Funding the Medical Profession Australia 1900-1939

Dec 12, 2000Health Funding, Paper

From Federation to World War II Growth of Hospitals

1901 – 1939

This was a period of growth in social welfare sentiment and government action along Deakinite liberal and social democratic lines. This was accompanied by a growth in bureaucratic agencies to administer government schemes, particularly repatriation services. It was also the period in which the first ideas evolved for some form of national insurance to fund welfare and social security measures, including for health care.

Private hospitals began to grow to cater for those not wishing to enter a public institution. Until then, most people who could afford to be treated were treated at home. Most of the private hospitals were run for the exclusive benefit of members from trade unions, fraternities, churches or regions. Most hospitals were beginning to include in-house nurse training. Some private hospitals were started by groups of doctors who wanted to practise surgery for income as their services to public hospitals were honorary. (It is only recently that private hospitals and nursing homes attracted the attention of profit seeking corporate investors). The growth of government involvement in health matters was closely related to the growth in the number of hospitals and their increasing role in health services.


  • The Medical Officer for Health for Sydney started Maternal and Infant Welfare Services, staffed by public health nurses.


  • The Australian Institute of Tropical Medicine was set up in Townsville as a result of cooperation of the federal and state governments over concern for European settlers in tropical Queensland. Commonwealth and Queensland governments and several universities joined in its founding.
  • The Commonwealth Quarantine Act established the Federal Quarantine Service to direct the operation of the Act in conjunction with the States


  • The Founding Fathers had made little provision in the constitution for direct federal action in social security, but S. 51 (XIV) empowered the federal parliament to legislate on insurance, other than State insurance”, and on State insurance “extending beyond the limits of the State concerned”. For three decades concepts of insurance were to dominate government policy thinking on social security.
  • The Commonwealth Statistician was sent to Europe to look into schemes of “working men’s insurance”. He reported ideas for insurance schemes to cover old age, invalidity, sickness, accident, and death or unemployment of the bread winner.
  • A national old age pension scheme was put into operation, with a means test.
  • The idea of Bush Nursing Schemes was first proposed.


  • An invalid pension scheme was introduced. It was means tested.


  • A “baby bonus” scheme was introduced by the Commonwealth government. It comprised a maternity allowance of five pounds. It was not means tested, and extended to single mothers.


  • Prime Minister Joseph Cook issued a memorandum saying action was in progress “for the formulation of a comprehensive scheme of national insurance on a contributory basis, embracing sickness, accident, maternity, widowhood and unemployment”. It was to be interrupted by WWl.
  • A smallpox outbreak in Sydney emphasised the need for greater Commonwealth involvement in health. Shortages of vaccines and other biological products led to the establishment of the Commonwealth Serum Laboratories. The Commonwealth later went on to subsidise State efforts to combat the wartime rise in venereal disease, and rehabilitation of veterans and their long term care.


  • A scheme for a Flying Doctor Service was proposed by LT Clifford Peel, Australian Flying Corps.


  • With the end of WWI payment of private medical practitioners by government increased. The Repatriation Commission’s “local medical officers scheme” involved fee-for-service payments for the care of returned servicemen. The Repatriation Department was formed.


  • The world flu pandemic began.


  • The Commonwealth Department of Health was established to cover quarantine, vaccines, public health laboratories, investigation and prevention of diseases including tropical diseases, public health education. Its formation resulted from an offer by a visiting Rockefeller Foundation Senior Executive to provide four fellowships for study in the USA, and to send US specialists to help control hookworm in Australia – on the condition that the Commonwealth established a separate Health Ministry and Department of Health.


  • The British Medical Association, which also represented doctors in Australia, resolved to support national state-subsidised health insurance, but only on condition that assistance to patients be by cash reimbursement of medical fees, not provision of free medical services. No third party should intervene in the doctor-patient relationship. The doctor should be held in sole obligation to the patient.


  • A Royal Commission into National Insurance was appointed, covering sickness, invalidity, unemployment, and old age. It recommended a National Insurance Scheme based on compulsory contributions from employees and employers providing sickness, invalidity, maternity, and superannuation benefits, with a separate National Health Scheme to provide medical treatment and measures to prevent sickness and accident. Its final report did not appear until 1927. It referred the matter of health benefits insurance to a separate Royal Commission.


  • The Registration Act of NSW took control of the nursing profession away from the Nurses Association and put it under government. The Act established a board to set up a register, to hold examinations, to issue and cancel practicing certificates, to set standards of conduct and to impose sanctions for breach of those standards.
  • The BMA (in Australia), the Repatriation Commission, and some friendly societies agreed that families of servicemen who died due to the war would be treated by friendly society or “lodge” doctors who would receive a (capitation) fee per family group covered. Thus government financial support of private medical practice again increased via repatriation services. (It was to increase again after WWII and in 1950 when the pensioner medical service and the medical benefits insurance scheme began).


  • A Royal Commission on Health report recommended that the role of the Health Department be extended. The Royal Commission did not consider medical or hospital insurance. It was mainly concerned with preventive public health – screening, quarantine, control of infectious disease. It recommended baby health centres, pre-natal and post-natal clinics operated by local government.


  • The Public Medical Officers Association of NSW was set up to cover salaried hospital staff specialists and registrars.


  • The first National Insurance Bill was introduced to the federal Parliament by Dr Earle Page, Treasurer in the Bruce-Page Commonwealth government. Page’s plan was introduced as ‘the most comprehensive and progressive measure of social reform ever brought forward in any parliament in Australia”.
  • Although the Federation Constitution had provided little power for direct federal intervention in social security, Section 51(xiv) empowered the Commonwealth Parliament to legislate on “insurance, other then State insurance; also state insurance extending beyond the limits of the State concerned”.
  • Page’s Bill was based largely on the recommendations of the Royal Commission on National Insurance (see 1923). It had recommended a national scheme based on compulsory contributions from employers and employees, with a separate health scheme to cover medical treatment and preventive health measures .
  • The Bill included sickness, invalidity and maternity benefits but no national health scheme as recommended by the Royal Commission.
  • Page tried but failed to have the separate health scheme approved, but opposition by employers, friendly societies, and the States (which were concerned that the health scheme would take over Workers” Compensation) proved too strong.
  • When the full force of the Great Depression hit at the end of the 1920s, the Lyons government shelved any plans for extending social welfare. To cut expenditure, Lyons made maternity allowances subject to a means test, and proposed introducing a contributory element into the old age pensions scheme.
  • The first Council of the College of Surgeons of Australasia (later Royal Australasian College) was elected.
  • A Commonwealth anti-TB program was proposed – unsuccessfully.
  • A Flying Doctor base was established at Cloncurry Queensland with a Commonwealth subsidy.


  • Australia’s first hospital insurance funds were set up in Perth Hospital (now Royal Perth) and in BeIllnger Hospital, NSW.


  • National health insurance schemes were much debated around this time, but no action resulted.
  • Due to the Depression, the Health Department was pruned of several branches. Its activities were still curtailed at start of WWII in 1939. It did not start to expand until the 1940 Constitutional amendment increased the Commonwealth’s power to intervene in health matters.
  • The Royal Australian College of Physicians and Surgeons (RACPS) was formed. Until 1938 it was called the Association of Physicians of Australasia and NZ. The process had begun of displacing GPs from hospitals, their replacement by specialists, and the subordination of salaried hospital staff doctors to the honorary Visiting Medical Officers.


  • The Lyons government considered resurrecting the Page scheme for national insurance, but with the impact of the Depression still being felt neither employers nor employees favoured a compulsory contribution scheme.


  • Social insurance schemes in Britain and European countries were studied and reports made to federal Parliament. Government invited British officials to Australia from the British Ministry of Labour and the Ministry of Health to make recommendations regarding unemployment, pension and health insurance schemes. In regard to health, Sir Walter Kinnear proposed a contributory scheme along the lines of the British National Insurance system.


  • Queensland government permitted public hospital boards to employ full time medical staff instead of visiting honoraries.
  • Commonwealth established the National Health and Medical Research Council (NH&MRC).


  • A report to the Commonwealth government by W. Kinnear from the UK Health Ministry recommended health and pensions insurance to cover GP’s services.
  • The Commonwealth Medical Research Endowment Act established a National Research Endowment Fund.


  • The National Health and Pensions Insurance Act was introduced by R.G. Casey Treasurer in the Lyons government. His Bill was designed on Kinnear’s recommendations (see 1935). Casey’s Bill passed, but the Act’s implementation was postponed and finally set aside with the outbreak of WWII.
  • Casey wanted to establish the contributory principle, fearing the costs of a free service. He also wanted to avoid the charity stigma. In his first reading speech Casey stated :
  • “All we are asking is that men and women when in employment and earning wages will, by a great co-operative effort in conjunction with their employers and the government, contribute about two per cent of their wages in order to support a scheme which will assist the sick, the aged, the widow and the orphan, preserve the dignity of labour, and enable the Government to extend its benevolence on a self-respecting basis, to a very largely increased number of participants… unless something is done to put these schemes on a contributory basis, no government of the future, however well intentioned, could embark upon any worth-while extension of our social services without seriously threatening the whole financial fabric of the Commonwealth”.
  • Casey’s plan differed from the 1928 Page plan by proposing provision for free [at the point of service] medical attendance and treatment for insured persons. It included any medicines involved and certain appliances.
  • Casey’s Bill was opposed by representatives of employers, employees and Friendly Societies. Labor Opposition spokesman John Curtin said:
  • The Labor Party believes that the time has arrived when National Health services should be treated in principal in the same way as education. They should be free to all members of the community.
  • The Executive Committee of the BMA in Australia (now the AMA) reached agreement with the federal government upon rates of doctors’ remuneration and other conditions of service within the national insurance scheme. But when Casey introduced the Bill to Parliament, he received a letter from the BMA repudiating the earlier agreement. When State branches of the BMA had learned of the precise terms, they had repudiated the federal council executive committee’s deal with government.
  • A National Insurance Commission was appointed to administer the scheme and a Royal Commission was appointed to investigate doctors” remuneration under the scheme. Before the Royal Commission could report, key figures were killed when their plane to Sydney crashed into the Dandenongs. This was rather symbolic as the whole scheme was dropped with the onset of mobilisation for WWII.
  • “This closed thirty years of effort to institute a national social security program based on compulsory contributory insurance principles – efforts which produced nothing more than two miscarriages and a still birth.” (J.C.H. Dewney Australian Health Services, 1972)