Australia’s Health System: Some Issues and Challenges

Subject: Administration and Regulation
Pages: 9
Words: 2298
Reading time:
9 min
Study level: Bachelor


The Australian health system had undergone and continues to experience rapid change and innovation. It is part of the social governance of the country with an objective to enhance public health. Health policy is the primary focus of the political agenda as significant challenges remain. The report will investigate the process of health policy redesign with its inherent complexities, potential costs, and opportunities that would allow Australia’s health system to achieve its objectives.

Brief Overview of Policy Area

The policy area selected for this assignment is health. The health care system in Australia began reforms in 1997 which comprehensively reviewed all aspects of health delivery and introduced evidence-based decision-making. National strategies such as public immunization and rural healthcare availability were some of the changes mandated to increase access and inclusivity in the population. Vital statistics were improved such as an approximately 94% vaccination rate amongst children (“Immunization coverage”).

Currently, Australia spends 10% of its gross domestic product on health, which is $65 billion more than a decade ago with an average 4.7% annual growth in spending (“Health & Welfare Expenditure”). Australia uses a hybrid model of health care delivery, combining government-funded basic health services while residents have the option to purchase private insurance for more sophisticated treatments (Dixit and Sambasivan 14). Public administration oversees policy formulation and any resource management. Health policy in recent years has focused on structural change which eliminates disparities, improves quality, and reduces waste.

Assessment of the Need for Change

One of the most pressing issues in Australian health policy is providing health care access to a wider range of populations. Unfortunately, the country’s health system was shaped by its colonial history which has left many minority populations, particularly the Indigenous people, with significant barriers to receiving official public healthcare. While significant efforts have been made to address the issue by focusing on these populations in interventions and providing more public hospitals in rural areas, the improvement is largely incremental.

Indigenous health continues to significantly lag behind the general white population in every aspect of the health and delivery framework (“Summary of Aboriginal”). It is an indicator of severe health disparities based on social and ethnic patterns, which is unacceptable for a modern health system in a developed country.

The public health access and utilization as a ratio of total health expenditure are lower in Australia than in other OECD developed countries. As an example, while Australia has one of the highest numbers of MRI machines per population, the average rate of MRI exams is much lower than any of the OECD countries. This indicates a resource allocation issue in the policy. While healthcare expenditure can be boosted, it is necessary to provide policy incentives that would improve efficiency and performance. This leads to the issue of healthcare delivery as Australia experiences significant problems with waitlists. While maximum waiting times have been established, the performance indicator has not been raised adequately.

The inefficiency of the system and resource allocation is causing time to be lost between assessments and actual treatment, as well as a high underutilization of available medical resources. Finally, there are gaps in data regarding discharge planning, patient experiences, and clinical outcomes which causes information asymmetry for all involved stakeholders (Dixit and Sambasivan 13). This issue indicates not only the need for structural change but cultural improvement in the health system as well.

Another aspect that requires examination is the funding of healthcare. There are strong opinions on the current system as some support liberalization of the system as a market while others feel a bundled payment system based on patient outcomes is the solution. Despite public healthcare availability, out-of-pocket costs are disproportionately high for specialist care, pharmaceuticals, or complex treatments which are not covered by national coverage. The increased prevalence of chronic diseases in developed countries such as Australia is causing residents to seek health care services more often. However, the current system is neither fitting nor flexible for proper care management of chronic conditions (Macri 1).

Extent of Change

Access to healthcare can be improved by relying on the approaches used in the system. For example, a large barrier for minorities remains the lack of culturally competent training and translator services. Incremental improvements in this aspect which would allow the presentation of information in a culturally sensitive manner could lead to significant improvements in healthcare utilization. Reliance on modern technologies could also prove effective without using physical time and space in hospitals. Telephone centers, digital health, and telehealth possibilities can provide citizens with minor health issues, guidance on further treatment, and critical post-discharge follow-ups (“Equity of access”). All of which would significantly improve the range of available health options while decreasing the burden on the public health system.

Resource allocation and efficiency in healthcare should be addressed by pooling resources and management between private and public hospitals. Appropriateness of care can be embedded into outcome measures of a hospital as well as mechanisms of performance measurement for strategies such as patient education and discharge planning (Dixit and Sambasivan 14). Government policymakers, both federal and state can actively engage in the oversight of hospital systems.

A potential approach to resource allocation is disinvestment which is the process of relocating resources from one service to another and reducing investments into ineffective or outdated aspects which provide little public health gain. Optimizing healthcare and resource use can be achieved through disinvestment to ensure that practice is consistent with evidence-based guidelines and public funds are properly implemented, particularly for local healthcare providers (Harris et al. 7).

The cost of healthcare from a private hospital is a barrier for those without insurance or those who are unable to afford high out-of-pocket costs. Currently, Australia utilizes activity-based funding (ABF) which provides funding to organizations based on the number of patients and services offered. The system has positive impacts such as increasing public health utilization all while reducing lengths of stay and hospital expenditure growth. It allows targeting certain outcomes such as waiting times. However, it impacts post-acute care admissions and other health-related outcomes. It may be viable to switch to a bundled payment model which would further reduce costs without hampering the quality.

In bundled payments, hospitals receive payment not only for a number of patients or medical incidents, but the quality of patient outcomes. This would essentially switch the healthcare business model to a patient-centered approach that would value customer satisfaction as it would directly impact the payment mechanism. Furthermore, allowing patients to have the freedom of choosing healthcare providers can introduce a market-based approach of competition amongst hospitals as they seek to improve quality (Dixit and Sambasivan 10). However, policymakers should be aware that population health conditions cannot always be predicted, and basic healthcare should remain a necessary priority.

Potential Costs

The Australian government has highlighted its full commitment to using the cost-benefit analysis for regulatory proposals as part of its decision-making process. A cost-benefit analysis seems to account for the community and economic impacts including direct consequences and financial effects in order to evaluate value gains.

Cost-Benefit analysis provides both quantitative and qualitative data to policymakers to assess the impact of legislative proposals and to take into account all long long-term effects on individual groups or communities. Furthermore, it helps to establish a link between health policy and other sectors of the economy, which would ideally maximize net benefits (“Cost-Benefit Analysis”).

A cost-benefit analysis consists of several steps which begin with specifying an available range of options. Then, it is necessary to identify the focus of benefits, impacts of the options, and select measurement indicators. Predicting the impact over the life of the regulation is also necessary by conducting uncertainty assessments and long-term predictions. The next step is monetization or placing a monetary value on the impacts of a regulatory initiative. Each benefit or loss will have financially measurable consequences. It is a general quantification based on the cost of goods and services and the estimation of value for non-tradeable commodities.

Future costs must be considered as well, such as inflation that would calculate net present values. After the net present value of options is calculated in monetary currency, a sensitivity analysis should be performed. It seeks to determine how a change in variables can impact the total cost of regulation. Finally, a conclusion should be reached based on the results of a cost-benefit analysis that would present the necessary outcomes at the most appropriate net value cost (“Cost-Benefit Analysis”).

Historically, health policy in Australia was evaluated in terms of Quality-Adjusted Life Years (QALY) when conducting a cost-benefit analysis. QALY are measures that combine lifespan with state of health until death. Therefore, cost-effectiveness compares a treatment regarding treatment expenses per QALY. Health sector decisions are path-dependent, meaning that they are based on historical trends and self-reinforced institutions.

The health system’s perpetual use of cost-effectiveness analysis above all else is controversial since the concept of placing a monetary value on life and health can be considered immoral. Levels of governments and healthcare organizations engaged in reporting monetary boundaries per life-year when determining subsidies and regulatory support for treatments (Dobes 10).

Redesign Process

The policy cycle of system redesign is cyclical, following the steps of research, design, implementation, and analysis. The first step to the redesign process is research. An approach based on management theory should be selected, such as Six Sigma which reduces variation, Lean Thinking for eliminating waste, and Theory of Constraints for managing limitations in a system. Evidence-based research through rigorous methods identifying and deeply studying a specific policy issue. Research should incorporate policy-related aspects such as costs and public opinion. The design process must be conducted when the team develops a deeper understanding of the ongoing situation with healthcare delivery.

A positive policymaking environment should be created within all levels of government. The diagnostic process includes observation, expert opinion, and breaking down process sequences. Policies should be matched to realistic outcomes and provide measures by which policy would be measured. Policy options and alternatives should be available to be most effective at accomplishing goals (McDonald 19).

The implementation stage consists of putting policy into effect through negotiation, communication, and leadership. The competing option should be evaluated in the context of political realities and interests of stakeholders to pass the legislation. Finally, the analysis stage attempts to evaluate the consequences of the policy through an examination of various steps. Political understanding, public support, and evaluation of effectiveness are central to the analysis process (McDonald 19).

Large-scale change can be achieved through various approaches. Institutional entrepreneurship consists of involved stakeholders in the health industry leveraging resources to create reforms. This implies certain guidelines and expectations of the status quo to be broken in order to break away from existing institutional models and pave the way for innovation at a systemic level. Meanwhile, systems thinking attempts to understand the dynamic nature of relationships, needs, and resource distribution within a system.

Using this process, policymakers can implement and evaluate change on a systemic level. Strengths of systems thinking include understanding and fostering the value of interdisciplinary relationships, a long-term vision that strives to understand the consequences of any lasting changes, and recognition of context with effects both local and historical on the transformation of the health system. Large-scale change is only possible with strategic realignment that maintains the support of public engagement and organizational drive for innovation, the principles of which continuously overlap (Melder 15).

Political Opportunity

In the policy design and implementation process, politicians are principals while bureaucrats are agents of action. While principals formulate the policy, they inherently rely on bureaucratic expertise in the area (Dixit and Sambasivan 13). The federal government of Australia is currently experiencing increased revenue which provides ample opportunity for policy investment. In combination with other policy changes such as tax reform, health care should be considered as well since it directly relies on taxpayer money. While the current state of the healthcare system is adequate with relatively high quality, it is unsustainable in the status quo.

However, there is a significant opportunity to utilize the technological innovation of Australian healthcare for economic gain. This can be done by selling telehealth technologies, capturing medical tourism markets, and investing in foreign institutions. Overall, attracting domestic investment and talent is also vital (Bartlett et al. 4). Therefore, there is a significant political opportunity to develop, invest into, and maximize the healthcare sector as it has far-reaching impacts on the country’s economy.

Health policy undergoes reform when there is an evident need for viable solutions to critical issues, and public pressure becomes overwhelming. This provides a political opportunity for change in public policy towards the advantage of a certain party or leader. Australians currently consider healthcare and medical research a vital spending priority for the government and are concerned by the impacts that health delivery may have on society.

Politicians in states with growing populations recognize the concerns of limited bed space and long waitlists for hospital procedures as well as lack of other services such as mental health. Public opinion is dissatisfied with the lack of action on commitments from earlier in the decade (Duckett). Therefore, it is critical for policymakers to use the trend of public opinion in combination with the potential for economic growth to redesign health policies.


The Australian healthcare system is a combination of public and private healthcare that has produced significant results in the last decades as more funding is dedicated to the industry. However, there remains a myriad of challenges, ranging from health care access to efficiency and high costs. The policy can address these aspects on a systemic level through an evidence-based and competent approach. The cost-benefit analysis should consider potential costs, including long-term impacts and QALY values. Finally, the political opportunity for health care reform is currently prime for policy redesign.

Works Cited

Bartlett, Chris, et al. “Australia’s Healthcare System: An opportunity for economic growth.Strategy&. 2016. Web.

“Cost-Benefit Analysis.” Australian Government Office of Best Practice Regulation. 2016. Web.

Dixit, Sunil K, and Murali Sambasivan. “A Review of the Australian Healthcare System: A Policy Perspective.” SAGE Open Medicine, vol. 6, 2018, pp. 1-14.

Dobes, Leo. “A Century of Australian Cost-Benefit Analysis.Department of Finance and Deregulation. 2008. Web.

Duckett, S. “Waiting for Better Care: Why Australia’s Hospitals and Health Care Is Failing.The Conversation. 2018. Web.

“Equity of access for all Australians.” HealthDirect Australia. 2017. Web.

Harris, Claire, et al. “Sustainability in Health Care by Allocating Resources Effectively (SHARE) 9: Conceptualising Disinvestment in The Local Healthcare Setting.” BMC Health Services Research, vol. 17, no. 633, 2017, pp. 1-23.

“Health & Welfare Expenditure.” Australian Institute of Health and Welfare. 2017. Web.

Immunization Coverage Rates for All Children.Australian Government Department of Health, 2018. Web.

Macri, Joseph. “Australia’s Health System: Some Issues and Challenges.” Journal of Health & Medical Economics, vol. 2, no. 29, 2018, pp. 1-2.

McDonald, Tim. “Policy Design and Redesign of American Healthcare.Harvard Kennedy School, 2014. Web.

Melder, Angela. “Redesign and Innovation in Hospitals: Foundations to Making It Happen.Deeble Institute. 2015. Web.

Summary of Aboriginal and Torres Strait Islander Health Status 2017.Australian Indigenous HealthInfoNet, 2018. Web.