3 May 2004

Do Australians want a private welfare state? Are they getting one anyway?

Gabrielle Meagher, The University of Sydney

Australian federal governments—both Labor and Liberal—have been promoting the entry of private businesses into providing human services like aged care, child care, and health care in the name of enhancing customer choice and improving service efficiency and quality. By so doing, governments have been privatising the Australian welfare state. But do Australians believe businesses will deliver better services? And how big is the gap between their beliefs about what’s best and what’s actually going on?

Australians express limited support for private sector delivery of social services.

In late 2003, the Australian Survey of Social Attitudes included this question: ‘In general who do you think is best suited to deliver the following services?’ (Gibson et al. 2004). In this paper, I focus on the responses of more than 2000 people to this question about health services, child care, and care for the elderly. (For a full list of services the survey asked about, and more information about the survey itself, see Appendix A.)

Their responses show limited and selective support for private sector delivery of social services. More Australians believe that governments are best suited to delivering child, aged, and health care than any other form of organisation, including families and relatives (see Table 1). Public support for government delivery of health care is overwhelming at more than 80 per cent. Support for government delivery of aged care is less strong—but a majority of Australians surveyed (nearly 55 per cent) express it. Support for government provision of child care is less strong again, but still exceeds support for delivery by private businesses (29.7) or families and relatives (27 per cent).

Significantly, there is broad, although not complete, consensus on these attitudes. On the question of who best to deliver health services, 78 per cent of people who identified as Liberals said governments, compared to 83 per cent of people who identified as Labor. Unsurprisingly, among those who didn’t see governments as best to deliver health, Liberal identifiers were more likely to favour private businesses (19 per cent) than were Labor identifiers (10 per cent). On the question of who best to care for the elderly, 53 per cent of people who identified as Liberals said governments were best compared to 59 per cent of people who identified as Labor. Again, Liberal identifiers were more likely to favour private businesses in aged care (14 per cent) than were Labor identifiers (10 per cent). People’s attitudes diverged most along party political lines on the question of who best to deliver child care. In this case, Liberal identifiers actually favoured private businesses over all other providers: 39 per cent of this group thought private businesses were best, with only 29 per cent favouring governments. Conversely, among Labor identifiers, 41 per cent favoured government delivery of child care; only 24 per cent said private businesses were best. Liberal and Labor identifiers were in almost complete agreement about the role of families and relatives in providing health, aged, and child care.

WHO DOES DELIVER SERVICES?

As it happens, families are the principal providers of care for children, the elderly, and people with disabilities (see ABS 2001; AIHW 2003, p. 123). And not for profit community service organisations (only some of which are charities) provide many human services. More significantly for my purposes here, private businesses are also major human service providers. Indeed private businesses dominate in several kinds of health and community service.

Private businesses dominate in several kinds of health and community service.

There are different ways to measure the contributions of government, for profit, and not for profit sectors in human services to compare what Australians say they think is best with what goes on in the real world. One way is to measure the relative proportions of government, for profit, and not for profit organisations delivering services. Because the Australian Survey of Social Attitudes asks who best to deliver services, this is probably the most obvious measure to compare with the attitudes data. (The following data exclude informal care provided by families and communities.)

Health services are usually divided into hospitals and other health services. In 1999–2000, 68 per cent of all hospital beds were in public hospitals, 19 per cent were in for profit private hospitals (up from 13 per cent in 1991–2), and 13 percent were in not for profit private hospitals (AIHW 2002a, pp. 242, 280). Given the growth rate of the 1990s and ongoing and vigorous federal government support for private provision, the proportion of hospital beds in for profit private hospitals is probably higher now. Non-hospital medical services include services provided by general practitioners, specialist medical practitioners, pathologists, and imaging services. These services are mostly provided by private practitioners on a fee-for-service basis.

Care for the elderly is usually divided into residential and non-residential care. In turn, residential aged care is usually divided into nursing homes and accommodation for the aged (in which nursing or medical care is not provided as a major service). For profit businesses dominate in the nursing home sector. In June 2000, 57 per cent of businesses operating nursing homes aimed to turn a profit (ABS 2001, p. 32). Not for profit organisations dominate other forms of residential aged care. Nevertheless, in June 2003, for profit businesses still provided 28.5 per cent of residential places for the aged (SCRGSP 2004, p. 12.5). Government and not for profit organisations deliver most non-residential care for the aged (ABS 2001, p. 50).

Child care can be divided into care for children of preschool age, and care for school aged children out of school hours. Most child care places are for preschool aged children (71 per cent). Of these places for preschool aged children, long day care places account for 88 per cent (ABS 2001, p. 20), and in June 2001, 67 per cent of all long day care centres were owned by private, for profit businesses (AIHW 2003, p. 234). Further, between 1995–6 and 1999–2000, growth in the number of for profit businesses accounted for almost all growth in the number of child care providers in Australia. During this half decade, for profit business increased their share from 46 per cent to 56 per cent of all organisations providing child care (ABS 2001, p. 38).

AND WHO PAYS?

Another way to measure the relative contributions of government, for profit, and not for profit sectors in human services is to measure the structure of funding. In health care, child care, and aged care, government subsidies usually supplement contributions from individuals and families. Indeed, governments often contribute the bulk of funding, even when services are provided by not for profit organisations or private sector providers.

In 1999–2000, for profit companies in aged and child care received more than $1.3 billion from governments.

In 2001–02, governments spent just over $15 billion on public hospitals. They spent an almost identical sum on private hospitals, non-hospital medical services, and pharmaceuticals combined, all of which are privately provided in the main. Governments fund one third of the cost of private hospital care and more than 80 per cent of non-hospital medical services, most of which are privately provided by fee-for-service professionals and for profit businesses (AIHW 2002b, Tables 13 & 14).

In 1999–2000, for profit companies in aged and child care received a total of more than $1.3 billion from governments, amounting to nearly two thirds of all their combined income (ABS 2001, pp. 33, 39, 46). Government funding accounted for 74 per cent of the income of for profit businesses operating nursing homes in 1999–2000, with the remainder coming largely from fees to residents. Not for profit operators of nursing homes actually received a smaller proportion of their income (66 per cent) from government funding than did for profit operators (ABS 2001, p. 33). For profit providers of other forms of residential care to the elderly received 36 per cent of their income from government, compared to 58 per cent for non profit providers (ABS 2001, p. 46). Non-residential care services for the elderly are also heavily subsidised by governments through programs such as Home and Community Care (HACC), but detailed data on the structure of funding to different types of business/organisation is not available. Government funding accounted for 44 per cent of the income of for profit businesses delivering child care in 1999–2000, compared to 43 per cent for non profit providers (ABS 2001, p. 39).

This data on the structures of service delivery and funding shows that certain types of services in health, aged and child care are dominated by for profit businesses in receipt of massive public subsidies. Yet as Table 1 shows, Australians’ support for service delivery by private businesses is limited. Thus, it seems Australians are getting a more privatised welfare state than they want.

WHY IS SUPPORT FOR SERVICE DELIVERY BY CHARITIES SO LOW?

Given the role of not for profit organisations in delivering services, one finding that should not pass without remark is the relatively low level of expressed support for delivery of health and child care by charities. One possibility is that survey respondents construed the term narrowly, assuming that the gifts of generous citizens fund ‘charities’ that provide services as a gift to recipients in turn. Another possibility is that many Australians are simply not aware of how complex the ‘mixed economy’ of human service delivery and funding is in Australia, and so don’t realise the extent of service delivery by not for profit organisations of various kinds (including charities in the narrow sense).

Most Australians adhere to a universalistic norm for provision of health and education.

Neither possibility undermines the survey’s findings about strong support for provision by governments and scepticism about service delivery by private businesses. People might reject the idea of service delivery by charities because they are committed to the ‘universalistic’ principle that everyone has a right to guaranteed services that only governments can provide or because they are committed to the ‘market-oriented’ principle that people should pay for services they use, and businesses should have the opportunity to provide for them.

We get clues from higher levels of support for charitable provision of aged care (10.5 per cent), care for the disabled (14 per cent), and counselling or welfare support (35.9 per cent) compared to health (1.2 per cent) and child care (2.9 per cent). Clearly, Australians express different levels of support for charitable delivery of different kinds of services. Alongside the data on government, private business, and family provision, I read this as evidence of a complex distribution of norms about which services people think should be available as a right to all, which services people think communities should provide in the form of charity to help their needy, which services people think users should buy in the market place, and which services people think family members should provide for each other.

A large majority of Australians seem to adhere to a universalistic norm for provision of health and education (which 83 per cent of respondents thought best provided by governments). A significant minority adhere to a norm of charitable provision of counselling and welfare support and (fewer) care for the disabled and the aged, although governments remain the preferred provider of all these services (see Appendix Table A.1). Australians are almost evenly divided between universalistic, market-oriented, and family-oriented norms when it comes to child care.

At any rate, despite their patchy support for charitable provision of human services, it seems unlikely that Australians are expressing profound dissatisfaction with existing not for profit providers, which include charities. One implication is clear: not for profit human service organisations need to make their presence more widely known.

SHOULD WE MIND THE GAP?

Private businesses deliver a much higher proportion of health, aged, and child care than Australians think is ideal. But perhaps the gap between opinion and reality is not a problem. Perhaps people interpreted the survey question loosely, responding with their attitudes about who should be responsible for delivering and/or paying for services. Certainly attitudes mirror the pattern of human services funding more closely than they mirror the structure of human service delivery. In the most startling example, the proportion of total spending on health services funded by government (80 per cent) equals exactly the proportion of Australians who think governments are best suited to deliver these services.

Taxpayer subsidised essential services make good business sense.

This interpretation is too glib. Australians express attitudes indicating commitment to higher levels of public provision than currently exist in several human services, and some (more targeted) support for higher public spending. For example, respondents expressed other attitudes in the survey suggesting many believe that the quality of public education and health services is declining, and they are willing to pay more tax to improve it (Wilson & Breusch 2004). And they are right to do so. There are economic and social reasons why privatisation of human services is undesirable, and why generous public provision of essential social services is both more efficient and more just than private provision. (For a catalogue of some economic and social problems of privatisation, see Quiggin (2002).)

It is not hard to see why private businesses move into human service provision—taxpayer subsidised essential services make good business sense. So much sense, in fact, that corporations are now sweeping through child care, aged care, and health industries buying up small businesses (AIHW 2002, Box 5.1; AIHW 2003, p. 235; Alberici 2004; Jackson 2003). But there are good reasons to suspect that privatisation makes bad social policy sense.

Download Appendix A in Adobe Acrobat (pdf) format, 84 kb.

REFERENCES

ABS 2001, Community Services Australia, Cat. no. 8696.0, Australian Bureau of Statistics, Canberra.

AIHW 2002a, Australia’s Health 2002, Australian Institute of Health and Welfare, Canberra. [Online], Available: http://www.aihw.gov.au/publications/aus/ah02/ [2004, Apr. 16].

AIHW 2002b, Health Expenditure Australia 2001-02, Health and Welfare Expenditure Series No. 17, Australian Institute of Health and Welfare, Canberra, 040225 Update [Online], Available: http://www.aihw.gov.au/publications/index.cfm?type=detail&id=9307 [2004, Apr. 16].

AIHW 2003, Australia’s Welfare 2003, Australian Institute of Health and Welfare, Canberra [Online], Available: http://www.aihw.gov.au/publications/aus/aw03/ [2004, Apr. 16].

Alberici, E. 2004, ‘Child care companies in the spotlight’, Transcript, The 7.30 Report, 29 March [Online], Available: http://www.abc.net.au/7.30/content/2004/s1076521.htm [2004, Apr. 16].

Gibson, R., Wilson, S., Denemark, D., Meagher, G. & Western, M. 2004, The Australian Survey of Social Attitudes 2003, Australian Social Science Data Archive, The Australian National University.

Jackson, A. 2003, ‘ABC Learning on acquisition alert’, The Sydney Morning Herald, 15 September [Online], Available: http://www.smh.com.au/articles/2003/09/14/1063478063909.html?from=storyrhs [2004, Apr. 16].

Richardson, S. & Martin, B. 2004, The care of older Australians: a picture of the residential aged care workforce, National Institute of Labour Studies, Flinders University, Adelaide. [Online], Available: http://www.ageing.health.gov.au/workforce/download/nilsrepfinal.pdf [2004, Apr. 16].

Quiggin, J. 2002, ‘Privatisation and nationalisation in the 21st century’, Growth, no. 50, pp. 66–73.

SCRGSP (Steering Committee for the Review of Government Service Provision) 2004, Report on Government Services 2004, Productivity Commission, Canberra.

Wilson, S. & Breusch, T. forthcoming 2004, ‘After the tax revolt: why Medicare matters more to middle Australia than lower taxes’, Australian Journal of Social Issues.

Dr Gabrielle Meagher is senior lecturer in Political Economy in the School of Economics and Political Science at The University of Sydney, a Principal Investigator of the Australian Survey of Social Attitudes, and Editor of The Drawing Board: An Australian Review of Public Affairs.

ISSN 1443-8607
The Drawing Board: An Australian Review of Public Affairs
© The University of Sydney