Australian Politics and Policy - Senior, 2019a

Health policy
Seventy years of muddling through
Charles Lindblom coined the term ‘muddling through’ to describe a policy
development process whereby policy makers build on what has gone before, even
if the resulting policy does not align with what they have designed from a blank
slate. 21 It’s analogous to the way a series of additions may be made to an old house,
in preference to pulling it down and starting from scratch.
While the Chifley government was thwarted in its attempts to develop a
universal tax-funded health system, in 1948 it managed to introduce the
Pharmaceutical Benefits Scheme (PBS), initially providing a limited number of
free life-saving and disease-preventing drugs, using the purchasing power of
government to secure reasonable prices. The Menzies (Liberal–Country Party
Coalition) government, elected in 1949, pragmatically retained and extended the
PBS, and, apart from the introduction of a co-payment in 1959, the essential
architecture of the PBS remains largely unchanged.
An important provision of the PBS is the use of cost–benefit analysis to decide
the price at which pharmaceuticals will be listed and therefore subsidised. If the
supplier cannot meet the Commonwealth’s price, the drug does not become listed.
Because the manufacturing cost of most drugs is low, most companies agree to
listing at the Commonwealth price. Pharmaceuticals are similar to computer
software, in that almost all of the cost is in development, while the per-unit cost is
very low.
This is the only case of the Commonwealth using its purchasing power to set
prices and to regulate what will and will not be paid for or subsidised. Politically
it’s easier to take on the largely foreign pharmaceutical firms rather than the local
medical lobby.
The next major initiative was by the Whitlam (Labor) government, in office
from 1972 to 1975. It introduced a universal tax-funded scheme known as
‘Medibank’ (not to be confused with the private insurance firm of the same name).
Its main elements were free access to public hospitals and a range of other services,
most notably free or heavily subsidised access to medical services. Medical
practitioners would be paid on a fee-for-service basis, and would remain in private
practice, thus avoiding the ‘no conscription’ constraint. Hospitals and their funding
remained under state control, with funding negotiated in a series of agreements
between the Commonwealth and the states.
When it was introduced to parliament Medibank met with furious opposition,
from the medical lobbies, the private health insurers and the Coalition opposition
who effectively controlled the numbers in the Senate. Medibank became law only
in 1974 following a double dissolution election and a joint sitting of parliament.
The Fraser (Coalition) government, in office from 1975 to 1983, demolished
Medibank in a series of small steps, and by 1979 health funding had essentially
21 Lindblom 1959.
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