Dr Rachel David discussed rising out of pocket costs and premiums with ABC Gold Coast Morning Show

Station: ABC Gold Coast
Program: Mornings
Date: 6/3/2024
Time: 8:36 AM
Compere: Sarah Cumming
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


SARAH CUMMING: Tough news for your bank balance this morning – private health insurance premiums are going up 3 per cent. It’s happening next month. How will this affect you? Will you have to cancel your health insurance? Or has it changed your mind maybe, about taking it up? Let me know, 1300-903-917, or the text line 0487-993-222.

Dr Rachel David is the CEO of Private Healthcare Australia, which represents the health funds, and I spoke to her a moment ago.

RACHEL DAVID: Look, the health funds completely acknowledge that a number of their members are doing it tough, and we need to everything in our power to keep premiums low. This premium-setting process for health funds is a highly controlled process. The funds don’t arrive at the pricing on their own. They submit a number of data points and a huge amount of information to the Federal Government, and not one but two regulators, the Credential Authority or APRA. And the Department of Health go through that with a fine tooth comb before the Minister ultimately makes a decision about the price rises. And that’s not just one round of negotiations, it’s multiple rounds of negotiations to arrive at that point.

So look, it has been very thoroughly considered, and the public interest has been taken into account and including the cost of living crisis. But what- we are treading a bit of a fine line because a lot of the providers, so the hospitals and the medical practices that health insurance pays for, they’ve been hard hit by inflation as well. So a hospital has to pay for greatly increased costs of recruitment, power and food, and we have to be able to meet those costs to ensure that we can continue to offer quality services in the private sector. So that’s why premiums do need to go up by a bit this year.

SARAH CUMMING: One issue, or one problem that keeps coming up from our listeners, with many wondering why doesn’t insurance actually cover the real costs of getting certain treatment anyway? Not simply the expenses that the insurer incurs. The Australian health insurance sort of limits the liability of the insurer and leaves the insured open to excessive costs. We still have to pay more for treatment – the insurance doesn’t even cover ultimately our appointments or treatments that we need.
RACHEL DAVID: Well, there are a couple of reasons for that. The first is that under the Medicare legislation – and health insurance funds are bolted into the Medicare legislation – but it’s very clear that health funds cannot fund Medicare treatment that occurs out of hospital if a Medicare benefit is payable. So it cannot- a health fund cannot co-fund or cover any extra charges that a medical specialist or a GP charges a consumer. So that is the first thing. It’s not something I particularly agree with, and I think there are some circumstances, some limited circumstances in which health funds should be able to do that. And there are ways of ensuring that it wouldn’t contribute to inflation in health costs, and that’s something that we are in active discussions with the Government about. But that’s a very longstanding piece of legislation that’s been in place for 40 years, and it does constrain health funds from funding any care that occurs outside of a hospital. So that’s the first thing to remember.

The second thing is that the biggest part of expenditure for health funds is hospital care, and well over 90 per cent of hospital care is funded without a gap. Where the gaps come in is for the funding for what the doctor does. So the way that that works is that the health funds will pay everything for the hospital and, for the most part, everything for any medical implants or surgical supplies that are used in your treatment. But when it comes to what the doctor charges, they can pay so much. But if they doctor wants to charge more and more and more, they can’t keep chasing that. Otherwise, that will have an impact on inflation and they will never be able to cover the gap. And that again comes back to a legislative issue, and that is in Australia medical practitioners in private have a constitutional right to charge whatever they like. There’s no way that an institution like the Federal Government or health insurance can constrain that in our economy. All they can do is negotiate with doctors to be able to keep that gap as low as possible.

SARAH CUMMING: So ultimately, as health- private health insurance premiums increase, doctors can also increase their fees at the same time, and the gap just gets bigger and bigger.
RACHEL DAVID: Look, they can. But I think I’d make a couple of points in relation to the medical gap. The first is that private health insurance in spite of this still provides very good value for money. So, any- if for every dollar that a consumer spends in premiums, they get $0.86 back, which is way higher than for any other insurance type. The issue for many people is it’s not something that they get back right away, and they may have to be a member of a health fund for a lifetime, get to that older age group where people tend to claim more, and that’s when they derive value for money. So that’s an issue for a lot of people. But it’s a reality that health insurance, compared to any other insurance, is very good value for money, once you get into those particular life stages where you’re likely to claim.

The issue around the medical gap is more difficult, again, because of the constitutional right for doctors to set their own fees. So there are a few things that we have proposed. And the first is that the government has a medical cost finder website that was supposed to allow consumers and their GP to better compare prices of medical specialists, and there are about 10 to 15 per cent of our members who will pick a specialist purely on price. We thought this was a going to be a great innovation. It was something that the previous government introduced. But as it turned out, it hasn’t been implemented properly and that doctors’ participation in this was left up to completely voluntary. And to date, even though a fortune has been spent on this, only ten doctors have signed up.

Now, that infrastructure is all there, it is completely plausible that far more doctors’ fees could be published if this was correctly implemented. So we’re asking the federal government to look at that. And the second thing is that what we’re- what we’d like to see is the consumer law strengthened in Australia so that if people are charged fees by their doctor and they weren’t provided with proper, informed financial consent before their medical treatment, that they’re not liable to pay those charges. And we’re still hearing far too many reports of people who get to the end of their surgical treatment or their treatment in hospital, and they’re slugged with costs that they knew nothing about. This has already been done in the US. The Biden administration has put through what they call surprise billing legislation, and it acts as a real deterrent for people in the community, including doctors, to levy charges against people which they were unaware of, and get away with it.

SARAH CUMMING: At the moment, the system encourages people really to sign up to private health insurance or suffer a financial penalty. It’s sort of in the early 30s now, for people aged in their early 30s. Given the longer life expectancy, the better health that people generally have, do you think that age should be raised?
RACHEL DAVID: Look, there are a number- there are three incentives and penalties that exist to encourage people into private health insurance. And I have to say at the moment, with our public hospitals under an almost unprecedented level of stress, they’re pretty important. I mean, at the moment, the private sector is covering so- a much larger percentage of planned surgery than it did before the pandemic. So we’re looking at, you know, over 80 per cent of hip replacements, which is a very, um, common procedure at being done in the private sector. So it’s very important that, you know, we do keep this going to avoid that burden going back into the public sector.

So, there’s a few things. Firstly, the federal government pays a rebate, which is about a quarter of the premium for people on lower incomes to support them to choose private health insurance. The second is, if you are a higher income earner, you will pay a penalty through your taxes if you don’t have health insurance. It’s called the Medicare levy surcharge. And the third thing is that if you’re aged over 31, and you take out private health insurance for the first time, then you’ll pay a higher premium for a period of ten years.

Now, the government is looking, reviewing all of these incentives right at the moment to make sure they’re properly targeted. But one of the problems, particularly with the premium penalty for people aged over 31, is that it’s a very hard thing to unravel once it’s in place. If you think about it, then what do you do with the people that are already paying it? There are all sorts of very difficult grandfathering arrangements that would need to be brought in, brought into play. So look, while the government is looking at it, I think they’re probably more likely to address any issues with the rebate and the penalty rather than changing the age. And I think- the age penalty and the issues with the age penalty, and the reason that was brought in is that prior to those incentives, an 85-year-old could take out a policy and a 25-year-old could take out the same policy, and the 85-year-old will pay exactly the same. And that’s just not fair. And that put a far bigger burden on younger people who had health insurance than it does today. So look, the government is looking at those incentives, but it’s going to be tricky to change that one.

SARAH CUMMING: At the moment, certain health insurers have waiting periods. If you sign up, for instance, you pay your health insurance, you might have to wait, say, 12 months before you can access any obstetric services or something of the like. If people want to switch health funds, what is the situation there? Do they have to restart waiting periods?
RACHEL DAVID: No they don’t. So long as they move from the same level of cover to the same level of cover, no you don’t have a waiting period.
SARAH CUMMING: If you’re moving to a completely new company, a completely different health insurer.
RACHEL DAVID: Yeah, that’s right. But it has to be cover that’s like for like.
SARAH CUMMING: Dr David, thanks for your time this morning.
RACHEL DAVID: Thank you very much.

[End of excerpt]
SARAH CUMMING: That is Dr Rachel David, the CEO of Private Healthcare Australia, which represents the private health funds.
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