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May 05th 2013 print

Will Dallas Brooks

To pay for the NDIS, kill the waste

The author's research demonstrated that 56 cents of every NSW hospital dollar was spent inefficiently, with 30 cents of that sum totally squandered. If the past is any guide, taxpayers are about to be hit with another gold-plated bureaucrats' delight


In 2006, as part of my work in clinical and hospital reform, I prepared a cost benefit analysis of medical services provided by public hospitals in New South Wales. In 2005, there were some 35 million clinical occasions of service provided by the over 360 hospitals, allied health,  paramedical health networks and mental health facilities servicing the NSW population.


The total cost to the State of delivering that care was in excess of $11.6 Billion (which is the cost of delivering and maintaining hospital and associated healthcare facilities, but not GPs). The total cost of full universal healthcare delivery, nationally, was $86.879 Billion (including medicare, GPs, private servicing and pharmaceutical benefits), or about $4,200 for every man, woman and child. Medical care delivery represented about 9.1% of GDP in 2005/06, as part of my original study.

The problem is not the amount of money going into universal healthcare, it is the amount wasted.

My research, delivered to the NSW Department of Health and promptly filed as a “draft” so it can never be accessed as part of any Freedom of Information claim, showed that of every dollar spent by the state, 56 cents was inefficient expenditure.

Of that 56 cents, 30 cents in every dollar was total waste, in other words sunk costs that could not be recovered or recouped under any circumstances, arising from a combination of poor decisions, over-spent and over-time works, cancelled capital programs and corruption. The next 26 cents in every dollar was process and system inefficiencies relating to unnecessary duplication, resource multipliers, poor policy, poor systems and technology, and inefficient processes, administration, contracts and suppliers.

The remaining 44 cents in every dollar had to cover medical staff expenditure (including wages), the cost of the good, supply chain costs, service administration and pertinent associated costs.

Take, for example, a unit of blood.

In 2005/06 a typical unit of blood cost $426 dollars for each request, including the costs of collection, treatment, storage, processing, delivery ready for service, refrigeration and preparation for use. This is not an atypical cost, by the way: a California study in 2010 found that the true cost per unit of donated blood to be in the order of US$522 – $1,183. One major factor in the total cost of blood, for example, is the level of wastage and disposal, particularly during operations – sometimes over ordering blood when the clinical presentation might indicate an unlikelihood of blood being required, or, more typically, not enough clinical pre-op assessment meaning urgent peri-operative blood delivery.

But, even taking that into consideration, it means that for every $426 unit of blood, $238.56 is pure bureaucratic waste. Taken one step further, of the total expenditure in NSW in 2005/06, $6.496 billion could be re-directed into front-line care if that 56% bureaucratic waste was eliminated. Nationally, that represent $48.65224 billion that could be better used, every year, in care delivery.

To put it another way, if we were to eliminate health system inefficiency in public healthcare, we could fund a full National Disability Insurance Scheme (NDIS) four times over. Every. Single. Year.

What the Government is proposing is a brand new bureaucratic nightmare to run alongside the public health system, and I dare say its waste levels would be as high, if not higher, than the current universal health model.

We only have to cut inefficiencies by a quarter to deliver a fully funded NDIS, commencing next year. No new taxes (as proposed), no new bureaucracy, no new borrowings – a fully funded, working, integrated healthcare system.

In other words, the kind of system proposed by Kevin Rudd in 2007, which he could not deliver. Nor his successor, Julia Gillard.

To eliminate that waste you have to make some tough choices, and that would make some very strong unions in the sector very unhappy.

Personally, I’d rather save lives than keep some union hacks happy, but hey, it appears as though I’m in the minority.

Or am I?

This article first appeared at Polliter.com, where Will Dallas Brooks is the chief editor. Brooks is an independent consultant in hospital management, healthcare reform and clinical care. He worked extensively with Professor Chris O’Brien on developing the world’s first comprehensive cancer data repository, and has advised State and Federal governments on improving public healthcare systems and increasing accountability in medicine.