5AA Mornings program interview with Dr Rachel David regarding the release of APRA data

Station: 5AA
Program: Mornings
Date: 20/11/2019
Time: 10:11 AM
Compere: Leon Byner
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


LEON BYNER: Now, yesterday morning a number of things came up thanks to a lot of information that you were sharing with us about private health insurance. The two matters that I promised I’d follow up – and there’s actually more than that this morning but we’ll get to that in a moment. First matter was that the makers of prosthetics that you end up getting in your knee or other, maybe a hip or other part of your body have said that the Health Funds are not passing on the considerable savings that have already been made from the supplier to the client via of course the health system be it public or private. There’s that issue.

The other issue is that there is a lot of advertising out there saying look, have a look at your healthy because it could be that you are insured for maternity needs for example but you may not need those, so check with your policy and you can knock those over. Callers have been saying: well Leon, that’s fine but we’ve made the inquiries and by knocking those over we are also getting rid of things we do want because they’re packaged together and you can unbundle them.

So I thought we’d better sort this out, let’s talk to the CEO of Private Healthcare Australia, Dr Rachel David. Rachel, thanks for coming on this morning.

RACHEL DAVID: Thanks Leon.
LEON BYNER: First question. The accusation by prosthetic makers that the private Health Funds are squelching on passing on savings?
RACHEL DAVID: Look, I think it’s a little bit disappointing because I think this is a bit of a distraction because of the soaring costs of medical devices that we’ve seen after an agreement with the government that the multinational manufacturers, or the overseas manufacturers made which was meant to reduce costs.
LEON BYNER: Why didn’t it?
RACHEL DAVID: Well look, the agreement was that benefits would reduce for the amount that Health Funds were obliged to pay for some devices would come down and in last year’s premium round the Health Fund passed that on in full to their customers to deliver the lowest premium increase in 17 years. And you can see that from yesterday’s results on, that were released by our credential regulator, APRA, that showed that health Fund had eaten into their margin to deliver that savings and in fact their margins had decreased by a whole percentage point or 100 basis points.

Now what happened following that agreement was to claw back the values the multi-national manufacturers drove sales of devices in other categories. So while the prices of cardiac implants like pacemakers, cataract lenses, hip and knee replacements came down the manufacturers used their sales representatives to drive the volumes, or the amount of some smaller devices like, or smaller implants like glues, sponges, tapes and so forth, so that in fact instead of the promised savings that were supposed to come through we only saved $13 million compared to the promised $250 million.

So the government in response to this has asked for a review. They’ve announced a review of the use of some of what they called general and miscellaneous items, which are some of these papers that are used in operations, surgical operations, and have asked for justification about why this is has occurred. Because there’s been a very steep increase, a 19 per cent growth in this category since the government signed the agreement which is a bit disappointing. Because if we’re going to keep premiums down every participant in the private sector needs to come to the party – not just the Health Fund, not just the hospitals, and not just the doctors but some of the suppliers of the goods that are used.

LEON BYNER: I need to ask you, and whilst it’s difficult to comment on one individual case I think there is a principle here that needs to be accessed and that is this, that at the moment – and I know there’s been discussions about possibly changing this before you get into hospital, if you have anything done that’s not included in the hospital coverage. As soon as you get admitted, we always believe and assume that whatever level of coverage you’ve got, if you’ve got hospital cover that’s it, it’s paid for.
LEON BYNER: Now, what we discovered yesterday – and I don’t know whether this is a one off or whether there is more going on here – we had a caller tell us that even though they were admitted to hospital for a procedure, their Health Fund said we’re not going to cover you because you were an outpatient even though you were admitted.
RACHEL DAVID: Look that to me, without knowing the specifics of the case, that doesn’t make sense. If the, if you’re an outpatient and you see a specialist in their room and there’s no admission form signed, then the Health Fund by law can’t cover any gap for that service. If you are admitted to hospital and you’ve passed what they call an eligibility check that shows you actually have private health insurance, and that part of the process has being done, then the health and the Medicare Benefits Schedule has been filled, then by and large the Health Fund is obliged to pay for hospital cover and in the vast majority of cases that happens.

So look this person needs to have their complaint dealt with and the first thing they need to do is get an explanation from their Health Fund. They need to call their Health Fund and if that is not satisfactory they need to call the Private Health Insurance Ombudsman which is an organisation that’s set up by the government to resolve this kind of issue and complaint when someone fallen between the cracks, and their details are available online.

LEON BYNER: I want to ask you about this one, and you will have seen and heard the advertising as we have, and that is that there’s quite a lot of funds are advertising at the moment that you may not need maternity cover and so on. But callers have been telling us – and this is not just a one off, we’ve had several of these – where they’ve done the inquiries and they’ve been told well yes, we can get rid of your maternity or pregnancy cover but it’s bundled with this, this and this so if you want to get rid of that we have to get rid of this because we can’t unbundle them. Why are we then telling people that they can have this option when clearly in many cases they can’t?
RACHEL DAVID: It can be complex and to be honest I’m not personally a fan of that kind of advertising and I think if anyone is confused about their health insurance and about choosing their health insurance their first port of call should be a website called privatehealth.gov.au which does give some better comparisons of the Health Fund product types and the different tiers – the gold, silver, bronze [indistinct]-
LEON BYNER: Are we really saying that we’re not to trust that kind of advertising?
RACHEL DAVID: Well look, it is difficult because there are always going to be some bundles of cover under our current system. If we made each Health Fund products completely bespoke for everybody who bought it, it would be hugely, prohibitively expensive for anyone who is older and probably too cheap for people who were younger. At the moment under our community rating system the costs are evened out by people buying these bundles of care. So, essentially the, you will always have some things bundled into the product that you’re buying that you might not use right away. And in fact-
LEON BYNER: [Interrupts] Because it’s misleading to be saying that to people when you know that you can’t actually do it unless you either change funds or change your plan.
RACHEL DAVID: Well that’s why I think in fact people do need to check on the government, the independent comparator[sic] site, to see whether what they’re buying is suitable for them and at the right tier. In fact in many products you don’t actually save a lot of money by excluding pregnancy cover particularly if you are older and you need other forms of top hospital cover like joint replacement and cardiac which will push you up into that high risk category.

So what I would urge people to seek, rather than responding to an ad, to seek that independent advice from privatehealth.gov.au because in fact the categories the government has introduced do make it easier to understand. And, but I would also advise people that if you are older and you think you might need joint replacement surgery, you’re at risk of heart problems or you might need eye surgery you are going to be needing that top level cover to access both procedures.

LEON BYNER: Got to ask you about this I know there is an active discussion going on between your groups – the private health insurance groups – and the government about being able, because we have a lot of callers who talk about the fact that if you go to emergency at a private hospital you’ve got $300, $400 sometimes more until the point at which you get admitted…
RACHEL DAVID: That’s right.
LEON BYNER: …and there is some discussion going on on that. Is it likely that things could change here as to what you’re allowed to cover or do you think it’ll be status quo?
RACHEL DAVID: Well look I hope so because Health Minister Greg Hunt has signalled a great interest in actually reforming this part of the legislation that’s been around since the 1970s. And in fact that regulation that excludes Health Funds from covering out of hospital hasn’t been adjusted in so long and it’s not now, it’s now not applicable to the kind of health system we have…
RACHEL DAVID: …and the kind of diseases that people have. So yes I think it probably will change but I think it’ll be in some specific areas first to see how it goes. And one of the areas that he has a laser focus on is mental health and some of the very high co-payments that people with mental health conditions are experiencing in the community and seeing if they can get those down. Also, cancer and some of the funding for out of hospital services in cancer which is lagging behind the current technology. [Indistinct]-
LEON BYNER: Just quickly, you’ve got a lot of people bailing out of private health, or not taking cover. Is this mainly younger millennials doing this?
RACHEL DAVID: It is. And I do think that as a sector we need to do more for people in that category. They can perceive, because of the amount we’re spending on older populations, that they’re paying more and getting less. And so currently we’re working with the government and the regulators on ways to make it easier for younger people to get a foothold in private health. The reason being that it’s often the only part of the sector where mental health admissions are covered and where you can get treated quickly for some of the sporting accidents and injuries that people might experience in that age group.
LEON BYNER: Rachel, thank you for joining us today. That’s the CEO of Private Health Care, Rachel David.
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