891 ABC Adelaide Interview with Dr Rachel David, CEO, Private Healthcare Australia


Station: 891 ABC Adelaide
Program: Mornings
Date: 2nd March 2016
Time: 9:07 AM
Compere: Ali Clarke

Interviewee: Dr Rachel David, CEO, Private Healthcare Australia

ALI CLARKE: It is expected to be confirmed that health fund premiums will rise by another 5.59 per cent on average as of next month. To explain this rise is Dr Rachel David, CEO of Private Healthcare Australia; they represent the majority of the private health industry. Good morning Dr David.
RACHEL DAVID: Yes good morning.
ALI CLARKE: Can you explain this rise? Plenty of people will be thinking, and looking, and sitting at home going really? More?
RACHEL DAVID: Yes look health costs are going up at rates greater than inflation, and greater than the premium rise every year. We’re seeing health costs go up eight per cent every year for hospital beds, nine per cent every year for medical specialist costs, and over ten per cent for medical devices. Now health funds can’t control those costs, but what we can do is a couple of things; firstly the Health Minister has made some terrific moves to review the regulations in our industry, and look at ways we can help keep costs down; we working with her to deliver those in the near future. And we can also work at keeping our own expenses down, and you will see that over the last ten years the management expenses of health funds have decreased dramatically from fourteen per cent some years ago to eight per cent, which is good by any industry. So we’re working hard to make sure that every dollar in the system that we can save is saved and that we don’t increase costs for consumers unnecessarily.
ALI CLARKE: Initially though the majority of providers actually reduced the initial 2016 claims though after push-back from the Health Minister. I mean does that not indicate that there’s some more wiggle room on this?
 RACHEL DAVID: The vast majority of health funds did look into their books and see if there was anything extra that they could give this year as a one off. The reason for that is that the Minister is looking at some ways to make health insurance firstly easier to understand for consumers, and also to lower costs. We did this as a sign of goodwill, but we want to work with her on this very important review of health insurance to make it better for all consumers.
ALI CLARKE: I was reading something from the Consumers Health Forum of Australia just the other day that actually said that APRA statistics in recent years showed that the gap between the premium revenue health funds receive and what they pay out in benefits has actually risen significantly, and has in fact reached an all time high they’re saying of $3.1 billion in surplus revenue. How do you answer to that?
RACHEL DAVID: Look there is- the surplus revenue is around for a few reasons, and I’ll run through them quickly. Firstly we are required to keep some surplus revenue for regulatory reasons, that’s so in the case of a catastrophic event that funds can and have the ability to pay out on claims. The second reason is that particularly for not-for-profit funds a number of them are providing services as well as providing health insurance, and that involves buildings, and employing people, and that is reflected in their capital position as well. And for some of the not-for-profit funds which don’t pay dividends and can’t easily raise money if there’s an unprecedented call on their funds, they need to keep a bit extra because if something was to happen they can’t easily raise money by going to equity markets or other sources.
ALI CLARKE: You’ve said that most people accept a reasonable increase is necessary, I mean looking at it though there has been an increase of 142 per cent since 2002. Is that really reasonable and do you think these continued rises are truly sustainable?
RACHEL DAVID: Look this is reflective of the costs in the healthcare system as a whole. It is not just for private health, it’s also for the public system, hence the discussion that we’re having about tax. So what we need to do to keep the system sustainable is to make sure there is absolutely no waste in the system, and that we are paying for things that truly benefit our members. One thing that we are looking at with the Minister is the benefits that we pay for medical devices and surgical tools. The Commonwealth Government some years ago set that benefit at very, very high rates compared to world prices, so that private patients are actually paying through their premiums between two and five times too much. We’re now looking at a process to bring those benefits down to real market price levels, and that process is going very well, and that’s something the Health Minister has championed as well as a number of other things that we’re looking at to keep costs down and keep the system sustainable.
ALI CLARKE: And given all of that though do you still accept that there will potentially be casualties who will slip through the cracks because of this front-off cost though, and also, you know, the complexity of the system?
RACHEL DAVID: Those are things that we are looking at in some detail, firstly at making the system easier for consumers to understand, and secondly what we can do to keep costs down. In spite of the premium increases every year private health insurance is a remarkably popular product, and the 47 per cent of the population, or 13 million Australians that have some form of health insurance tend to stick with it. We are going to make it easier for those people to stick with their health insurance, and really benefit from being able to have surgical procedures at a time of their choosing, a place of their choosing, and with a doctor of their choice.
 ALI CLARKE: Dr Rachel David, CEO of Private Healthcare Australia, thank you for your time this morning.
RACHEL DAVID: Thanks very much.
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