ABC Illawarra Mornings program interview with Dr Rachel David on APRA PHI statistics

Station: ABC Illawarra
Program: Mornings
Date: 19/02/2020
Time: 10:40 AM
Compere: Nick Rheinberger
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


NICK RHEINBERGER: Let’s talk about a different aspect of health and that is health insurance. The latest figures from APRA, the Australian Prudential Regulation Authority show that overall about 9400 people dropped their private health cover in the final three months of last year. That of course translates into many more thousands of people dropping it over the year. This is quite often because they know that a price rise is coming up – usually your health insurance company will send you a letter saying well our premiums are going to rise at time X and you just [indistinct], well that’s the last straw. I’m going to take my chances with Medicare. What is the future for private health insurance in Australia?

Rachel David is with us now and she is from Private Healthcare Australia, here at ABC Illawarra. G’day Rachel, how are you going?

NICK RHEINBERGER: Nick is my name, sorry.
RACHEL DAVID: Sorry. I’m so sorry. This is the trouble when you try and answer the phone in a crowded environment and run off…
NICK RHEINBERGER: That’s alright. Tell me about your organisation, first of all, Private Healthcare Australia. What do you do?v
RACHEL DAVID: Sure. We’re a policy advocacy and research group that represents health funds in Australia. So we represent 97 per cent of the private health insurance industry.
NICK RHEINBERGER: How healthy are our health funds?
RACHEL DAVID: Well look, I think rumours of the decline and death of private health insurance have been greatly exaggerated. It’s still the main way that essential non-emergency surgery gets paid for in Australia. It’s the main way that dental services get subsidised and it’s the main way that in-patient mental health care gets subsidised. But we do have some pretty significant challenges and one of those is that the cost of health care, or the types of care that we are providing, is rising so fast ahead of inflation. And so to keep premiums down, the health funds have to work very hard to control costs. But even so, even though we’ve kept premiums to the lowest rise in 19 years, it is challenging for younger people and people on very low incomes to be able to afford health insurance, even if they really need elective surgery.
NICK RHEINBERGER: It’s not just you keeping the premiums down, are the gaps increasing? Are people having to pay more out of pocket to stay in [indistinct]?
RACHEL DAVID: Well I think in pockets of the community they are but overall, if you look at medical specialists’ prices, as the economy and wages in the economy have flattened, prices for medical out of pockets, the rise of those has flattened as well. But you’re still getting about three per cent of services out there that have been provided, which are provided in hospital, in private, where there are gaps. And the problem is when those gaps are a surprise to the customer. Most people that get really good informed financial consent in advance and they get a quote for their procedure, and they’ve said they’re happy to go ahead, are not disturbed by it. But it’s the people that are surprised by their bills that are a problem, and we’re working pretty hard with the AMA to stamp out that kind of behaviour.
NICK RHEINBERGER: This is a simple question but probably takes a complicated answer: what is the government’s role in health insurance premiums in Australia?
RACHEL DAVID: Well since 1999, they have a role in reviewing the data that’s provided to them by the prudential regulator and approving any premium rise. And that means that the fund has to have a certain amount of reserves in place and they have to-v
NICK RHEINBERGER: [Interrupts] What do reserves mean?
RACHEL DAVID: Well that means the money that they have to have in the bank, that is cash that’s available to pay out on claims, you know, if there’s an unexpected [indistinct] on claims. And that amount is set by a regulator and the government looks at that, they look at the claims over the last 12 months and the forecast claims for surgery over the next 12 months. And then they use that data to make a decision on whether the premium rise asked for by the fund is fair. And there’s always a negotiation, it can get quite difficult. But you know the government does take an active role in establishing what that price is.
NICK RHEINBERGER: As we are getting older, how is that impacting on the health insurance for those people to continue their cover as they get into their 70s, 80s or even beyond?
RACHEL DAVID: Well I think that our society is living longer and the desire of people is to spend the extra 30 years of life that we’ve gained in the last hundred years, active and having a good quality of life. And that’s meant that for people roughly between the ages of 55 and 80, at the moment, they’re now claiming for elective procedures pretty much at record levels. And a lot of those procedures involve medical implants like either in the heart to keep it going or hips, knees, lenses in their eyes. And it’s those body parts that wear out that’s responsible for a lot of the growth in costs. So it’s a challenge but it’s also a challenge for the Medicare system because if this part of the system, that drop falls over, currently the private sector’s paying for 66 per cent of this. And you know if that was to revert to public hospitals, we’re looking at tens of billions of dollars that the taxpayer would need to find to cover those costs.
NICK RHEINBERGER: Well I’m glad you mentioned implants and hip and knee replacements and that kind of thing because the argument about it is very confusing or at least it is to me. The health insurers were blaming the medical device industry for exorbitant prices on their devices. The health ministers struck a deal to lower prices, but you and your organisations, as the peak body, say they still cost too much. I mean how do we know what’s the facts here?
RACHEL DAVID: Look the data is pretty clear on what’s happened and the data is collected by an independent third party, being APRA, the prudential regulator. Traditionally Australians were always paying far too much for the devices manufactured by largely the American multinationals, but by the multinational companies …
NICK RHEINBERGER: [Interrupts] Compared to what country are we paying too much?
RACHEL DAVID: Compared to the UK, Europe, New Zealand. Pretty much the rest of the world, there are very few countries that we’re- maybe parts of the US would, you know, we’d be paying the same mount, but very few countries. We’re actually just for one of the basic heart devices that’s used – the stents that are used to unblock arteries. There’s- the stents that are available in New Zealand are a fifth of the price even now. So we’ve always had that issue and the government took the right move to intervene and in some categories, not all, they agreed a benefit reduction. Because the government sets the benefits that the health fund pays, they agreed a benefit reduction with the reps of the multinationals. But instead of actually creating a saving for health fund members, what happened was that the companies then drove sales of other widgets in other categories, so that the sales volumes increased massively to make up for the benefit reductions. So what we saw over the last 12 months was that the amount of surgery we were providing- we were paying for increased by 0.1 per cent, but the claims for medical devices in relation to those surgeries increased by 8.3 per cent, wildly out of proportion to the amount of surgery that was performed because they were driving the sales of devices to make up the difference.
NICK RHEINBERGER: Alright. Rachel David, very good to talk to you today. Thank you very much for having a chat to me.
RACHEL DAVID: Thanks Nick.
NICK RHEINBERGER: That’s Rachel David with us, Dr Rachel David that is, at ABC Illawarra, who is the chief executive of Private Healthcare Australia which represents private health funds in Australia.
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