HISTORY NOVEMBER 21, 2013
The unhappy few of Americans who still think national health insurance is a good idea might learn something from Australia’s experience with a national system—not so much about how to design a workable system, but about the political struggles that must occur before one finally emerges. Australia had the rudiments of a welfare state well before the United States, and its first comprehensive proposal for national health insurance dates from 1938, but the final battle over a program really began in 1972 when a Labor government took power.
Australia has two major political parties: Labor, which is similar to the British Labor Party, and the Liberal Party, which is similar to the British Tories, and which works in coalition with several minor parties. In 1972, Gough Whitlam’s Labor government proposed a national health care system, dubbed Medibank, to provide free public hospital care and to defray the cost of other medical services. Australians could still supplement Medibank with private insurance that would allow them to stay in private hospitals and be cared for by the physician of their choice. Medibank was roughly similar to America’s Medicare system, but applied to all ages.
Australia elects its prime ministers on a parliamentary vote, but it is a federation like the United States, and it elects state governments and a second national chamber, a senate, in which each state has an equal vote regardless of its population. Labor controlled the lower House, which is based on population, but Liberals controlled the Senate and were able to block implementation of Medibank. Finally, in August 1974, after a third standoff between the House and Senate, the two bodies were forced by Australia’s Constitution to create a joint legislature. It passed the Medibank bill. But that wasn’t the end of the controversy.
As Pamela Behan recounts in Solving the Health Care Problem, the powerful Australian Medical Association responded to Medibank by encouraging doctors to jack up their rates, creating a widening gap between what Medibank’s reimbursement and the doctors’ fees. Liberals, who controlled four of the six states, refused to cooperate with the new legislation. And while the joint body had approved spending on Medibank, it was not permitted by the Constitution to decide on its funding. So instead of coming out of an additional percentage of the income tax, funding came out of general revenue, widening deficits and creating a fiscal crisis at a time when unemployment was rising in Australia. Voters, concerned about the economy, voted out the Labor government in 1975 and installed a new Liberal government under Malcolm Fraser.
What happened next should send chills up the spine of Obamacare supporters. The Fraser government gradually undermined Medibank by amending it. It passed a tax to pay for the system, but allowed citizens who purchased private insurance not to pay the tax. It reduced payments to the public system. Finally, in April 1981, it repealed the Medibank legislation, ending the program. Two years later, however, with the economy again in recession, Labor under Bob Hawke won a resounding victory in the House and Senate. Labor also controlled four of the six state governments. One of Labor’s campaign promises was to restore the national health insurance system.
Labor then got a new system, dubbed Medicare, through the House and Senate. It was virtually the same as Medibank, but this time was backed by a levy on the income tax. Australians could still buy private insurance, but they would also have to pay the tax. And this time, the states cooperated with the federal program. The Australian Medical Association objected, but not as adamantly as before, since many doctors had abandoned fee-for-service medicine to work for hospital as salaried professionals. The program itself proved so popular that when a Liberal government took power in 1996, it did not try to undermine or repeal it. As happened in Europe, Canada and Japan, national health insurance became part of what the state did.
What, then, are the lessons that Americans and supporters of Obamacare can learn from Australia’s experience? The most obvious is that no piece is legislation is permanent, but must be sustained politically. If it is passed over the opposition of a rival party, and if that party comes into power, it can always repeal it or simply make it impossible to implement. The only way to ensure that the legislation will survive a change in the party in power is if the legislation becomes thoroughly popular. If it can’t be fully implemented—which is what happened to the original Medibank legislation—it will be vulnerable to a challenge.
From all appearances, the Obama administration seemed to believe that the mere act of getting the Affordable Care Act through Congress would ensure its survival and popularity. But now it faces the very real possibility that the Republicans, campaigning on the failure of Obamacare and flagging recovery, would win back the Senate in 2014, and be in a position to force the administration to accept changes in the Affordable Care Act that will weaken the program. Obama has already embraced modifications to the act—allowing insurance companies to bypass the exchanges and their regulations—that will hurt it. And if Republicans were to win the White House and Congress in 2016, they could simply repeal the Affordable Care Act.
The Australian program, when it was at last fully implemented after 1984, had the advantage of being relatively simple to run, like America’s Medicare program. The Affordable Care Act has proven to be a nightmare to implement and has already had consequences that the public, if not the politicians, did not foresee, such as the cancellation of existing policies and the removal of desirable hospitals and doctors that providers will accept under the exchanges. Many Republican states have undermined its universality by refusing to accept added Medicaid money.
Some leftwing critics of Obamacare have suggested that the administration should have fought to expand Medicare to all ages rather than to build the program upon the existing structure of hospitals, employer-based insurance, and private insurance. In theory, Americans would have been better off if the Obama administration had been able to win support for a system like the Australian. But the Australian system was erected atop a medical system that was far simpler than what America now enjoys, or suffers from, and could be done with a minimum of dislocation. For the Obama administration to have installed its version of Australian Medicare, it would have had to blow up and replace the existing system. That would have been impossible politically, and would have also entailed different kinds of complex challenges—for instance, the abandonment of the employer-based system. The real alternative in 2009-2010 would not have been more radical but less radical, incremental changes to the existing healthcare infrastructure.
For those of us who think America should provide access to healthcare for all its citizens, the lessons of Australia are not cheery. They suggest that it is possible that Obamacare would be dismantled in the years to come, but they don’t suggest an easy way in which it can, like the Australian system, be re-installed after the public suffers from the effects of its demise. Obamacare is a mess, but it’s not clear that the existing structure of healthcare in America invites a less messy alternative. One can only hope that the Obama administration can finally get its act together and get healthcare,gov to work properly. And do so quickly enough so that in November 2014, the political ax doesn’t fall on Democrats’ heads.