Program: Mornings
Date: 10/9/2024
Time: 9:19 AM
Compere: David Bevan
| DAVID BEVAN: | Dr Rachel David is CEO of the Private Healthcare Australia, which is the peak representative body for the private health insurance industry. She joins us now. Good morning, Dr David. |
| RACHEL DAVID: | Morning David. |
| DAVID BEVAN: | Yesterday we had another instalment, and it seems to be coming, an increasingly bitter row, between some providers of healthcare – that is, hospitals. Yesterday it was Healthscope and members of your industry. And look, I’m paraphrasing here, but basically Healthscope was telling our people, and they- you would have seen the full page ads that not enough of your members, your insurers, are handing over enough money from the premiums. |
| RACHEL DAVID: | Well, look, David, I have seen the ads, and it’s a bit baffling to us about why Healthscope has launched this campaign, given that health funds are paying hospitals 8 per cent more above- and that’s above inflation, than they did last year. But our first concern is for the 15 million members of private health insurance in Australia. We don’t want premiums to go up a dollar more than is necessary in an inflationary environment where people are concerned about cost of living. And our job is also to guarantee that people can have surgery and treatment in a private hospital when they need it, so they don’t need to go on a waiting list. And we will continue to do those things in spite of what Healthscope appears to be trying to do here. |
| DAVID BEVAN: | You say the industry is contributing- was it 8 per cent more than inflation? |
| RACHEL DAVID: | 8 per cent more than we- on average than the health funds pay last year. So claims are returning very strongly after the pandemic. And I can reassure people that health funds pay back more in the dollar than any other form of insurance. And I guess the frustrating thing for me is that Healthscope has contracts in place with Bupa, which is a big health fund in South Australia, and the other health funds that they’ve mentioned in their ads, that was signed within the last 12 months. And in addition to those contracts, at least one of those funds has offered Healthscope a very big out-of-cycle payment to help them get through what are some tough times and what we’ve acknowledged as some tough times from private hospitals. So the funds- and actually the government has been bending over backwards to assist them, and this is the way that they respond. So it is very disappointing, but we will guarantee to the members of health funds that we will not put up costs for them as a result of this, nor are we going to enter into a process that denies them access to surgery when they need it. |
| DAVID BEVAN: | And yet we have Healthscope, which is a very large operator in the sector, saying that there are some insurers who, instead of returning $0.88 in the dollar, are as- returning as little as 80, and some even less than that. |
| RACHEL DAVID: | Well, the $0.88 is an average. Some pay more, some pay less But those figures were pretty misleading because they were calculated during the pandemic, which is where- time when there were lockdowns. So the health funds did accumulate some extra money during that time, and they agreed to pay it all back to members. $4.5 billion was returned to members during that period, and now that claims are returning to normal, we can expect that average ratio, which is the- 83 to $0.88 in the dollar will return to normal. It’s a completely meaningless claim. |
| DAVID BEVAN: | Well, is it also misleading to say that the funds are paying 8 per cent more above inflation? because you’re comparing it also to a period when the funds weren’t paying out much because of the pandemic. Are both sets of figures for the same reason misleading? |
| RACHEL DAVID: | Well, look, what I can say to that is we have the rates of surgery returning to above what they were even before the pandemic because there is some catch up built in there. So, in fact, while we are treading this line between putting upward pressure on premiums and delivering hospitals what they need to continue, I think the 8 per cent is pretty reasonable. And that’s going to continue to increase this year as we track inflation with what the health funds are paying hospital. |
| DAVID BEVAN: | But is that figure distorted for the same reason as you say yesterday’s figures from Healthscope were distorted? And that is that you’re both referring to an unusual period during the pandemic. Is that correct? |
| RACHEL DAVID: |
Yes, but the number is going up and it will increase again this year. So we are continuing to pay hospitals more. We are continuing to pay hospitals in a way that permits them to keep up with inflation. But don’t forget also what the root cause of the problem is for Healthscope, and it’s their owner, Brookfield. Brookfield is a trillion-dollar global company that purchased these hospitals for way above the price the market expected. It sold the hospitals and the lion’s share of the profits went back to North America. And then it entered into a lease back agreement, which meant that- which didn’t take account of rising interest rates. So now it has a problem with debt, and it is completely unreasonable for Brookfield and Healthscope to expect that health funds and their members, which are Australian mums and dads struggling with a cost-of-living crisis, are going to dig them out of that hole. It is completely self-inflicted. It has nothing to do with private health funds in Australia, and it’s not fair for them to expect Australian households to bail them out. |
| DAVID BEVAN: | Well, we did ask about the takeover and whether or not that was what was driving it yesterday when we were speaking to the CEO of Healthscope. But another way of looking at this is are any other private hospital operators complaining about the amount of money the insurance industry is handing over? |
| RACHEL DAVID: |
Well, we certainly haven’t seen any of them jumping on board with this campaign, which I think is a telling factor. We know that Healthscope approached a number of groups to- to get them to join this campaign and put their logos on it and so forth, and pretty much- and nobody did. And I think I’d point out that Australia’s largest hospital company, Ramsay, which is a listed company, it reports all of its figures, is still making a net margin of 9.4 per cent in Australia. Now it’s less than it would like, but it is still a very profitable company. And there are a number- yeah, there are a number of hospitals that are doing it tough, but the number of hospitals that are at imminent risk of closure is a lot smaller than some of these scare campaigns are reporting. So that’s- we’ve got a government viability review of the sector that we’re working with and the hospitals are working with. That is going to identify hospitals which are genuine risk of closure, where there is no alternative and that are providing essential services. And we have absolutely guaranteed that we will help those hospitals stay afloat. |
| DAVID BEVAN: | Are any of those hospitals in South Australia? |
| RACHEL DAVID: | Well, we’re going to wait on the government’s report to actually identify those. That’s the purpose of the government’s viability review. |
| DAVID BEVAN: | Right. |
| RACHEL DAVID: | But what the health funds are not going to do is pay a massive above-inflation increase to every hospital, regardless of where it’s located and regardless of its profitability, because that would put serious upward pressure on premiums. And that is absolutely the opposite of what we’re trying to do. |
| DAVID BEVAN: | Are the health insurers healthy? |
| RACHEL DAVID: | Yeah. Look, like everything, private health insurance goes through different- it goes through- is affected by the business cycle. |
| DAVID BEVAN: | Well, are they profitable? Are your members profitable at the moment? |
| RACHEL DAVID: | They are profitable because it’s not permissible to run a health fund in Australia at a loss and- consistently at a loss. A health fund in Australia to be a registered health fund needs to be able to meet some pretty significant prudential requirements. And to do that, they have to be profitable. Since the pandemic, there has been a number of people have joined a health fund. It’s been to a great extent driven by immigration into Australia. So the health funds are doing reasonably well. But like every other business in Australia, they’ve been impacted by inflation as well. And they need to work hard to manage their costs, to reduce waste and to keep premiums down. |
| DAVID BEVAN: | Okay. So when do we find out this report from the Federal Government, the state of private hospitals around Australia? When’s that due? |
| RACHEL DAVID: | Well, look, I believe it’s in its final stages at the moment. This first piece of it, which is looking at the data around the viability of hospitals and specific hospitals. That will probably be discussed with the sector privately before anything is publicly released so that we can work on a solution for those hospitals which are genuinely struggling, which are in areas of need and which are providing essential services. |
| DAVID BEVAN: | All right, but end of the year? |
| RACHEL DAVID: | Look, I would expect so. At the end of the year is when we start to negotiate with the prudential regulator and the Department of Health about what premiums will be for next year. So that’s a pretty essential input. So I expect it will be by the end of the year. |
| DAVID BEVAN: | All right. Well, Dr Rachel David, thank you very much for talking to us. |
| RACHEL DAVID: | Thank you, David. |
| DAVID BEVAN: | CEO of the Private Healthcare Australia, which is the peak representative body for the private health insurance. |
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