Thursday, 25 September 2014

Why the Medicare Co-Payment Could Cost You Less.

The following article has been extracted from Inside Enterprise, a Business School sponsored, student-run publication.

With the introduction of a new $7 doctor’s fee announced as part of the 2014 Federal Budget, effectively ending the reign of free healthcare in Australia, Geordie Costello explains the logic behind the move and how it could cost you significantly less in the long-run.

I am sitting in the waiting room of my local doctor’s office. What am I doing? Waiting of course, what else does one do in a doctor’s office? Having forced myself through all the celebrity magazines, there is nothing left but to sit back and gaze around the unadorned room. Or is there? I decide to play a game, maybe not a tasteful game, but one that will help kill the time. It is called ‘pick the ailment’. Some patients are easier to pick than others. A boy sitting two seats to my left has plaster around his arm, the obvious conclusion that he has fractured it. The woman directly across from me sits hunched over a bucket and looks to have a terrible virus. Other patients prove more of a challenge, probably carrying illnesses with less obvious symptoms. I start to wonder if there is someone in the waiting room who does not really need any medical attention? After finally being called in to see the doctor, who prescribes me a ‘good night’s sleep’ for my case of the ‘sniffles’, I realise that person is me. Not to worry, the whole doctor thing is free right?

Wrong. There is an old saying, ‘there ain’t no such thing as a free lunch’. If you are not paying for a good or service, it just means someone else is. As taxpayers, we all incur the costs of healthcare, albeit some more than others, and that cost is currently rising at an alarming rate. The Australian Institute of Health and Welfare has released the latest statistics on primary healthcare funding, of which general practitioner (GP) billing comprises a large percentage. Controlling for inflation, Australian government expenditure has increased from $669 to $1,005 per person over the last 10 years, an increase of 50%, or an average annual growth rate of 4.2%. Unless we are willing to pay considerably higher taxes, redirect funds away from other vital areas, or let the government budget collapse into long-term decline, these rising costs need to be addressed.

Part of the reason for these increased costs is that, as a common good, healthcare leaves itself vulnerable to exploitation. This problem is known as the ‘Tragedy of the Commons’. The term stems back to 1830’s England, where herders were allowed to let their sheep graze on common land. If overgrazing occurred, only the herders overgrazing would reap the benefits of fatter sheep, yet all would share in the costs of the damaged land. To understand the likely outcome in this situation, we can use a little ‘game theory’, and ask ourselves what is the best response of the herder, given the responses of all other herders?

If you are a herder and none of the other herders are overgrazing, your best response is to overgraze and reap all the benefits. But what if half the herders are overgrazing? The benefits of overgrazing are smaller, but the cost to the commons occurs regardless, so you might as well overgraze. Then again, what if all the herders are overgrazing? In this case, you are incurring a huge cost to the commons, so even the smallest benefit of overgrazing may mitigate this loss.

Given that overgrazing is always your best response, and hence, are the best responses of all other herders, we arrive at the Nash Equilibrium, a point where everyone overgrazes and the commons is destroyed. This concept is called ‘free riding’ and is currently occurring in our medical system such that we are all likely to have overgrazed once or twice in our lives. The extra benefit I received from seeing the doctor was minimal but, ignoring the opportunity cost of my time, the personal cost of my doctor’s visit was zero. I was free riding on the collective, given the true cost of my visit is assumed by the taxpayer. This ‘true’ cost is based on the Medicare Benefit Schedule (MBS), which details a list of items that the government will cover, and the amounts they cover for.

With the MBS data provided by Medicare, we may be able to estimate the current prevalence of free riding behaviour. The MBS lists a number of items. The most common is called ‘Item 23 (Level B)’. It relates to a GP consultation lasting between 0-20 minutes that involves only one of the following: taking patient history, conducting a clinical exam, arranging an investigation, implementing a management plan or providing preventative healthcare. This is your standard GP consultation and it costs you about $36.30.

There also exists ‘Item 3 (Level A)’ which refers to “professional attendance for an obvious problem characterised by the straightforward nature of the task.” This item costs $16.60. Given level A people do not truly require medical assistance, it seems conceivable that free riders like myself are ubiquitous in this group.

The MBS data illustrates a sobering picture. In 2013, 12 visits for every 100 people in Australia were committed by free riders, and the problem appears to be worsening. Since 2003, the average annual growth rate per capita has been 7.6%. This is a conservative estimate, given that a GP is incentivised to charge a Level B to a free rider, as the criteria can be easily met and they would receive more than double the benefit from the government.

So, I hear you ask, how does charging a $7 fee solve this problem? Well, it may not eliminate free riding altogether, but it is certainly a step in the right direction. By charging a small fee, the government introduces a ‘user pay’ element into the Medicare system. This is not too dissimilar to our government subsidised rail network. According to Infrastructure NSW, each train trip costs the taxpayer on average $9.45, while the average on-peak fare is about $4.70.

Like the rail system, a Medicare fee reduces free riding behaviour as everyone must now face an explicit cost. Even though it is a reasonably small cost, it would be enough to convince me to just wait out my sniffles or head up to the Chemist to buy some Sudafed. In other words, with a $7 fee the personal cost of going to the doctor now exceeds the benefit.

Of course, all systems have their drawbacks. Most people’s first impression would be that a fee will unfairly penalise the lowest income earners and the sickest people, those already burdened by the increasing exemption of GP Bulk Billing. Firstly, less bulk billing is a fallacy. Bulk billing rates of GP’s reached their highest point ever in the 2013 December quarter, at 81.9% Australia wide and 86.7% in NSW. There is simply no such thing as the ‘good old Bulk Billing days’. Those days are now.

Despite this, the flat fee announced in the Federal Government’s 2014 Budget may cause sick, low-income earners to avoid the GP or instead seek out emergency rooms. The government has partly mitigated this concern by providing a ten visit safety-net for pensioners, concession cardholders and children, and by suggesting to the states and territories that higher fees should be charged for emergency room use. Yet by far the most effective and fairest policy would be to means-test the fee. This would reduce the burden on low income earners and further eliminate free riding behaviour, given that high income earners would face an explicit cost that better reflects their ability to pay.

Nevertheless, next time you leave the doctor’s office, remember that the annoying $7 fee you just paid has prevented countless free riders from unnecessarily going to the GP, saving you, the taxpayer, $36.30 for each one. And that is why the Medicare co-payment could cost you less.

Geordie Costello
Current student at the University of Sydney Business School

Wednesday, 17 September 2014

Beyond Borders

Australian: “How you going?”
American: “Are you asking where I am going?”

These minor colloquial differences such as the usage of words like: ‘mate’ ‘keen’ ‘heaps’ ‘uni’ ‘flatmates’ 'jumper' and ‘doona’ add to a gnarley cultural clash between the United States and Australia.

My name is Jennifer Crane and I am a third-year communication studies major and environmental systems and society minor from the University of California, Los Angeles (UCLA).  I have received the privilege to study abroad here at the University of Sydney for one semester, and I couldn’t be more excited!

So far, my adventures in Australia have given me more than I could have ever dreamed. I have made heaps of new mates (to use the Aussie lingo), that I can already tell will be lifelong friends of mine.

The Australians I have met have been nothing but kind and helpful. I still cannot believe the amount of information Australians are willing to share with me, however ignorant my questions about Aussie culture may be.

Every weekend spent in this magnificent country has been eventful and daring. I have tried to keep active, may it be venturing out to a national park for some hiking, surfing at 7 Mile Beach, or just going out to pubs with friends. *Future plans include snorkeling at the Great Barrier Reef, hiking and skydiving in New Zealand and a road trip along the coast with mates.

In addition, I have been exploring Australia’s natural beauty with my mates in the class “Learning in Outdoor Education.” During these last couple weeks we received the opportunity to venture out to the Royal National Park and the Blue Mountains for a three day hike. The experience was absolutely incredible, and as such, led to a lot of self-reflection of my own life and personal growth.

A couple of mates and I taking a break along a river bed in the Blue Mountains

My time spent at the University of Sydney has proven to be significantly different than my home university in terms of the academics. I have found the work here to be structured differently than what I am normally used to. Although there are less assignments due, they are graded a lot more heavily compared to having more assignments with a different grading scale. The study vacations, woven into the semester, have proved to be beneficial. I am able to explore Australia and recharge so as to prepare myself for a focused and productive time at Uni.

At UCLA, our quarters are composed of 10 weeks and are very stressful. We usually always have some sort of exam or essay due every week throughout the quarter since it is relatively short. Unlike the University of Sydney, we do not have as many study vacations (which I wish we did!).

I have found the “tutes” (tutorials) to be much like my discussions back home minus the classroom presentations. The tutorials are definitely helpful and a great way to receive clarification on lectures and facilitate debate about relevant topics to the course.

Although my time is short, there’s one lesson I have learned from it all.

With an open heart and an open mind, we may find comfort in knowing there's always a silver lining of human kindess and compassion that runs far beyond borders.

A panorama view of the Blue Mountains as I self-reflect on my time in Australia

Jennifer Crane
Current student at the University of Sydney and Marketing & Communications Intern at the University of Sydney Business School

Tuesday, 26 August 2014

Inside Enterprise: Founding a Student Business Journal

In June 2013, a group of enthusiastic students and I took the first steps in implementing an idea I had toyed with for some time: starting a business publication that was entirely student-run, informing a readership that spanned several Australian Universities and which would inspire business students through the practical tips and insights gained from successful industry professionals. Six months later and the first issue of Inside Enterprise was released, launched with the ethos of ‘Informing and inspiring the next generation of business leaders.’ Our founding vision was to become a platform that bridged the world of university-taught theory and that of real-world business. This publication would ensure that every student could have free, regular access to a host of experiences and tools that could help them translate their ideas into reality. Our inaugural issue was themed ‘The Gamechanger’ – reflective of Inside Enterprise's belief that successful business people are often more than great thinkers: they are brilliant communicators who can inspire change through the very power of their words and ideas.

The greatest challenge in starting something ambitious like this with no experience or funds and a team comprising initially of only my friends, was gaining credibility from the people whose help we most sorely needed. We were fortunate enough to secure sponsorship from the University of Sydney Business School and the Commonwealth Bank of Australia which made printing 2,000 copies of the first issue and 5,000 copies of the second issue realisable. We were also very lucky to find designers, editors and IT directors from the pool of talented students whom we accessed via newsletters, word of mouth and social media. It was very reassuring to know that there were so many people who perceived value in the publication and wanted to become involved in any way possible.

Beyond publishing and distributing two print issues a year across four major universities in Sydney, we operate a website ( that features additional student-produced content entrenched within the business world. We also run writers workshops and training days every semester to help our writers produce better quality content.

The success of issue one owed largely to the assistance given by many of our partner societies, such as AIESEC, UNIT and the Sydney Marketing Society (SMS), who helped us distribute and get word of our publication out to the public. Every day we continue to think of ways to tighten our internal processes, improve our publication and expand in new directions to make a greater impact on our readership and to in turn enable them to more effectively impact us. There is simply no experience more educational and rewarding than that of creating something that adds value – whether it be a business, a product or a publication.

Jenny Huang
Current student at the University of Sydney Business School

Thursday, 14 August 2014

A Taste of America, Summer Study Abroad

How the time flies. Just over six weeks ago, I had just finished my Sydney Uni exams and jumped onto a plane bound for LA. It was there that I was to spend six weeks studying and travelling. Now that I am back in Sydney, I’m launching straight back into semester (my final semester too!) with an abundance of new friendships, experiences and knowledge acquired from studying at UCLA.

So what were some of the key things that I took away from it? Well, one thing was the cultural differences and differences in slang between the American and Australian way of conversing. Even though I was aware of this to a small extent beforehand, living there and interacting with American classmates and locals really made these differences more prevalent, so discovering these differences was interesting.

I also really enjoyed living on campus. Not only did it mean not having to commute to class, but UCLA really was a beautiful campus and a great university, proud of its athletes and its reputation (mention USC to any UCLA student and they’d tell you all about the great rivalry between the two universities). Although I didn’t get a chance to participate in any of the sporting activities myself, I really did enjoy my classes. Perhaps one of the reasons why was because I was studying something totally different to my usual field of Marketing and International Business. In fact, I decided I would try my hand at two subjects from the Arts faculty: Public Art in LA (a Mexican studies class) and Medical Ethics (a Philosophy class). Both were really great in giving me a better understanding of America’s history and its subsequent contemporary values and beliefs. For instance, each week our Public Art class went to a different mural or public artwork to observe and analyse the artistic techniques and historical significance of the work. By contrast, the Medical Ethics class involved a lot of discussion and debate about what was morally right or wrong about taboo subjects such as euthanasia, abortion, enhancement and so forth. Studying each of these subjects gave me great insight into different ways of writing, reading, arguing, problem solving, etc. all of which were very different to the styles that I had grown accustomed to in my Business degree. I think this was what I really valued about this experience overall.

Generally speaking therefore, I am glad that I’ve undertaken the program because it’s given me greater perspective into my strengths, interests, and ambitions of perhaps working or studying (a postgrad course) in America one day. It’s certainly been another stepping stone for me in understanding where I ‘fit in’ in the global market.  Only time will tell when the next time will be when I return to America with a new and improved purpose.

A few of the other participants, also from Sydney Uni, who I developed close friendships with.

The campus was really well-maintained. The only downside was that it was a huge campus, meaning that most of us had hilarious stories of getting lost and walking into class late during our first week.
Christine Ma
Current student at the University of Sydney Business School

Monday, 11 August 2014

Discovering New Forms of Business

Corporate Social Responsibility has been an idea embedded into the pores of business foundation classes from the start.

At the same time, I felt like it was more of an elaborate marketing ploy. Businesses are concerned with making a profit, I reasoned. Why would they willingly participate in extra activities and practices that would add extra costs?

It wasn’t until I stumbled across ‘social enterprise’ that I truly understood the implications that this CSR could have for business.

In the most basic of ways, social enterprises are the best mix of not-for-profits and businesses. It’s a term describing an organisation that has business operations (sale of goods/services) but exists or works towards a humanitarian benefit.

Why is it great? It enables organisations to create sustainable change without having to rely on donations or grants.

My first run with the term was about one and a half years ago, when I joined a youth-run social enterprise called AIESEC.

AIESEC’s social mission is to develop global youth leaders, and empower young people to make a positive change, while its business operations are focused on facilitating the international experiences that enable young people to develop those leadership capacities.

Interestingly, I was a ‘customer’ of AIESEC before I joined the organisation itself.

In the summer of 2012, I went on an AIESEC volunteering exchange, spending six weeks in Sri Lanka facilitating soft-skill training sessions for university students. 

From exploring a different culture, meeting like-minded youth from across the world, and working alongside locals on projects directly impacting their community, the experience challenged me to think differently about the world and how we can all play a part in making it a better place.

Working alongside more than 40 young people from 10 different countries!

I can definitely vouch for how much the life-changing experience has impacted me, and how gaining insight into not only how a social enterprise works, but also experiencing it firsthand has elucidated that businesses can care about more than just their profit margins.

As young people, I feel like many of us want to work for something that’s actually making a positive impact, but may be unsure of how we can develop or utilise our business skills to do so.

My answer? Discover the world of social enterprise, where business is moving more towards ‘creating shared value’ as opposed to ’corporate social responsibility’.

In a legitimately unbiased way, I think it’s really encouraging that the Business School here at the University of Sydney offers a Community Placement Program which enables students to learn and work for a social enterprise and be recognised for their learning in an accredited course (BUSS2503, 6 units of study), as well as many other subjects on social entrepreneurship and community service.

For more real life examples of social enterprises check out Thankyou Group, which sell things like bottled water to fund clean water projects in third world countries and TOMS Shoes, which donate a pair of shoes for each pair sold to a child in need.

Helen Chan
Current student at the University of Sydney Business School

Thursday, 7 August 2014

Shanghai Study Abroad Program: Student Reflections

Six weeks in Shanghai flew by as a short-term study abroad student at Fudan University. This pilot program was organised by the US Studies Centre at the University of Sydney, and offered to students in the Business School and Arts Faculty.

As part of the program, 17 University of Sydney students completed a four-week intensive summer school at Fudan University, which is renowned as one of China’s leading universities. Students studied a variety of courses such as Chinese Diplomacy and politics, Chinese civilisation, Chinese art, and international business. Our study schedule also included daily Mandarin lessons that catered to all experience levels, from beginners to advanced. Most students received up to 12 credit points for taking these units, and all added real value and international experience to their degree. 

Another major component of this program was a series of site visits to Chinese business, government and non-government organisations led by US Studies Centre staff. These site visits enabled our group to enjoy presentations, discussion sessions and participate in debates with professionals working in Shanghai. Highlights of this two-week schedule of visits included engaging Q&A sessions at the Australian and American Chambers of Commerce, Australian and American Consulates, eBay China, Apple and AEG entertainment group. 

It was thrilling to hear from a variety of mid- to senior level management about their experiences as expats and local people, navigating the challenges and opportunities that doing business in China entails. Another stand out experience was participating in a round-table discussion with foreign service officers at the American Consulate, and enjoying a group dinner with Bates Gill, the CEO of the US Studies Centre and world renowned US-China expert.

Life in Shanghai outside the classroom certainly lived up to our expectations. As a group and as individuals, each student in this pilot program made a huge effort to immerse themselves in the local customs, culture and food. Some of us arrived in Shanghai not knowing how to use chopsticks, and others who had previously travelled to China deepened their connection to this exciting, vibrant metropolis.

Overall, this was an incredibly rich and rewarding experience; made even more special by the close friendships we formed within the University of Sydney group, and with other international students taking the program. I have certainly returned to Sydney with a strong case of the ‘China bug’ that will hopefully lead me to return to China later in my career.

Madeline Greer
Current student at the University of Sydney Business School

Tuesday, 5 August 2014

The Importance of Leadership

Imagine it’s your first team meeting and you know well that you have to lead the team for convincing results. English is not your first language, you don’t know the demographics and psychological behaviors and you don’t even know how they react to the conversation and words at times. This is predominantly what every international student experiences while studying at the University of Sydney.

The best real life industrial management example for executing leadership in regards to the same situation is Nissan’s current CEO, Carlos Ghosn. He pulled out a remarkable turnaround which was not accomplished by adhering to conventional wisdom.

Leadership Quality
One proven way to develop effective leadership is to focus on the behaviors you expect a leader to display. Spell out these activities personally with your team. In conversations, discuss what a leader in your organisation should do - for example, act as a role model or motivate others - and describe each behavior with enough specificity to inform selection, training and evaluation. Be precise, real and action-oriented. By describing these qualities as behaviors (rather than as character traits) you’ll underscore two messages: It isn’t worth much to have an attribute that you don’t display; and if you fall short of what the best leaders do, you can still close that gap. Emphasising behavior over traits also opens the door to style differences, as long as leaders maintain the standards you’ve set.

Leadership Approach
When you manage a team of people, adapt your leadership style to meet each person’s needs. In general, there are four types of approaches: directing, coaching, supporting and delegating. Depending on the level of your team’s competence and commitment, choose which will work best. When your direct report is learning new skills, be directive. Define tasks clearly and check progress to make sure the team is not faltering. Use out of the box experiments while learning new skills, but make sure there is freedom to make mistakes and learn from them. Be supportive, encouraging highly competent employees who lack confidence. With employees who are both highly motivated and experienced, delegate tasks. In all cases, your responsibility is to find the balance between hand-holding and empowering. It’s our assignment to be able to energise others and influence them so that they all want to be around us.

One Strong  Recommendation
Group assignments are provided to work in a corporate environment at the University of Sydney. Students are prone to experience the politics, stress and develop an etiquette of learning useful managerial experiences. As a take home reward, ensure that you don’t have any personal animosities. University and your learning experiences will be what you make of it.

Shivaramakrishnan Ramamoorthy
Current student at the University of Sydney Business School
Master of Management, Master of International Management (CEMS) and Master of Commerce (Marketing)