It is often assumed that health care is more efficiently delivered in the private system. At least with respect to costs, this assumption is without basis. The private hospitals offer the convenience of little or no waiting periods and the doctor of choice, but at greatly increased expense. For example, the average cost in the public sector of performing coronary angioplasty is $5500 and of a coronary bypass operation $15,200. Even on the most conservative estimates, these costs are between half and two-thirds of those in the private sector, with no appreciable difference in outcome.
In Victoria, public hospitals are predominantly funded by casemix funding. In general, public hospitals would be financially viable if they were given the full casemix payment for all the cases they treated. Unfortunately this is not the case. The State Government "caps'' total payments to an individual hospital at a level considerably lower than the demand. Hospitals are not given extra funding for work done above this level, even though stringent financial penalties are applied if waiting-list targets are exceeded or patients wait too long in emergency departments because of a lack of beds. Hospitals can ``bid'' to do extra work, but at discounted casemix payments well below the cost of the service. Only a government bureaucracy could devise such a convoluted system of funding, which is a nightmare to administer.
Furthermore, even though all public hospitals have eaten into their capital reserves and some have gone into debt in an effort to meet clinical demands, the State Government continues to impose an annual 1.5per cent "efficiency'' cut.