Economics of Health System

Introduction

An unhealthy lifestyle increases one’ vulnerability to many diseases- one such disease is diabetes. Department of Health (2016) identified that approximately 5% of the Australians (1.2 million) have been diagnosed with diabetes, however, 20% of the patients are still undiagnosed (AIHW, 2018).   The recommended way to overcome the disease is to improve the lifestyle (AIHW, 2018), however, there is a need for support from the health system as well. The support is not straightforward as different stakeholders in the health system have different economic interests as discussed below.

Overview of the Health System

According to WHO (2010), a health system can be described to be comprising of several organisations, institution, and people who look after improving the quality of health.  The health system improves the quality of health by developing programs which are aimed at prevention (of diseases), promotion (of healthy lifestyles), and cure and rehabilitation after suffering from a disease. WHO (2010) suggested that there are several stakeholders involved in the health system which can be divided into six blocks- service delivery, health workforce, health information systems, access to essential medicines, financing, and leadership/governance. These stakeholders despite having the same goal of improving the health quality, may have different interests due to the economics of any disease. The same is true for diabetes management in Australia as argued below.

Diabetes Management in Australia

The economic interests of the six blocks of health systems in case of diabetes are discussed below on the basis of two stages of diseases management- prevention and treatment.

Herman (2011) argued that the prevention of disease and promotion of healthy lifestyle requires that awareness schemes are conducted to reduce the incidence of the disease. Of the six blocks identified in figure 1, there are three blocks which are involved in the prevention of disease and promotion of a healthy lifestyle- First is the Governance, which develops a vision and strategy like Australian National Diabetes Strategy (2016-2020). The leadership is also responsible for providing financing (second block) to realise the vision and make the strategy successful. The third block involved is the health information system which is responsible for planning and conducting awareness campaigns in schools and communities. Thus, as far as the prevention of disease and promotion of a healthy lifestyle is concerned, the economic interests of the three blocks are aligned (Herman, 2011).

Despite the awareness campaign, there are increasing incidents of diabetes which are attributed to the fact that despite awareness people are unwilling or unable to improve their lifestyle. This results in the incidence of diabetes. At this stage, all the six blocks are involved- the government is responsible for providing the vision and strategic direction to the overall plan. The service delivery and health workforce (blocks of healthcare system) are responsible for treating patients. The problem with the treatment is that it is costly due to two aspects- First, a significant amount of research needs to be conducted on developing cures which in Australia is carried out by National Health and Medical Research Council (NHMRC). The high cost associated with research and medicine development needs to be passed on the consumer for future researches to be carried out. Second, all the healthcare facilities need to be managed as well- by providing the best equipment and maintaining a well-trained health workforce. The above discussed two aspects make the healthcare system really costly which may result in it becoming unaffordable for many of the patients, thereby reducing the access to the essentials medicines (block of healthcare system)  (Herman, 2011).

To ensure that the healthcare for diabetes is affordable and the patients have access to the essential medicines, the Australian government is using its financing capability to reduce the cost for the patients in three ways- First, under the Medicare Benefits Scheme, subsidies are provided for patient care for planning and managing terminal and chronic conditions. A General Practitioner can refer an eligible patient (a patient can get a maximum of five referrals) for treatment under the subsidised Medicare health care service. Second, under the Pharmaceutical Benefits Scheme, a patient can get medicines at a subsidised price. Third, under the National Diabetes Services Scheme (which is run through an agreement between Diabetes Australia (a Non-Profit organisation) and the Department of Health) subsidies are provided to the patients on products including urine ketone test strips, syringes and needles, blood glucose test strips, and insulin pumps.

Based on the above argument it can be seen that whilst the individuals are responsible for poor lifestyle choices, the government has to bear the consequences of the disease- it could be in the form of lost working hours or the financial support which the government has to provide both on prevention (through awareness campaign) and treatment (by offering subsidies). Department of Health (2018) estimates that over the period 2017-2018, the Australian government was expected to spend $87.9 billion on the overall healthcare, which is a significant amount. This expense is likely to increase in future due to several factors including changing dynamics between public and private stakeholders of healthcare, ageing population, and increasing cost of research and medical treatments (Macri, 2015).

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