2GB Money News program interview with Dr Rachel David on rising private health insurance premiums

Station: 2GB
Program: Money News
Date: 16/7/2019
Time: 7:10 PM
Compere: John Stanley
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


JOHN STANLEY: Private health insurance – you almost feel like we’re going around in circles on this because in terms of private health insurance, we know premiums have been rising. Now there has been some progress on that front. But private health insurance premiums have been rising. We know, and there’s a report from the Grattan Institute today, which is suggesting that younger people are dropping out of private health insurance. We know we’ve got an ageing population. We know that if people drop out, logically it’s going to be very difficult for the funds to continue to keep premiums in check. So how do we deal with all of this because ultimately you’ve got to go to the heart of it and say who’s charging what; how do we make it more cost effective so when you take out private health cover, you don’t find yourself with all these extra costs and rising premiums and not getting the value that you’re looking for.

Dr Rachel David is the Chief Executive Officer of Private Healthcare Australia, the umbrella body for private health cover. And she’s got some interesting points on all of this which we want to go through right now.

Doctor, good evening to you.

JOHN STANLEY: Look, we’ve gone around in circles in this a lot and there’s talk today about more inquiries. But I’ve looked at your response. You’ve detailed a few things which go to the costs. So when we pay for private health insurance and then we get the bills, within those bills you say there are costs that could be significantly reduced.
RACHEL DAVID: Absolutely and we don’t need any more inquiries, we know what the problems are here. And the report from the Grattan Institute didn’t offer any new information about what are the issues with private health – it’s the same as the issues for the whole health system. We have known for years that there was a large population – the Baby Boom population – that were going to hit 55, they’re going to live longer, and they’re going to require more surgical treatment and more medical treatment over those years. And the population that’s followed that, the working population was going to either need to pay more to their taxes and health fund premiums to fund the system, or we were going to need to find another way. That is not news, that is something the government and the sector has known for years.

So what do we need to do? If we need to maintain the community rating system that we have now for health insurance, that means that you pay the same premium regardless of whether you’re well or sick, we can only do one of two things – take costs out that are unnecessary or increase the subsidy, the private health insurance rebate, for lower income earnings. And that’s a rebate that used to be 30 per cent of the premium, but has been frozen by the government as a budget measure for some years. So there are the two options; we’ve given the Government some suggestion about areas where we could take some costs out and not impact consumers. They’ve acted on some of them but there’s a long way to go I think in terms of keeping [indistinct] on premiums.

JOHN STANLEY: Look, I saw today a typical one – someone who’s quite well known and was on social media talking about a couple of- I mean they’ve had cancer, very serious, and they’ve talked about brain surgery, a series of radiation treatment, all sorts of various treatments they’ve had to have. They say they have top private health cover and yet they are many tens of thousands of dollars out of pocket. So having paid the top health cover, having got very sick, this person is now many tens of thousand dollars out of pocket, above what they’ve paid in private health cover. Is that the way it should work?
RACHEL DAVID: Absolutely not and that’s a disgrace really that that should happen.
JOHN STANLEY: [Interrupts] So where’s that money going?
RACHEL DAVID: Look, overall, private health insurance does exactly what it says it does. It covers the cost of hospital treatment, but what it can’t cover is individual doctor’s bills. We can’t cover, by law, the doctor’s bills which occur out of hospital. And for in hospital, we can cover their bill, but they in fact, on top of that can charge whatever they like – they have the constitutional right to do that. So we very strongly advise people, a number of doctors we pay them above the MBS schedule fee to participate in the health fund gap cover scheme, but not all of them choose to do so. There are some doctors that operate in very high income areas, it might be a celebrity in their field that charge more, but people need to have the choice. They need to know in advance who’s good and who charges high amounts and it’s not always the same people and- but I do believe the Federal Government is taking some action in this area that is going to commence very soon which is a website that people and GPs can use to navigate their way to a lower cost provider …
JOHN STANLEY: [Interrupts] Yeah. But lower cost- but you’ll still be- you know, you can get very, very sick and you can be thousands of dollars out of pocket, but if you’re going as a public patient, you wouldn’t have any cost, would you?
RACHEL DAVID: That’s right. But in the public system there are a couple of issues. The first is there is a wait time for pretty much everything and sometimes if it’s deemed non-urgent and that can be quite a long time. And you might say: oh well, non-urgent maybe that means you need to wait. But if you’re going blind and you need cataract surgery, the wait time for that in some areas is three years, you know, I mean that is not what an individual would consider non-urgent. So that’s the first issue …
JOHN STANLEY: [Interrupts] But then the person pays the private health insurance premiums and then has to pay extra on top and so what they would figure is we’re paying the premiums so we should be able to get the faster treatment, then you’ve got to pay that extra money on top of that.
RACHEL DAVID: For- you know, for the doctor and to be fair, more than half of hospital treatment that is provided by doctors is provided without a gap. But for those people who are unlucky enough to live in a high income area, or I mean an area where there’s not a lot of competition between medical specialists, they can be slugged. And we know that there’s no relationship between the size of the gap and the quality of the doctor …
JOHN STANLEY: [Interrupts] So if there’s a hospital sits between a really high income area and an area where you might describe it as more, you know, lower socioeconomic area, that you’re going to be paying more because doctors can charge the people on the other side of the hospital for a lot?
RACHEL DAVID: Yeah. Well unfortunately, we’ve got some very clear data that shows that that’s the case and that’s why people need to, at this point, before the Government has had a chance to act in this area and I know that Minister Hunt has pledged that he will do something in this area. But while that happens, if people do need to go into hospital for surgery and they’re worried about cost, they need to discuss it with their health fund and their GP, explain that money is an issue and not be ashamed to do that. You know, that’s something we need to take on as consumers and informed consumers and ask for a lower cost option that’s just as good because there’s usually one available.
JOHN STANLEY: Alright. What about – I mean I see some of the references that you’ve made to things like prosthetics and things like some of the equipment where you say there’s red tape that prevents hospitals and doctors from acquiring this stuff, and some of these prosthetics to be brought into the country at significantly cheaper prices. Is that correct?
RACHEL DAVID: Yeah. Look, that’s right. Unfortunately, even after the government has started a reform process in this area, we’re still paying world record prices for medical devices in this country. It’s a problem in the public sector but it’s a far greater problem in the private sector where …
JOHN STANLEY: [Interrupts] World record prices, that’s right across the Western world, we’re paying more?
RACHEL DAVID: Yeah. Look, that is right. There have been some reductions but like I’ll give one example and that’s the- a very common implant that’s used all over Australia as a cardiac stent. So if you have a blockage in one of your heart arteries, you get a stent or a little piece of – a little wire cage put inside the artery. It’s very old technology, it’s been around for decades and we pay, at the moment, like for like, so it’s exactly the same product five times as much in this country as New Zealand.
JOHN STANLEY: As New Zealand? Alright.
RACHEL DAVID: As New Zealand. And you know, and this is a product that has been used for decades.
RACHEL DAVID: It’s used all around the world. So we have a major issue still in this area.
JOHN STANLEY: And the government could fix that? The government could fix that you’re saying? Or is it a regulatory thing?
RACHEL DAVID: Yeah. Look, I mean the government- unfortunately, the government needs to fix that because it’s the government that regulates the prices.
RACHEL DAVID: So it’s not actually a free market in this area. And what we’ve asked is that we move to a national procurement scheme for medical devices.
JOHN STANLEY: Okay. Look, we’re not going to solve it in a couple of minutes because I think telephone book-sized reports have been produced on all of this stuff in the past and it’s a very big issue.
RACHEL DAVID: Absolutely.
JOHN STANLEY: I’ve got a board of people who want to talk about this. So I’ll take these calls and I appreciate your time tonight.
RACHEL DAVID: Thank you.
JOHN STANLEY: Let’s see if we can get this thing sorted. It’s really in the hands of the Health Minister, isn’t it? You got to do something now.
RACHEL DAVID: Well, it is. But we’re very happy to help.
JOHN STANLEY: Okay. Alright. Dr Rachel David from Private Healthcare Australia.
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