JOHN DWYER. The folly of looking at private health insurance as a single issue rather than a policy failure .Part 1 of 2

Oct 23, 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.

In recent years a consensus on the major elements needed to restructure our health care system to make it fairer and more cost effective has been observable in the many articles on healthcare reform appearing in P and I and statements from many of the Colleges of Medicine and even the AMA. That consensus embraces a healthcare reform commission (a child of the COAG Health Council) to drive needed change, a pooling of COAG’s financial resources to create a single funder, a major investment in resourcing primary care infrastructure so that it can apply evidence-based strategies to prevent lifestyle-induced illnesses (not the government’s  “set up to fail”  “Healthcare Home” initiative which is a pale imitation of the successful “Medical Home” model I have discussed in detail here) and a resource distribution formula based on local need. At government level little of this has been accepted let alone implemented. These are the issues for government to focus on, not measures designed to protect the profits of private health insurers.

I am in complete agreement with the points made in recent contributions herein by Ian McCauley and Lesley Russell and most of the initiatives discussed recently by John Menadue, however I do think that the issues associated with private hospital care and private insurance need to be set against awareness of the current state of hospital care in Australia.

Our major public hospitals are national treasures offering very high standards of clinical care in general and emergency care in particular. The care offered is integrated with research and teaching and provides access to numerous clinical trials attempting to reverse serious disease. It remains prestigious for a doctor to have an appointment to such an institute. Only a handful of private hospitals in Australia have emergency departments backed by intensive care units. Major trauma requires the collective skills only available in a major public hospital. Over the last two decades, however, public hospitals have been struggling to keep up with the demand for their services and provide timely access for elective surgical procedures. There are two reasons for this: (1) Financial pressures have forced many hospitals to reduce their bed availability; Commonwealth support for public hospitals is at an all time low; and (2) the failure of our primary care system to stem the tsunami of Australians developing chronic and complex diseases. Patients with advanced disease pour into emergency departments and into hospital beds so that medical patients occupy some 75 % of a major public hospital beds. Frustratingly a number of studies have concluded that 600,000 or more public hospital admissions could be avoided each year with early intervention in the community. On average public hospitals have 7-11% more patients presenting to their EDs each year and these patients are older and sicker and an increase of 4-5 % in admissions is not met with appropriate budget increases. Despite the introduction to public hospitals of so-called  “Activity Based Funding” which was associated with political rhetoric such as “you do the work and we will pay you for it”, in reality public hospitals have fixed and increasingly inadequate budgets.

When I started work in a tertiary Sydney hospital in 1985, the ratio of medical to surgical patients was roughly 50:50. We welcomed young Australians on the completion of their surgical training to our rosters and the time patients needed to wait for elective surgery was reasonable. With the steady loss of surgical beds, public hospital surgeons became increasingly frustrated and slowly then rapidly took their services to private hospitals. Today 75-80% of patients in private hospitals are admitted for surgery. A few private hospitals, usually those co-located with a major public hospital, perform difficult, indeed major, surgical procedures but in most private hospitals patients need relatively minor surgery and stay but a few days. In general, reviews have found that there is no difference in the outcomes when similar procedures are performed in either the public or private system. Of course there is much of importance only available through our tertiary public hospitals. For rural and remote Australians such comparisons mean little, as they so often do not have access to private hospitals.

So public and private hospitals operate in different clinical universes and this has led to public hospitals not being able to compete, as they would wish, with private hospitals in terms of reliable and speedy access to their elective surgical services. In such a non-competitive environment, many surgeons are asking for extraordinary levels of remuneration for their services. Given all the above it is not surprising that there is no evidence to suggest that private sector hospital services are taking pressure off public hospitals. While there are constant suggestions of over-servicing in private hospitals, in general they are offering quality services that are well utilised but are inaccessible for the majority of Australians despite all tax-payers contributing to the annual 11 billion dollar support for increasingly expensive and cost ineffective private health insurance (PHI).

In any holistic examination of our Australian healthcare system one finds that the problems associated with providing timely and quality hospital services can only be addressed by reducing the demand for hospital services and its strategies to achieve that goal that should be the focus of government, health providers and consumers not the propping up of PHI. In many OECD countries restructured primary care is reducing hospital admissions by 20-40%. With that outcome, needed accessibility to hospital services is, of course, far easier to achieve. There is therefore a compelling case to redirect the taxpayer dollars supporting PHI to structural reforms that could achieve similar results in Australia. The value of such reforms will be compared to the proposed changes to PHI in part two of this discussion.

Professor John Dwyer is Emeritus Professor of Medicine UNSW and Founder of the “Australian Health Care Alliance”.

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