Whitlam, Medibank and health system reform

5 November 2014
Medicare, Australia's universal health insurance scheme, might enjoy strong support today but at its origins was bitter opposition, writes Associate Professor James Gillespie.

Medibank was strongly identified with Whitlam's leadership and the new direction he took the ALP. The Medibank proposal advocated by Gough Whitlam was not popular when it was first outlined, including within the Labor Party.

Labor had favoured the introduction of a national health service, similar to the British NHS with its centralised funding and control. The Coalition parties and the medical profession preferred the existing system of publicly subsidized private health insurance - which left out about one third of the population.

The origins of Australia's health insurance scheme

As leader, Whitlam led Labor away from centralised models of socialised medicine - which he now thought were constitutionally and politically impossible. He turned to advice from outside the ALP's usual channels, drawing on models of national health insurance reform developed by two University of Melbourne PhD students, Dick Scotton and John Deeble.

Whitlam was far more interested in Medibank's stress on broadening access to the existing health system... He showed little interest in the reform of how medicine was practiced.
Associate Professor James Gillespie

Scotton later reflected on the almost accidental manner Medibank became Labor policy. He and Deeble were doctoral students interested in health insurance primarily as an intellectual challenge. At the time, neither were reformers, although their work showed a keen interest in issues of equity.

Their early publications had pointed to the high cost and complexity of Australia's private health insurance system, resulting in inefficiencies and misallocation of resources across the whole system. In an academic paper published in 1967, Scotton argued that the cost of private hospital insurance fell hardest on low income earners, pressures that increased the proportion left with no insurance cover.

Their writings would most likely have disappeared as an academic exercise, buried in dusty theses and academic journals but for Whitlam's intense interest in policy. Whitlam was looking for a new health policy as part of his general attempt to modernise and rejuvenate the ALP; he heard their ideas and made an instant decision to adopt them.

How Whitlam positioned Medibank

Whitlam's support for universal health coverage through state action, and to reject centralised ownership and control, was consistent with his broader social agenda: societies can only work freely if 'the encumbrances inherent in different life chances are registered and worked against'.

Whitlam's 'democratic socialism' relied on collective action through enlightened government to identify and ameliorate social problems, whether the poor sewerage of the outer suburbs, the planning disasters of urban and regional development or financial barriers to adequate health care.

The new policy faced intense hostility from the Left of the federal ALP, which remained wedded to an approach built on expanding salaried doctors in community health clinics.

This remained official ALP policy. Whitlam was far more interested in Medibank's stress on broadening access to the existing health system - removing financial barriers to medical services. He showed little interest in the reform of how medicine was practiced. The community health program under his government remained a poor cousin of Medibank's reforms of financial access.

The political and constitutional struggle for Medibank

The battle for Medibank was the most bitterly fought political and constitutional struggle of the Whitlam government. Repeatedly blocked by the Coalition in the Senate, the parliamentary gridlock over Medibank legislation provided a trigger for the 1974 double dissolution election.

Whitlam won the election, but not the Senate. Another rejection of Medibank led to the only joint sitting of the two houses of Parliament - finally passing the bills. This drawn-out process, and prolonged negotiations with the states to end means testing of public wards in their hospitals, meant Medibank only came into effect in July 1975.

After 1975, despite promises to preserve Medibank, Malcolm Fraser's Coalition government undermined the new scheme. Medibank was abolished in 1981. However, the Fraser attempt to build an alternative based on private health funds degenerated into chaos, with four major changes to Medibank in five years.

Large sections of the population were again denied access to affordable health care. When the Hawke government revived Medibank (under the new title of Medicare) in 1984, there was very little resistance from the medical profession. The Coalition remained intransigent in opposition, but no longer commanded the Senate. There is considerable evidence that their opposition to Whitlam's main legacy played a major part in their failure to win power until 1996.

In retrospect, Whitlam's Medibank reforms brought Australia into line with the universal access to health care standard in most European countries. It was far less radical than its opponents feared - offering little critique of how health care was delivered. Medibank (and Medicare) concentrated on questions of equity, reducing financial barriers to access to medical care. It remained a system for paying the doctor, not reforming the delivery of health care.

This article was written by Associate Professor James Gillespie, Deputy Director of the University's Menzies Centre for Health Policy.

Source: Making Medicare: the politics of Universal Health Care in Australia, by Anne-Marie Boxall and James Gillespie, UNSW Press, 2013.

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