After 18 months of summits, taskforces, and work by the National Health and Hospitals Reform Commission (NHHRC),1 it is still unclear whether Australia’s health system stands on the threshold of major change. Despite Prime Minister Kevin Rudd’s bold statements during the 2007 election campaign, we do not know the real shape, scope or timetable for health reform. Why the delay?

First, the government was elected without a detailed health reform plan. Second, substantive change requires a national leadership group with the confidence and technical expertise to confront the vested professional, business and political interests that will resist change. Importantly, the general public and most clinicians still support the view that the national government should take overall responsibility and lead the reform agenda.

Inevitably, the Rudd Government has faced a choice between two contrasting paths. The first is to “talk tough, but do little”. This path characterises Australians as enjoying both excellent health and access to one of the world’s best health care systems. Consequently, new initiatives are limited in scope and largely reactive to the “crises” of the day. To date, the new government’s big actions — financial commitments to the 2009–2014 Australian Health Care Agreements, new hospital-based infrastructure, and reduction of surgical waiting lists — have continued down this conservative road.

The alternative is the “road less travelled”. This alternative characterises the current system as chronically stressed and dysfunctional, and is well summarised by the NHHRC.1,2 It recognises daily failures in clinical care and systemic neglect of Indigenous health, mental health, dental care and aged care. Most importantly, it states that our current “hospital-centric” system will not cope with the coming tsunami of chronic disease.

This alternative path demands new operating principles that prioritise equity of access, reduce out-of-pocket costs, promote consumer-responsiveness, value collaborative and out-of-hospital care, incorporate new technologies, and build systems to support clinical and system-level accountability. Although the conceptual basis for this approach was established internationally,3,4 it is rarely implemented.

If this is the season for radical reform, what should the Australian Government do in the next 6 months? Most importantly, it must decide swiftly on a preferred model for finance and governance. In February 2009, the NHHRC set out three options.2 The conservative option (Option A) is that the federal government assumes financial responsibility for all out-of-hospital care. Sadly, this would leave public hospital funding to the states alone. Even if Option A were combined with partial federal funding of state hospitals,1 we would still retain many of the worst features of our current divided system.

Instead, a bold move to a national system that reduces the service gaps is urgently required. The government could adopt the NHHRC’s Option B (regional health authorities) and Option C (national social insurance).2 A public financing system that originates in one level of government, supplemented by private health insurance, would start to open up access for all Australians to the widest range of health services. Unfortunately, in its final report, the NHHRC repackaged and watered down its three original options into two: building a “Healthy Australia Accord”; and then, possible development of “Medicare Select”.1 These are nice names but serve to obscure the real political choices and delay the implementation of change.

I believe new national financing arrangements are also the best way to support regional health providers. That is, only a nationally coordinated system can work effectively to reduce health inequities and utilise all clinicians fully. The additional goals of reducing out-of-pocket expenses and containing overall national health expenditure (currently below 10% of gross domestic product1) can be built into a national framework. As in other countries such as the Netherlands, this financing option may work best if implemented by more than one national insurer.5 Its viability may well depend on revising the current level of taxation support for private health insurance.

Any new financing options must be linked with active development of a vibrant new breed of health service providers. Although these providers must deliver high-quality, evidence-based clinical care, they also need to develop collaborative care packages for those with complex or chronic needs. Here, Australia needs to learn from overseas experience.3,4,6 Real innovation and the development of consumer-responsive care rely on the existence of genuine competition between providers. Our rigid state-based systems offer no real choice to the users or alternative options for those who require services that the states cannot provide.

A government committed to reform of the health system must move away from sole reliance on both federal and state bureaucracies. An independent implementation authority with sufficient resources and legislative power, and a timetable for delivery has a greater chance of achieving real change. Within such an authority, there is the need to embed strong clinical leadership alongside the requisite management and health system expertise.3,4 Together, these actions would start to drag our 19th century hospital-centric system into a 21st century framework that could deliver dynamic and responsive health care. These actions do not require another round of hollow consultations, a national plebiscite or another election campaign. They require political decisions.