Health care expenditure around the globe is increasing as a proportion of GDP.  In particular, in OECD countries on average spending per capita rose by 74% in real terms between 1990 and 2008 (OECD paper p 224).  No country has an inexhaustible budget for health and this pattern is placing pressure on government budgets and has led to a focus on efficiency in the health sector (World Health Organisation, 2010, p. 13) (Bloor & Maynard, 2006, p. 1257). The structural elements of the Australian system of Universal Health Care and fee for service payments will ensure that the pattern of growth in expenditure continues raising questions about its long term sustainability (The Treasury, 2010).

This paper argues that the current mix of incentive payments to providers of health care services leads to the provision of services which could be considered inefficient and better outcomes would be achieved if they were avoided (avoidable care), consisting of overtreatment, incorrect and over diagnosis.  The paper then explores some of the drivers of avoidable care and proposes to reorient health policy settings to shift the expectations of professionals, industry/corporations and society to improve the efficiency of the system and outcomes for patients.

Health care in Australia is primarily funded by the Commonwealth and states and territory governments, with 69.1 per cent of total health expenditure being funded by Governments (AIHW , 2012).  It is a significant expense, and in 2011-12 the budget for the Federal Department of Health and Ageing portfolio Budget was $61 billion or 16.7 per cent of the Budget. Medicare expenses are a major source of growth in expenditure and are expected to increase over the forward estimates and beyond (The Treasury, 2012).

The current system of funding is based upon outputs and is disconnected from health outcomes, limiting both the incentive and the opportunity to manage health and to improve efficiencies.  It is largely geared towards episodic treatment of illness, rather than considering holistic health.  It is estimated that 20-40% of resources are wasted through poor use of health funds (World Health Organisation, 2013, pp. 61-62). Overall, the reimbursement system rewards volume and not value, quantity not quality (Chamber of Commerce and Industry of Western Australia, 2007) (Boxall, 2011).

Considerable expense is occurring with arguably minimal predicted impact upon the disability burdens and therefore quality of life.  As illustrated in figure 1 below, the DALY’s for most of the major disease groups were expected to increase from 2003 to 2010.

Inefficient care

In order to become more efficient, a better understanding of what constitutes optimal care is needed as this would allow Governments to remove incentives for the provision of suboptimal care that currently exist.  Broadly, inefficiency in the system occurs when services provided are not valued by the person acquiring those services or the community.  Inefficiency in the health sector includes overprescribing of pharmaceuticals; over diagnosis of disease and inappropriate care. These items can be collectively termed ‘avoidable care’, see figure 2 below (Fineberg, 2012).

For example, in 2012, the MBS contained around 6000 items (not including pharmaceuticals); approximately 3% of these (about 1% of total MBS expenditure) have been formally assessed against contemporary evidence for safety, effectiveness and cost-effectiveness (Department of Health and Ageing, 2010).  A recent review suggested that there are approximately 150 potentially ineffective and/or unsafe services are listed under the MBS and would benefit from further assessment (Elshuag, et al., 2012).

In addition to potentially remunerating for ineffective treatments, there has been a developing concern about changes in criteria leading to over diagnosing or overtreatment.   The British Medical Journal has recently created the Too Much Medicine campaign which aims to highlight the threat to health outcomes from over diagnosing and over treating (Editor, 2012).  Recent research indicates that there is overtreatment of mild hypertension, over diagnosis of cancer, over diagnosis of pulmonary embolism and over diagnosis of kidney disease due to a change in the classification system (Moynihan, 2013).

This problem is not unique to the United Kingdom and Australia. In one study in the United States using two national databases, a cross-sectional comparison of outpatient visits in 1999 to visits in 2009 was conducted. Only two of the 11 overuse indicators (i.e. prescribing an intervention that is not recommended) improved and one became worse (prostate screening increase among men older than 74 years) (Katz, et al., 2013).

Of more concern was the findings of the Australian CareTrack study into the quality of healthcare which estimated that about 40% of patients did not receive evidence-based care (Runciman, et al., 2012).

Drivers of behaviour

There are numerous reasons that professionals provide unnecessary care. A clinician may regret at not applying a treatment which may lead to benefit and this may overpower the remorse for the costs of an unnecessary treatment. There may also be a desire to please referring clinicians or there may be concerns about potential future litigation for not applying a treatment (Scott & Elshaug, 2013).

It has been argued that the demand for health care is supply driven by the medical industry, with the pharmaceutical, service provision and technology providers all naturally needing to increase sales.   The pharmacological industry is particularly apt at supporting revised diagnostic criteria and medicalising what was previously a normal process, for example, at the same time that Merck’s hair growth drug Finasteride (Propecia) received approval in Australia, a marketing package was launched providing information to men about the emotional issues related to hair loss.  The strategy effectively converting a normal aging process into a medical issue (Moynihan, et al., 2002).

The pharmaceutical industry has now created an “ill for every pill, and a pill for every ill’ (Mintzes, 2012).  This can be seen in the stark increase of expenditure on testosterone products in Figure 3, below.

The message being that male sexual dysfunction is common, however there is no evidence of this phenomena being diagnosed (Handelsman, 2012). Indeed, the increase of prescriptions “….are likely to be due to promotion-driven non-compliance with PBS prescribing guidelines” (Handelsman, 2012).

Importantly, society’s expectations of the medical industries ability to solve every ill and prolong every life appear to be reinforcing the supply driven problem. Amartya Sen deliberates the paradox that American’s feel considerably less well than people in Bihar, India, although their life expectancy is far better, and Ivan Illich’s assertion that modern medicine has become a menace to well-being by undermining the capacity of people and societies to cope with, sickness, pain and death (Sen, 2002) (Illich, 2003).

In the United States, approximately 30 per cent of all expenditures were devoted to the last of a person’s life in Massacheusetts, and 38 per cent in California (Emanuel, et al., 2002).  In Australia, inappropriate over investigation and overtreatment of the aged who have multiple conditions can also be seen.  This pointless care delivered to patients who have advanced end-stage disease or terminal illnesses reduces their dignity and quality of life and consumes vast resources (Scott & Elshaug, 2013).

Noting these trends practitioners and policy makers in the United States have developed a “Choosing Wisely” to educate physicians as to the benefits of high-value, cost-conscious health care.  A similar campaign commenced in Canada, with the Canadian Medical Association supporting a ground movement by a group of doctors to remove unnecessary, and potentially harmful over testing and over treatment (McDiarmid, 2013).

It could be argued that the professional bodies are advocating for a shift in behaviour before political pressure is brought to bear on Governments.  This first move advantage, may stay regulatory or financial incentive maneuvers, which are often favoured by policy makers, which are based on the idea that clinicians will no longer do unnecessary things if they are not being paid, or paid as much, to do them (Scott & Elshaug, 2013).

Policy implications

There is considerable benefit in progressing the Government’s Comprehensive Management Framework for the Medicare Benefits Schedule through the development of an ongoing review program for items listed under the Medicare Benefits Schedule (Department of Health and Ageing, 2010).  An ongoing program would communicate to practitioners, patients and the health.

technology industry that the Government is only prepared to pay for practices that are considered to be valuable for the community and that listing on the MBS is contingent upon the practice remaining  demonstrating effective.  Items could be reviewed on a systematic basis, whereby the likelihood for change determines the priority for review.  Delisting or heavily restricting items that have no or low value, until proven otherwise could occur.

A strategy that may not require significant intervention from the Government would be the creation of a “choosing wisely” campaign in Australia.  This could be led by either the Government or Practitioner organizations (the Colleges and the AMA).   Similar to the US program it would promote conversations between physicians and patients by helping patients choose care that is supported by evidence, not duplicative of other tests or procedures already received, free from harm and truly necessary (AIBM Foundation, 2013).  The program would educate the medical profession on the benefits of including patients in the design of the interventions noting that empowering patients to actively participate reduces demand for care.  Approximately 20 per cent of patients who participate with full information on the potential costs and benefits, choose less invasive and less costly interventions (Stacey, et al., 2012).

Management of end of life health care according to expected life gains, would also provide significant efficiencies and potentially avoid invasive and painful procedures that may have little benefit for the patient.  Education of the public and medical profession as to what is appropriate end of life care would be critical to the success of such an initiative.  Consideration should be given to adopting a slightly more conservative approach to managing aging patients with multiple co-morbidities or poor quality of life. Use of prognosis tools and interventions that do not improve survival beyond a few months or do not improve quality of life should be restricted.  Alternatively, using decision aids and informed consent documentation that requires explicit estimates of potential benefits and potential harm/other consequences for patients may elicit patient’s values and beliefs, providing a more dignified care plan.


The current structure of Australia’s health system of pooled funds and fee for service payments leads to the over provision of services.  Practitioners are effectively rewarded for overtreatment and over diagnosis.  In addition, professionals are remunerated for providing services that are potentially ineffective or for clinical errors.   Optimal interventions are low risk and low cost with high potential to benefit the patient, however this cannot be achieved in a supply driven system in which the providers of services are driven to respond to the payment settings by increasing the scope of the definition of a health issue. Compounding this problem is society’s expectations that the medical industry will solve every issue and prolong every life, even though this appears to be extroadinarily expensive and may provide a less dignified process of dying.

It will take a combined effort to reorient the provision of health services and shift the expectations of professionals, industry/corporations and society to improve the efficiency of the system and outcomes for patients.  The Australian Government should commence a rolling review program into the provision of services under the MBS using a prioritization framework, delisting items that have no or low value; physician organisations could commence an education program to help patients and physicians choose high value, cost conscious and potentially less invasive care; and the Australian Government must commence an education program to manage community expectations around what constitutes appropriate end of life care.