With health on the agenda of the COAG meeting this week, it is well past time that governments at all levels commit to a fundamental redesign of Australia’s health “system”.

More money is clearly not solving the problem. The real problem is health care design. I estimate that poor design and systemic failures cost us well over $10 billion per annum and perhaps nearer $15 billion per annum.

What then are the key design problems health care faces?

First, health care is riddled with demarcations and restrictive work practices. There are only about 300 nurse practitioners in Australia as a result of opposition by doctors. There should be thousands of them across the country. We need role renewal and the creation of new types of health workers.

A second design problem is evident in widespread quality and safety problems. Bundaberg and Royal North Shore in Sydney are only the tips of a very large iceberg. The national cost of avoidable mistakes in health care is over $5b per annum. About 10,000 Australians die each year in health care as a result of avoidable mistakes. It is not at all clear who runs hospitals. There is a major disconnect between corporate governance and clinical governance.

A third major design problem is that we have constructed a sickness model of care rather than a health model. The Australian Institute of Health and Welfare identified 14 preventable health risks. The top five were tobacco smoking, high blood pressure, high body mass, physical inactivity and high blood cholesterol. The identified 14 preventable health risks accounted for 32% of the total burden of disease and injury in 2003. Yet only 2% of health funds are spent on prevention and public health – keeping people well. In Canada it is 8.6% and in New Zealand 7.4%.

A fourth major design problem is our preoccupation with hospitals when the future focus of health delivery should be in primary care – in the home and in the community. Our public debate is all about hospitals – waiting lists and emergency departments. We have more acute hospital beds per capita than the UK, Canada and the USA.

The fifth design problem is well known – the fragmentation of health services, particularly as a result of the commonwealth/state divide. But there is also a lack of integration within the commonwealth’s own area of MBS and PBS. Like almost all major reform issues in health, this divided responsibility will require political will. How national responsibility for funding, standards and direction of health services will be reconciled with ‘subsidiarity’ – delegating priority setting and delivery as much as possible to the local level – will be a key issue to be addressed. The Mersey Hospital proposal is not the way to go.

Those rubbery figures in waiting lists show the limitations of more money as the solution. There is a lot of “gaming” in these lists with less urgent cases pushed up the list to leverage more money. Joint replacement is a major driver in these lists. A 94% increase in the 10 years to 2004 suggests serious over-servicing. Further, it is not clear that more money will attract well-paid surgeons to do more elective surgery.

Medicare has been successful in funding the demand side of health care. What have been ignored are the gross inefficiencies, mainly on the “supply side”. We need a re-design of the way we deliver health care.

*John Menadue is a former head of three Federal Government Departments, and was also a Telstra Director and Chief Executive Officer of Qantas. He has chaired reviews of health services in NSW and SA. For more information, see www.CPD.org.au – Obstacles to Health Reform by John Menadue.