5AA Mornings program interview with Dr Rachel David regarding private health insurance

Station: 5AA
Program: Mornings
Date: 26/02/2018
Time: 10:06 AM
Compere: Leon Byner
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


LEON BYNER: Now, there’s a story that emerged yesterday that I reckon would have peaked a lot of people’s interest with regards to private health insurance. Personally, I’m glad I took it out a long time ago and I think you’d understand why. But South Australians according to – and this came out of Labor, right? – Federal Labor, South Australians paid $249 million more for private health than they got back in benefits. South Australians with private health insurance charged SA residents – well, the funds did – $1.75 billion for hospital and extras insurance, paid out 1.5 in benefits.

Now, Labor is using these figures to push for a 2 per cent cap on premium increases but the private healthcare industry says the latest crack at the private health insurance industry only confirms that health funds were paying the highest percentage of premium back to customers of all insurance types. Now, I don’t know how that kind of answers the question because the claim is that more has been paid out than was got back.

So, let’s talk to the chief executive of the Private Healthcare Australia, Dr Rachel David. Rachel, thanks for joining us today. So …

RACHEL DAVID: Morning, Leon.
LEON BYNER: … Just explain this, would you? Because the data that Labor are putting out is that South Australians with private health insurance pay $249 mil more in premiums than they got back. But you’re saying this proves that we’re paying- or you’re paying – the highest percentage of premium back to customers. Now, how does that work?
RACHEL DAVID: Well look, if you compare private health insurance to all other types of insurance, we pay back 86 cents to customers of every dollar that they’re putting in in premiums. If you compare that to, say, general insurance, they only get over a lifetime, 64 cents back. So, all we’re saying is it’s an extremely worthwhile investment given what we actually give back in terms of healthcare. Now, no one likes to see premiums go up but the only reason that premiums are going up is because health funds pay for more healthcare as more people are using it.
LEON BYNER: So, you don’t deny that health insurance is paying- that people that insure, they’re paying out more than they’re getting back, you don’t deny that, you’re just saying that if you compare it to other insurance …
RACHEL DAVID: Absolutely not. So, for every type of insurance business, they will always keep a little bit back because you’ve got to do a few things. You’ve got to manage the business, and you need to keep what the regulators call prudential reserves, which is some money in reserve in case of an unexpected run on claims. And that’s to keep the business safe in future because the worst thing would be if people had paid into their health insurance for years and years, something happens and the fund goes out of business. So, that’s regulated by a government agency – APRA – to make sure that members’ funds are safe, so that there is some money kept back for credential reserves.
LEON BYNER: Alright. I get a lot of feedback from callers about private health. And I want to ask you a few general questions, alright?
LEON BYNER: One of the big complaints is: I pay this big premium per month, and then when I come to have a procedure, I’ve got these out of pocket expenses, why aren’t I covered? Is it because they’re on a tier or a level that’s not what it should be, or is it that they’re in an insurance issue where they’re actually in the wrong tier and they didn’t know? Which is it?
RACHEL DAVID: Well look, for the most part, out of pocket costs are due to the medical expenses. If people have taken out a product where they have not got a lot of insurance, not got the right level of insurance, at the point of taking that out, it should be explained that there’s an excess or there is secondly a waiting period during which if they did get treatment, they might need to pay some more. Now, we’re working on ways of making that much clearer to people at the time they buy health insurance.
LEON BYNER: But shouldn’t you already be doing that now. I mean, there’s been so much advertising out there that when you do a policy, you should know what you’re covered for, shouldn’t you?
RACHEL DAVID: Absolutely. And I think that if people are not sure, they need to look at their health fund’s website and contact their health fund to make sure that if they believe they will need treatment in the near future that they are fully covered. You also mentioned out of pocket, which can be due to other things, particularly medical expenses. And I think it’s important to mention that for if people see a specialist outside of a hospital, health funds are not allowed to cover for the gap for that service. So, if it’s outside a hospital, and they will need to pay a gap, and they need to ask their GP before they’re referred, whether that’s like to be charged or not.
LEON BYNER: Now, the thing I’m talking about here is where you go for a procedure, you think: oh I’m fully covered, I’m on the top tier – then you get a bill.
RACHEL DAVID: Yes. And that can be due to a couple of things. But if it’s in hospital treatment, you absolutely need to ask the doctor before you have the treatment, what the out of pockets for the medical treatment are likely to be. So, that can be for the surgeon, the anaesthetist, or an assistant surgeon, and they need to give you a quote in advance.

What we’re working on with the Government at the moment is a mechanism whereby before a patient’s referred – so at the GP level – people can get an idea of what the charges are of different doctors, because not all doctors in all cities charge out of pocket, and it’s important that consumers get the message that they do have a choice and that there are doctors who may be able to provide the service.

LEON BYNER: Alright. Let’s say Josh Smith checks his health and he thinks: hang on, I’m on the wrong tier. I want to go up a level, because I’m going to have an operation. He’s already insured, but he’s on a tier that he thought would cover him but he’s not. Does he have a qualifying waiting period?
RACHEL DAVID: At this point, it’s possible there might be some limitations on benefits if he chooses to increase his insurance, but he absolutely needs to talk to the health fund about how long that will last for. So, if you do choose to upgrade your cover, it depends on what health fund you’re with and what level you’re going to as to whether there will be out of pockets, but you need to talk to the fund about that.
LEON BYNER: Hypothetically, let’s say a patient is a little bit aware, and he or she says: right, I want to build the coverage for things I reckon I’m going to need, and they pick out eight or nine things. Why can’t they do that, put that to the insurance company and say: what will you charge to cover me for this?
RACHEL DAVID: Well look, to an extent, that happens already. There is a basic level of cover for people that are generally healthy, and they want to enter into a fund so that they don’t need to pay the lifetime loading as they get older, and by and large those people do trade up and increase their health insurance over time. There are also products which have much more value in them. So you know, you do get no out of pocket cover for a number of procedures, but they’re obviously more expensive at the top end of things.

Now, some people often ask us, can we make cover completely bespoke for our needs and pick out a series of things which meet our needs? Unfortunately, we can’t do that completely, because of the community rating system which means that we cannot increase premiums or decrease premiums based on someone’s health status, and that does restrict what funds are able to do.

LEON BYNER: Alright. You’re familiar with the Da Vinci machine, aren’t you?
LEON BYNER: Okay. Why won’t funds cover that?
RACHEL DAVID: Well, health funds are really obliged to cover things whereby there’s strong evidence for their effectiveness, and if we were to cover everything, every new device that came onto the market without having that evidence, that would put really, really high upward pressure on premiums.
LEON BYNER: I have to catch you there. As far as I know, the Da Vinci, according to doctors that I talk to, is very effective. Let’s just deal with that in itself. I mean, I know what you’re saying. You could argue the same for drugs on the PBS. So, are you telling us that the Da Vinci machine isn’t proven?
RACHEL DAVID: What the Da Vinci machine is is a surgical assist device which uses robotic arms for surgery, particularly for prostate cancer and surgery in the pelvis. In terms of its ability to assist surgeons, it has a lot of support from medical specialists which I’m not going to debate, but when it comes to the outcomes for patients, in terms of how their cancer progresses, there is no evidence that using a Da Vinci machine is better or worse than traditional surgery. So until health funds get access to that evidence – and the same goes for the Government, whether it be MBS processes and procedures which also don’t fully cover the Da Vinci robot – until that evidence is produced, it’s not possible to cover the full cost of using that device.
LEON BYNER: Now, one last question. If you want to make sure as a patient that you’ve got the right coverage, how do you do it?
RACHEL DAVID: The most important thing is firstly to look at what you can afford and then to assess what your health needs are likely to be. So if you’re young, your health needs are going to be around things like sporting injuries, mental health and pregnancy. If you’re older, there are a range of things to do with joint replacements, lens replacements and cardiac conditions that you’ll need your health insurance for. So thinking about your health needs and what you can afford is most important, and then I’d recommend going to a site called privatehealth.gov.au, which is a government-backed site which helps you compare health fund products. And after that, when you’ve got an idea about what’s available, call the health fund to doubly check what it is that you’re buying and that it actually meets your needs.
LEON BYNER: Alright. Look, Rachel David, thank you for joining us today.

Couple of things there that have been said which I suspect will get a response, not the least of which the Da Vinci machine. But just giving you some ideas as to where the health funds are going in their thinking. But look, it’s like anything else, when you get insurance – household and contents: similar principle. Understand what you’re actually buying, because you don’t want this: oh, no, we don’t cover that. Oh, that was rain. It needed to come in from the other side, or the ground. So you don’t want that, do you, especially in your health. So, the best time to negotiate is when you’re paying the premium.

* * END * *