Mechanisms that affect recovery from fetal and neonatal hypoxic-ischemic (H-I) brain injury have not been fully elucidated. The incidence of intrapartum asphyxia is approximately 2.5%, but the occurrence of adverse clinical outcome is much lower. One of the factors which may account for this relatively good outcome is the process of neurogenesis, which has been described in adult animals. We used a neonatal mouse model to assess new cells in the hippocampus after H-I injury.Neonatal mice underwent permanent unilateral carotid ligation on the seventh postnatal day followed by exposure to 8% hypoxia for 75 minutes. The presence of new cells was determined by bromodeoxyuridine (BrdU) incorporation into cells with sacrifice of the animals at intervals. Brain sections were stained for BrdU in combination with neuronal, glial, endothelial and microglial stains.We found a significant increase in BrdU-positive cells in the neonatal mouse hippocampus in the injured area compared to the non-injured area, most prominent in the dentate gyrus (DG) . Among the cells which showed differentiation, those which were stained as either microglial or endothelial cells showed a peak increase at three days after the injury in the DG, injured versus non-injured side (30.5 ± 17.8 v. 2.7 ± 2.6, p < 0.0002). As in the adult animal, neurogenesis was significantly increased in the DG with injury (15.0 ± 4.6 v. 5.2 ± 1.6 at 35 days after injury, p < 0.0002), and this increase was subsequent to the appearance of the other dividing cells. Numbers of new oligodendrocytes were significantly higher in the DG on the non-injured side (7.0 ± 24.2 v. 0.1 ± 0.3, p < 0.0002), suggesting that oligodendrocyte synthesis was reduced in the injured hippocampus.These findings demonstrate that the neonatal animal responds to brain injury with neurogenesis, much like the adult animal. In addition, H-I insult leads to more neurogenesis than hypoxia alone. This process may play a role in the recovery of the neonatal animal from H-I insult, and if so, enhancement of the process may improve recovery. The incidence of intrapartum asphyxia was recently determined to be 2.5% in a large population of singleton pregnancies . Even soNew neuronal growth has been demonstrated in several studies of adult H-I models, including in humans -10, but Figure The DG on the hypoxic-ischemic side of the brain exhibited significantly higher numbers of BrdU-positive cells at P10, P17, and P42 than either CA1 or CA3. BrdU/RCA-positive cells were significantly higher at P10 in the DG. The morphology and location of the BrdU/RCA-positive cells suggested that they were endothelial or microglial cells. BrdU/NeuN-positive cells were higher at P17 and P42 in the DG , followed rapidly by the appearance of BrdU/RCA-positive cells, again mainly in the DG, and then by BrdU/NeuN-positive cells (putative neurons) developing only in the DG (at 42 days of age). There were minimal numbers of BrdU/GFAP-positive cells observed at all points.Ischemia has been shown to increase neurogenesis in several adult animal models of brain ischemia. Following global cerebral ischemia in adult gerbils, neurogenesis has been shown to increase in the hippocampal SGZ, while newly born neurons were demonstrated in the CA1 pyramidal cell layer . In anotThe data strongly suggested that the development of oligodendrocytes (BrdU/CNPase-positive cells) was impaired in the DG on the hypoxic-ischemic side of the brain, with significantly fewer of these cells observed in the hypoxic-ischemic side as compared to the hypoxia alone side at 10 days. This finding is in contradiction to findings reported by Zaidi et al , who demWhite matter damage in neonates is thought to be in part due to vulnerability of the immature oligodendrocyte to H-I damage . In seveWe found a significant, early increase in BrdU-positive cells expressing RCA, an endothelial cell marker and microglial marker, on the side of the brain affected by hypoxic-ischemic injury. The mechanisms of angiogenesis in the brain after H-I injury are not well understood, and there is also little known about angiogenesis in neonatal animal models. Vascular endothelial growth factor (VEGF) is endothelial cell specific and has been implicated in hypoxia-mediated angiogenesis . VEGF haThe present study did not demonstrate an increase in BrdU-positive cells co-labeling for an astrocyte marker, GFAP, after H-I injury. Astrocytes have been demonstrated to express apoptotic enzymes within hours after H-I injury in neonatal rats . In neonAs evidenced by the variability reported in the astrocytic response to H-I brain injury, the response of this cell in this environment needs to be better characterized. Because astrocytes help to maintain the extracellular milieu needed for neuronal formation and function, it is possible that their early loss after H-I injury may contribute to subsequent neuronal degeneration. Future studies in our neonatal mouse model could be geared towards better understanding the early response of astrocytes. Postponing evaluation until three days post-injury in this model likely resulted in underestimation of the astrocytes' role in this injury repair process. Chronic hypoxia has been demonstrated to induce astrocytes into more immature phenotypes, which do not express normal levels of GFAP . The abiAlthough the BrdU-positive cells in our study were co-labeled with stains identifying four separate types of cells, there were many BrdU-positive cells that were not identified by these four stains. The co-labeling studies we performed accounted for only about 20% of all the BrdU-positive cells. The BrdU labeling protocol we used consisted of BrdU injections over the course of the experiment, rather than a one time injection at the time of H-I injury, which resulted in the staining of more cells than would be found following a single injection. In this manner, we were able to evaluate how each cell type varied its number and location at different intervals after the injury. This provided information about the cellular response to hypoxic-ischemic brain injury in both the acute and long-term settings. The role and identity of the non-co-labeled cells remains unclear. It is probable that these were immature cell types, not yet expressing the markers for which we evaluated.The validity of cells staining for BrdU representing new or dividing cells versus apoptotic or necrotic cells is also an issue to be considered. As a result, TUNEL staining was performed on several hippocampal sections. At P10, three days after H-I injury, TUNEL staining does reveal apoptotic and necrotic nuclei. However, by P42, this finding is virtually non-existent, suggesting that any BrdU-positive cells are present due to cell proliferation or growth. . The pups were then placed with the dams for two hours prior to placement in an 8% oxygen chamber partially immersed in a water bath at 37° for 75 minutes. This procedure was described previously in the rat by Levine  and Riceet al , and thel [et al . Within Paraffin was removed from slides using xylene, followed by rehydration in an alcohol dilution series. Slides were soaked in 0.1% Triton-X 100 in PBS for ten minutes to increase permeability of fixed tissue, followed by rinsing in 1X PBS. Antigen retrieval was performed using a microwave method. Slides were incubated for twenty minutes after slow boiling for ten minutes and then rinsed in PBS and blocked using 2% normal calf serum for 20 minutes.Sheep anti-BrdU antibody (Biodesign #M20105S), diluted 1:200 in PBS, was selected for the visualization of new cells. Co-labeling runs used mouse anti-NeuN (Chemicon #MAB377) 1:2000 for the visualization of neurons, rabbit anti-GFAP (DAKO # Z0334), diluted 1:300 in PBS for the visualization of astrocytes, biotinylated RCA (Vector #B-1085) diluted 1:300, for the visualization of endothelial cells and microglia cells, and CNPase (Sigma #C-5922), diluted 1:200, for the visualization of oligodendrocytes. All primary antibodies except NeuN were allowed to incubate at room temperature for one hour.Elite ABC Kit #PK-6102), diluted 1:200 in 1.5% normal horse serum, was applied to each section and incubated for thirty minutes at room temperature. Slides were washed in a PBS series before applying Vector Elite ABC reagent and incubation for thirty minutes at room temperature. Sections were washed again in PBS and TSA amplification reagent (NEN #SAT700) with biotinylated tyramide 1:200 in amplification buffer was applied. Sections were incubated for eight minutes at room temperature.Primary NeuN antibody was allowed to incubate for thirty minutes at room temperature, and washed three times in a 1X PBS solution. Biotinylated anti-mouse antibody (Vector Preliminary staining demonstrated that only NeuN antibody required amplification. All other antibodies were used in an indirect staining method, with a secondary, fluorescent antibody. Cy3 anti-Sheep (Jackson # 713-165-147), diluted 1:400, was used to visualize BrdU in all cases. FITC anti-rabbit (Jackson # 711-095-152), diluted 1:100, was used to visualize GFAP. Strepavidin FITC (Jackson #016-010-084), diluted 1:100, was used to visualize biotinylated RCA and NeuN. FITC anti-mouse (Jackson #715-095-151), diluted 1:100, was used to visualize CNPase.To reduce background, slides were rinsed in 4 changes of PBS for 5 minutes each. Secondary antibodies were applied and incubated for 1 hour. Slides were rinsed in PBS, and immersed in Hoechst Stain for 8 minutes. Another rinse series in PBS was applied before coverslipping, using Vectashield Mounting medium. (Vector #H-1000)Cells were counted in 4–6 animals at each time interval. For each animal, the cells were counted from the injury area in the anterior hippocampus   in CA1, To confirm dual labeling, confocal imaging was performed in selected cells with a Zeiss 510 laser scanning confocal microscope with the use of Zeiss software. The objective used was Zeiss63x C-Apochromat 1.2 NA. To excite the FITC fluorochrome (green), a 488-nm laser line generated by an argon laser was used, and for the Cy3 fluorochrome (red), a 543-nm laser line from a HeNe laser was used. Filter sets used were a bandpass 500- to 600- filter ("green" channel) and a long-pass 585- to 650-nm filter ("red" channel). We identified cells that were labeled for BrdU and the neuronal marker NeuN. These cells were then examined by confocal microscopy, and 1-μm step Z series were obtained. , according to manufacturer recommendations. Therefore, after rehydration, the tissue was treated with Proteinase K (20 μg/mL) and incubated for 15 minutes. Endogenous peroxidases were quenched with hydrogen peroxide. Sections were then treated with equilibration buffer and TdT enzyme treatment. Next, the sections were stained with anti-dioxigenin peroxidase conjugate for 30 minutes, and the slides were developed with stable DAB.Nested, repeated measures analysis of variance was used to examine differences in number of cells between times of sacrifice (10, 17, or 42 days), side of brain , region of the hippocampus (CA1, CA3, DG) and antibody type (CNPase, GFAP, NeuN, and RCA). A second analysis was performed using only BrdU-positive cells. Post hoc analyses were performed using the adjusted least square means and applying a Bonferroni correction to the overall alpha level. Statistical significance was assessed using an alpha level of 0.05. All analyses were performed using SAS 8.2.Ricinus communis agglutinin I –s RCA, neuronal nuclear marker – NeuNhypoxic-ischemic – H-I, bromodeoxyuridine – BrdU, subventricular zone – SVZ, subgranular zone – SGZ, dentate gyrus – DG, glial fibrillary acidic protein – GFAP, 2'3'-cyclic nucleotide 3'-phosphodiesterase -CNPase,


Real-time reverse transcription PCR (RT-PCR) has greatly improved the ease and sensitivity of quantitative gene expression studies. However, accurate measurement of gene expression with this method relies on the choice of a valid reference for data normalization. Studies rarely verify that gene expression levels for reference genes are adequately consistent among the samples used, nor compare alternative genes to assess which are most reliable for the experimental conditions analyzed.Populus) housekeeping genes, we demonstrate a simple method for determining the degree of stability of gene expression over a set of experimental conditions. Based on a traditional method for analyzing the stability of varieties in plant breeding, it defines measures of gene expression stability from analysis of variance (ANOVA) and linear regression. We found that the potential internal control genes differed widely in their expression stability over the different tissues, developmental stages and environmental conditions studied.Using real-time RT-PCR to study the expression of 10 poplar (genus Our results support that quantitative comparisons of candidate reference genes are an important part of real-time RT-PCR studies that seek to precisely evaluate variation in gene expression. The method we demonstrated facilitates statistical and graphical evaluation of gene expression stability. Selection of the best reference gene for a given set of experimental conditions should enable detection of biologically significant changes in gene expression that are too small to be revealed by less precise methods, or when highly variable reference genes are unknowingly used in real-time RT-PCR experiments. For many years the vast majority of gene expression studies have employed non-quantitative or semi-quantitative RNA gel blots and RT-PCR analysis. Real-time PCR technology has removed many of the difficulties associated with quantitative gene expression studies , and reaReal-time qRT-PCR offers a robust means for precisely quantifying changes in gene expression over a wide dynamic range. It is also applicable to experiments where RNA amounts are limiting, such as for micro-dissected tissues. However, selection of an appropriate normalization method is crucial for reliable quantitative gene expression results ,6. The pNormalization to total RNA content poses a number of problems. It is difficult to quantify small amounts of RNA, and variation in RT and PCR reaction efficiencies are not accounted for by this method. Similarly, normalization to an external RNA standard is problematic due to RNA instability. The most commonly used method is relative quantitation, whereby gene expression level is normalized to that of an internal reference gene. While this avoids the problems and limitations of absolute quantitation, selection of a proper internal control–gene expressed at a nearly constant level in all tissue samples being investigated–is required. Failure to use an appropriate control gene may result in biased gene expression profiles, as well as low precision. The consequences may be that only gross changes in expression level are declared statistically significant, or that patterns of expression are erroneously characterized.18S rRNA is frequently used as an internal control, it is far from ideal. It requires the use of total RNA and random primers for the RT reaction, and is expressed at very high levels; some means for attenuating 18S expression might be needed when weakly expressed genes are studied. In addition, there can be imbalances in rRNA and mRNA fractions between different samples, and 18S is not always expressed at a constant level in all conditions [18S expression levels appear to be affected to a lesser extent by partial RNA degradation than are mRNA expression levels [Until recently, internal controls (often referred to as housekeeping or maintenance genes), were selected based on stability of expression in qualitative studies , via low-sensitivity assays such as densitometry of hybridized blots, or via semi-quantitative RT-PCR. None of these will be adequate for identifying reliable internal controls for real-time qRT-PCR. For example, expression profiling via real-time qRT-PCR of 10 commonly used human internal control genes revealed different degrees and patterns of expression among 13 tissue types, and no single gene was a suitable universal control for all tissue types . AlthougStudies in mammalian and microbial systems, where real-time qRT-PCR has been most extensively applied to date, have begun to include evaluations of various housekeeping genes for normalization -11. VandPopulus trichocarpa × P. deltoides, cottonwood hybrid) tissues collected at different developmental stages, and at different times of the year. The goal of our studies was to detect changes associated with seasonal development and tree aging for several regulatory genes. We therefore undertook a study to compare the stability of several potential control genes. We found that the genes tested exhibited very different degrees of variation in expression among tissue samples, and that a statistical and graphical method helped us to select the genes best suited for the developmental studies we were conducting. This approach, which is very similar to a classical method used by plant breeders to assess the relative stability in yield of different varieties [In this study, we used real-time qRT-PCR to examine the expression of 10 housekeeping genes in a diversity of poplar , translational initiation factor, elongation factor, and rRNA. Searches of the literature revealed that members of all classes have been used as internal controls for studies of plant gene expression using RNA gel blots or RT-PCR assays. Poplar genes belonging to these gene families were identified via searches of the EST database Table . The expT). CT is the cycle at which a significant increase in amount of PCR product (measured by increase in fluorescence) occurs, generally the middle of the exponential phase of amplification.Within a single experiment, aliquots of the same cDNA synthesis reaction were used for real-time PCR amplification of each of the 10 genes and all gene primer and cDNA combinations were amplified in triplicate in a single PCR run. The entire experiment was then repeated a second time and results combined for statistical analysis. Quantitation via real-time PCR is based on cycle threshold  for each gene are given in Table 18S as an internal control for expression studies using these and other tissue samples and had noticed that 18S CT values sometimes varied considerably (data not shown). This may have been largely due to the high abundance of 18S transcripts. Use of 18S as an internal control for studies of genes expressed at relatively low levels required additional dilution of the cDNA templates for 18S amplification relative to the gene being studied. In the present study, the amount of cDNA was the same for all PCR reactions, but 18S primer concentrations were 50 nM, while all other gene primer concentrations were 600 nM. As expected, 18S was the most abundant (lowest CT) housekeeping transcript; TUA was the least abundant.Mean CT values to examine variation among tissues and RT-PCR experiments. Examination of the distribution of the residual values from ANOVA indicated that assumptions concerning homogeneity of variance and normality of data were adequately met (data not shown). The ANOVA F-test of differences among tissues indicated that five of the genes showed significant variation in expression among the tissue samples. The degree of residual variation, as reflected in the mean square error (MSE), residuals, or coefficient of variation (CV), varied widely. Four genes had CVs below 5%, and two had CVs at or above 25% , whereas TUA is expressed at a much lower level (mean CT = 28.9)  Table . For theol genes . A potenOur primers were designed based on a limited EST set that likely did not include all family members, and ESTs vary in sequence quality. Thus, primers could have amplified more than one family member or primer mismatches due to EST sequence errors could have lowered PCR efficiency. Although gel and real-time PCR dissociation curve analyses did not indicate that multiple genes were amplified with our primer sets, these analyses might not detect multiple amplicons from different family members that are the same size and have the same PCR efficiency. As discussed above this is not necessarily a detriment–amplification of multiple family members might result in a more stable internal control than single gene amplification. In addition, the upcoming release of a large poplar unigene set and annotated genome sequence  will impUsing ANOVA and linear regression analysis, we demonstrated that levels of expression stability among a number of potential control genes can vary widely, and that it is not difficult, costly or labor-intensive to test a number of genes. Moreover, such validation tests might have the additional benefit of revealing technical problems, such as excessive variability in RT and PCR efficiency due to RNA quality or inconsistent pipetting.For some experiments, choice of an internal control is straightforward. For example, a number of housekeeping genes should be satisfactory controls for comparisons of transgene expression level in the same tissue type from different transgenic lines grown under identical conditions. However, this is not the case for studies that compare gene expression among different tissue or cell types, at different developmental stages, or under different environmental conditions, as were represented in our study of trees in field environments over a period of seven months. For such studies, internal controls should be carefully tested and validated. Statistical confirmation of internal controls for qRT-PCR should enable previously indiscernible small changes in expression level to be reliability detected.P. trichocarpa × P. deltoidies) over a seven-month period in 2001  with modifications. Tissues (0.2 g) were ground to a fine powder with mortar and pestle in liquid N2. The powder was added to a tube containing 1 ml of RNeasy RLT buffer and 0.01 g soluble polyvinylpyrrolidone , and homogenized using a polytron for approximately 30 sec. Four volumes of 5 M Potassium acetate, pH 6.5 was added to the homogenate, the mixture was incubated on ice for 15 min, and the precipitate removed by a 15 min centrifugation (12,000 rpm) at 4°C. Supernatant was transferred to two 1.5 ml microcentrifuge tubes and 0.5 volume of 100% EtOH was added. Samples were transferred to RNeasy mini columns and the remaining steps were as directed by the manufacturer's instructions for plant RNA isolation (steps 6–11). RNA was quantified using spectrophotometric OD260 measurements and quality was assesed by OD260/ OD 280 ratios and by electrophoresis on 1% formaldehyde agarose gels followed by ethidium bromide staining. RNAs were stored at -80°C.Tissues were collected from five or six year-old ramets  of a single female poplar hybrid clone (To identify poplar homologs of genes commonly used as controls for plant gene expression studies, we queried poplar EST databases with Arabidopsis protein sequences using TBLASTN . SelecteContaminating DNA was removed from RNA samples using the DNA-Free kit (Ambion, Austin, TX, USA) according to the manufacturer's protocol, and two-step real-time RT-PCR performed. cDNA was synthesized from 5 μg of RNA using the SuperScript first-strand synthesis system for RT-PCR (Invitrogen) with random hexamer primers according to the manufacturer's instructions, except that the initial 65°C denaturation step was omitted. The cDNAs were diluted 1:5 with nuclease-free water. Aliquots of the same cDNA sample were used with all primer sets for real-time PCR, and amplification reactions with all primer sets were performed in the same PCR run. Reactions were done in a 25 μl volume containing 600 nM of each primer, 6.5 μl of cDNA sample (≈320 ng of input RNA) and 1X SYBR Green PCR master mix (Applied Biosystems). For 18S amplification, primer concentration was 50 nm. Real-time PCR was performed on the ABI Prism 7700 Sequence Detection System (Applied Biosystems) in a 96-well reaction plate using the parameters recommended by the manufacturer (2 min. at 50°C, 10 min. at 95°C and 40 cycles of 95°C for 15 sec and 60°C for 1 min.). Each PCR reaction was performed in triplicate and no-template controls were included. Specificity of the amplifications was verified at the end of the PCR run using ABI Prism Dissociation Curve Analysis Software. The entire experiment, including both the RT and real-time PCR steps, was repeated, giving a total of two experimental replications.T values) from the ABI PRISM 7700 Sequence Detection System were analyzed in Microsoft Excel. Single factor ANOVA and regression analysis using the least squares method were performed using the Excel Analysis ToolPak. Assumptions concerning homogeneity of variance and normality were evaluated from inspection of residuals  from the ANOVA  Generate data from multiple analyses of gene expression via quantitative RT PCR that can be assumed to be statistically independent (or nearly so), including from multiple independent samples that bracket the experimental conditions of interest.2) Conduct ANOVA to examine the extent of variation among samples, and  test their significance using appropriate F-ratios. Examine plot of residuals vs. mean expression level, or use a statistical test, to check normality of data.3) Genes showing high variance among tissues in ANOVA, especially if accompanied by large mean square errors (or coefficients of variation), are to be avoided as controls.4) Calculate mean expression level over all genes studied for each sample type as an index of both experimental and biological conditions that promote high levels of measured expression. Use of a large number of genes and tissue samples (e.g., at least five, and preferably many more) are desirable where estimates of stability are to be compared between studies.5) Regress mean expression level for each gene in each sample type over the mean for the sample type. The estimated slope and mean square residual (deviation from regression prediction) provide estimates of the degree to which the gene is sensitive to general expression-promoting conditions (slope) and whose expression continues to be difficult to predict .6) Assuming that both constancy over sample types (low slope) and high predictability (low coefficient of variation) are desirable, a stability index can be created as their product , and the gene with the lowest value chosen.7) Alternatively, visually inspect regression and residual plots to select genes that would be most suitable as controls for specific sets of experimental conditions.AMB developed the molecular methods, participated in design of the study, and drafted the manuscript. IAY designed primers, carried out the real time RT-PCR experiments, performed the statistical analysis and drafted the manuscript. SHS conceived the analysis, and participated in its design. All authors read, helped to edit, and approved the final manuscript.


This paper is an edited version of an invited paper submitted to the Australian Health Care Summit on 17–19 August 2003. It comments upon the policies which have dominated recent debate and contrasts their importance with the importance of five issues which have received relatively little attention.Policy is usually a response to identified problems and the paper examines the nature and size of the problems which heave led to recent policy initiatives. These are contrasted with the magnitude and potential cost effectiveness policies to address the problems in five areas of comparative neglect.It is argued that recent and proposed changes to the financing and delivery of health services in Australia have focused upon issues of relatively minor significance while failing to address adequately major inequities and system deficiencies.There is a need for an independent review of the health system with the terms of reference focusing attention upon large system-wide failures. The theme of this paper is that recent and proposed changes to the financing and delivery of health services in Australia have focused upon issues of relatively minor significance while failing to address adequately major inequities and system deficiencies. An intriguing question – not discussed in the paper – is how such drastic failures could continue year after year with little comment and no decisive policy commensurate with the magnitude of the problems. The political-sociological answer to this question is undoubtedly complex and contentious. The failure may (or may not) be attributed to understandable, even unavoidable obstacles arising from Australia's social history. Nevertheless it is important to be aware that these failures exist.The current state of our health services could justifiably be described as a 'silent crisis'; service delivery is highly inequitable and inefficient; patients are dying unnecessarily and avoidable medical errors are imposing huge financial and human costs on the community. While this occurs, health policy at the political level has focussed upon cost shifting between the States and Commonwealth, between public and private sectors and between the well off and the poorer members of society. Reforms addressing the larger issue have progressed at glacial speed, relative to what is achievable, or they have stalled altogether.relatively inconsequential (and possibly negative) impact of these policies, five major problems are outlined in Section 4, each of which has received insufficient or no attention.In Section 2 there is a brief overview of the economists' analytical framework in order to introduce two preliminary issues, viz, the role of social values in health system reform and the constraints created by the limited availability of resources. Two commonly made but wrong inferences from this latter constraint are discussed. Section 3 is concerned with recent policy and, in particular, the changes to private health insurance (PHI) which have been introduced since July 1997. In contrast with the Policy implications and options for future policy are discussed and highlighted throughout the paper. In the final section I argue that the optimal health system – entirely public, largely private or one of the myriad combinations between these polar options – is the system which is most likely to address systemic failures. The most important changes to achieve the optimal system may have less to do with the public-private mix of services, or even funding, than with the extent to which these failures are addressed within any of the conceivable health systems of the future. This, in turn, may depend upon the willingness to create appropriate economic and other incentives.The discipline of economics provides a framework for the analysis of options which is based upon a comparison of costs and benefits. If social welfare is to be maximised then the logic of the framework must be adopted explicitly or implicitly. The framework focuses attention upon the benefits which might be obtained when resources are used in a particular way, and the benefits which might have been obtained if they had been used somewhere else – the (opportunity) cost of using those resources in the chosen way. Social wellbeing is maximised when the benefits exceed the (opportunity) costs in every setting and on every margin where choice is possible.While this statement is tautologically true, the focus upon choice highlights two important facts. First, choices generally do exist; the economy is flexible and choices are driven by individual and social preferences. Technical inevitabilities are rarely encountered. Second, and more fundamentally, it is necessary to define 'benefits'. In principle, the abstract framework is consistent with an almost unlimited number of value systems. For example, in the context of an intensive care department with limited capacity, benefits and costs might be measured by lives saved and lives lost. In this simple example the cost benefit formula would translate into a policy of providing ICU beds to those most likely to live.Social objectives in the health sector are clearly more complex than in most other settings and the nexus between objectives, policies and the optimal health system is more problematical. Nevertheless, an important conclusion from this framework (which needs constant repetition) is that there is not a single 'best' health system; rather, there are various options which are more or less consistent with different social goals.This conclusion is illustrated in Table Conclusion 1:The form of the optimal health scheme depends upon social objectives and disagreement about these translates into differences with respect to the funding and delivery of health services.While the two objectives in Table In contrast, the value system underpinning the public model is less clearly articulated (at least in Anglo Saxon countries). The financing and provision of services to the entire population is often characterised as 'middle (and upper) class welfare' and contrasted with the less intrusive 'safety net welfare' which is all that is required to help those who cannot help themselves. This interpretation of egalitarianism does not, however, correctly represent the values which underpin the public health insurance system. These are nicely described in a report of a commission of enquiry into Canadian Medicare as follows:'Canadian Medicare is far more than just an administrative mechanism for paying medical bills. It is widely regarded as an important symbol of community, a concrete representation of mutual support and concern... it expresses the fundamental equality of Canadian citizens in the face of death and disease... as the Premier of Ottawa pointed out... "There is no social program that we have that more defines Canadianism"' .The social value or world view embodied in this quotation does not correspond with the simple notion of assistance for the indigent. Rather it corresponds with a desire to 'remove health and health care from the economic reward system' in the same way as all citizens are, in principle, given equal protection by the law. A close analogy is the desire to have public parks which may be accessed by all members of the community without payment. The objective is not a redistribution of income or the provision of a safety net. Rather, with this view, access to public parks is one of the consequences of belonging to the community; it is a shared benefit and, as such, engenders a feeling of sharing, participation and belonging. The concept is closely linked to the notion of 'social capital' which 'accumulates' with an increase in communal sharing and participation. Pay parks are possible, but a fully informed community might reject this option. Its citizens may wish to live in a community where the Arts flourish, where its sportsmen and women are a source of national pride, where parks are free for all citizens, where an acceptable standard of living is guaranteed after retirement and where all citizens have access to the same range of medical services. In European countries the term 'solidarity' is used to describe this value system. Unfortunately, in English, there is no commonly used and understood word for the concept. ('Communitarianism' is the closest translation.) The consequence of this is a degree of confusion in the expression of social values as both sides of the debate attempt to appropriate the word 'equity' to support their world view. It is clearly desirable that the debate should not be derailed by linguistic ambiguities.Conclusion 2:Health policy should be informed by a careful evaluation of the social values held by different groups of the community with respect to different elements of the health system.While it is ultimately the responsibility of the government to decide which of these values should be embodied in policy, it is desirable for the government's decision to be informed by evidence concerning the community's values and the strength of preferences for different values systems by different groups in the community. In his influential book 'The Power of Public Ideas' Robert Reich emphasises the importance of 'discovery', or the process of getting the public to articulate these values . To dateConclusion 3:The choice between public and private funding of health services depends upon social values and, in particular, the strength of liberal-libertarian versus solidarity-communitarian values as they apply to the health sector.Returning to the first defining characteristic of the economic framework, the emphasis upon choice conflicts with two commonly held technocratic beliefs about the inevitability of particular 'problems'. First, the common perception that the country cannot, or shortly will not be able to afford health services is unambiguously false, at least in the foreseeable future. In the USA, per capita expenditures are about double the Australian level and the US Health Care Financing Agency (HCFA) has projected a doubling of these expenditures relative to GDP by 2030. This is technically possible. The relevant question is whether or not we obtain commensurate benefits from these expenditures and if, as a society, we chose these benefits in preference to the benefits foregone. Taking an extreme example, if Australians could spend 25 percent of GDP upon health services this option would probably be embraced enthusiastically if it resulted in an illness free life expectancy of 120. Optimal expenditures are entirely a function of the benefits we obtain and are not driven by technological imperatives.Conclusion 4:There is no immediate limit to the optimal level of health expenditures. It is technically possible to increase present expenditures very significantly. The optimal level depends upon the costs and benefits of the various health services. Increased health expenditures should be enthusiastically embraced if they improve health and health related objectives sufficiently. Technocratic arguments asserting the economic impossibility of increased health spending or increased public funding are unambiguously wrong. At best they are based upon unstated political/ideological assumptions and not economic arguments.A similar argument applies to the second non-problem – the impossibility of funding health services through public taxation. Arguments of the form 'the Government can't afford to pay' are also unambiguously false. The country which can afford to finance health expenditure from private health insurance can also afford to pay an equivalent amount through taxation and some have argued that PHI is, itself, a form of privatised tax. The government share of the health bill is smaller in Australia than in most developed countries. Likewise, taxation is relatively low. This implies that Australia could significantly raise its level of public funding without exceeding the tax burden which is presently experienced in most comparable countries. More fundamentally, however, the form of financing for health services is flexible and is again a matter of social choice. It is likely that this choice will be influenced by the relative costs and benefits arising from the choice, but in the health sector the known costs and benefits associated with public and private health care are not compelling. Privately funded health care is often a little more expensive, but countries with a strong preference for liberal-libertarian values might sensibly opt for a relatively larger private scheme even if it is more expensive. The principle of paying more for what is wanted should not be controversial!Conclusion 5:The balance between public and private sources of revenue for a health service should be determined premanually by the social philosophy of the country. There are no compelling technical or economic constraints on the freedom of sound choice.Public debate has recently focused upon three 'problems', namely the high and rising cost of pharmaceuticals, the declining rate of bulk billing by General Practitioners  and the declining number of people purchasing private health insurance. The comments below do not purport to be an exhaustive analysis of these subjects but are included to contrast the subject matter of the policy debate with the more substantive problems which will be discussed in the following section. Pharmaceuticals and PHI are discussed more fully in Richardson and Segal .Pharmaceuticals are included in the Pharmaceutical Benefits Scheme (PBS) after a detailed review of their effectiveness and cost effectiveness . This pThese measures have not contained pharmaceutical costs. In view of rising drug prices in other countries it is likely that this is primarily or entirely attributable to the high cost of new generation drugs and is not attributable to policy. Nevertheless, expenditures have risen and in recent years copayments have been progressively increased in order to reduce government expenditures through the PBS. However it is not clear that the use of copayments, and particularly in a single sector, will have an overall beneficial effect. First, as demonstrated by the Rand Experiment copayments reduce demand somewhat (elasticities are low but not insignificant) . There iSecondly, relatively larger copayments in one sub-sector violates a fundamental principle for achieving allocative efficiency; viz, a 'level  playing field' between alternative products/interventions. Violation of this condition increases the likelihood that less cost effective services may be used because of the distorted price signals. Allocative efficiency depends upon relative prices rather than the existence of copayments per se. More specifically, high pharmaceutical prices at the point of service will encourage the use of potentially more expensive interventions including hospital services if a copayment results in the deterioration of a patient's health.Thirdly, the effects of copayments on national health expenditures will be relatively small. Wealthy individuals will simply pay the copayment and health care card holders will be largely shielded from them. The most important effect of the copayment is that it will shift costs from the taxpayer to the patient; that is, its major effect will be upon the distribution of income with the healthy-wealthy taxpayer gaining at the expense of the less healthy-less wealthy.In 1960, pharmaceutical costs represented an estimated 22.3 percent of health expenditure. By 2002 they were 13.5 percent of the total. The comparison indicates that the composition of expenditures may vary significantly through time and, taken out of context, focus upon a single sub-sector may be misleading. Cost control requires a full system perspective and there is no optimal level of pharmaceutical expenditures which is independent of the cost of alternative services. The problem is, in part, attributable to the program structure of delivery and financing which treats pharmaceuticals as an independent program as distinct from an input into an overall treatment regime.Conclusion 6:Reliance on copayments for the control of pharmaceutical expenditures is probably an inappropriate policy as it violates an important principle for achieving allocative efficiency. A more global approach to health policy analysis and reform is needed.Since the introduction of Medicare the percentage of GP attendances bulk billed rose from 52.5 percent in 1984/85 to a maximum of 80.6 percent in 1996/97, then fell to a low of 66.5 percent in December 2004. The measures discussed below appear to have arrested this trend and by March 2004 bulk billing had risen to 68.7 percent of GP attendances [The chief problem the reforms were designed to overcome was the possibility that the falling level of bulk billing may have jeopardised access to health services by pensioner/health care card holders and other low income households. Importantly, data did not exist to demonstrate that this was, indeed, a problem and that bulk billing or service use by this group had declined by the average or near average percentage. That is, the existence and quantitative significance of the 'problem' were not documented.The recent 'Medicare Plus' package introduced a potentially important structural change. Rebates for bulk billed/health care card holders were separated from the rebate to the general public thereby allowing the separate treatment of the two groups. To encourage the bulk billing of the first group the benefit was increased and bulk billing doctors were permitted, for the first time, to direct-bill the Health Insurance Commission for general patients while simultaneously charging an 'over the counter' extra payment, a measure widely perceived as encouraging an increase in fees as patients will commonly equate the relatively small copayment with the total fee.These measures have two important effects. First, the probable increase in general fees allows the benefit payable for GP bulk billed pensioners/health care card holders to be at a lower level than would occur than without the effective cross subsidy from increased general fees. Secondly, the government can preserve 'equity' (ie bulk billing the needy) by adjusting only the pensioner/health care card holder benefit, while simultaneously allowing a deterioration of the general rebate. Cost shifting would have been further facilitated by an earlier agreement to allow private health insurers to reimburse medical expenses above the schedule fee as part of an agreement with doctors to remove out-of-pocket costs. But this proposal was rejected by the Senate.In sum, there is now a structure which facilitates cost shifting from the public to the private sector. There are two important caveats to this conclusion. First, a rebate structure which facilities additional cost shifting does not imply that government will use this option in the short or long run. Secondly, the effect of additional cost shifting will be mitigated by an additional element of the Medicare Plus package, namely, the introduction of a 'safety net' which reimburses 80 percent of out-of-pocket, out-of-hospital costs including billing above the schedule fee once family expenses reach $1,000 . The long run effect of this latter cost off-set is difficult to assess. As reported in the announcement of Medicare Plus the expected cost of the safety net in its first three years would average $89 million p.a. as compared with likely out of pocket medical expenses of about $1,400 million. in 2004/05 (extrapolated AIHW) [relatively 'small order' issues.However, the most significant feature of these changes to the reimbursement formula for medical expenses is that they deal with relatively infrequent as the majority of this group have always been bulk billed while others will have satisfactory access to hospital based care.Under Medicare, pensioners/health care card holders with significant health problems have access to emergency and outpatient facilities at public hospitals. Poor access to these will increase inconvenience and queuing and, in an unknown number of cases, result in poorer health. But this more serious outcome is likely to be Conclusion 7:Proposed and actual policies towards pharmaceutical expenditures and bulk billing have had a common element. Both represent immediate or potential cost shifting from the government to the public and any net reduction in societal expenditure because of a reduction in patient initiated services will have potentially adverse effects upon the health of the 'near poor'. However, the financial effects of the policies are relatively small and the indirect adverse effect upon health is likely to be correspondingly small.The role and regulation of PHI after the introduction of compulsory national health insurance has been ambiguous and anomalous. Since Medicare was introduced as the vehicle for achieving fairness in the financing and delivery of health care it has never been clearly stated why PHI should be closely regulated to achieve fairness in he sub-group of the population which elects to purchase PHI and why it is regulated in a way which inhibits effective competition. But these are the effects of Australia's community rating and reinsurance requirements respectively.In the last one and a half decades there has been an ongoing concern that declining levels of private health insurance have had an adverse effect upon the public hospital system and that 'PHI reform' has been needed to solve this problem. The argument is summarised in the following (constructed) quotation:'Private health insurance was caught up in a downward spiral caused by the adverse selection identified in the Productivity Commission report . 'RisingPHI is primarily purchased to cover the costs of private hospitalisation. Consequently, as PHI declined through time, fewer patients have been able to afford the cost of private hospitals, and this has created an excess demand for public hospital beds. The increasing length of queues is a confirmation of this problem"."While plausible, the account of history in the second half of this argument is wrong. Between 1985/86 and 1999/00 private hospitals increased their share of admissions by 32.4 percent from 25.9 to 34.3 percent of the total. The share of bed days rose from 21.9 to 28.1 percent of the total or by 28.3 percent [Conclusion 8:Media analysis of the relationship between PHI and queuing in the public system highlights an important system failure; viz, the failure of the media to exercise rudimentary critical skills in their analysis of PHI and hospital queuing.Even if PHI membership had fallen sufficiently to have reduced the share of private hospital admissions by almost a third, the balance of public and private hospital separations in 1999/00 would have been similar to the share in 1985/86. This suggests that it was the events summarised in the first half of the quotation which were of concern at the government and departmental level and that PHI membership and the public-private mix of health financing and delivery were explicitly or implicitly the real target of health policy.In response to the 'problem' of falling PHI and the demand side problem for public hospitals (which did not exist!), the government introduced three enduring policy changes. In July 1997 individuals with an income above $50,000 and families with a combined income above $100,000 who did not purchase PHI became liable for a 1 percent tax surcharge upon their incomes. In December 1998 a 30 percent rebate on PHI premiums was introduced. (In August 2004 a selective increase in the rebate was foreshadowed); and in September 1999 lifetime community rating was enacted which has the effect of reducing future premiums for those who have held PHI from the age of 30. Discounts apply at any age between 30 and 64; 30 is the age of maximum discount. Failure to enrol by this age will result in a higher premium if PHI is subsequently purchased.The evidence demonstrates that these policies, and particularly the last policy, have succeeded in increasing PHI membership. However it has created an industry which, along with the platypus and echidna could be Australia's entrants into the world's strange but true contest. Australia would almost certainly win – even without our egg laying marsupials. First, the surcharge results in a negative price for the wealthy. Individuals and families above the income threshold avoid an increasingly large tax payment as their income rises; that is, if they purchase PHI they will have a greater income at the end of the year than the individuals and families above the threshold who do not buy PHI. This is analogous to supporting the automobile industry by placing a surcharge on wealthy families who fail to buy an Australian car. It would be difficult to find any other support scheme which uses the income tax system to coerce the purchase of a particular product. It would be equally difficult to find a produce where the price is negative.Secondly, (and predating the recent legislation) the use of PHI to cover hospital bills generally results in a greater, not smaller, out of pocket expense. Public hospitalisation is free. Those with PHI commonly pay a copayment. Third, lifetime community rating also involves a leap of faith. The 30 year old must believe that public policy will remain stable for 50 years – a belief that should have been challenged when both parties announced changes in the 2004 election campaign. However lifetime community rating also has a bizarre dimension. Insurance is generally purchased to reduce risk and uncertainty. In the health sector these arise because of the risk and uncertainty of ill health and the cost of medical care. Prior to lifetime community rating this uncertainty depended upon possible events in the following 1–3 years. After the change it depended upon the next 1–30 years. Events in 30 years are more uncertain than events in 3 years and, consequently, the legislation increased risk and uncertainty. The perceived risk was amplified by the publicly financed marketing of private insurance. Predictably, people responded to the increased uncertainty by buying more insurance. Thus, to encourage the uptake of insurance the government increased the very thing insurance is designed to reduce, viz, risk and uncertainty.A final anomaly which predates the recent PHI reforms is that private health insurance in Australia leaves the consumer with residual risk. Particularly for ancillary services, most benefits are capped and out of pocket expenditures rise with the price of the service. This pattern of benefits is exactly the opposite of the structure of benefits which will maximise the patient's 'expected utility' .Taken together, the changes introduced since July 1997 have created an extraordinarily complex and perverse set of incentives. The ethical basis of the free market and the liberal-libertarian model is that choices should be determined by individual's preferences in relation to real (opportunity) costs. The surcharge subverts this process and coerces choice and the strength of the coercion is based upon economic class. There is no justification for this in the economic theory of the efficient market.albeit in the context of compulsory core insurance) is consistent with a legitimate and defensible world view, viz, the liberal-libertarian belief that in a free society individuals should be encouraged to take responsibility for their own lives. In particular, the 30 percent subsidy is the orthodox approach to encouraging an industry which has a special claim for protection and, private health insurance does not compete on a 'level playing field': it competes with a public sector which is free at the point of service.Despite this conclusion, it is a legitimate function of government to determine the balance between public and private delivery financing and the distribution of health care costs. As described earlier the preference for private sector funding and provision . Rather, the contentious issues include the 'right' or otherwise of the individual to spend their own income on whatever they wish without coercive financial penalties and the consequences for the remainder of the community when one group jumps the queue and has priority access to the most experienced doctors.delivery of health services. Rather, they are about financing care and the public-private balance in the health system. The balance, in turn, affects the distribution of health care costs between different households. Copayments shift costs from the government to patients. As government payments are met by progressive taxation, copayments redistribute the cost of health care from wealthy-healthy taxpayers to the less healthy, less wealthy. Additionally, as copayments have a disproportionate effect upon the use of services by low income households, the proportion of the government subsidy returned to high income households rises as copayments rise.PHI policy has been consistent with the other policies discussed above in one important respect. The policies are likely to have a relatively small effect upon the The redistributive effects of PHI are more complex. Low income households which purchase PHI unambiguously pay more for hospital and health services. Their taxes and the Medicare surcharge are unchanged and the purchase of PHI leaves them out of pocket. For higher income households, which are liable for the PHI surcharge, the effects are conceptually ambiguous as they depend upon the assumption made about the surcharge in a counterfactual world in which PHI did not result in a surcharge exemption. The surcharge was created specifically to permit an exemption for those who purchased PHI and the removal of the exemption might therefore be accompanied by the removal of the surcharge.Finally, and as noted earlier, the proposed changes to bulk billing represent a structural change which will facilitate the transfer of medical insurance costs from the public to the private sector.Conclusion 10:Recent and foreshadowed legislative policy initiatives with respect to bulk billing, copayments and PHI, all concern the financing of health services. Recent policy has been introduced with measures to mitigate the impact upon the most needy and, in the case of medical rebates, in a way which accommodates the popularity of bulk billing. Nevertheless, a common feature is that each of the proposed or implemented policies assists with the creation of a structure which facilitates the transfer of expenditure from the public to the private sector. If this occurs, it will reduce the cross subsidy from healthy wealthy to unhealthy less wealthy households. This effect occurs immediately with copayments. The transfers are more complex in the case of PHI.The five issues below have two common elements. First, they are directly concerned with health services and not the distribution of costs and incomes. Second, they have been almost ignored in the public policy debate despite being problem areas where there are quantitatively large inefficiencies and a corresponding potential to increase health outcomes and/or increase the overall cost effectiveness of the system.In common with all other health systems many, and probably most, of the services provided in Australia have not been adequately evaluated and there is no ongoing process for the elimination of cost ineffective services. In 1987 Chassin et al  estimateWith respect to this issue, the Australian record is comparatively good. It has led the world with the introduction of mandatory economic evaluations for the drugs and services to be subsidised through the PBS and the Medical Benefits Scheme respectively. However the failure of other countries does not indicate that Australian procedures are satisfactory. The overwhelming majority of the services which were accepted before the introduction of mandatory economic evaluations have not been assessed and, with the passage of time, there is a need for the reassessment of services and drugs.A related problem is that drugs or services which are efficacious when used appropriately in a random control trial may be used inefficiently with inappropriate patients who do not have the clinical indications of the patients in the trial. Gold standard medical care requires that cost effective therapy, drawing upon evidence-based medicine, should be the norm and not the exception in medical practice. Cost effectiveness should be determined by a broad ranging comparison of options form across the full range of potential interventions; that is, comparator interventions should take account of substitute services from across the entire health sector. This does not presently occur. Guidelines for the PBS require a comparison between drugs and exclude comparison with lifestyle/behaviour change programs.Conclusion 11:The scale of present evaluation activities is inadequate. In an industry absorbing 9 percent of the GDP – the country's largest industry – there should be ongoing and large scale evaluation and re-evaluation of the cost effectiveness of the services provided. Evaluation should be based upon a comparison with the full spectrum of substitute services. A failure to do this almost certainly ensures that there will be widespread and significant allocative inefficiency in the level and mix of services.Implementation of evidence based practice will inevitably be resisted by service providers whose practice and income may be adversely affected. Consequently, provider education for a 'culture change' is likely to be a slow and ineffective vehicle for change. In contrast, once the desired practice pattern has been determined, financial incentives to encourage this form of practice may be implemented relatively quickly and do not involve direct coercion. The economics literature is replete with examples where such incentives have significantly altered provider behaviour -19. AustConclusion 12:Reimbursement formula for service provision should include financial incentives at all levels of service delivery for the use of the most cost effective therapies.The more general principle which should, but does not, permeate the market for health services is that the willingness to pay for services should vary with social objectives, a principle which is successfully incorporated in simple competitive markets when social and individual objectives are identical. As one example where this principle has recently and successfully been used, if society wishes to encourage bulk billing (which clearly benefits patients but lessens provider control over their incomes) then the benefit for services that are bulk billed should be increased relative to the rebate for other services and the differential increased until the target of bulk billing is achieved. Likewise, if society wishes providers to adopt evidence based medicine, hospitals to install clinical pathways, some procedures to be encouraged and others discouraged, then payment for the desired service or process should be increased relative to the reward when these services or activities do not occur.At the level of the individual service, recent research has demonstrated health-related social objectives which are often broader than the minimisation of morbidity and mortality, for example, preferential treatment for particular age groups, particular classes of patients and health benefits ,22. PresConclusion 13:The payment of service providers should incorporate the principle that society should pay for what it wishes to have in accordance with its social objectives, rather than what it is given. This implies the need for ongoing enquiry into health related social objectives (the numerous objectives loosely grouped under the heading of 'equity').In 1982 John Deeble and I used data from the first full year of compulsory health insurance, (Medibank), to determine the level of service use in each of Australia's statistical divisions . An examThe results reveal an 8 to 10 fold variation in service use. Part of this is attributable to the random variation that would be expected because of the uncertainty of the episodes of ill health. Using state-wide data the ratio of actual to expected variance was calculated. This is reported in the column of numbers to the left of the bar diagram. For the first procedure, coronary angiography, the observed variance was 13.4 times greater than expected; ie actual variance was 1,440 percent of the expectation. This extraordinary result is reproduced for all of the procedures examined.A second example of uneven service delivery was also published by the same authors. This related to the likelihood of obtaining a high tech procedure – angiography or revascularisation – after a heart attack. Results shown in Table Taken together these studies suggest that there is a highly erratic pattern of service delivery across Australia and between social groups. One of three conclusions is inevitable. Some groups are under-serviced; some groups are over-serviced or both of these problems occur to different sub-groups of the population. This indicates both allocative inefficiency  and significant inequity for those with poor access to health services or a different form of inequity for those persuaded to undergo procedures where risks exceed likely medical benefits. Government has shown almost no interest in this type of result. There has been recognition of an 'urban-rural' discrepancy but, 20 years after the demonstration of a more complex pattern than a simple urban-rural dichotomy, remarkably little has been achieved.Conclusion 14:Significant variation in the use of services has been allowed to continue more than two decades after it was identified. Small area variation across Australia almost certainly reflects significant allocative inefficiency and an inequitable access to health services. There appears to have been relatively little interest in this problem.The health system at present consists of a series of financially independent programs ('silos'), which are poorly linked to other health services or programs. There appears to be near universal agreement that a sensible health scheme cannot be built upon the current Federal-State division of financing, responsibilities and powers or upon the existing Commonwealth program structure. In the context of a recent review of hospital care, the Tasmanian Government accepted a recommendation for the pooling of all health and aged care resources . HoweverTwo case studies are used below to illustrate what gold standard allocative efficiency would imply for the use and coordination of services. They indicate the distance that health services reform must travel in Australia before we have gold standard delivery.The first case study is real. A Seattle-based 'pure' Managed Care company, Ethix, was asked to establish a health scheme for a small town close to Seattle. Routine surveillance of the medical claims over the first two years of the new scheme highlighted an anomaly. There were excessively large numbers of youths receiving surgery for spinal injuries. Further investigation found that the problem was attributable to a toboggan run on the outskirts of the town which had a tree stump half way down the slope. Youths were crashing into the stump and damaging their spine. The health scheme paid for a bulldozer to remove the stump .Medicare does not pay for bulldozer services. However, in the circumstances described here it should do so. More generally, the vignette illustrates two of the characteristics of gold standard delivery, namely, routine data surveillance to locate problems with any aspect of social or medical behaviour which might be modified to improve health and, secondly, the flexibility of funding which is needed to adopt the most cost effective solution to the identified problems. In contrast, in the Australian health scheme a problem of this sort would not be detected by the health system. It is possible that a similar type of accident could fall under the jurisdiction of an occupational health and safety or traffic accident authority. Otherwise there would be neither the will nor the means to respond. If such a problem was eventually identified the typical response would be accusation, blame shifting and, possibly, litigation. The cause of this problem is related to the practice of Management by Objectives, an aspect of managerialism, which encourages local rather than system-wide thinking. Interestingly, Peter Drucker, one of the early advocates of MBO, in recent years has publishes warnings about its over-use and limitations.Conclusion 15:A key challenge is to establish a single payer (for each person) with flexibility and incentives to purchase the most cost effective services. Services should not be determined by historical program boundaries and rigid budgets. There has been a serious failure by government to address this fundamental issue. The achievement of this relatively simple reform is necessary (but not sufficient) for the achievement of a range of system reforms.The second case study is a hypothetical scenario constructed by Duckett to illustrate gold standard system coordination and processes .State call centre which advises her to visit her local health team. She is able to see the GP quickly who asks her a series of questions from the relevant research based protocol and undertakes a clinical examination. The GP emails the results to a local specialist... who orders some further investigations consistent with the state research based care path... Advice of (an) impending admission is automatically conveyed electronically to the GP and the social worker in the referring health team. The social worker contacts the hospital to discuss discharge planning... The specialist... suggest(s) a number of sources for information about the patient's condition. The patient contacts the call centre for further information... The case is randomly selected by the hospital audit committee for quality review. The committee suggests some slight changes to the state-wide protocol committee.' p204.'A woman with dizziness is concerned about her health. She rings the The key elements of this scenario relate to information access and transferral. It illustrates the role of evidence based medicine, routine service review, the adaptation of protocols, universal electronic transfer of all information and the absence of incentives to depart from best practice.Parts of this scenario correspond with Australian practice. But the events in italics would be unusual. It appears to be serendipitous whether a particular problem of a particular person and in a particular part of Australia results in a response which even partially mirrors the gold standard response in this scenario.Conclusion 16:Commonwealth and State authorities should mandate practices which improve the coordination of services. To facilitate this there should be universal use of electronic data systems for patient notes and information transfer. Evidence based protocols and clinical paths should be adopted when available and relevant. Feedback and error learning should be a routine part of the system. All of these desirable features are presently difficult because of the fragmentation of the system which is, in part, attributable to the failure to establish a single funder for all health services received by an individual.Results from the 1995 'Quality in Australian Health Care Study' (QAHCS) suggest that the quality of health care in Australia is a problem which overshadows all others. In the initial study, reported by Wilson et al  medical By extrapolating results the authors estimated that about 470,000 admissions were associated annually with an AE and that these would have resulted in 18,000 deaths and 50,000 cases of permanent disability. In a subsequent report Runciman et al  estimateFrom the response to these events (discussed below) it appears likely that many have been unable to appreciate the scale of the carnage implied by the report. If the results from the original QAHCS are not discounted then medical errors have been responsible for the death of more Australians per annum than the average annual death rate of Australian soldiers in World War 1 (15,800). Permanent disabilities per annum approximate the annual rate of casualties in The Great War (62,500). Unlike The Great War, the problem of AEs has probably been ongoing for 50 years or more.In Table While those affected by adverse events will, on average, be older and frailer than those who died in Bali or during World War 1, the magnitude of the problem is still staggering. Considering the reaction to the Bali bombing it might have been expected that the publication of the QAHCS would have caused a seismic shock, with the public demanding immediate, comprehensive reform and government passing urgent legislation to mandate any achievable system reform which ameliorated the problem. If the system failures which preceded the Bali bombing warrant a Parliamentary inquiry, equivalent interest might have been expected with respect to a problem responsible for an equivalent number of deaths every week. An effectively unlimited budget might have been approved for the upgrading of quality and safety.In contrast, the actual reaction to the report must constitute one of the more puzzling episodes of Australia's social history. At all levels the response was sedate, cautious and incremental and there appears to have been greater concern that our health system might be perceived as unsafe than with the fact that it actually is unsafe. The level of activity in the 5 years following publication of QAHCS suggests that the results may not have been truly believed. But no subsequent study was funded to validate or refute the results.inter alia, in moves to tighten up hospital accreditation processes; to monitor adverse events more closely; to improve consumer participation in the evaluation of health care; to encourage health professionals to report adverse events; to improve health information technology; to establish practice guidelines, etc. The large number of funded projects are described and listed in ACSQHC, [The QAHCS results were not ignored. As summarised in Table  ACSQHC, .Despite the high level of activity, the importance, priority and sense of urgency reflected appear more appropriate for an (important) ongoing reform process in an already well-operating system. There is a yawning gulf between this and what the public would undoubtedly demand if our TV and news services were reporting deaths on the scale of the September 11 New York disaster very two months accompanied by about three times this number of injuries. The philosophy of the reform process appears to be summarised by the ACSQHC when it approvingly quotes Berwick as saying that 'there are no quick fixes. We must re-examine all that we do', p14 .inter alia, created the Institute of Clinical Excellence. By 2002 – 6 years after publication – the Victorian Quality Council Plan had been established. In 2003 the updated version of this plan set as its goals, inter alia, the establishment of a framework, the involvement of consumers and education. Almost 10 years after the report, the ACSQHC called for mandatory participation of all hospitals in a process of assessment [As a description of history the 'no quick fixes' statement is correct. The 1999 report – 4 years after the publication of the QAHCS recommended that 'actions identified by the taskforce... need to be implemented at all levels of the health system'. By 2001 NSW had passed legislation which, sessment  and  are, the pace of change nevertheless seems slow given the stark message of the original QAHCS study four years ago... 50,000 Australians suffer permanent disability and 18,000 die at least in part as a result of their health care', p404–50 .By 2002 Siddons could still comment that:th anniversary of the study year, the most striking outcome has been the paucity of reform currently exhibited at the coalface of tertiary health care', p823 ['On the 10e', p823 .per annum. Consequently, expenditures of this amount could be justified if they eliminated the unnecessary AEs or if the cost of the achievable 50 percent reduction in AEs was less than $2 billion per annum.The inadequacy of the response is surprising as the evidence suggests that a reduction in AEs would be spectacularly cost effective. The interim report from the national expert group estimated the potential savings from preventable adverse events in 1995/96 would be $4.17 billion prima facie, very significant and effective change could have been/can be rapidly implemented. The chief distinguishing feature of each of the suggestions below is that they involve legislation and regulatory enforcement which appears to be inconsistent with the apparent emphasis upon persuasion and voluntary culture change in many of the present activities. Mandated options include the suggestions below.In contrast with the view that little could be done quickly there are a number of examples where, AccreditationFor decades health professionals have believed that a significant number of small hospitals are dangerous. However there has been no decisive action. With full knowledge of the QAHCS results, hospital accreditation remains voluntary in all States except Victoria. There will clearly be self-selection. Low quality hospitals will opt not to seek accreditation and poorly qualified doctors will seek out these hospitals. Universal accreditation could be mandated. Multiple accreditation teams could have the power to randomly inspect hospitals or units within hospitals and close those judged to be dangerous – as occurs with restaurants with sub-standard hygiene. It is unclear whether or not present accreditation is sufficiently rigorous to reduce avoidable adverse events significantly. There appears little reason why the accreditation process should not itself be reviewed to ensure that credentialed hospitals satisfy rigorous safety standards in their facilities and procedures.Doctor AccreditationPatterns of private practice patterns are already subject to scrutiny in Australia. But the chief purpose is to detect medical fraud. Legislation could require the examination of practices to detect those which deviate significantly from evidence based guidelines constructed by the relevant Royal Colleges. When there is a known relationship between the small number of procedures carried out by a doctor and negative outcomes, as occurs with surgery, critical annual procedure rates may be established which trigger the provision of information to the doctor, the mandatory review of the practice and finally the dis-accreditation of the doctor for the conduct of these procedures. While it is true that some doctors take on the hard cases partial standardisation for case complexity is possible and this problem would obviously be taken into account by those conducting the review. The appropriate systems could be established in 1 to 2 years.Mandatory Disclosure and Error LearningIt is not compulsory for hospitals or doctors to register AE and routinely provide feedback to facilitate error learning. This means that the most important vehicle for improving quality and reducing patient risk is not compulsory. The opportunity for error leaning is almost certainly under-utilised in a large number of hospitals and probably ignored by the doctors whose performance most needs monitoring. Legislation might ensure the universality of this critical system reform. The adverse events register could and should be linked to doctors and appropriate threshold levels installed which sequentially trigger information feedback, review, and finally dis-accreditation of the doctor. It is likely that the first of these steps will be sufficient to effect satisfactory change. Despite this, 9 years after publication of the QAHCS the chairman of the ASCQHC notes that 'we have insufficient accurate data for fully appreciating the current size of the multiple causes of this problem ... we need the data from multiple sources, including incident monitoring systems, routine administration data sources and the use of screening tools to practically identify areas that may cause harm.' (p5) [m.' (p5) .Protection from litigationThe published research on 'high reliability organizations' suggests that it is wise to separate inquisitorial from punishment processes, such as dis-accreditation. Adverse events are unlikely to be reported if there is a financial incentive to hide the AE. For this reason legislative protection of doctors from the financial outcome of litigation is probably a prerequisite for a successful and comprehensive system of error learning. The consequences for a doctor associated with AE should be based upon medical criteria and uncoupled from the social mechanism for compensating patients. Legal protection alone is unlikely to improve the quality of the information used for error learning. Rather, it should be part of a package of requirements which includes penalties for the failure to report an AE.Information transferPatient notes are still transferred within hospitals using 19th Century clipboards. It is known that this commonly causes potentially lethal errors. The mandated use of (long available) electronic forms of transmission could alert staff to the risk of inappropriate procedures, the administration of conflicting drugs or the failure to administer a drug. Likewise X-ray films are often misplaced or lost. The consequences may be lethal. Legislation could ensure the use of digital technology to ensure immediate access of results. New wireless technologies make it possible for roving staff – doctors and other professionals – to have constant access to text and basic technical data. As with electronic note taking this might take 1 to 2 years to fully install in all Australian hospitals, clinics and nursing homes.Hospital systemsHospital systems in Australia are commonly ramshackle or antique. There are no required pathways or mandatory discharge criteria. There are no internal or external financial incentives for the optimal treatment of patients. These changes are more complex but could be installed comfortably in 4–6 years.Conclusion 17:th Century information technology throughout the health system is likely to be small relative to the human and financial cost of AEs averted.There is no reason why much of the health system should have missed the IT revolution which has transformed other parts of the community. In relation to the size of the AE problem, the cost of implementing late 20Minimum staffing requirementsThere is no regulation which links on site expertise and the complexity or riskiness of the procedures which may be undertaken in a hospital. For example, it is possible for a hospital to permit significant surgery but have no on-site medical practitioner post-operatively. This potentially lethal practice could be proscribed and minimum staffing ratios implemented within the 1–2 weeks needed to reschedule staff or the location of procedures. It was not until 2003 that the ACSQHC released a paper considering issues of staff rostering, skill mix, staff numbers, staff supervision and team functioning [ctioning . While ectioning  it commectioning .QueuingThe airline industry operates a highly efficient computerised system of booking and queuing which may be accessed by travel agents throughout the world. By this standard most hospital queuing systems – if they exist – are rudimentary. It is possible and desirable for different hospitals in the public hospital system to be interconnected to provide patients or their doctors with available times for treatment city, state or nation-wide. Queuing and scheduling can and should be operated using publicly known criteria. In the USA there is a nation-wide system for matching patients with available organs. (There is, interestingly a prioritisation criterion which, for reasons of equity, assigns compatible organs on the basis of need, not prognosis.) Australia has no such system.Conclusion 18:Queuing should be regulated by a nation-wide prioritising system based upon explicit criteria. This would increase efficiency and, for the patient, increase choice and certainty.The private sector would have greater difficulty in operating such a system because of the patient's attachment to a particular doctor. Private health insurance organisations could, however, offer a similar service to patients who are willing to accept treatment from contracted providers. Australia's technologically conservative PHI organisations appear uninterested in these initiatives.Information and system auditThe suggestions above and, to date, the majority of the reforms contemplated in reports, represent process measures of success. However, their objective is to reduce adverse errors and for this reason, record analysis of the form conducted by the QAHCS should be an ongoing feature of the system. The QAHCS research was relatively expensive, but these costs are infinitesimal in relation to the importance of the surveillance, the costs, the morbidity and deaths averted.Conclusion 19:A policy of persuasion and culture change is an insufficient response to a problem of the magnitude of the AE epidemic. As a matter of highest priority, legislation should be passed requiring extensive system regulation and reform to reduce the incidence of adverse events. The required changes should be fully funded (or they will not occur) and should include the use of state of the art IT, minimum staffing requirements and system feedback on both individual hospital and individual doctor performance. Evaluation and random audit of all hospitals and health care providers and the reporting of all AEs should be mandatory. Doctors should be given comprehensive protection against the results of successful litigation. The review of doctor performance should be uncoupled from compensation for the patient.Public informationThere is no legitimate reason for information relating to hospitals and individual doctors to be withheld from the public. There is a persuasive argument that the public has a right to such information. Additionally public awareness and the likely response from the public to such information are likely to accelerate the pace of reform. There are persuasive reasons for providing information more generally concerning the performance of all parts of the system, including individual care providers. Patient choice in the absence of information is a charade. Failure to forewarn patients that the hospital of their (doctors') choice has a substandard safety record and that capacity exists in hospitals with a better record could, and arguably should, be regarded as professional negligence. There can be little doubt that, if consulted, the public would overwhelmingly endorse the need for this information. More generally, the provision of information is an effective method for effecting change and it is unlikely that the pace of reform would have been as sedate if the public were properly aware of the safety record of various health care providers.One argument against this option is that the provision of information might result in a loss of confidence in hospitals and doctors. However, the argument that the public should be kept in ignorance to engender unjustified confidence is, at best, dubious and if this ignorance allows an inadequate policy response then it is additionally harmful. In some states of the USA, and most notably New York, severity adjusted mortality rates are available for every hospital and for every doctor. This has not resulted in a significant change in the pattern for public demand but it has galvanised doctors and hospital staff to successfully review and upgrade their procedures . League Conclusion 20:Information is a key element in achieving system reform and for the efficient operation of all markets, private or public. All institutions and individuals should receive rapid feedback on their performance. Information should be routinely collected and also obtained from random audit of hospitals. In particular, information should be publicly available with respect to the safety record of hospitals and providers of medical care.Financial incentivesAs discussed earlier, financial incentives are one some of the most effective, non-coercive ways of achieving desired outcomes. There has been very limited use of this powerful instrument and the financing of medical services has generally been perceived as a reward for providers doing what they select to do rather than as an opportunity for influencing what is done. This is an important missed opportunity. Importantly, financial incentives are non-coercive and avoid the head-to-head conflict between 'clinical autonomy' and the 'patient's right to evidence based medicine' which may accompany direct regulation.Conclusion 21:Financial incentives should be used flexibly throughout the health system to induce behaviour which minimise AEs.Governance and ownership of the problemA key theme of this paper has been that government policy has focused almost exclusively upon financial issues and that there has been little concern from within the legislature with health services and health. This is possibly the root cause of the government failure. Activities from within the various bureaucracies have largely been bureaucratic. In its 2004 review of State initiatives the ACSQHC reports that Queensland now has 'a program to develop a workforce culture that values a multi-disciplinary evidence based approach to improvement'; in 2003 the NT implemented an 'overarching quality committee'; NSW had 'involved the appointment of patient safety managers'. The ACT now has a framework which 'provides explicit lines of accountably'; Victoria now 'has a policy of an open and transparent approach to the provision of information' etc (p8) [etc (p8) . There iThe ACSQHC itself appears frustrated with the scale of the national effort when it comments that 'over the last year with public failures reported in some Australian hospitals it is clear that a small program of national investment and development needs to be matched by the will, skill and capacity of stakeholders....' (p5). On the same page it comments that 'Council is actively working to further develop data sources, but cannot do so without continued support by all governments' (p5). Almost 10 years after the 1995 report the ACSQHC comments that 'future work ... needs to consider what governance and responsibilities are required at all levels of the health care system to ensure the provision of safe health care' (p84).Conclusion 22:Despite the unnecessary death of between 40,000 and 80,000 Australians since the publication of the QAHCS, Australian government has not taken ownership of the problem of adverse events. As a result, those attempting to effect change have been forced to 'coax and cajole' Options to 'mandate and enforce' have been largely ignored.The last conclusion relates to the need to generate and disseminate information relating to system safety. The arguments for this apply more generally to health system data. Australia has a wealth of administrative databases which could be employed to investigate and improve system performance. As noted earlier, service use is very uneven across Australia. To the extent that this violates the usual notion of 'equity' this information should be an important input into policy formulation. It does not appear to be used for this purpose outside NSW. However the quality of the data also presents other opportunities. The effect of different treatments, such as the varying rates of angiography and revascularisation observed between public and private hospitals could be traced through time if record linkage were possible. This would allow an assessment of downstream costs, mortality and morbidity associated with the two patient groups. There are clearly many opportunities for longitudinal research of this sort. A further option which may be piggy-backed on administrative data is the routine provision of information to different groups of patients who have been identified by their service mix. Information of this sort is probably a highly effective way of 'empowering patients'; that is, enabling patients, and particularly those with a chronic disease, to take greater control of their disease management.These developments have not occurred for a variety of reasons. First, for an $80,000 million industry, research funding for 'product development and marketing' – health services research – is astonishingly small. In the USA six Federal agencies alone spent $US 1,658 million in 2002 upon HSR. The agencies and their expenditures are detailed in Table A second and possibly related reason is that there is no dedicated instrumentality, similar to the AIHW, which has taken 'ownership' of the need to provide and periodically to review the need for information generated by HSR. Funding is currently inadequate but also ad hoc.Third, concern over the confidentiality of records has been elevated to such a level that easy and routine data linkage to observe the outcome of different service patterns does not seem to be a possibility. For example, access to Australia-wide, de-identified public hospital records requires the separate consent of all States and Territories as well as the cooperation of the Commonwealth Department of Health or AIHW. Data linkage to determine the consequences of different treatment patterns – who lives and who dies – is so difficult that the research is effectively proscribed.It is extremely doubtful that this concern in the bureaucracy over privacy would reflect the preferences of a well-informed population. Patients almost certainly suffer and die because of the interpretation and implementation of our confidentiality laws in a way which seriously inhibits the capacity of the public, researchers and private and public agencies to investigate the outcome of system performance and differences in individual treatments. The bureaucratic fetish with confidentiality does not occur in the USA where the risk of litigation is significantly greater than in Australia. In some states data relating to hospital and doctor mortality rates are regularly published and in California unit record hospital data is available on CD in university libraries.Conclusion 23:Routinely collected administrative data should be fully used to monitor system performance. In particular it should be employed to monitor equity of access to services regularly and to provide disease-related information to population groups identified as having particular needs and interests. A statutorily independent national institute for health services research should be established whose terms of reference require the achievement of these objectives.There are various options for the macro reform of the health system and the corresponding reform of financial incentives and the roles and responsibilities of the various players. In particular, Dick Scotton has cogently argued for the adoption of Managed Competition -43. A paThe chief conclusion from this paper is that the 'health care debate' and recent policy 'reform' has focussed upon issues which are best described as 'very small order' as judged by their likely effect upon either health or the cost effectiveness of the health system. They have been primarily concerned with dollars, not health and, more specifically, with the distribution of the cost between the public and private sectors.None of the policies discussed in Section 3 of the paper is likely to increase cost effectiveness. Cost shifting from the PBS to the public creates differential copayments which encourages allocative inefficiency. PHI reforms have created an industry with bizarre financial incentives and is a spectacular example of negative micro economic reform.The common feature of the three policies is that each moves the health system in a direction which is more consistent with the liberal/libertarian world view in which responsibility is transferred to the individual and away from the community. While PHI helps the individual to avoid financial decisions at the point of service, the individual is responsible for the purchase of the insurance and for the payment of (net) premiums. Copayments are the most direct method for shifting responsibility to the individual users of health services. Bulk billing for pensioners/health care card holders preserves the safety net which is needed for the achievement of equity as commonly defined by this world view. Over the longer term the pursuit of these values would redistribute income to the healthy, wealthy and away from the unhealthy unwealthy which is the antithesis of the communitarian/solidarity value system. The vehicle for the transfer is both a decline in community financed expenditures and a corresponding decline in taxation.As discussed in Section 2, decision making with respect to social objectives is the legitimate role of government. However, good economic and social policy seeks to achieve these objectives in a way that is cost effective. The reforms discussed here have not achieved this.In contrast with these policies, the five neglected areas discussed in Section 4 deal with problems which are 'large order issues' as judged by their likely impact upon health and the cost effectiveness of the health system. Also contrasting with the first group, these issues are relatively 'value neutral' as judged by either the communitarian or libertarian perspectives. The failure to address satisfactorily these issues is attributable to neglect, not the dominance of a particular ideology. This failure over a very long period itself refects a failure in the governance structure and a failure to identify and act upon opportunities for quantitatively large system improvements. The failure is probably replicated in most other developed countries, reflecting the complexity of the health sector. But benchmarking against similarly impaired systems does not alter the fact that there are opportunities for significantly improving the community's health which have been largely ignored. The reasons why this has occurred has not been discussed here and, to a greater or lesser extent, these failures have probably been replicated in most other developed countries, reflecting similar social and technical histories.The author(s) declare that they have no competing interests.