Budget Review 2016–17 Index

Amanda Biggs

Coordinated care for people with chronic conditions

In March 2016, the Government announced the Healthier Medicare package that will allow patients with complex and chronic conditions to enrol with a Health Care Home (HCH) which will then be responsible for managing and coordinating their care.[1] This budget provides funding of $21.3 million over four years to trial this model with 65,000 patients from 1 July 2017.[2]

One in five Australians has multiple chronic conditions like heart disease, diabetes, arthritis, respiratory disease and mental illness.[3] Healthier Medicare is based on recommendations of the Primary Health Care Advisory Group (PHCAG).[4] HCHs will develop tailored care plans and coordinate all treatment needs for patients, whether provided by Medicare, state and local governments or the community sector. A risk stratification tool will be developed to identify eligible patients and new payments models tested.[5]

Trials involving 200 HCHs and 65,000 patients will test alternatives to traditional fee for service payments, such as bundled and upfront quarterly payments. Alternative payment models have the potential to encourage HCHs to be more innovative and flexible in how they deliver care, and improve health outcomes for patients.[6] Expenditure will be redirected from fee for service chronic disease management (CDM) Medicare items as these would no longer be accessed by participants in the trial. PCHAG found that CDM items could be better structured to support more tailored and flexible patient care.[7]

A public hospital funding Heads of Agreement signed in April 2016 by the Council of Australian Governments committed all jurisdictions to support initiatives to reduce hospitalisations such as coordinated care and flexible funding models for patients with complex and chronic conditions. The Agreement included a specific commitment to implement a pilot of HCH.[8]

Models similar to HCHs are used overseas. The United States adopted Patient Centered Medical Homes for children and families. These offer holistic person-centred primary care designed to improve quality by emphasising integrated, team-based care.[9] Ontario in Canada has also adopted this model.[10] Patient enrolment with a chosen primary care practice is also used extensively in New Zealand.[11] Recent reviews of this model of care reveal mixed results, but overall are generally positive.[12]

Improving coordination of care for patients with chronic conditions has been trialled previously in Australia with mixed results. The 2011–12 Budget provided $30.0 million over four years to trial coordinated diabetes care.[13] It involved conducting a randomised control trial (RCT) of 7,781 diabetes patients across 184 general practices to test care components across two intervention groups, including flexible funding payments. It ran for 18 months. An evaluation found only small improvements achieved in the intervention groups compared to the control and reported it would be unlikely it would be cost-effective to roll out that funding model more broadly.[14]

However, the evaluation noted there were lessons for the development of similar programs in the future. These should ‘incorporate flexible funding for registration with a health care home, payment for quality and funding for care facilitation, targeting resources where they can realise the greatest benefit’, eHealth and better integration of primary and secondary care to reduce hospital costs.[15]

The Healthier Medicare package has met with qualified support. The Consumers’ Health Forum (CHF) described it as ‘promising’ but warned that the funding level may be insufficient.[16] The Australian Healthcare and Hospitals Association (AHHA) agreed with the need to improve coordination of patient care, but predicted the HCH will only partly address this.[17] Academic Stephen Leeder from Sydney University noted that trials of similar programs show they have ‘the capacity to improve care and decrease the need for hospital stays’. [18] But others have pointed to challenges ahead. Economist Peter Sivey from La Trobe University cautioned that trying to reduce hospital admissions through improvements in primary care is ‘notoriously difficult’.[19] Other uncertainties include the location and oversight of the trials and the evaluation process. If private health insurers become involved in the trials, as envisioned by PCHAG, this may also prompt further debate.[20]

It is not clear if legislative amendments will be required to commence trials.

Other measures

A number of measures aimed at making substantial savings from Medicare are included in the Budget. The pause in indexation for a number of health programs will be extended, with savings of around $1.9 billion expected. Medicare Benefits Schedule (MBS) fees for services provided by GPs, specialists, allied health and other practitioners will be paused for a further two years to June 2020, with savings of $925.3 million forecast.[21] The pause on indexation of income thresholds used to determine the Medicare Levy Surcharge and the Private Health Insurance Rebate will also be extended with savings of $744.2 million over three years.[22] In addition, savings of $182.2 million will come from the Health Flexible Funds, including by extending the indexation pause for a further two years, and reducing uncommitted funds.[23] Stakeholders, including doctor and consumer groups have generally responded negatively to these measures.[24]

Activities to improve compliance were also announced in the Budget. These include using advanced data analytics to better target providers who are non-compliant with claiming rules, and improve debt recovery arrangements. Savings of $66.2 million over four years are forecast. Funding of $12.0 million is allocated for the measure in 2016–17.[25]

A number of obsolete services will be removed from the MBS in line with the recommendations of the Medicare Benefits Schedule (MBS) Review, realising savings of $5.1 million over four years.[26]

[1].          S Ley (Minister for Health), Health care homes to keep chronically-ill out of hospital, media release, 31 March 2016.

[2].          Australian Government, Budget measures: budget paper no. 2: 2016–17, 2016, p. 105.

[3].          S Ley, op. cit.

[4].          Primary Care Health Advisory Group (PCHAG), Better Outcomes for People with Chronic and Complex Health Conditions, Department of Health, Canberra, 2015.

[5].          S Ley (Minister for Health), New Medicare payment model for chronically-ill patients, media release, 31 March 2016.

[6].          PCHAG, op. cit., p. 38.

[7].          Ibid., p. 39.

[8].          Council of Australian Governments (COAG), Heads of Agreement between the Commonwealth and the States and Territories on Public Hospital Funding, 1 April 2016.

[9].          Department of Health and Human Services (US), ‘What is a medical home? Why is it important?’, Department of Health and Human Services website.

[10].       W W Rosser, et al., ‘Progress of Ontario’s Family Health Team Model: a patient-centered medical home’, Annals of Family Medicine, 9(2), 2011, pp. 165–171.

[11].       F Goodyear-Smith, et al., ‘International Learning on Increasing the Value and Effectiveness of Primary Care (I LIVE PC) New Zealand’, Journal of the American Board of Family Medicine, 25(S1), 2012, p. S39–S44.

[12].       J A Alexander, et al., ‘Implementation of patient-centered medical homes in adult primary care practices’, Medical Care Research and Review, 72(4), 2015, p. 440.

[13].       Australian Government, Budget measures: budget paper no.2: 2011–12, 2011, p. 215.

[14].       McKinsey and Company, Evaluation report of the diabetes care project, Department of Health?, 2015, p. 3.

[15].       Ibid.

[16].       J Doggett, ed, ‘Health budget 2016—the reaction’, Croakey, 4 May 2016.

[17].       Ibid.

[18].       P Sivey, S Leeder and L Russell, ‘Hospital funding deal: experts respond’, Conversation, 1 April 2016.

[19].       Ibid.

[20].       PCHAG, op. cit., p. 9.

[21].       Budget measures: budget paper no. 2: 2016–17, op. cit., p 108. The existing pause (first announced in the 2014–15 Budget) was due to expire in 2018.

[22].       Ibid., p. 113.

[23].       Ibid., p. 103.

[24].       For an overview of stakeholder responses see J Doggett, op. cit.

[25].       Ibid., p. 104.


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