Richard Bailey SCOTTON (1930 - 2019)

Professorial Fellow, Public Sector Management Institute & National Centre for Health Program Evaluation (1990 - 1998)

Richard Scotton

Richard (Dick) Scotton AO, who passed away on October 1, 2019 aged 88, will be remembered for his significant contribution both to Australian economics and to the Australian community.

Foundations for Medibank

While he is best known as one of the architects of Australia’s first compulsory health insurance scheme, Medibank – for which he was awarded the Order of Australia – this enduring achievement was only the culmination of his pioneering investigation of the Australian health system. In a partnership with Professor John Stewart Deeble AO, he co-authored a series of studies in the 1960s which were transformative. At the time health economics did not exist as an academic discipline and their contribution laid the foundation for its subsequent expansion into an important sub-discipline. Dick’s first book Medical Care in Australia: an Economic Diagnosis was the first to examine the sector from the perspective of an academic economist.

At the time of his partnership with John Deeble, remarkably little was known about the financing, delivery and distribution of health services in Australia. Dick and John documented, inter alia, the number of doctors in Australia, the number of Australians with no health insurance, the inadequacy of the coverage of the health insurance which did exist and the incidence of hospital and medical expenses. This led to their most important work, a proposal for compulsory national health insurance, a proposal which was adopted and promoted by the then-leader of the Labor Party, Gough Whitlam.

Both Dick and John were political economists in the original sense of the term. Both believed that economics must ultimately serve the community and, preferably, sooner rather than later. Both were conscripted by the Whitlam government to help implement Medibank, with Dick becoming the chairman of the Health Insurance Commission from 1973 to 1976. He worked closely with the minister for Social Security (and later Governor General), Bill Hayden as a special advisor.

In his autobiography, Hayden recognised the decisive roles of Dick and John, stating, “Dick Scotton and John Deeble, creators of the Medibank health insurance concept, were remarkably adept academics, endlessly bouncing new policy ideas. What’s more, they were able to develop practical working systems within which to implement the ideas.”

From Sydneysider to Melburnian

Dick was initially educated in Sydney, pursuing a career in the banking industry. However, after accepting a position as the University of Melbourne’s Institute of Applied Economic and Social Research, he became an enthusiastic Melburnian and it was the Institute that sponsored his partnership with John Deeble.

While most of his career was university-based, Dick also held senior positions in the Health Commission of Victoria and the Victorian Accident Compensation Commission. For two years, he worked in Canada, where he observed their Medicare system which was to become the model for the insurance of medical costs in Australia’s Medibank. The personal contacts established in this time were important. Dick believed that without the technical assistance from his Canadian colleagues the immense logistic complexities associated with the implementation of Medibank would have frustrated the introduction of the scheme.

Dick returned to academia as a professorial fellow, initially at the Public Sector Management Institute created at Monash University by Professor Allan Fels AO. He was decisive in persuading me to join them, and together with Chris Selby-Smith and the University of Melbourne’s David Dunt, we succeeded in attracting long-term funding which led to the creation of the now internationally recognised Centre for Health Economics at Monash Business School.

In the initial years, with myself as an inexperienced director, I relied heavily upon Dick’s advice and experience. Dick was politically astute and a good judge of character. His assessment of options and strategies were invariably thoughtful and wise. Nevertheless he was essentially a retiring person: he did not seek credit or status. He was motivated to help others, which he did to our great advantage.

The Making of Medibank

While he was at Monash, Dick had two major interests. The first was the documentation of the events which promoted and threatened the introduction of Medibank. His monumental The Making of Medibank is a fascinating insight into the vastly complex interplay of people and events which led to Australia’s most significant post-war social reform. It is a testament to the astonishing depth and breadth of Dick’s knowledge of the people and politics which were decisive in overcoming the vigorous and often vicious opposition to the scheme.

Despite his initial commitment to Medibank (later Medicare), by the 1990s Dick had concluded that it had “reached its use-by date”. Services were poorly coordinated. The fragmentation of finances and governance inhibited innovation and reform, problems which were, and are, largely independent of the introduction of Medibank/Medicare. Dick’s solution once again drew upon experience from other countries and, in particular, the Netherlands, Israel and selected comprehensive health schemes in the United States. His model of Managed Competition – often referred to as the “Scotton Plan” – envisaged the creation of private and public 'budget holders' financed, primarily, from risk-adjusted premiums paid by the government. Competition on a financially level playing field would create the dynamism which Medibank/Medicare lacked and the existence of a single payer for all services would ensure allocative efficiency and the coordination of services. The proposal was examined by the Productivity Commission in a workshop in December 2002, but, unsurprisingly, did not receive the backing of the major interest groups in the present system.

Avid pursuit of learning

After retiring in 2000, Dick refocused his interests. He developed a passion for bowls and extended his already encyclopedic interests. He is the only person I know who finished, and apparently understood, Stephen Hawking's A Brief History of Time which he tried, unsuccessfully, to explain to me. He was also unsuccessful in persuading me to read Edward Gibbon’s A History of the Decline and Fall of the Roman Empire which he considered to be one of the all-time best reads. Retirement also permitted Dick to spend more time at his holiday home in Somers and more time with his wonderful wife, June. Dick lived largely in a world of ideas. June’s support and devotion helped preserve balance and perspective on other parts of his life.

Like many, I owe an enormous debt to Dick. He was a lovely man, a good friend and an inspirational role model: someone who combined a vision for a better society with the energy and knowledge necessary to make the vision practical.

With his death, Australia lost a fine mind, but not the legacy of an innovative and generous scholar.

By Emeritus Professor Jeff Richardson. Published in The Insider, 17 October 2019.
Photo credit: Craig Cahill, The Age