6PR Mornings Interview with Dr Rachel David on private health insurance premiums

Station: 6PR
Program: Mornings
Date: 1/08/2017
Time: 9:54 AM
Compere: Gareth Parker
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia

GARETH PARKER: There is a story in The Australian newspaper this morning that the private health insurance industry is on a track where it’s dealing with cost blowouts, it’s dealing with cost pressures, and the concern is that premiums might soon become so expensive that a whole bunch of Australians might drop their cover altogether, and that could have very serious consequences for the entire system.

The chief executive of the industry body that represents the private health insurance industry, Private Healthcare Australia, is Rachel David; she’s just stepped off a plane and I welcome her to the Morning Program.

Good morning, Rachel.
RACHEL DAVID: G’day Gareth, how are you?
GARETH PARKER: Very well, thank you. We appreciate you slotting us in. Sounds like you’ve had a busy morning.
RACHEL DAVID: My pleasure. Indeed.
GARETH PARKER: What’s the concern here? I mean, we know everyone who’s got private health insurance knows their premiums have been going up. They’ve been going up faster than inflation for what feels like a decade or so.
RACHEL DAVID: Yeah, look, the premiums are going up for two reasons. One is the costs of the health system itself are going up, and the second is that as we age and develop more chronic diseases, we’re using the health system more. Now, public hospitals are also going up in cost, but there’s less of a direct price signal to the consumers there; that’s just really reflected in our taxes, and to pay for those, people talk about things like maybe putting up the GST or the Medicare levy, but when it comes to private health, people get that very direct signal every year when premiums go up.
GARETH PARKER: So, you’re raising the alarm bell today that if this trend continues that some people are just going to drop out of the system.
RACHEL DAVID: Yeah, look, it can’t go on like that forever, and I think the Federal Government has taken some important steps in the right direction. There are a couple of things we need to look at carefully, and firstly, it’s that some of the things that health funds are obliged to pay for under federal government rules are really quite wasteful and not appropriate. We know, for example, that Australia has some of the highest medical device costs in the whole world because of federal government legislation, and we’re working with the Government to bring those prices back in line to market prices around the world. Some of the other….
GARETH PARKER: [Interrupts] Can you just explain the fine detail of that, Rachel, before we go onto some of the other things? Because it’s something that I’ve read about before, and it just seems crazy. I mean- and even to the point where private hospitals are paying almost double and triple what public hospitals do. It just seems bizarre.
RACHEL DAVID: Yeah, it is, over a decade ago, some federal government regulations were put in place to make sure that consumers got access to medical devices like hips, knees, artificial lenses, but a problem with that was the prices were fixed by the Commonwealth Government, and they were fixed at very high levels. As with all technology, the price of these things has come down around the world and we’re using more of them than ever before to the extent that now Australians are paying between two and five times too much. The Federal Government’s taken some steps to reduce those benefits, but there’s still a long way to go, and we’ve had a really good hearing from the Federal Government on that issue.
GARETH PARKER: So, progress is perhaps being made in the background on that one. What are some of the other things, Rachel?
RACHEL DAVID: Yeah. Well look, we know from the Government’s review of the Medicare Benefits Schedule there are still treatments that we’re paying for that are out of date, and care that is not as effective as it could be; there’s still a lot of waste in the system in terms of a very small number of people actually committing fraud in the private health insurance space, and there are people that for various reasons are sent to hospital when that’s the most expensive place they could be treated, and the evidence would suggest they don’t need to be treated there and would be better off getting services in the home, so we’re looking – with the Federal Government – at all of those things, and chasing every dollar of waste in the system that we possibly can to keep premiums affordable.
GARETH PARKER: So, if that doesn’t happen- I mean, look, it’s going to happen; you’re going to try and keep a lid on costs, but they have been growing much more quickly than inflation, so it follows, therefore, that premiums are going to rise. I mean, what’s the consequence if people do, in fact, start to drop their cover?
RACHEL DAVID: Well look, we know that public hospital waiting times are a sensitive issue for people, and people often don’t know until they try and access a public hospital what that waiting time will be. In some areas, it can be over a year for particular procedures, and there’s no capacity for public hospitals to take on all the non-emergency surgery and all the mental health cases that the private sector currently manages. So at the moment, private health covers about two-thirds of the non-emergency or elective surgery that goes on in Australia; that’s your routine procedures, your hips and knees that get replaced, hernia repairs, and other procedures that you book in to hospital for. Now, if people are no longer able to access private health, they’ll go on to either a public hospital waiting list or they’ll have to pay the full cost themselves, and the full cost is a lot of money: about $28,000 for a routine hip replacement.
GARETH PARKER: And obviously, if public hospital waiting lists get any longer, well, we can figure out what the consequence is there. Rachel, we are out of time. Appreciate your time on the Morning Program today.
RACHEL DAVID: Thanks Gareth.
GARETH PARKER: Okay. That’s Rachel David from Private Healthcare Australia.
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