Socialised healthcare

Now that the US has some kind of socialised medicine, it is worth commenting on how such a system could be improved.

Critics cite that when something is free, it is usually of poor quality, inefficient, is ultimately more expensive (due to the inefficiency and higher taxes) and creates long waiting queues.

I would agree, that anything that is free to the patient, creates the "free rider problem". In other words, people with a lower socio-economic background consume more than their fair share of public healthcare and of course shoulder less than their fair share of the cost because their income is lower and they pay lower taxes than everyone else.

But in a user pays system like the US had, this did not not necessarily mean health costs were much lower due to greater competition or efficiency. If insurance companies and doctors collude on pricing, they could control the market as prices were unregulated. Since health care is a necessity, patients would have no other choice but to pay because health care is price inelastic (price changes have a small effect on the demand for health care). Also, the US is very litigious country and therefore doctors pay to pay hefty insurance premiums in order to practice. Therefore tort reform by limiting the damages that could be claimed is an important aspect to reduce the overall cost of healthcare.

In Australia, the Medicare system is totally free to the patient if the doctor provides "bulk billing". Under "bulk billing" the doctor receives 85% of the scheduled fee from the government. The benefit for the doctor is that they avoid the costs of and risks of debt collection since the government will pay. However, this incentivises the doctor to see more patients in a smaller amount of time in order to increase their own income, which may lead to poorer quality patient care.

An alternative to "bulk billing" is where the patient pays the doctor first, and then the patient seeks a 85% to 100% rebate from the government for the cost. Under this alternative, the doctor is not restricted to the scheduled fee and can charge what they please. Usually the doctor can spend more time with the patient since their fees are not capped by the government, which may lead to higher quality patient care.

The "free rider problem" is most likely encountered with "bulk billing" doctors. There is usually much longer queues for doctors who offer "bulk billing". Instead of zero cost to the patient, the government or doctor should charge a nominal fee for the visitation, perhaps $10. This would discourage a significant amount of free riders as it poses an upfront cost, and only patients with significant illness would see a doctor under such circumstances. However, this would not eliminate the incentive for doctors to try and see more patients in a fixed amount of time and therefore the quality of service may not necessarily improve.

In Australia, people can also purchase private health insurance. Theoretically, they are paying more for health care, and therefore should be able to jump waiting queues and receive better quality of service. Australia incentivises wealthier people to have private health insurance otherwise they pay a higher taxation levy on Medicare.

The problem with the Australian system is that it does not encourage people to consciously adopt a healthier lifestyle to avoid illness. Perhaps the Singapore system should be adopted in part because it similar to a user pays system with a government safety net. In Singapore, a percentage of your salary is credited to a MediSave account. When a person is sick, they use the monies accumulated in their own (or family members') MediSave account to pay for their medical bills. For a healthy person, they would hardly use anything in the MediSave account and should they die, the money in the MediSave account could be passed onto family members. If the MediSave account is depleted, then the government provides a safety net to cover costs of essential health care.

Rather than 100% of the costs being paid from the MediSave account, perhaps the government should co-pay so that it is 50-50 between the government and patient paying for their medical bills. This is slightly more socialised than fully privatised. Also, tax rebates should be offered for people who choose to purchase private health insurance. This would encourage wealthier people to pay higher premiums for private health insurance to reduce their tax burden while at the same time supposedly obtaining better health care.

My proposal for Australia:

1. Reduce (or eliminate) the compulsory 1.5% Medicare Levy on taxable income.
2. Eliminate the 1% Medicare Levy Surchage if your household income is greater than $140,000. Instead, offer a tax rebate (e.g. 1%) if a minimum level of private health insurance is purchased. This would encourage not only families earning more than $140,000 household income but also those earning less than this because a percentage tax rebate would apply to anyone with a minimum level of private health insurance. By increasing the pool of consumers of private health insurance this would generate more competition in the private health insurance which may lead to lower premiums.
3. Introduce a compulsory MediSave account where each taxpayer (or person within working age) must set aside 6 to 8% of their income to meet future personal or immediate family's hospitalization, day surgery and for certain outpatient expenses. The government should then reduce (or eliminate) the compulsory 1.5% Medicare Levy on taxable income. Also, the government should co-pay instead of 100% payment from the taxpayer for their medical expenses. This would ease the medical cost for any unfortunate illness or injury that may occur for an individual.
4. Allow doctors and hospitals to set their own prices to encourage competition and greater quality of service. But there must be a government authority to monitor any price collusion/price fixing. There should still be some government hospitals where the cost is very affordable but there may be longer waiting queues or the quality of service may not be as good. Payment for medical bills should still come from a mixture of private health insurance, MediSave account and co-payment from the government.
5. Continue the Pharmaceutical Benefits Scheme (PBS)