ABC News Breakfast program interview with Dr Rachel David regarding State of the Health Funds Report

Station: ABC NEWS
Program: Breakfast
Date: 6/03/2018
Time: 8:17 AM
Compere: Glen Bartholomew
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


GLEN BARTHOLOMEW: Well, that view – can do better – seems to apply to many Australians when they think about their health insurance. Complaints to the Private Health Insurance Ombudsman have risen by 30 per cent to reach a record high in 2016, ’17. The State of the Health Funds Report shows there were 5750 complaints over a range of issues from incorrect direct debiting to hospital exclusions.

What does the industry say about that? Let’s get a response from Dr Rachel David, chief executive of Private Healthcare Australia that represents the funds. Good morning.

RACHEL DAVID: Morning, Glen.
GLEN BARTHOLOMEW: Many Australians obviously frustrated by the service they’re getting from their private health insurer. What do you say to them?
RACHEL DAVID: Well look, we work very closely with the Health Insurance Ombudsman, in addressing consumer complaints. Even one complaint to the Ombudsman needs to be addressed because we need to make sure that people, many of whom have been members for a long time, are actually getting value from the sector. But we do need to be clear, this level of complaints that is described as a record level of complaints is of a very low base. There are, probably of all the policies, only 0.09 per cent of them ended up in a complaint, and this is off the back of millions of transactions every year. So, while we are very concerned about any rise in complaints, we need to be clear that this is not the majority of health fund members that we’re talking about.
GLEN BARTHOLOMEW: But that said, there are still obviously 5700 people who don’t think they’re getting a good response or value for money. You say you’re working with the Ombudsman but what’s the result of that work, what are you doing to make sure customers get a better deal?
RACHEL DAVID: Look, we’ve invested a lot in a process that we’re in with the Federal Government about reforming the way that consumers choose and use their health insurance. The system has become incredibly complex over the last few years, in some respects that’s due to the fact that healthcare itself has become more complex but also as consumers have demanded more affordable products, health funds have been trying to meet that need by introducing products with exclusions and certain restrictions on cover that has made it quite difficult for consumers to navigate the system. We’ve now made a considerable investment in addressing that with the Federal Government by pairing products into the gold, silver, bronze, and basic tiers so people can more easily choose a policy based on their life stage. The second thing we’re doing is ensuring that medical treatment areas are clearly defined so that there’s no incentives to slice and dice into areas and, say, cover part of air, nose, and throat surgery and not the whole thing. So, we’re doing that and making sure that we communicate to consumers what’s included in their cover in a more comprehensive way.
GLEN BARTHOLOMEW: That does sound like a concession you haven’t been communicating those changes successfully in the past. Those increasing gap fees and the number of exclusions were indeed two key complaints, asking for the industry to do more to make people feel they’re getting a fair deal. Not surprisingly when people pay more as the fees go up, and the premiums go up, and the services contract, they don’t think that makes a lot of sense. Why are we paying more and getting less?
RACHEL DAVID: Well, actually that’s not true. The only reason that premiums are going up – and this is very clearly demonstrated in industry data – is that health funds are paying for more healthcare. So, last year alone, there were 25,000 more admissions for chemotherapy, 5000 more admissions for serious mental health conditions, 13,000 more admissions for stroke, just to mention a few key areas that are top of mind.
GLEN BARTHOLOMEW: A lot of the private health insurance companies are in really good health economically, though, their profit reports in recent weeks even, are pretty healthy indeed.
RACHEL DAVID: Well look, in terms of profits, the health fund net margins, or net profits, on average have remained absolutely stable – between 5 and 6 per cent – over the last 15 years. There was one health fund in the last reporting season that had, as a result of good investments, made a good before tax profit, and they immediately took steps to return that to members in a $20 million loyalty bonus. So, there’s really no evidence that health funds are stockpiling a pot of gold somewhere for their own purposes. Eighty-six cents in every dollar of premium income invested by consumers in the health fund is returned to them in benefits. So, we need to be clear that while every complaint is of concern to the health funds and will be pursued, and an attempt made to resolve it, the reasons premiums are going up is because more services are being provided, not less.
GLEN BARTHOLOMEW: Premiums for private health insurance rising about 70 per cent over the past decade, that’s not going to reverse, that trend, any time soon, is it?
RACHEL DAVID: Well look, what we’re seeing is a large population, the baby boom population, reaching an age where they’re using a large number of health services. And that’s been reflected in the cost of public health. Public hospitals have received a 6.5 per cent increase in the latest agreement until 2023. And it’s been reflected in the heavy use of elective or non-emergency surgery, and mental health services in private hospitals. And that’s what we’re seeing coming through the system. That does make it difficult to put downward pressure on premiums but it’s not impossible …
RACHEL DAVID: … As we’ve seen from the work that we’ve done with the Federal Government in controlling some prices, like the high costs of medical technology in Australia.
GLEN BARTHOLOMEW: We’ll look forward to you continuing to work with the Ombudsman, and trying to resolve some of those 5700 complaints. Thanks for joining us this morning.
RACHEL DAVID: Thanks, Glen.
GLEN BARTHOLOMEW: Dr Rachel David, the chief executive of Private Healthcare Australia.
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