Our health system is unsustainable. It is demand-driven, with no means to stem the growth in forms of illness and domains of illness management. It has no capacity to contain health costs. In the next decade as the population ages, health spending is expected to increase by 4-5% of GDP.

In 2009 the National Health and Hospitals Reform Commission outlined three options for reforming the Australian health system. Two of these retained the status quo (the present structure of the health system established with Medicare in 1984), with minor adjustments in financing arrangements.

The third option was called ‘Medicare Select’. It proposed significant reform of Medicare to enable consumers to better co-ordinate their use of health services and contain health costs within a continuing framework of universal public insurance. It drew upon the Dutch experience, the most innovative in Europe, in integrating public and private insurance and combining universal coverage with consumer-driven competition to contain health spending.

The Commission knew that Medicare Select would not be adopted in 2009, but it had the foresight to include it in its report, knowing that it would one day be revisited. It’s framework for building on and expanding Medicare with competing health plans was the right one for Australia. In retrospect, it’s 2009 proposal  lacked sufficient attention to the structure of its recommended competing health plans, and it also lacked a compelling rationale for why competing health plans were necessary for a better Medicare and a healthier society.

This is a uniquely Australian governance model for health care that builds on and expands Medicare, while containing health costs and advancing integrated, person-centred care. It is oriented to living a healthy life, not simply managing illness.

Our reformed model:

1. Our health system should be overhauled so that it is oriented to supporting Australians in living a healthy life. It should support individuals and families in minimizing health risks and maximizing healthy behaviours, while continuing to offer universal coverage in the event of illness and injury. Medicare would continue as a universal public insurance scheme.

2. In this reform, individuals and families would access Medicare-funded health services (hospital, dental, domiciliary, general practitioner and community health services) through a not-for-profit association called a health mutual. A health mutual is a consumer-governed membership association, a health care intermediary, that looks after the health of its members, encourages healthy living and minimizes health risks, organizes care and meets all of the member’s health care costs through a combination of Medicare contributions, co-payments and supplementary insurance.

3. Each health mutual would be required to specify an ethos, a philosophy of healthy living. The mission of each health mutual is to compete in keeping its members healthy and well and out of hospital. Competition between them would be, in part, a contest between rival philosophies of living a good and healthy life.

Our model of Medicare Select with consumer governance would comprise the following health mutuals:

Catholic (based on the Catholic community and existing Catholic health care);
Sports and Outdoor Living (based on active lifestyles and sports participation);
New Age (based on complementary health philosophies and practices);
Temperance (based on temperance societies and faith groups with a focus on abstinence from alcohol, tobacco and drugs);
Workers and Unions (based on union memberships with a focus on health and safety at work);
Seniors (based on seniors networks and approaches to healthy ageing such as the Japanese ‘Han’ system);
Indigenous (based on indigenous communities and traditional cultural approaches to well-being);
Rural and Remote (based on health strategies tailored to rural and remote communities).

International evidence suggests that competition across various sectors is best served with between 7 and 9 robust competitors.