Okay, let me try and lay it out a little clearer, and I'm going to use the PBS as a bit of an example here because it's one of the areas I take great issue with on almost every budget and think, as far as money saving goes, it's an area that can be streamlined quite beautifully with little effort compared to the cost gains it would achieve. Once that's understood I can broaden it out to how a similar method can be used with healthcare in general.
So the Pharmaceutical Benefits Scheme (PBS) is in charge of choosing and subsidising which medications the Gov't will pay for under medicare/concessions. In it's initial form, these medications were evaluated for therapeutic benefit and then approved for subsidisation, and it worked quite well. However, many years later, this has essentially become a gatekeeper style system in which anything gets shot through and the subsidisation bill goes on to the patient, as over the years they have had to constantly raise patient contribution to help make up the costs of everything that's been placed on the PBS list.
For instance, if I take a fairly common class of antihypertensives, we currently subsidise eight different types of ACEi's on our PBS. Now for 90% of the people on them, they're likely using Ramipril or Perindopril, which are these days, cheap well tested and effective. Lisinopril is better for use in pregnant women, the rest are a rare in use and usually for specialist reasons. But we subsidise ALL of them, and more or less with little need to.
In what I would propose as a fix, you would allocate one or two (depending on the class of drug) to be our first line use in therapy, and move everything else to an authority or private script. You then open out a, say five year contract on the ACEi and they're assessed on cost, efficacy, side effect profile etc. with the idea of running for the 80% population. This way pharmaceutical companies have a reason to drive prices down on their products in order to apply, so the end user gets a better price and most everyone ends up with a safe, cheap, effective medication that's needed. The other therapies are still available, but we're not longer bloating the system by having the majority of the population. For those who suffer side effects, you can give all the other ACEi's an Authority with the stipulation of "must have been intollerant to X agent" etc. so as not to limit people therapuetically, but to cut the cost to the end user.
Now our system also subsidises some very specialist drugs as well, and these therapies are available because of it. Some immunosuppressants and antineoplastics are clocking in at above $1000 a box, with the end user with a medicare card only paying $40 of it and the rest being footed by the taxpayer. Am I glad we have these therapies available? Absolutely!! But for the same money, you could treat a WHOLE lot more other people with a less rare, more treatable condition. It's not a Utilitarianism system.
Now healthcare in general is like this. Renal medicine is huge here, we have the largest dialysis center in the southern hemisphere. Now renal medicine is extremely expensive to operate, especially for a relatively small population (rounding up a good deal, I'd say about 1000 patients out here and in the surrounding area). The reason Cuba can afford such fast accessed and cheap healthcare, is because they don't have renal programs, if your kidneys fail, you'll be palliated and that's it. The resources simply aren't their to treat. So we're very lucky to have the healthcare we do in this country, where we can triage SO much into it, and have access to an amazing breadth of services...but it comes at a cost.
Where the private/public health hybrid system comes in. You have the Gov't supply the bulk healthcare, and effectively and efficiently for the 90% of cases it will encounter, and then you move more fringe treatments (which are usually expensive) into the private sector so the general populace is not left footing the bill for things the general populace wouldn't usually have to deal with.
Anyway, that's a very brief look at it.