Dr Rachel David spoke with ABC Radio Brisbane about private hospitals and gold cover

Station: ABC Radio Brisbane
Program: Mornings
Date: 29/4/2024
Time: 9:34 AM
Compere: Steve Austin
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


STEVE AUSTIN: Well, if we are paying more for health insurance premiums than ever before, what are the implications of that? Why are private hospitals having to close their doors or deciding to stop offering services like maternity services? I’m asking this because remember Michael Roff, the chief executive of the Australian Private Hospitals Association, and what he told me last week?


The system’s out of balance. We’ve got private hospitals closing services, and in fact entire hospitals closing. And at the same time, you’ve got the private health insurance sector that collectively made a profit of $2 billion last year. So the system is clearly out of balance. And the health insurers have the capacity to pay hospitals more without the need for additional premium increases. So we’re also having those discussions with the health insurers because they really need to come to the party.

[End of Excerpt]

STEVE AUSTIN: That’s Michael Roff from the Private Hospitals Association. Doctor Rachel David is the chief executive officer of Private Healthcare Australia, which is the private health insurers peak body. Rachel David, why are insurance companies private- pricing private hospitals out of reach?
RACHEL DAVID: Well, look, that’s really not true at any level. I think that it’s- there’s no doubt that private hospitals have had a tough time as a result of the pandemic. And also, as a result of the consequences of inflation, they are paying more for recruitment, power and food, the same as other businesses. And to the extent that they can, health funds have been meeting through their contractual obligations those payments, including when hospitals have come to them out of cycle of the normal contracting processes and asked for more money. And I’m unaware of any of those requests that have actually been denied. The problem here …
STEVE AUSTIN: [Interrupts] Who decides how much insurers will ever pay- will pay for certain procedures and surgeries, Rachel David?
RACHEL DAVID: Look, to some extent it’s regulated by the Federal Government. So particularly for what the health funds pay for doctors and for medical implants and technologies, that’s regulated by the Federal Government. For private hospitals, that’s a contracting process that goes on between the hospital and the health fund. But even if a hospital can’t reach an agreement with a health fund, the fund still has to pay 85 per cent of the contracted price. So it really is very tightly regulated what health funds pay for these services.
STEVE AUSTIN: What relationships do insurers have with private hospitals?
RACHEL DAVID: Look, to be honest, it is for the most part a pretty collaborative relationship. You know, occasionally you see things bubble up in the media where the contracting process has got a bit rough. And it is- people are having a tough time with inflation at the moment. But for the most part, we understand that private hospitals are the bedrock of our system in terms of the equality and access, particularly to surgery, that they provide. But the entire onus in our system is placed on the health fund to keep premiums and treatment in hospital affordable. That’s why the contracting process can become adversarial, because at the end of the day, the health funds will not get massive premium increases approved by the Federal Government. It’s …
STEVE AUSTIN: [Interrupts] Michael Roff’s told- sorry, Michael Roff’s told me without private hospitals, you wouldn’t have a product to sell.
RACHEL DAVID: Well, yes and no. We still- the health funds still pay for treatment in other settings, out of hospital and in the public sector. But the private hospitals have a very important role, particularly in providing prompt and high quality access to surgery. And the health funds understand that and are determined to preserve that.

My guest is Doctor Rachel David. Rachel is the chief executive officer of Private Healthcare Australia. This is 612 ABC Brisbane.

Rachel, there was a story in the Saturday paper on the weekend about a family without private health insurance. They had a son who needed his adenoids out. The specialist said he could sign them up as a once-off private patient at the public hospital where he also worked Medicare would be billed for the procedure – in other words, the taxpayer would be billed for the procedure – and they would pay the specialist fee and would jump the queue. Have you ever heard of this happening?

RACHEL DAVID: Look, I have, and to be honest, I’m a little bit worried about it. I’m not sure that that’s really the role that our public hospitals were set up for. And it sounds awfully like a sort of bribe if you want my honest opinion, like putting pressure on a family to say: hey, you know, give me some money, some of which will benefit me personally, and I’ll be able to bump you up the queue. So, look, I think there are a number of financial …
STEVE AUSTIN: [Talks over] It sounds like cost shifting to the taxpayer to me …
RACHEL DAVID: Well, it is …
STEVE AUSTIN: … saying if you go into the Medicare system, it’ll be quicker.
RACHEL DAVID: Yeah, well, that’s exactly right. But then you’re not really in the Medicare system, you’re bumping other people off who might be at greater need. And under the Medicare principles, I think we need to be clear that clinical need needs to be the basis of any prioritisation decision. So it shouldn’t be your ability to pay, and if that is actually what’s happening at in large numbers, then you know, that fundamental principle of Medicare, that is that you’ll be treated on the basis of your clinical need is being undermined. And so I’d really like to see that kind of practice stop, if that’s possible.
STEVE AUSTIN: Here in Queensland, private hospitals are closing certain units because they just- there’s- they can’t make it work financially. And it’s not about the money, but they still have to pay staff. They can’t just say, yeah come in and work for free, we’ll keep the unit open. And they cite the cost of insurance premiums as one of their key chief issues, Rachel David.
RACHEL DAVID: Look, I think there are a number of issues here that-and it depends a lot on the type of service. So we are seeing very strong demand for surgery in the private sector at the moment. And we’re not seeing any problems with private hospitals filling their beds with surgical patients, but particularly for planned surgery as it’s pretty hard to get access to a hospital waiting list at the moment. There are some specific services where they are having problems. Maternity is one of them, and there are a few issues there. One is the ability to recruit specialist staff with severe workforce shortages in that area, particularly outside the metropolitan areas. And the second is the very high price of private obstetrics in the community. So all the antenatal visits that people have to have before they actually have the baby, private health insurance can’t cover those because we’re not allowed to co-fund or co-pay with Medicare in the community. And the out of pocket costs are very high; that’s put a lot of people off seeking obstetric care in the community. And it’s had the effect of meaning that the hospitals can’t actually achieve the occupancy that they need to stay viable. And that’s something that we have many times approached the obstetricians and government about. But it’s been very hard to get action in that area. I think …
STEVE AUSTIN: [Interrupts] What can be done to correct this? Because I think it was in the paper on the weekend, the gold one- one of the publications reported the gold health cover health insurance was becoming unsustainable, with one insurer’s gold cover topping $10,000 a year. So how does this get fixed, I guess is where I’m heading with this, Rachel, how do we fix this?

Yeah, look, the obstetrics one is complex, but I’ll just address the issue of the gold or the top hospital cover. Now, the previous government brought in a system of tiering health insurance products into gold, silver bronze, basic in terms of the amount of cover and the cost of the policy. And they did this first up, because they thought it would make it easier for consumers to pick a product that was right for them. Now, I’m not sure at the end of the day it has actually helped. But one unintended consequence has been that because the system is so rigid, what you’ve got with gold hospital cover is a group of people who know they’re going to claim. So it’s very high risk for the health insurers, and it contains- gold hospital cover contains things like weight loss surgery, admission for mental illness that can be many weeks in duration, and every conceivable expensive type of procedure is up in that tier. Now, most people don’t need that level of cover indefinitely. So what’s tended to happen is that people sit in a silver or a bronze product and if they are told that they need to have a particular procedure that isn’t covered, they upgrade, wait a couple of months and then have the procedure.

So the net effect of that is that you have a high, high risk group left in gold, therefore the premiums are really high. Now we think that system is too rigid. It is pricing some people with some needs out of the market and it needs- and we think it needs to be reviewed, as there have been multiple unintended consequences. And one is that, you’ve got a double whammy. If you want maternity care in private, you’ve got the very high obstetrician fees for the antenatal visits and you’ve got a high premium for the hospital care now, which is a double whammy. And we probably think it’s time for that to be reviewed by the government.

STEVE AUSTIN: So since the government is the regulator, are they doing that?
RACHEL DAVID: Look, there’s a lot on the agenda for private health. We’ve been given some pretty strong assurances by the Minister for Health that this will be looked at. There are a lot of open reviews that are on the table for private health at the moment, but we’re thinking it’s more of a second term issue for the government at the moment.
STEVE AUSTIN: I appreciate your time. Rachel David, thank you.
RACHEL DAVID: Thanks, Steve.
STEVE AUSTIN: Doctor Rachel David is the Chief Executive Officer of Private Healthcare Australia.
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