A Liberal approach to healthcare reform
the landmark health and aged care reforms of the menzies era aimed to protect the vulnerable without compromising the interests of private enterprise and individual initiative. By David Furse-Roberts.
Campaigning in the Freemantle by-election of 1945 for the seat vacated by the recently deceased Prime Minister John Curtin, Robert Menzies declared his new Liberal Party as ‘standing unhesitatingly for the most ample provision in respect of old age and sickness’.
This Paper will discuss the seminal health and aged care reforms of Menzies’ second term as Prime Minister from 1953-60. It will cover his government’s main legislative initiatives on public health including the National Health Act (1953), the Aged Persons’ Homes Act (1954) and the Pharmaceutical Benefits Scheme implemented in 1960.
When Menzies returned to power in 1949, he desired to chart a new direction in health policy from the preceding Chifley Labor government. Reflecting Liberal principles, such an approach would seek more of the ‘private enterprise answer’ to the treatment and care of the sick, and private enterprise meant not only commercial businesses but also charities, churches and voluntary associations.
Liberalism and public health
To better appreciate the landmark health reforms of Menzies and his government, it is valuable to explore the Liberal philosophy from which they sprung. With popular thinking tending to see health policy initiatives as more typical of Labor governments, it would be easy to assume they had a democratic socialist or social democratic impetus. Yet the inspiration behind Menzies’ initiatives in healthcare was profoundly Liberal.
The twentieth-century liberalism of Menzies stressed not only individual self-reliance, but also the care of the poor and the sick. In his William Quale Lecture in 1954, Menzies affirmed that:
The protection of the poor and the weak, and the elimination of the causes of poverty and weakness are undoubtedly the supreme business of politics. One can recognise that without in any way ceasing to insist that the first duty of every man is to do his utmost to stand on his own feet, to form his own judgments, and to accept his own responsibilities.
Menzies’ approach to health care of maximising individual initiative and free enterprise on the one hand, with the provision of ameliorative social welfare measures on the other, accorded with the thinking of key twentieth-century liberal theorists such as Friedrich Hayek. In The Road to Serfdom (1944), Hayek maintained that ‘there is no incompatibility in principle between the state providing greater [social] security in this way and the preservation of individual freedom’.
Balancing these two principles, the Menzies government delivered health care policies calculated to ameliorate the suffering of the sick and frail aged without compromising the interests of private enterprise and individual initiative.
Menzies’ Health Ministry
In the delivery of his health policy from 1953 to 1960, Menzies was assisted by two Ministers for Health, Dr Earle Page and Dr Donald Cameron.
Born in Grafton NSW in 1880, Earle Page trained as a doctor at the University of Sydney, opened a private hospital and worked briefly as a medical surgeon during the First World War. Elected to Federal Parliament as the Member for Cowper in 1919, he became one of the leading lights of the new Country Party, leading it into coalition with the then Nationalist Party from 1923 and its successor, the United Australia Party, until 1939. Following the death of Joe Lyons in April 1939, Page served briefly as Australia’s 11th Prime Minister until the UAP elected Menzies as its new leader and Prime Minister three weeks later. As is widely known, the relationship between Menzies and Page was difficult, yet Menzies in 1949 was magnanimous enough to appoint Page as his first Minister for Health. In his six years in the portfolio, Page was responsible primarily for the passage of the 1953 National Health Act.
In January 1956, Donald Cameron succeeded Page as Menzies’ second Minister for Health serving until December 1961. Born in Ipswich, Queensland, in 1900, Cameron also trained as a doctor in Sydney and served as a medical officer at the Royal Prince Alfred Hospital during the late 1920s and early 30s. With the outbreak of the Second World War, Cameron served in the Medical Corps of the Australian Army and was awarded an OBE in 1946. Joining Menzies’ new Liberal Party, Cameron was elected to the new Queensland seat of Oxley in the 1949 election. Appointed as Minister for Health by Menzies in 1956, he was responsible for introducing the 1959 National Health Act that rebirthed the Pharmaceutical Benefits Scheme.
National Health Act 1953
Starting with Earl Page as Minister, the first major health reform of the Menzies government was the introduction of the National Health Act (1953).
Just prior to his election as Prime Minister in 1949, Menzies had expressed his opposition to a nationalised system of health care favoured by the incumbent Labor government. Seeking to avoid government monopoly in the provision of health care, Menzies called for a ‘common sense’ approach entailing ‘the co-operation of the States, of the municipalities, of hospital managements, of friendly societies, and of the medical, dental, pharmaceutical and allied professions’. Such an approach would not only seek more of the ‘private enterprise answer’ to the treatment and care of the sick but would serve to protect the sanctity of the voluntary ‘doctor-patient relationship’. Menzies declared that his government would stand ‘utterly opposed’ to the socialist idea that medical service should become a salaried government service.
Differentiating his government’s new approach to health care from that of the preceding Chifley Labor Government, the Menzies Government introduced its new legislation to deal comprehensively with certain medical services and medical benefits. Under the National Health Act, these would be based upon contributions made by individuals to a Medical Benefits Fund conducted by a registered medical benefits organisation, supplemented by a ‘Commonwealth Benefit’, being a benefit payable by the Commonwealth in respect of a professional service rendered to a contributor. According to Menzies, the underlying principle of these provisions was that ‘the individual doctor-patient relationship should be preserved, and the disadvantages of a fully nationalised and Government-conducted scheme averted’,
Speaking in support of the legislation, Menzies’ parliamentary colleague, Percy Joske, told the House of Representatives that ‘under the medical benefits scheme of this Government, medicine is not socialised, the patient is entitled to choose his own doctor, and the doctor is neither a servant of the State, nor bound to prescribe in accordance with a formula’. Both Menzies and his Minister for Health, Dr Earle Page, were studious to prevent Australia from going down the post-war British path of a nationalised health-service, in the form of the NHS, that had witnessed a palpable deterioration in the doctor-patient relationship and the general diminution of private medical practice. Thus Menzies’ National Health Act would seek to restore the proper involvement of private enterprise in the ministering of health care and treatment.
Aged Persons’ Homes Act
This reform to general healthcare was followed by substantial reforms to Australian aged care under the Aged Persons’ Homes Act of 1954 which gave churches and charities a greater hand in the provision of aged care facilities and services. In this vein, the Act was wholly consistent with Menzies’ approach of engaging private enterprise in the delivery of health and aged care.
Under the Aged Persons’ Homes Act, the Commonwealth paid subsidies for the building of aged persons’ homes on a pound-for-pound basis to non-profit organisations, particularly religious organisations, or organisations of which the principle objects or purpose were charitable or benevolent. At one level, the policy was adopted because it was the most effective way of rapidly expanding provision of aged care accommodation. Most significantly, however, the initiative was deeply rooted in the concept of community philanthropy that Menzies regarded as so integral to social welfare. With churches and private organisation receiving government grants under the legislation, they were able to provide personalised accommodation and services according to the needs of the individual.
Introducing the legislation to parliament, Menzies’ Minister for Social Services, William McMahon, told the House of Representatives that the Commonwealth was anxious to provide leadership, ‘to find a solution to what is a delicate human problem – the care and companionship of aged people’. On the economic side, the legislation would contribute to the capital cost of approved homes for aged people, whilst on the social side; it would ‘enable older persons to live in surroundings as close as possible to those of normal domestic life, with all the associations we think of when we think of our home’. In particular, ‘the companionship of husband and wife [would] be preserved’. A few years after the passage of the Aged Persons’ Homes Act in 1954, Menzies addressed a Wesley Mission audience where he expressed his pride in what it had achieved:
Why is it…that I am so proud of this great matter of homes for aged people? It isn’t because they’re institutions … it’s because they are homes, it’s because they set out to reproduce for the individual … not the sense of the institution like the old asylums that one used to walk by as a boy but a home with friendliness in it, administered with loving kindness, the maintenance of friendships, the sense of personal identity and of personal dignity.
For Menzies, it was this characteristic that gave them ‘an individuality and quality which really preserve the human dignity of the people who go into them’. Recalling his boyhood years in Ballarat from the early 1900s, Menzies had found himself ‘depressed’ by the pitiable plight of the elderly people that dwelt in institutions with a cold, clinical and impersonal feel to them. With this early experience etched in his memory, Menzies was resolved to help humanise the living conditions of elderly Australians with the Aged Person’s Homes Act designed to give greater resources for non-profit organisations to run aged care facilities.
For Menzies, this was not simply an innovation in aged care policy, but ‘one of the great revolutions of our time’, where such palpable improvements to the living conditions and dignity of senior Australians signified the progress of human civilisation.
Pharmaceutical Benefits Scheme
Turning to the provision of affordable medicines, the Menzies government introduced the Pharmaceutical Benefits Scheme to make life-saving medicines affordable for ordinary Australians.
To be sure, the idea of the PBS was first proposed by the wartime Curtin Labor Government in 1944, which had even introduced legislation to bring it into effect. Vigorous opposition to the Scheme from the Australian branch of the British Medical Association and other medical stakeholders, however, resulted in a successful High Court challenge to the PBS Act which rendered it unconstitutional.
The succeeding Chifley Labor government reintroduced the PBS with the successful carriage of a 1946 referendum giving it new powers to legislate it without constitutional challenge. The success of the 1946 referendum was made possible by a qualifying clause the government had negotiated with Menzies. While the constitutional obstacle to the PBS had been removed, the Chifley government’s execution of the Scheme floundered as it again encountered stiff resistance from the Australian BMA and many doctors. This opposition to the Scheme stemmed from a fear that it was seen to be the first stepping-stone in the Labor government’s objective to socialise medicine and healthcare.
After Labor’s defeat in 1949, the suspicions of the medical profession abated and this created a more congenial climate for Menzies and his government to revisit the PBS. The other factor in Menzies’ favour were medical and scientific advances in medicine, increasing popular demand for pharmaceuticals and life-altering medication. With this trend making the case for a national PBS all the more compelling, the Menzies government passed the National Health Act (1959) to resurrect the scheme which came into effect from 1 March 1960.
Speaking of the rationale behind the new PBS, Menzies’ Minister for Health, Donald Cameron told parliament in 1959 that such initiatives needed to be ‘capable of modification and improvement from time to time as circumstances permit’ yet done in a way that is ‘financially responsible’ and not unduly burdensome to taxpayers. Accordingly, the new PBS included a patient contribution (or co-payment) of five shillings for each medicine to ensure that the Scheme would be financially sustainable over the longer term.
Reflecting the growth of the pharmaceutical industry, the rebirthed PBS included a much more expansive list of medicines than that proposed by Earl Page as Health Minister. In addition to the small number of ‘expensive and life-saving drugs’ such as penicillin, sulfa drugs, vaccines, serums, diphtheria antitoxin and insulin, the PBS covered a broad range of medications available to the general public at the subsidised rate. By capping all medicines at five shillings, it gave assurances to all patients of the cost they would incur for their prescriptions. If the medicine was worth less than five shillings, it would be charged at a rate to be determined by the chemist or pharmacy.
A balancing act
To conclude, the health and aged care reforms of the Menzies government balanced social welfare with personal initiative and responsibility. In so doing, they acknowledged a strategic role for government yet also a critical part to be played by private enterprise in the provision of health and aged care. Vesting individuals with a greater sense of responsibility was the thinking behind the contributory principle integral to both the National Health Act of 1953 and the 1960 Pharmaceutical Benefits Scheme. As the practical outworking of Menzies’ Liberal philosophy, Australian health and aged care would make ample provision for the sick and the aged, but with policy mechanisms in place to ensure that such obligations did not fall to government alone but to the goodwill, initiative, and resource of individual citizens and private enterprises.
David Furse-Roberts is a Research Fellow at the Menzies Research Centre. This is an edited extract of his research paper for the Robert Menzies Institute 2023 conference.