THE FUTURE OF MEDICARE AND MEDICARE LOCALS

The Conversation Conference

August 13^th 2014

Recently-announced proposed budget changes bear heavily on the future of Medicare and Medicare Locals (MLs).

 

The element in the budget that I wish to concentrate upon today is what’s happening with the 61 Medicare Locals.  I have been asked to address three questions:

• The argument for ML reform - what has and hasn’t worked and what changes are needed?
• Will the reform of MLs work or will abolition be the only answer? 
• What do we see internationally that could be applied within Australia to alleviate the problems with MLs?

The argument for reform of Medicare Locals

MLs have been reviewed both with regard to their function by John Horvath and specifically with regard to financial management by Deloitte.

As one might predict, the financial management of these entities was found to be immature and often below par. As well, much diversity of competence and performance was found in function among the MLs. General practitioners complained about being excluded from MLs.  Some feared that they will take over their work.

 

In any case the reviews proposed abolishing MLs and replacing them with Primary Health Networks – PHNs – that have rather similar functions.  Although the reviews proposed there should be fewer PHNs than MLs, it emphasised the value of having MLs and Local Health Districts – LHDs – or Local Hospital Networks – LHNs – relate closely to one another.  Contiguity was seen as a virtue.  How this will happen is not clear.  In NSW we have at present 17 MLs and 17 LHDs. As John Horvath observed in his review “to be effective, boundary alignment with Local Hospital Networks (LHNs) is critical for engagement” but of course this will not be possible at the PHN level unless there are more, not fewer, PHNs than there were MLs.

Perhaps to overcome the mismatch between PHN and LHNs, each PHN will have a board, informed by a Clinical Council and a Community Committee for each LHN.  These committees will oversee the functions that MLs provide at present though it is clear that PHNs will not have a service role other than exceptionally.  The Clinical Council is intended to give strong voice to general practitioners who reportedly have felt excluded from many MLs.

 A transition to PHNs may not involve much change providing they remain the same size as the MLs.  In Victoria where there are 90 or so LHNs, things are not clear. In any case funding to MLs will cease next year.  As John Horvath says in his report,  “The role of the PHN is to work with general practitioners, private specialists, LHNs/LHDs, private hospitals, aged care facilities, Indigenous health services, NGOs and other providers to establish clinical pathways of care that arise from the needs of patients (not organisations) that will necessarily cross over sectors to improve patient outcomes.”

 

The argument for a name change is quite acceptable.  ML is confusing.  The argument for abolition and then reconstruction rather than managing the process of development of laggard MLs and learning from the ones that are going well is less obvious.  There is no contestable policy visible, just a budget statement. 

What has worked?  In western Sydney the Western Sydney Local Health District (LHD) whose board I chair has worked with the ML on six projects and has another important one under way. The ML does not itself provide the service.  Rather, it coordinates and manages the players.

Indeed, the function that the ML has proved most useful in managing in partnership with the LHD is the increasing load of people with multiple serious and continuing illnesses has been to link their care between hospital and community.

Our district encompasses a population of nearly one million people, 40% of whom were born overseas.  We include Parramatta, Auburn, and Westmead, Blacktown and Mt Druitt and all places in between.  We have our share of older people and those living with economic disadvantage.  There are three major hospitals – Blacktown Mt Druitt – BMDH – Auburn and Westmead (WH), WH being the largest and BMDH being redeveloped to become a major tertiary centre.  Lots of hospital admissions are of people in crisis with their chronic illnesses.

With special sponsorship from NSW Health we are currently constructing integrated care programs for people with a chronic health problem – heart failure, chronic emphysema or diabetes.  We are doing this in partnership with our ML.  We are devising ways to centre care on the patient by brining into formal relationship general practice, community health services, hospital out-patient and community specialist acre and hospital inpatient services.

This is aided by limited use of electronic records.  It depends on good will and negotiation.  It also depends on formal affiliations between the ML and LHD because our sources of funding are different.

   

These projects do not account for all that the ML does.  For example it has also helped organise out of hours general practice services in western Sydney and has partnered several prevention programs. It is active as a provider of continuing education for general practitioners and those in training.  

Is abolition of the MLs essential?

There has been no recent suggestion to reform MLs, just abolish them.  Any restructuring in the health service comes at a huge cost and serious disruption and that should be factored into the argument for it.

 

I am not as familiar with all aspects of the performance of MLs as the review committees, but I am surprised that the proposal for abolition and then construction of a group of organisations of roughly the same function was not available for contest before it became an edict in the budget.  I personally don’t think that the function of the MLs warranted wholesale abolition. They were young and we had hardly a chance to establish them. That is my point of view.  I could be wrong, of course.

 

But the move to PHNs will be expensive and now we have private health insurers wishing to contract with the federal government to provide PHN services.  How this will serve public patients is unclear.  It is true that in the US managed care transacted by private insurers has often achieved good outcomes for integrated service delivery. But I cannot see how that could be provided in Australia with its divided financial arrangements between states and commonwealth, public and private patients.

So, to western Sydney.  Our district encompasses a population of nearly one million people, 40% of whom were born overseas.  We include Parramatta, Auburn, and Westmead, Blacktown and Mt Druitt and all places in between.  We have our share of older people and those living with economic disadvantage.  There are three major hospitals – BMD, Auburn and Westmead, WH being the largest and BMDH being redeveloped to become a major tertiary centre.  Lots of hospital admissions are of people in crisis with their chronic illness.  Before the ML there were active Divisions of General Practice.

With special sponsorship from NSW Health we are currently constructing integrated care programs for people with a chronic health problem – heart failure, chronic emphysema or diabetes.  We are doing this in partnership with our ML.  We are devising ways to centre care on the patient by brining into formal relationship general practice, community health services, hospital out-patient and community specialist 

acre and hospital inpatient services.

This is aided by limited use of electronic records.  It depends on good will and negotiation.  It also depends on formal affiliations between the ML and LHD because our sources of funding are different. The features of this relationship that have meant it is a success so far as it has developed that I can identify include: 

1.  Managerial commitment and compatible, mature personalities of the executives of both LHD and ML – both share a belief that collaboration is feasible and desirable and a common goal of contributing to the health of the district.    

2.  Overlapping geography.  This is important in preventing dual loyalties and administrative confusion.  There is no space for playing one master LHD or ML off against another.  Although successes have been achieved in some MLs where there are more than one per LHD, reports of conflicts and sub-optimal performance are common.  We lobbied hard to have the ML boundaries set to be the same as those of the LHD and have never regretted it. 

3.  A common foe – the rising tide of chronic illness. 

Has this arrangement been optimal? When it comes to integrated care the answer is no, because factors we know to be critical in the achievement of integrated care are missing. But whether this is ground enough for abolition – especially when the proposed replacement does not, it seems to me, promise more that would enable truly integrated care to be provided – is extremely thin.

International models of relevance to MLs and PHNs.

If we take the fundamental task of MLs or PHNs to be to integrate care for patients with chronic illnesses, then we should look at overseas models.  Where integrated care works to reduce inappropriate use of hospitals there is one payer as at Kaiser Permanente’s managed care for six million Californians, and many of the McKinsey-supported projects in the US and the UK. Complete electronic data systems are used to assess clinical performance and health outcomes, guidelines and a keen interest is expressed in professional standards for all practitioners, with rewards and sanctions for achievement or non-compliance. The Veterans Affairs services in Australia bear close scrutiny as a model in this regard.  Pull any of these pieces out of the integrated care structure and the whole thing collapses.  I know of no examples of successful 

integrated care that have been unmanaged.

We have none of these necessary arrangements.  These qualities of successful integrated care are not within the power of general practice or a ML or PHN to achieve whether embedded in a Commonwealth-funded arrangement or a private insurance set-up given the way Australia funds health care though separate silos.  The initiatives needed to change this belong with the major state and federal health bureaucracies.

 

It is true that growing interest has been expressed by private health insurers in the PHNs and where they might play a role.  For example, Medibank and the WA and Victorian governments have proposed a trial of intensive care coordination 3000 patients with complex and chronic health problems. 2000 of the patients would be covered by Medicare and 1000 would in addition be privately insured.  Community nurses would ensure all patients are seen by their general practitioner within seven days of hospital discharge.  The interventions proposed have elements found in most efforts to integrate care and are not dissimilar to those found partially in many MLs. It is not clear whether the proposals can extent to what is successful in Australia through the VA or in the US through managed care.

So we have the foundations through the LHD-ML liaison to provide more appropriate care for people with chronic illnesses but no superstructure.  To drive towards optimality requires a common funding stream, tighter management of the process and a set of quality performance goals that carry incentives and sanctions.

These features are recurrent in the successful models of integrated care with which McKinsey and Co, a consultancy, have established in the US, England and Europe.  They are similar to what the King’s Fund, a health service think tank, in London also articulate, though in the NHS integrated care has not worked as well as hoped.  Tough, but if you want it to work, observe what the ingredients are where it does work.

The way forward

Integrated care is a necessary revision to the current model of disjointed care because chronic illness is coming to dominate our health care agenda and this cannot be done with optimal success when components of care are disconnected.

 

In moving to PHNs to replace Medicare Locals we can expect a year or more of disruption due to transitions and it remains to be seen what management assistance will be provided to the agencies, presumably including private insurers and existing successful MLs and maybe even LHDs/LHNs that contest to provide the services of a PHN.

 

The positive thing is that the need for integration is clearly recognised as is the role of the general practitioner.  These are good omens.  I do not know what process the federal government proposes to use to implement its approach to PHNs – we can only wait and see.  This is not an era in our political history where policy – either its formation or action that might be based on it – is obvious or strong.  But we can hope that gains made by many fledgling MLs will not be lost.

 

A call to action in the July 26 edition of the Lancet is especially apposite.  “Primary care needs to be reshaped to truly function as the most important pillar for people-centred health and well-being in the 21^st century. Primary care leadership needs to wake up and start a revolution.”