2CC Summer Drive program interview with Dr Rachel David on a range of private health insurance issues

Station: 2CC
Program: Summer Drive
Date: 30/12/2019
Time: 6:41 PM
Compere: Luke Grant
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


LUKE GRANT: I want to get back to this issue of private health insurance. Research shows more than two million Australians have dropped out of their private health insurance in the past five years. This is a poll by YouGov Galaxy, 47 per cent of a thousand surveyed adults have opted out of their cover since 2014. It’s understood many young people are deserting their private cover because they aren’t getting enough out of it. Baby boomers often claim more than younger members, no surprises there. Younger Australians say the private sector is too expensive. Experts are calling on health providers to improve the value and affordability of insurance for these members.

Dr Rachel David is the CEO of Private Healthcare Australia and she joins me on the line. Rachel nice to chat again. Hope you’re well.

RACHEL DAVID: Yeah g’day Luke.
LUKE GRANT: G’day to you. If those numbers are right, there are lots of people dropping out and I imagine the leading cause is price. Is there anything in that statement that’s inaccurate?
RACHEL DAVID: No look you’re right and we are concerned obviously that a number of members do struggle to meet the costs of health insurance. But I do want to take a bit of an issue with the poll that’s been doing the rounds this morning. I mean the numbers in that are completely wrong. In fact, we’ve seen close to 400,000 people net actually join private health insurance over the last five years. So this idea that 2 million people have dropped out is garbage. But the issue is that we are overweight in terms of the older generation. We have no difficulty selling health insurance to people aged over 55. They claim a lot and younger people actually cross subsidise their claims and maybe rightly they feel that they’re paying more and getting less. So that’s the problem that we’ve actually got to solve.
LUKE GRANT: Those older people now that might be claiming more were at some point younger people who might have been claiming less. I mean isn’t that how it works?
RACHEL DAVID: Yeah well that’s right. But this has been a problem for Medicare and the private health side in that because the older- that baby boom generation where the average age is now 70 is pretty large and the expectations that they’ll keep on working and participating in society are rightfully high. It’s actually meant that the cross subsidy that younger people are paying is roughly $900 and it’s getting greater because those- the generations that follow are actually smaller. So we do need to do a little bit more to help those people get a foothold in the system but we can’t do it by taking things away from older people who might have paid into their health fund all their lives.
LUKE GRANT: Yes. What about the issue – you and I have talked about before – which is private health insurance being used to prop up the public system? Now this is not a new story as Government indicated that what’s happening there, are they happy with it? Unhappy with it? Do they intend to do something or how do we get beyond that? Because there would be people paying amongst their private health cover, an element of that, because the covers being used in the public system.
RACHEL DAVID: Yeah well look this is still a massive problem around Australia and just here in New South Wales we heard last week that you know, a whistle-blower from the Northern Beaches Hospital had been forging signatures on patients’ admission forms so that the hospital could claim against their health fund. Now whether or not that is exactly what happened or whatever, it is an endemic problem throughout Australia where people who are entitled to treatment under Medicare, presenting to emergency departments with emergency situations who are in distress are being in one way or another harassed to provide their health insurance details. And you know, and in doing so are actually paying twice for the same thing and getting no additional benefits. This pushes up premiums for everyone. So I do understand that Minister Hunt has taken issue with that, with this- with a particular incident that occurred, that allegedly occurred at Northern Beaches. But also that there has been a number of discussions with state and territory governments about the situation and the fact that it’s actually a lose-lose for everyone in the system.
LUKE GRANT: Generally, when we talk about premium increases the answer, whoever it might be, particularly a politician, will be but the increase is less than last year’s you know, how good are we? That doesn’t help with people whose cost of living seemingly goes up every year. Is it value for money? And I know the premium rise is not as bad as it might have been but does private health insurance really offer the value that people are looking for because it does cost them?
RACHEL DAVID: Well look the reason that premiums go up is put simply because the funds are paying for more health care. So for every dollar that people pay in premiums, they get 87 cents back in terms of benefits for the health fund, from the health fund which is way more than any other form of insurance. So if you look at general insurance for instance and home the contents and so forth, 60 is- the payback ratio is about 64 cents. So if you look at 87 cents is a lot higher in terms of what people get back. But the trouble is it’s not spread evenly. A younger person who has private health insurance, the reason that they claim is mainly in the mental health area and that’s the biggest issue in that cohort. But the vast majority of claims are occurring in people aged over 50 related to the condition of ageing. So joint replacements, lens replacements, eye surgery and that sort of thing. So yes it is value for money, people do get back what they put in but it’s not spread evenly and that’s why some people perceive they’re paying more and getting less. And you know as an organisation we’ve lobbied very hard to ensure we’re able to do more for younger people including a youth discount that we’ve brought in as part of health insurance reform this year.
LUKE GRANT: What do you make of Ian Burgess the CEO of the Medical Technology Association, who I think requested or paid for or funded this report today, he says that health insurers were not passing on savings from recent medical device price cuts which fell on average 14 per cent in recent years saving insurers $390 million. What do you say to those clients?
RACHEL DAVID: Well I think we need to be clear who the MTA and Mr Burgess represent. They represent for the most part the big American medical device companies that have done very well out of private health insurance in Australia for many years. To the extent that Australian people with private health insurance are paying two to five times the price for medical implants in Australia that they would charge anywhere else in the world. So for example even now, like a simple stent that- it was the little thing that people put in to stop heart disease, artery disease in the heart, in New Zealand it’s one fifth of the price that it is in Australia. So these companies have done enormously well out of Australia, they’ve made huge margins here. But very recently because of rising premiums the Government has started to place much more scrutiny on their activities and they have reduced some of the benefits they were obliging health funds to pay in some of the key areas. What the health funds passed on every dollar of those savings to consumers and were able to deliver much lower premium increases as a result both last year and this year, which is the lowest premium rise in 19 years as a result. But then what these companies did was to go ahead and drive the volume of the widget they were selling to hospitals at a much greater rate. So in fact they eliminated a lot of the savings that that could have been made. So yeah, we are in a dispute with them but these are very, very big organisations globally. They’ve done very well out of Australia up until now and sadly a lot of the profits they were making out of health funds members’ money have just gone straight to Wall Street and I think rightly the Government is cracking down on that.
LUKE GRANT: Rachel, time has got us sadly. We could talk forever on this and I’ve got callers everywhere on the issue so maybe we can talk again over the next few weeks if you’re around. But thank you for letting us interrupt your Monday, very much indeed. Great to chat.
RACHEL DAVID: It’s my pleasure. Thanks Luke.
LUKE GRANT: Thank you very much indeed.
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