JOHN DWYER. The folly of looking at private health insurance as a single issue . Part 2 of2Oct 24, 2017
So “Private Health insurance is in the DNA” of the Coalition government we hear from Minister Hunt. That may well be the case but there is no evidence to suggest that the delivery of equitable, quality health care to all Australians is so programmed. Indeed many have commented that the recent focus on private health insurance and the need for younger Australians to embrace a very poor deal is couched in rhetoric which suggests that Private Hospital care is better than Public Hospital care and, in any case, the public hospital system may not be there for you when you need it.
The recent attempt by the Coalition to make Private Health Insurance (PHI) more attractive, as mass desertion of the steadily more expensive products on offer puts at risk the handsome profits insurers are used to, involves a few worthwhile initiatives. Reducing the exorbitant costs the private sector pays for prosthetic devices is welcome, as is the decision to withdraw taxpayer support for 18 “alternative” modalities which our National Health and Medical Research Council determined were not associated with any credible evidence of effectiveness. The amount of money to be saved is not inconsiderable (more than 30 million dollars a year) but more important could be the signal this change sends to Australians on the need to examine the evidence base for any care they are offered.
The “Carrots” on offer to younger Australians to encourage them to stick with PHI are unlikely to be effective. The small discount on premiums and better access to mental health services are unlikely to resonate with the young and healthy. The better coverage of mental health services provided by private hospitals is still patchy and limited and requires top cover premiums. There remain only two logical reasons to hold PHI. For some the cost of insurance is less that the penalty non-participation generates in the form of the Medicare Levy. This is changing as the premiums are increasing so steadily. Incredibly in the plans announced by the Minister, there is no restriction on the continued offer of “Junk” policies that might avoid the Medicare levy but offer no private hospital care!
Australians who are at considerable risk of needing elective surgical procedures and are concerned that public hospitals may not be able to meet their needs are naturally attracted to PHI. Those in this category will be older Australians and likely to actually use private hospital care. Politicians often note the popularity of PHI with pensioners. In fact it is a sad reality that many older people, with very limited financial resources, need to forgo a more comfortable old age as they feel they must hold private insurance. Finally we hear from industry representatives that the proposed changes are likely to see a reduction in the annual increase in the costs of continued insurance. Not 5% next year but something as low as 4.1 to 4.2 %; big deal.
What is little appreciated is the fact that insurers and public hospitals share the imperative of reducing the number of seriously ill medical patients requiring repeated admissions to hospital. While most patients in private hospitals have surgical requirements, 50-60% of the funds spent by insurers covers just 5-10% of those they insure who have chronic and complex incurable medical problems, often requiring multiple admissions in any one year. All the above surely suggests that the status quo is unacceptable and that evidence-based structural reforms that would address the worsening problems should be a priority for government and community.
There would be no need for any tax dollars to support a private health system if the government could meet its obligations to provide quality, readily accessible care to all Australians within a taxpayer-funded National Health Scheme. There is little doubt that this could be achieved with the current expenditure of about 10.5% of GDP if we really embraced the structural reforms discussed in the first part of this discussion. In the current climate, where political rather than policy considerations dominate, the following is a bit like dreaming about what one would do if one won the lottery, however we would-be reformists need to discuss and debate detailed policy initiatives that would strengthen our case for change.
What could we do with the almost 11 billion dollars we spend to support PHI that wring much more health from every dollar? Let’s look at how that could be used to provide primary care in Australia with the infrastructure that would reduce the burden to individuals and society associated with lifestyle-related chronic disease and the associated need for hospital admissions. Reduction in our dependency on so much expensive hospital care is the key to sustainable quality and equitable health care.
We spend about 19 billion dollars a year on Medicare and 7 billion of that is paid to our GPs to provide us with primary care. If we used 7 billion dollars of the money used to support PHI on the additional infrastructure GPs need to offer evidence-based prevention programs and community-based interventions to prevent hospital admissions, the dollars would provide so much more health than they currently do. The additional infrastructure needed is all about creating ‘Team medicine”. GP practices can be converted into “Medical Homes” in which patients enrol and have access to a range of health professionals working as a team to improve health literacy, to provide continuity of care for earlier recognition of problems that, if not treated, could produce chronic disease and offer care in the community to prevent avoidable admissions. The model has been shown to significantly reduce hospital admissions.
Imagine this needed scenario. COAG has pooled health dollars. A single funder is purchasing the full range of health services Australians need. The money is distributed to area health services responsible for paying for primary and hospital care. The area health services have budgets strengthened by the addition of the redirected 4 billon dollars no longer being spent on PHI, and can either pay public hospitals to open additional beds they have closed or offer a contract to private hospitals to provide specific services to “public” patients.
There is a precedent for this with State Departments of Health purchasing, from private hospitals, winter services for patients with respiratory problems. If, as seems inevitable, rates of PHI continue to fall, private hospitals may increasingly welcome such opportunities.
This model is somewhat different from the suggested Commonwealth Hospital Benefit Scheme described recently herein by John Menadue. Such a scheme, which would certainly be a better alternative to the current situation, would see a benefit paid by the Commonwealth whether one was in a public or private hospital, with additional charges in the private hospital being paid by the patient or PHI. Patients would have the choice of public or private hospital care. But that is to my mind simplistic and disregards the reality that hospitals are not all similarly resourced and nor should they be. The area health service should make sure that the hospital services they arrange for patients are based on the particular skills and services needed. Although a matter for future discussion, the evolution of better role delineation for individual hospitals – to have them operating as part of a network, not an island in an ocean of health care – is one of the major structural reforms awaiting implementation. With such integration we can all stop thinking of hospitals as either private or public.
In summary the ever-increasing problems with PHI should have us thinking about system wide structural reforms that solve entrenched problems rather than tinkering to make the unpalatable palatable.
Professor John Dwyer is Emeritus Professor of Medicine UNSW and Founder of the Australian Healthcare Reform Alliance.