerative diseases you may uh develop and so what is really uh the break break uh Break Even Point here um look um can't thank you enough Franchesca you've really opened up a very exciting area there's lots of complexity we uh designing health servic is always complex because we walk on shifting Sands and the situation that we have now will not be the situation in 10 or 20 years time so the complexity is there but you've really opened it up for us and you've excited a lot of discussion so uh on behalf of George Willis who's the chair of the hunter branch of the New South Wales uh Royal Society we'd like to thank you for coming giving us this talk and I would like to thank all of you for coming to this evening it's been a great and very enlightening evening for us all I think so thank you very much indeed [Applause]