JOHN DWYER. What a mess! Insurance for health care, both public and private, is increasingly dysfunctional with sensible and equitable solutions held hostage by “vested interests”. PART ONE

Dec 10, 2019

We Australians have for decades now made it clear that we want  a health care system that delivers quality care in a timely manner with availability based on need not personal financial wellbeing. Increasingly it is obvious to all that the system should  better fund programs to prevent illness not just treat it.These are the principles we wish to see Medicare embrace and we are willing to have our tax-dollars pay for the benefits.

That too many of the above aspirations remain aspirational is a matter for regret and redressing. We have lived for too long with the reality that Australians with private health insurance (PHI) have more timely access to many surgical procedures. When it comes to Primary Care, particularly services supplied to us by our GPs, we have said, “no” to private health funds paying for general practice care; a two tiered system with better care for those with PHI is totally unacceptable. That possibility, however is being considered In the current turmoil surrounding the viability of PHI; here is the background.

The private health insurance industry in Australia is said to be trapped in a “death spiral” as more and more Australians are rejecting PHI as it is just too expensive. It its hardly in the throes of death however with profits of about 1.3 billion dollars per year. In addition, and frankly disgracefully, it operates from a sheltered workshop subsidised by 11 billion tax-payer dollars. Despite overheads that scream inefficiency and dwarf the administrative costs of Medicare and the fact that the industry is massively over supplied with insurers (38 at last count), the industry want an extra billion of our dollars to remain viable.

There has been a lot of publicity lately about the pressure on payouts required for those using insurance because greedy specialists (particularly surgeons) are charging huge fees for their skills. I agree that  the fees required by some surgeons are unconscionable. The government, through its “Medical Benefits Schedule” suggests what it feels is a reasonable fee for a particular problem. For surgical services provided in a private hospital Medicare will pay 75% of that schedule. Only 25% of doctors charge the scheduled fee which is indeed inadequate. Two-thirds of doctors charge 50% more than the schedule suggests but about 7% charge three times the schedule fee or even more. Private health insurers are under constant pressure to pay more of the fee charged by a specialist doctor for care given in a private hospital but as doctors can charge what they like and insurers won’t pay for exorbitant fees, patients are increasingly being forced to pay larger and larger “gap” payments. This is really a much bigger problem for the insured rather than the insurer!

While reigning in the medical “cowboys” who charge inordinate fees is important, the real pressure on PHI is associated with an even more expensive problem that gets little air time. Currently the percentage of Australians paying for health insurance is falling rapidly. Last year the number of people under 65 with PHI fell by 125,000 while the number older than 65 with insurance increased by 63,000. More and more of those 65+ policy holders are using that insurance. Under our community rating scheme Insurers can’t withhold insurance because of existing medical problems.They now have to live with a situation where 5% of those they insure utilise 50-55% of their available funds. Such patients are older, with chronic medical problems requiring multiple and lengthy hospital admissions each year. The insurers feel trapped as the services provided to these  patients in the community and paid for by Medicare are not preventing all these admissions to hospitals. Private insurers are not permitted to pay for services offered by Medicare. Over a period where wages increased by 8% the cost of PHI increased by 30%. If the admissions for the cohort described above could be significantly reduced, the Insurers say they could reduce premiums, an essential outcome if the industry is to survive,

In reality our public hospitals are faced with a similar problem which brings into focus the major weakness in our health system. Our lack of attention to the prevention of chronic disease through a failure to provide the infrastructure in our primary care system needed to halt the tsunami of Australians developing life stye related illness, is disgraceful. Internationally we are much criticised for this failing. We have a doctor centric health system focussed on managing sickness with a population whose health literacy is the lowest among OECD countries. The flow on effect from this inadequacy is responsible for the problems faced by our public hospitals ( 650,000+ avoidable admissions per year) and private health insurers. We live longer than previous generations (though recent data suggests that increase in longevity may be reversing) but for far too many of us the last 20 years of life is blighted by multiple chronic medical problems that rob those years of quality. Over my career this has resulted in our public hospitals needing to admit more and more medical patients reducing the number of beds available to meet, in a timely fashion, the legitimate demand for surgical services.

Older Australians, loosing confidence in the public system being available to help them should they need surgery, have turned to PHI even when that has entailed much financial hardship. Both private insurers and our pubic hospitals need to reduce medical admissions but have no levers to pull to change this situation. In the wretched, unique, jurisdictional division of responsibilities that blight Australia’s heath care system, the Commonwealth holds these levers as it is responsible for out of hospital care.

To continue the story and address recent suggestions/developments we need to first visit GP land. Australian GPs are specialists who undergo rigorous training in general/family medicine which is no less demanding than that required to become a surgeon or specialist physician. However they are not paid nearly as much as other specialists for an equally skilled and responsible service. Basically Medicare will pay GPs about $38.00 for a short (6 minute) routine consultation and $72.00 for a 40 minute consultation with a patient with complex needs. Most GPs don’t charge patients an additional sum ( bulk billing). GP’s time is consumed by caring for patients with acute problems or those with chronic disease. A visit to a home means losing money so inadequate is the payment for such care. Bureaucratic demands and other paper work consume much of their time and their clinical skills are not fully utilised in a system where patients expect most of their problems to result in a referral to a “real” specialist.

With this background and the problem PHI has in paying for “frequent flyers”,has come a suggestion that at first glance may seem reasonable but, on analysis, can be seen to threaten equity in our health care system. Private Healthcare Australia’s CEO Rachael David, is arguing as follows. GPs, particularly those working for corporate entities are favouring short consultations as they can make much more from a series of short consultations rather than 40 minute ones. (I know of no evidence that sup[ports the contention that inappropriately short consultation times are common). She suggests that if patients with PHI could use that insurance to pay GPs more than the Medicare rebate for 40 minute consultations they would do a better job of managing patients with multiple chronic problems. This may lead to fewer admissions to private hospitals and reduce cost for insurers.

The introduction of a two tiered system for Primary Care delivery would further threaten the equity we seek in healthcare delivery.  We must never accept a situation where a patient with a chronic and complex condition would receive care that was inferior to that offered to a patient with the same problems but is privately insured .Patients with PHI visiting their GP and paying more would expect more and financial incentives could see practices providing preferential care to the insured. This would seriously undermine the concept that all Australians have universal health care provided by the insurer they pay-“Medicare”. There are far more cost-effective and equitable strategies that we should use to address our current problems. These and Minister Hunt’s exploration of the idea of allowing PHI to pay for specialists service out of hospital, will be explored in part two of this series.

John Dwyer is an Emeritus Professor of Medicine at UNSW and founder of the Australian Healthcare Reform Alliance


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