Making Medicare

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A new book about the history of Medicare reminds us of the pivotal role that the union movement played in its introduction.

Medicare is 30 years old and a revered Australian institution – but a revisit of its tortuous creation, and new rumblings from the federal government about more user pays in health, suggests we shouldn’t be complacent about its survival as a universal health care system.

In Making Medicare two authors, Anne-Marie Boxall from the Deeble Institute and James Gillespie from the Menzies Centre for Health Policy, chart what they describe as the “contentious history of health reform in Australia”.

From 1969, when Gough Whitlam first took Medibank to an election as a central ALP policy, until 2003 when the Coalition “begrudgingly accepted Labor’s reforms and announced they were Medicare’s greatest friend”, a universal health system has generated intense political conflict.

From the beginning there were four significant opponents to Medibank (Medicare’s first incarnation):

  • The medical profession (represented by the AMA and the General Practitioners Society of Australia)
  • the states
  • the private insurance funds, and
  • the Liberal Party.

All were vociferous opponents when Gough Whitlam attempted to introduce his version of universal health insurance – Medibank.

From 1972 to 1984 Australia became the first developed country to introduce a universal health care system (under Whitlam), then discard it (under Fraser). In those 12 years Australia attempted, on five separate occasions, to find a way of balancing public and private insurance schemes. Finally, in 1984, the Hawke Government reintroduced a universal health care system, Medicare.

The pivotal role of unions

Medibank, the universal health care system introduced by the Whitlam Government, was eventually discarded by the Fraser Government after years of tinkering, and replaced with a system of private health insurance with public subsidies.

But from 1975, when the Whitlam Government lost office, through the years of the Fraser Government, till the ALP returned to power with Bob Hawke at the helm, the union movement championed the dream of a universal health care system.

The union movement had its own plan for universal health insurance based around a “health charter”.

Boxall and Gillespie say the support of the trade union movement proved crucial.

“The ACTU and many of its powerful members had been campaigning for the restoration of universal health insurance since 1976. They made sure it was a core part of Labor’s program in the successful 1983 election and it remained on the government’s agenda,” they said.

Medicare was not a gift – workers throughout the country gave up deserved wage increases in return for a universal health care system. And it has never been free – workers pay a levy based on ability to pay to finance the system.

“The main reason Labor in government implemented Medicare was pragmatic. Labor needed union support for wage restraint, and that support was contingent on the restoration of universal health insurance in Australia,” say Boxall and Gillespie.

Medicare was introduced as a key element of the historic “Income and Prices Accord”. Its appeal to the union movement was that it included non-wage elements – the “social wage” – that would improve the standard of living. High on the list of priorities was the provision of universal health insurance, which later became known as Medicare.

The Accord was an agreement on economic reform, negotiated between the opposition Labor Party and the ACTU in 1982. Its aim, from Labor’s view, was to secure union cooperation on wage restraint, so that productivity growth did not drive up inflation and unemployment.

“The social wage, therefore, would preserve real living standards but it was one of the mechanisms through which the government could achieve wage restraint and provide incentives for employers to create jobs.”

Despite initial public scepticism to Medicare when Labor first mooted it: “Medicare became overwhelmingly popular after it was implemented,” say Boxall and Gillespie.

Labor’s decision to make Medicare part of the social wage was vital to the success of the Income and Prices Accord.

Healthcare “game-changer”

In his introduction to Making Medicare Professor Stephen Leeder, Professor of Public Health and Community Medicine at the University of Sydney, describes the introduction of Medicare as a “thunderclap” and a “game-changer”.

“Medicare is an example of that rare thing in health care policy in Australia: a radical change,” he wrote.

Professor Leeder says Medicare needs to retain its core fundamentals into the future.

“In my view the real test of Medicare is its ability to survive as a universal health insurance system – paid for by everyone, accessible by everyone. If the changes and additions and subtractions lead to it being called a safety net, it is lost. If the central purpose can be maintained then it will continue to be a strong expression of a society that cares for all its members, sick or well, rich or poor.”


A fair and efficient system

Medicare had two fundamental pillars — a concern for equity i.e. equal access to equal care for rich and poor alike; and it was efficient by controlling health care costs. Medicare’s key characteristics, which made it a winner, were:

  • It was simple — every Australian would be covered.
  • It was affordable — everyone contributed according to his or her ability to pay.
  • It restored the principle of universality.
  • It was efficient — by shifting to a single government payer system, health insurance would not have to bear the overheads of a multiplicity of private funds, nor would vast resources be wasted on checking eligibility.