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A Stable Health System

This page examines the stability of the corporate health system in the context of affordability. What is likely to happen to a corporatised health system when health care is no longer profitable or when money is short and there is less to spend on care.

The Economy, Care and Affordability

Economic Instability and Health Care:- In the USA economic pressure is localised to health and aged care. The US corporate health and aged care system is consequently in disarray. Five of the largest aged care chains have entered chapter 11 bankruptcy. The shares of hospital corporations have fallen. Managed care is in dire trouble and share prices are tumbling. Shareholders suspect with good reason that the massive class actions commenced against the major HMO's will force them out of business.

Without investment and market support health care corporations do not prosper. If they are to survive then they dare not provide anything more than token care Marketing to maintain an image is more important for survival than spending money on care.

The extent to which patient care is determined by decisions in company board rooms is now clear. During times of vast profits and corporate expansion the consequences have been devastating for thousands of citizens. What will the consequences be when money is tight and bankruptcy threatens?

It is mischievous nonsense for corporate PR departments and governments in the USA to claim that care is not going to be adversely affected by the financial predicaments in which companies now find themselves.

Responding in the Interests of Citizens:- In planning health care we need to look to a system which can respond effectively and in a socially responsible way to downturns in wealth. I do not see the market responding in this way. It is more likely to move its investment in health care and seek profit elsewhere. At this time for instance the booming health and aged care shares in the USA and Australia have plummeted to fractions of their previous value. Shareholders have taken their money elsewhere. This is not in the interests of citizens and it is ideological nonsense to claim that those in need of care will not be affected adversely by this.

The Corporate Response:- A good example of corporate response to economic downturns is the story of corporations in the 1980's. Corporate expansion and rapid growth had occurred during the 1970's when large profits were easily made.

By the end of the 1970's the government were aware of the way medicare was being exploited. The FBI were concerned about increasing health care fraud but they did not have the resources to investigate. Instead government introduced Diagnosis Related Groups (GRG) which made fraud more difficult and placed a limit on profits. Many of the corporations sold general hospitals and shifted into "specialty" areas which operated in ways which allowed more profit to be generated. Their marketing strategies fanned community anxieties and created a false market of normal people who were then exploited for profit. The misuse of patients and the massive fraud perpetrated are documented on this www site.

Demand and Profit:- Graeme Samuel in his speech to the World Bank speaks of "exponentially increasing demands" It is important to distinguish the word "demand" used by Samuel from "need". Society accepts an ethical responsibility to attend to the genuine medical needs of others and to protect the vulnerable. It should ensure that it is able to do so in both good and bad times. Society is not required to accede to every demand by individuals, particularly when times are bad. Much of this demand is not need.

The market is not really concerned about the community's need.. Its primary concern is to generate a demand by marketing and then reap profits by meeting this demand. During bad times creating demand for unneeded services which pay well to increase profits can only be at the expense of less profitable services which are needed.

The only need in the market is profit and this is fundamental to survival. Tenet/NME's conduct described on this www site is a good example showing how demand for services can be generated when there is little or no need for them.

The Economy, Care and Affordability in Australia

Close to Home:- The recent revelations about the way the costs of food in aged care nursing homes in Australia have been cut to the bone in the new privatised nursing home system brings this problem sharply into focus. These are described in the Australian 23 March 2000. The paper talks about rogue organisations. The pressures of intense competition on the share market have ensured that in the US aged care marketplace rogue organisations are the ones which succeed. Rogue organisations have become the norm. There is every reason to believe that the same pressures will have similar outcomes in Australia.

Affordability, Oversight and Care:- The Australian is critical of current regulation and oversight. It points to the need for proper oversight procedures to check that nursing homes are feeding our elderly properly.

The incongruity of having to set up costly surveillance structures to go around checking that each elderly person is getting a decent plate of food escapes the market thinkers on the newspaper. That this sort of detailed surveillance should be necessary in a system where citizens are caring for the basic needs of vulnerable aged is a terrible indictment of the ideology and practices which have allowed people like this to care for our frail elderly..

These aged care providers are the people who should have been vetted by our licensing authorities. The licensing authorities should have the responsibility for ensuring that those providing care are motivated by concern for their ailing fellow citizens. They should be people of recognised integrity, people who can be trusted - fit and proper and approved under the probity regulations.

Probity Provisions Removed:- Instead the Australian government removed probity provisions when they revised and privatised the aged care regulations in 1996. Perhaps they realised the problems which these regulations would cause for corporate interests and once again ideology triumphed over sense. We should be making sure that probity provisions are put back in the regulations. We need to be sure that they are effective, are at arms length from politicians and economists, and that they can be enforced under our laws.

The Practicality of Detailed Oversight:- The sort of oversight suggested is of course impractical and this goes to the fundamental flaw in models such as that proposed by Samuel's in his speech. It illustrates the impossibility of controlling the dysfunctional practices which occur in health care when it is subjected to strong competitive market pressures. The recent exposures of dreadful standards of care at Riverside and across the nation illustrate the problem. If this is what happens when Australia is very wealthy and can afford surveillance, what will happen in bad times when the government has no money for surveillance and corporations are under pressure to skimp on care.

Rogue Organisations:- There is something surreal in advocating a system which depends on contracting the care of citizens to potential "rogue organisations", makes being a rogue profitable, and then tries to stop these rogues by regulating every facet of their activities. That such rogue organisations flourish and eventually dominate the publicly listed for profit health and aged care marketplace is clearly shown by the US experience.

A Stable System for Australia

If we want to have a stable health system it will need to be a system where share market listed companies play little or no part. It will need to be a system run by the more responsible sectors of our society. They should be people concerned about the community and directly accountable for care and not profit. Probity will be a key consideration, especially when money is tight and difficult decisions involving rationing must be made.

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This page created April 2000 by Michael Wynne