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• Increasing efficacy of healthcare, through advances in medical knowledge and the means of its application. A hundred years ago, most medical care was ineffective or dangerous. Since then, medical knowledge and technology have advanced at an accelerating rate, profoundly transforming the range of available medical services and the processes by which they are produced.

• Increasing value placed on access to healthcare, at both the individual and collective level, as a result of its increasing efficacy. Growing acceptance that such access is part of the basic standard of living in a developed and humane society has resulted in widespread social intervention to secure this access for all, regardless of capacity to pay.

• Rising real cost of "state-of-the-art" healthcare, partly because of the inflationary (on balance) impact of technological progress and partly because of treatments becoming available for previously untreatable conditions.

The combined effect of these processes has been a progressive increase in the "transfer burden" -- the cost of healthcare provided to the non-wealthy sick which has to be met by others -- if the equity, and indeed public health, goals of the society are to be met. This has been the driving force in the creation in virtually all developed countries of universal, publicly administered national health insurance programs. The establishment of Medibank was the Australian version of a stage in this process, which had, by and large, proceeded further in most other developed countries, including Britain, Germany, France, the Scandinavian countries and Canada.

The history of medical care organisation up to the 1960s has been well documented, through the early beginnings of charity and self-help, followed by steadily increasing public subsidisation as voluntary transfers fell short of the growing transfer burden.¹ World War II resulted in the reshaping of public policy in the direction of the "welfare state", with access to healthcare as an important component.

Together with pharmaceutical and pensioner benefits, the voluntary health insurance schemes enacted by the Menzies* Government represented a typically Australian compromise between government and private arrangements, and served their purpose for a period. However, despite mounting public subsidies, these schemes fell progressively short of meeting coverage and other equity goals. In other words, the transfer burden outgrew the capacity of a voluntary transfer system to raise the necessary funding.

We were as surprised as anyone else when Whitlam offered it as de facto Labor Party policy in a speech to a professional seminar at the Royal Prince Alfred Hospital, Sydney, some six weeks later. He continued his public advocacy, and about a year later the scheme was formally accepted by Labor's Federal Conference as party policy. The October 1969 election, which resulted in a massive swing to the Labor Party that was nevertheless insufficient for victory, brought national health insurance to the centre of the political stage.

A battle for hearts and minds ensued. The Liberal-Country Party Coalition Government, led by John Gorton, attempted to buttress voluntary insurance by a reformed Health Benefits Plan, involving increased benefits and new subsidies toward contributions paid by people on lower incomes. However, the failure to negotiate a satisfactory nexus between medical fees and benefits with the Australian Medical Association (AMA) undermined the effectiveness and the electoral impact of the reforms. Opinion polls over this period showed a consistent margin in favour of the universal program, but it was only one of many factors in the Labor Party's relatively narrow election victory in 1972.

The pre-election debates gave little warning of the bitter battle which was to follow. Other participants and contributors to this issue of the Journal record the intensity of the struggle over the implementation of what became known as the Medibank program. What I remember most clearly is the immensity of the task of formulating the details of the program, of establishing the administrative and operational machinery, of explaining and discussing the program with a host of interested parties, and of putting together legislation on the implementation of which the program depended.

We expected that this would be a process involving extensive negotiations, but the decision of the AMA to oppose the scheme in toto meant that serious negotiations were confined largely to the States about the public hospital agreements. On the Government side, 1973 was a year of frenetic activity for all involved, from the tabling of the Green Paper³ on 2 April and the White Paper⁴ on 8 November, to the introduction of the Health Insurance Bill on 28 November.

The Coalition parties were in disarray for some time after losing office in December 1972, and the real opposition to the universal health insurance program was spearheaded by the federal AMA, with support from other medical organisations. The AMA strategy of creating a public climate of opposition, engaging the support of potential antagonists of the program and neutralising the efforts of Minister for Social Security, Bill Hayden, to draw support from other groups was largely successful. This strategy culminated in the defeat of the Health Insurance Bills in the Senate on 12 December 1973.

The next few months represented the nadir of the health insurance program. Hayden sought in vain to find compromise positions that would be acceptable to the AMA and hence (hopefully) to the parliamentary Opposition. In fact, this was an unlikely outcome; the AMA had no need to negotiate anything to achieve its objective, and the Whitlam Government's popular support, as measured by opinion polls, had fallen disastrously. To all intents and purposes the program was dead.

In April 1973, Medibank was rescued from oblivion by an extraordinary turn of events. When Whitlam's attempt to secure a Senate majority by appointing Democratic Labor Party Senator Vince Gair to an ambassadorship misfired, his opposite number, Billy Snedden,^** announced that the Coalition parties would take the unprecedented step of rejecting the Supply Bills in the Senate. Whitlam immediately announced his intention to seek a double dissolution of both Houses and, before doing so, rushed the Health Insurance Bills through the House of Representatives and into the Senate, where they were defeated for a second time. This ensured that the Bills would qualify for passage at a joint sitting of both Houses if the Labor Party did not secure a majority in the new Senate.

The election, to be held on 18 May 1973, would determine whether or not Australia would have a universal health insurance program. The result was a win for the Labor Party, which nevertheless did not gain a Senate majority. The Health Insurance Bills were again passed by the Lower House and defeated in the Senate. On 7 August 1974, the Medibank legislation was enacted, by 95 votes to 92, at the only joint sitting of the Federal Parliament ever held.

In early 1975, as the prospect of administrative and systems breakdown receded, the hopes of Medibank's opponents centred increasingly on another refusal of Supply by the Senate in April or May -- a few weeks before Medibank was due to start. This would result not only in denial of funding for the program, but quite probably also in an early election, at which the Labor Government -- its political stocks having again fallen very low -- would almost certainly be defeated.

Once again, Medibank's rescue came from an unexpected quarter. As Snedden's position as Opposition leader weakened, he came under increasing pressure to refuse Supply and hence precipitate another early election. However, on 21 March 1975, he was replaced by Malcolm Fraser. Needing time to reorganise his forces, Fraser immediately announced that Supply would not be refused, and that finance for the implementation of Medibank would be forthcoming. The AMA recognised that the battle was over and advised its members not to disrupt Medibank. The four non-Labor State governments realised, some too late, that they had exposed their citizens to the loss of Medibank hospital benefits, and rushed to sign hospital agreements.

Medibank started on schedule, on 1 July 1975. In nine months, the Health Insurance Commission had increased its staff from 22 to 3500, opened 81 offices, installed 31 minicomputers, 633 terminals and 10 medium-sized computers linked by land-lines to the central computer, and registered and issued health insurance cards to 90% of the Australian population. Its information technology was, for its day, state of the art, but the enormous burden of processing around 150 000 claims a day caused severe problems for some months. It was December before the processing delays had been overcome, and by then the Whitlam Government was out of office.

The new program, commonly referred to as "Medibank Mark II", came into operation on 1 October 1976, with a levy rate of 2.5% of taxable income and a levy ceiling of $300. This arrangement proved workable, although administratively complex. However, it was only the first of a number of amendments to the health insurance arrangements, most of which had little rationale in terms of health policy. In November 1978, the health insurance levy and the compulsion to insure were abolished, and a new set of universal (but lower) medical benefits was introduced, with direct billing at 75% of scheduled fees for disadvantaged persons. A year later the scheme was changed again, with the universal 40% benefit being replaced by a flat benefit equal to the difference between $20 and the scheduled fee for all items.

These later variants proved generally popular in that coverage by private insurance fell away while the demand for public hospital treatment rose, as did the proportion of direct billing for medical services. In other words, all the variants of universal health insurance arrangements had an inexorable tendency to evolve towards the original Medibank program. Budgetary considerations, combined with pressure on the Fraser Government to produce policies more favourable to private providers and insurers, resulted in 1981 in a decision to abolish universal coverage and revert to a version of the pre-Medibank arrangements.

The new policy was announced in April 1981, to operate from 1 September that year. From that date, free public hospital care and Commonwealth medical benefits would be available only to pensioners qualifying for health cards, sickness beneficiaries and people meeting stringent means tests. For the general population, medical and hospital benefits would be available only to members of private health insurance funds, and contributions to basic hospital and medical tables would attract a 32% income tax rebate. Inpatient and outpatient fees were to be charged to all hospital patients except those qualifying for free care. As an incentive to the States to implement these charges, the new "Identified Health Grants", which replaced cost-shared grants for hospital services, would be reduced by amounts deemed to be collectible at standard fees declared by the Federal Minister for Health.

For the States and public hospitals, the new financial arrangements were extremely onerous. For individuals who did not meet the stringent conditions for free treatment, the consequences were worse still. They were not entitled to any medical benefits for private treatment or to free treatment at public hospitals. In order to make up the shortfall in revenue, public hospitals were once again forced to contract with debt collectors to collect outstanding fees. Instances of hardship were widespread. Public hospitals were unable to set up systems to collect outpatient fees, and Victoria and New South Wales enacted legislation to recover revenue for outpatient services to insured persons from health benefit funds.

The outcomes of the abandonment of universal coverage were so unsatisfactory that, in February 1982, the Labor Party, still recovering from three successive election defeats, resumed its commitment to a universal program under the title of the Hayden Health Plan. This policy was reaffirmed by Bob Hawke, under the title of Medicare, when he assumed the leadership in the following year. Medicare helped the Labor Party to a substantial election victory. Enabling legislation was passed in September 1983, and Medicare began operation on 1 October 1984. It differed from the original Medibank program only in matters of detail.

Despite its growing popularity, the implementation of Medicare did not mark the final acceptance of universal, publicly run health insurance in Australia. The Coalition parties offered alternative schemes at three subsequent elections, before declaring their support for it in the run-up to the 1996 election, at which they were victorious. That affirmation -- nearly 30 years after Whitlam's announcement at the Royal Prince Alfred Hospital seminar -- marked the final stage of universal health insurance becoming settled policy in Australia.

This is not, of course, the end of the story. Access is a key issue in health policy, but by no means the only one. Health policy can now focus more fruitfully on the more difficult issue of how to achieve better health outcomes and greater efficiency within the context of universal coverage.

1. Gillespie JA. The price of health: Australian governments and medical politics 1910-1960. Cambridge: Cambridge University Press, 1991.
2. Scotton RB, Macdonald CR. The making of Medibank. Sydney: School of Health Services Management, University of New South Wales, 1993.
3. Report of the Health Insurance Planning Committee to the Minister for Social Security. Canberra: AGPS, April 1973.
4. The Australian health insurance program, authorised by the Minister for Social Security, Mr Bill Hayden. Canberra: AGPS, November 1973.
5. Deeble JS. Unscrambling the omelette: public and private health care financing in Australia. In: McLachlan G, Maynard A, editors. The public/private mix in health: the myth and the reality. London: Nuffield Provincial Hospitals Trust, 1982.
6. Sax S. A strife of interests: politics and policies in Australian health service. Sydney: Allen & Unwin, 1984.

©MJA 2000
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