ABC Radio Sydney Focus interview with Dr Rachel David on changes to the health insurance system from 1 April 2019

Station: ABC Radio Sydney
Program: Focus
Date: 27/3/2019
Time: 10:35 AM
Compere: Cassie McCullagh
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


CASSIE MCCULLAGH: If you’ve just joined us, we’re talking about this healthcare system overhaul that’s coming into effect on Monday. From the first of April, there are going to be changes to the health insurance system, which will now see policies fall into four different categories: gold, silver, bronze and basic and then there’ll be some other categories where you could be silver plus for example, with different services added in if you want a policy like that. It’s meant to make things simpler, perhaps it is and perhaps there’s some good things in it as we’re hearing. And perhaps there are a few points of confusion and maybe some downsides.

Let’s get to Dr Rachel David who has been waiting very patiently and listening to this conversation. She’s the Chief Executive of Private Health Care Australia. Good morning, Rachel.

RACHEL DAVID: Good morning, Cassie.
CASSIE MCCULLAGH: Thanks for being there for us. Now, it’s interesting to hear some of the themes that have been emerging from our discussion and it seems that people are particularly curious about some aspects of the system. How does the- this was brought to us by the government, how does the private health sector see it?
RACHEL DAVID: I do want to explain this and really challenge a couple of things that were raised earlier in this discussion. And the first is that private health insurance is not value for money. We heard Leslie Russell say that it was not value for money. Both ourselves and the federal government keep very strong tabs on this; we’ve interviewed tens of thousands of consumers every year over a 20-year period and what we do know is 80 per cent of people or more than 80 per cent of people, who do have private health insurance, do find it value for money, particularly in terms of avoiding waiting lists or very large hospital costs.

And also having their doctor of choice who’s fully responsible for their care and fully trained and not say a shift worker every day. They’ve got someone who they can call on 24/7, which is very important to some folks.

So that is why the federal government introduced these reforms and it wasn’t a snap decision or something pushed by the private health insurance industry as we heard earlier as well. These reforms were developed based on intensive research over a two and a half-year period and it arose out of a committee of experts and leaders from the private health sector, which included doctors, the people that run private hospitals, public hospitals, consumers, more than one consumer group was involved, aged care, Allied Health and the AMA and medical groups. And in fact, even the CHOICE organisation was involved in some of the input into the consumer information.

So by no means was the process dominated by health funds. But we did see that there was a need to help consumers understand what is a very complex system. The health sector is complex.

RACHEL DAVID: And private health insurance on top of that is even more complex and so we did see a need to help consumers navigate this, choose and use appropriate health insurance.
CASSIE MCCULLAGH: Rachel, I’m just going to pop you back on hold for one second and we’ll see if we can get this line a little clearer. We’re having just a little trouble.
CASSIE MCCULLAGH: Yeah. So just stand by for me, yeah?
CASSIE MCCULLAGH: So look- oh we have you now and that does actually sound, that sounds much clearer. So explain I guess for us why health is- health costs seem to be rising every year? We’ve seen the mandated increases from the government, but also increases on top of that. What is it that drives that cost increase?
RACHEL DAVID: The costs go up in the health system whether you’re looking at the public hospitals or the Medicare side or the private health insurance side for one reason, and that’s because as a society we are paying for more healthcare. It’s going up – the costs are going up about 6.5 per cent on the public side and for private health insurance, it’s going up at 3.25 per cent.

So that is driven by the fact that over the last hundred years, we’ve gained an extra 30 years of life and in that 30 years, people are using more services to maintain a good quality of life. And the cost of some of those services has gone up as technology has improved. So you know, a few years ago people would’ve had one hip replacement and then maybe sat on the couch for a couple of years and then that was the end of their life, they passed away. Now, they’re having hip replacements, they’re going skiing, they’re probably still working, they’re playing tennis and in ten years time they’re having another one.

A few years ago, if you started to have heart troubles, you may have taken a bit of medication for your heart failure and you would’ve increasingly gone downhill and maybe passed away in your early 70s. These days, no one dies of heart failure. There are a number of cardiac implants that people can use to basically, tide them through until they pass away from something else in their 80s and 90s.

CASSIE MCCULLAGH: Okay. So it’s really a circumstance that’s arisen out of good fortune in a way and the system that we have chosen to have in this country through the taxpayers as well providing…
RACHEL DAVID: I think the Commonwealth fund shows that in Australia, we have amazing outcomes from our healthcare system. But it does come at a price and increasingly as we have this demographic change and technology change that the economy is still coming to grips with, both the tax system and the private health system is still evolving as to how we deal with that.
CASSIE MCCULLAGH: Now, what about some of the concerns that people have been expressing that they- at the very top of the tier, the gold category, some of the very routine procedures that people who are older will may well require such as hip replacements and knee replacements.
RACHEL DAVID: Sure. Look, as much as possible, the system has been designed to mirror what’s happening in the market already, but to help people choose an appropriate product for their life stage and make sure that if they do present to hospital that they are fully covered. We’ve talked about the tiers – Gold, Silver, Bronze, Basic – but the other thing that’s been done is that the clinical definitions or the ways that medical treatments are described has been made consistent between the funds so there’s no confusion, that a procedure might be described one way in one fund and a different way in another fund and those definitions have been made very inclusive. So there’s no slicing and dicing into treatment areas. So if you’re covered for orthopaedics or your bone and joint, you’re covered for bone and joints.
RACHEL DAVID: Now, that does mean that for some treatment areas, where we know that the use of those treatments is very high and the likelihood of people needing those treatments is high and the actual cost of those treatments is high because of high cost medical implants and long stays in hospital, those things will need to be in Gold.
RACHEL DAVID: Now, for things that are more unpredictable like your heart attacks – we mentioned heart attacks earlier. Heart attacks and heart disease is covered in lower tiers of cover. So, your Silver levels of cover, you’ll have cardiac treatments. And in Bronze, which is suitable for more of a younger person, some of the more unusual things like severe abdominal pain, that kind of thing will be covered in Bronze.
CASSIE MCCULLAGH: Okay. Now, there are a number of questions and I just want to allow people to ask us directly about them.

Marie in Lidcombe, good morning.

CALLER MARIE: Good morning.
CASSIE MCCULLAGH: Now, you’re concerned about pregnancy cover.
CALLER MARIE: I was. So I had cancer five years ago and part of the treatment was a hysterectomy, which means there’s no risk of pregnancy or any of that, and we’d tailored our cover and got all of those components removed which brought our premium down. Now, under the new premiums, it’s all back again and I can’t get rid of it again. So, I’m now paying for things that will never be relevant to me again and I would’ve thought that the simplest way to do this would’ve been you have a basic checklist for all these health companies, where you have hospital as the one that is compulsory that everybody has, then you have a list and you tick whatever is relevant to you. And if you won’t go to a health fund, then you’ve got this checklist and they look at this checklist and they say: right – so they compare it with a legitimate checklist rather than being covered for something I don’t need.
CASSIE MCCULLAGH: [Interrupts] Sorry. I just cut you off there. What were you saying then?
CALLER MARIE: I also have kids that are almost at the end of having to get- being under our cover so we still need the family because I’ve still got to cover two kids for another couple of years before they need to get their own health cover.
CASSIE MCCULLAGH: Okay. That’s just another layer there.
CALLER MARIE: [Talks over] It just doesn’t work.
CASSIE MCCULLAGH: Dr Rachel David, we’ve had a few people querying this point about pregnancy for people who are never going to require fertility treatments. What’s the perspective of the healthcare industry about that?
RACHEL DAVID: Look, this is one of the complexities we have to deal with because of some of the history of our system and the way that it’s regulated. I really fully understand this frustration. I myself have a family, I’ve got children, and we have to make these decisions. But one thing that we need to understand about the health insurance system in Australia is it’s community-rated, which means regardless of your health status, when you join a health fund, you pay the same premium as anyone else of the same age. So we don’t risk-rate. We don’t take- do a questionnaire to see whether you’re healthy or not before you join a health fund and then adjust your premium upwards if you’re unhealthy.

Now, I’ll just ask you to bear with me because this is a complexity. One of the consequences of that system is that we are limited. Although we can offer products with exclusions, which are cheaper, we are limited in what kinds of exclusions we can offer. So under that system, we still need to bundle certain high risk things together. So we can’t make products completely bespoke because if they were, not only would the system would be very complex, it would actually be a risk-rated system by default, and people that were very sick would pay astonishingly high premiums. People that didn’t have anything wrong with them at all would pay low premiums but then if something happened, they’d be faced with a very rapid upward adjustment of their premiums. So, it’s one of the features of the regulation of our system. Believe it or not, it does make the system fairer for everyone, but it is something that in- there’s really no workaround for at the moment.

CASSIE MCCULLAGH: Okay. So really, what you’re saying is that this is a way of sharing the burden among the sick and the not-so sick in a way that’s kind of been adjusted to be as fair and as equitable as a competitive system like this can make it?
RACHEL DAVID: As possible. It is fair and equitable as possible. But I do understand the frustration of individuals when having to deal with it as a consumer.
CASSIE MCCULLAGH: Okay. Now, another one of the hot button issues is clearly Pilates. Penny is with us. Good morning, Penny.
CALLER PENNY: Good morning.
CASSIE MCCULLAGH: Now, you’re a practitioner. You teach Pilates.
CALLER PENNY: Yes, I do teach Pilates.
CASSIE MCCULLAGH: And what’s your concern?
CALLER PENNY: Well, my concern is that [indistinct] review found low level of evidence, I was subsequent to removing that as rebatable. The Australian Physiotherapy Association turns this type of practice to include Pilates in [indistinct] exercise within their scope of practice. Now what this means is that they will be able to provide Pilates services as long as they don’t advertise or invoice that. And it’s very, very concerning because I think it’s going to confuse the public.
CALLER PENNY: And also, there’s no educational competencies backed with this change in scope of practice. Whereas, the [indistinct] Professional Associations, of course that do provide very good Pilates training, we are now no longer rebatable.
CASSIE MCCULLAGH: Yeah. Okay. Let’s hear what Rachel has to say because Pilates is an emerging form of exercise, and some people say rehabilitation. And maybe, what’s the policy around that? Because it does seem to be- it’s not in the alternatives, but it can be included in the physiotherapy area.
RACHEL DAVID: That’s right and look I would agree this is one part of the private health insurance reforms that’s probably caused a lot of controversy. The way it was decided was as a part of the Minister’s Advisory Committee on the reforms, it was decided by the group that non-evidence based natural therapy should no longer be rebated by the Government or supported by the health funds. And this is something that was very strongly pushed by the medical community who were concerned that some of the therapies, particularly your homeopathy and aromatherapy end of things, would be used as an alternative for recommended medical treatment rather than as a complementary therapy.

Now, when that list of 16 items was finally developed we were, from the health funds size- side, a bit surprised to see yoga, Pilates and a couple of other things which actually do have some evidence behind them included. We did question that, but sometimes as a result of these negotiations and committee decisions these are compromises that get made. I would pers- my personal view is that Pilates does have a role in the prevention of back pain and other musculoskeletal problems and it’s something that for which there is some evidence. And maybe it’s possible that outside the health fund products and design process that health funds may in some other way through their marketing activities support Pilates and other fitness based activities.

CASSIE MCCULLAGH: Well I’m sure that that would be very attractive for a lot of people. One of the other issues- I mean actually you’ve got a couple of questions that are coming in on the text line and I’m particularly keen to ask you this one from Chris, and we’ve also got some people waiting to talk to us as well – 1300222702 if you want to do that.

Chris says: what are you going to do when asked are you going to use public or private on entering hospital? Now this is something that people are increasingly asked when they enter the emergency department unexpectedly and they say: do you have private health insurance? What about that? Do you think people are then going to have to say: yes I’ve got gold, silver, bronze?

RACHEL DAVID: Look I think that’s a good question because increasingly we are seeing people, particularly people presenting to emergency departments in public hospitals with acute problems like chest pain and breathlessness being asked to reveal their health fund details. Now there’s traditionally always been people with private insurance treated in public hospitals for- particularly for elective surgery or non-emergency surgery because their surgeon only works in that setting or because they have a chronic illness and the specialist that they use only works in a public hospital. There’s been no growth whatsoever in those claims and that’s something that from a health fund and private health perspective we’re not concerned about.

What perhaps is a bit concerning is that the private patient is now seen as a bit of a revenue stream by some state Governments and so people presenting in emergencies who would otherwise have expected to have their treatment free at the point of service under the Medicare system have been asked to show their private health details. What I would advise consumers in that situation is that if they are in any way distressed, unable to make the decision or unwilling to make that decision that they understand if they are an Australian citizen they- it is within their rights to be treated as a public patient in a public hospital and that you can simply say no and refuse to provide your details and you must be treated on the basis of the clinical urgency of your condition – that’s the law.

CASSIE MCCULLAGH: Okay that’s important information.
CASSIE MCCULLAGH: So whether or not it gives you a better room somewhere down the track or you might get a television package or something, then that’s not a consideration that you should be taking into account at that point.
RACHEL DAVID: No absolutely. I mean and if any hospital is playing games with what benefits it’s offering people or ushering private people through quickly, that’s not appropriate either in a public hospital setting. In a public hospital setting you should be treated on the basis of clinical need and if you’re an Australian citizen, you’ve paid your taxes, then you are entitled to treatment free at the point of service in an emergency department.
RACHEL DAVID: You may need to wait.
RACHEL DAVID: But it’s not, it’s not an optional part of the law.
CASSIE MCCULLAGH: Okay. Now let’s hear from Steve, who’s in Picnic Point and he really wants to ask about cataract surgery. Good morning Steve.
CALLER STEVE: Yeah, good morning. My question is for the confusion to be straightened out, I have had health insurance all my life and I’m covered for eye surgery. I just recently had to have cataract surgery and then I was told I wasn’t covered. Now I was $10,000 out of pocket. Now if cataract surgery isn’t eye surgery, what would you call it?
RACHEL DAVID: Look I think Steve this is one of, exactly one of the problems that the reforms are designed to address. I’m really sorry to hear that you had what’s an obviously bad experience. Cataract surgery is one of the more high risk, high cost things that the health- health funds cover and the waitlists in the public system are very long, if in fact it’s offered at all. And really this is exactly the problem that the classification system is designed to fix. So I’m sorry that you had a bad experience but hopefully this, as a result of the reforms and health fund efforts to improve communication direct to customers, this sort of thing will be much less common.
CASSIE MCCULLAGH: Seven- what did he say? $10,000 Steve that’s a lot of money isn’t it.
CALLER STEVE: You’re telling me. Well I have one more- they’ve done eye and I’m going to have the other eye done next week. I was told I’ll be legally blind if I don’t do it within the 12 months so I couldn’t wait.
CALLER STEVE: I had to have done straight away.
RACHEL DAVID: I think Cassie the other thing that’s worth mentioning here is another phase of the reforms that the Government has foreshadowed is a website to help consumers and their GP in the referral process to get them to lower charging private specialists. And for cataract surgery that’s something that might be quite significant as well. So it’s a work in progress. I think the announcement’s only just been made that the federal government intends to invest in this. But it will encourage specialists that charge low or no gap to put their details up online. And I think that it’s an important development for people seeking elective surgery.
CASSIE MCCULLAGH: Now there is some concern from people that on Monday they will find out that they’re no longer covered for things that they had been before and they will face waiting lists. Do you know if that will be the case?
RACHEL DAVID: Look I think as much as possible this system has been designed to mirror the products that are already in the market and what’s already there. And so there are a large number of people that already have top hospital cover. For example, there’s a lot of people in that bucket, there’s a large number of people who have a more basic level of cover so not much is going to change for most people. For some people that have had products with exclusions, they may be different. But there- if- but there is no compulsion on people to move to a product where there are- where there’s more of an exclusion so I would suggest that that’s not going to happen. For people that are confused about any communication that they get as a result of this process, the first thing they should do is call their health fund. Then if they’re still not happy they should call the private- or contact the Private Health Insurance Ombudsman which is setting up a website called A lot more resources are going to be put into that website as a result of this process so that they’ll be able to use it to better compare products that meet their needs and also, if they’re still not happy, they’ll be able to call in and get their complaint resolved.
CASSIE MCCULLAGH: Okay is the second line after going the insurer. Look, as you would imagine Dr Rachel David there are a zillion people who’d like to ask you questions and we’ve got them pouring in on our text line – we might have to come back and revisit this. But thank you very much, too, for being available for us and for taking these questions without notice. So…
RACHEL DAVID: Pleasure Cassie.
CASSIE MCCULLAGH: Thank you very much for that. Dr Rachel David is the Chief Executive of Private Health Care Australia peak body representing that private health funds in Australia.
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