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Efficiency in health

Commission research paper

This paper was released on 23 April 2015 and in it the Commission has identified and assessed opportunities to improve the operation of Australia's health care system. This is based on a roundtable the Commission held with health policy experts in November 2014, as well as follow-up research.

Download the paper

  • At a glance
  • Media release
  • Contents

Download this infographic

Efficiency in Health infographic. Text follows this image.

Quick efficiency gains in our current health system

  • Health technology assessment
  • Clinical guidelines
  • Health workforce
  • Pharmacy and Pharmaceutical Benefits Scheme (PBS)
  • Provider Payment Models
  • Preventative Health
  • Private Health Insurance
  • Information and transparency.

Read more detail in the paper.

Efficiency in Health

A Productivity Commission research paper — based on views offered at a roundtable held with health policy experts in November 2014 — has found that there are significant opportunities to improve the efficiency of Australia's health care system through reforms that can be delivered without changing existing institutional and funding structures, and without delay.

Benefits to patients are clear; and cost savings are equally self-evident.

In the paper, the Commission observes that shared and overlapping responsibilities for health care funding and service delivery often mean that many participants in the health system share responsibility, with the consequence that no one participant has the incentive to pursue reforms. Therefore, in outlining prospective areas for efficiency gains, and acknowledging the rough justice of it, the Commission has proposed a responsible party and provided a roadmap, including timelines.

Participants in the Commission's health policy roundtable
Participant Organisation
Alan Castleman Australian Centre for Health Research
Debora Picone Australian Commission on Safety and Quality in Health Care
Alison Verhoeven Australian Healthcare and Hospitals Association
David Kalisch Australian Institute of Health and Welfare
Rohan Mead Australian Unity
Jeffrey Richardson Centre for Health Economics, Monash University
Clifford Hughes Clinical Excellence Commission
Carol Gisz Competition Policy Review Secretariat
Martin Bowles Department of Health (Australian Government)
David Cullen Department of Health (Australian Government)
Frances Diver Department of Health (Victoria)
Pradeep Philip Department of Health (Victoria)
Jim Birch Ernst and Young
Stephen Duckett Grattan Institute
Sharon Willcox Health Policy Solutions
Tony Sherbon Independent Hospital Pricing Authority
Shane Solomon Independent Hospital Pricing Authority
Andrew Wilson Medibank Private
Robyn Ward Medical Services Advisory Committee
Anthony Scott Melbourne Institute of Applied Economic and Social Research
Adam Elshaug Menzies Centre for Health Policy, School of Public Health, University of Sydney
Barbara Yeoh Monash Health
Ian Scott Princess Alexandra Hospital
Ian Frazer Translational Research Institute
Opportunities for efficiency gains in the Australian health care system
Opportunities, reform actions and responsibilities Timeframes Outcomes
Health technology assessment

Australian Government Minister for Health to:

  • accelerate work to review existing MBS and PBS items — giving priority to high-cost items that have not been subject to economic evaluation, or for which the benefits are relatively uncertain — reduce or remove subsidies where appropriate, and report on progress annually
  • review and revise Australia's system for health technology assessment (HTA), with a focus on reducing unnecessary duplication and fragmentation, improving disinvestment mechanisms (giving consideration to the merits of an independent decision maker), and deterring clinicians from using MBS and PBS items in circumstances where they are not clinically and cost effective
  • share Australian Government HTA assessments with the states and territories
  • Immediate
  • Within 1 year
  • Immediate
  • Treatments that are not clinically or cost effective — or that are harmful to patients — are not subsidised
  • Patients potentially have greater access to higher-value health interventions
  • HTA processes achieve objectives at least cost
Evidence-based guidance for clinicians

Australian Government Minister for Health to establish expert panels of clinicians to assess and endorse clinical guidelines, and to advise on dissemination, implementation and review
  • Within 1 year
  • Better informed health professionals, fewer adverse events and less waste
Provider payment models
  • Independent Hospital Pricing Authority to introduce a quality and safety dimension to pricing within activity-based funding, subject to current work confirming the feasibility of doing so

  • Australian, state and territory health ministers to trial and evaluate new payment models
  • A comprehensive review of the Australian health care system — instigated by the Australian Government Minister for Health — would provide an opportunity to investigate ways to better align financial incentives with health policy objectives
  • Within 2 years
  • Ongoing
  • Review can commence immediately
  • Safer and higher quality hospital services
  • More coordinated patient care, especially in primary care
Preventive health
  • Australian, state and territory governments to routinely trial and evaluate prevention initiatives
  • Options to strengthen incentives for cost-effective investment in preventive health to be considered as part of a comprehensive review of the health care system
  • Ongoing
  • Review can commence immediately
  • Cost-effective investment in preventive health
Health workforce
  • State and territory health ministers to initiate role expansions, based on evaluations of past and current trials, and amend scopes of practice accordingly
  • Australian Government Minister for Health to identify where there would be benefits in expanding the types of health professionals that can access reimbursement for MBS or PBS items
  • Australian Government Minister for Health to promote and champion workforce reforms at the national level, following abolition of Health Workforce Australia
  • Ongoing
  • Ongoing
  • Ongoing
  • Greater workforce flexibility, potentially lower labour costs, better patient access and higher workforce satisfaction
  • Nationally coordinated workforce policy activities
Pharmacy
  • Australian Government to remove restrictions on retail pharmacy location
  • State governments to remove restrictions on retail pharmacy ownership
  • Within 1 year
  • Within 1 year
  • Greater competition in retail pharmacy
  • Safety and access regulated cost effectively
Pharmaceutical Benefits Scheme pricing

Australian Government Minister for Health to:

  • eliminate delays in price disclosure processes
  • identify ways to apply a larger statutory price reduction to PBS items upon listing of a generic alternative
  • examine the case for a statutorily independent PBS price-setting authority
  • Within 1 year
  • More competitive PBS prices
Private health insurance

Australian Government Minister for Health to:

  • facilitate trials of expansions in the role of private health insurers — informed by proposals from insurers — and evaluate these trials
  • commission a review of the objectives and performance of private health insurance regulations, ideally as part of a comprehensive and independent review of the Australian health care system
  • Within 1 year
  • Review can commence immediately
  • Greater involvement of private health insurers in preventive health and coordinated care
  • Competitive and innovative health insurance market that serves the needs of consumers
Information and transparency
  • Australian, state and territory health ministers to release more data on the performance of individual health care facilities and clinicians, and drive greater uptake of electronic health records
  • Australian Government Minister for Health to publicly respond to the Review of the Personally Controlled Electronic Health Record
  • Australian Government social policy ministers to provide researchers with greater access to MBS, PBS, Centrelink and other government-held datasets
  • Immediate
  • Within 6 months
  • Immediate
  • Increased public reporting on individual hospitals and other providers, such as general practices and dentists
  • Greater use of electronic health records
  • Researchers can access and link administrative datasets
  • Preliminaries
    • Cover, Copyright and publication detail, Contents and Abbreviations.
  • Executive summary
  • Chapter 1 Australia's health system
  • Chapter 2 Promoting clinically and cost effective medicine
    • 2.1 Health technology assessment
    • 2.2 Evidence-based guidance for clinicians and patients
    • 2.3 Provider payment models
    • 2.4 Preventive health
  • Chapter 3 Opportunities for regulatory reform
    • 3.1 Health workforce
    • 3.2 Pharmacy
    • 3.3 Pharmaceutical Benefits Scheme pricing
    • 3.4 Private health insurance
  • Chapter 4 Information and transparency
    • 4.1 Why does information matter?
    • 4.2 What information could be better collected or released?
    • 4.3 Overcoming impediments to reform
    • 4.4 The way forward
  • Chapter 5 Summing up
  • References