Dr Rachel David spoke with 2GB’s Luke Grant about factors affecting premiums for 2024 and concerns about spinal cord stimulators

Station: 2GB
Program: Afternoons
Date: 20/12/2023
Time: 12:25 PM
Compere: Luke Grant

Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


LUKE GRANT: Now, there are some stark warnings today when it comes to our health, and insurance is front and centre. In a cost of living crisis, of course, many of us struggling with private health care, private health insurance. So much so the Government has rejected an increase by a number of the major operators by the industry as a whole. And while insurers are asking for an increase in premiums, they say that increase is needed to keep their profits in place and businesses viable. I think I mentioned yesterday when talking about this according to Mr. Butler, we were talking about sector-wide profits in the billions last year and perhaps even the year before. So let’s have a chat about this.

But importantly today, I wanted to talk further with Dr Rachel David, who’s CEO of Private Healthcare Australia, because in The Australian newspaper Natasha Robinson tells us about the medical device industry, which has been accused, she writes, of employing similar tactics to the tobacco lobby, if you don’t mind, in seeking to undermine independent research to protect their profits. Anyway, we’ll get to Rachel David now. She’s the CEO as I said, of Private Healthcare Australia. Dr David, nice to talk to you. Merry Christmas. I hope things are good.

RACHEL DAVID: Morning and Merry Christmas.
LUKE GRANT: So the Health Minister, Mark Butler, comes out yesterday and says no to premium hikes of 6 per cent. On the back of billion dollar profits, you can understand, in the middle of a cost of living crisis, why many Australians are finding Mark Butler and perhaps not referring to him as a hero, but at least agreeing with him.
RACHEL DAVID: Look, Mark Butler is doing the right thing. He has a job to do. And the process of price setting for private health insurance is regulated by the Federal Government, by regulators on the financial side through APRA, and by the Department of Health. So this is a negotiation, and it is absolutely right that he is taking a robust approach to this negotiation. Health funds don’t want to increase premiums by a single dollar, but premiums are determined by the cost of healthcare. And healthcare, like every other sector in the Australian economy, is subject to inflation. 5.9 per cent costs went up in healthcare last year, so we’ve got to now find savings so that we can cover the cost of essential services that themselves are being subject to inflation. So hospitals, they need to cope with inflation in recruitment, power, and food, just like a household.
LUKE GRANT: Yeah. But unlike a household who can’t say to their employer or the government if they’re on a fixed income, I’ll have a pension increase of 10 per cent this year, minister, or go to your boss, and say I’ll have 7 per cent extra this year. And then- it’s pretty hard to do that. We’ve all got to give and take, and it’s just a bit hard to justify. Look, I’m all for anyone making a profit, but on the back of making billions, really? When people are doing it this tough? You can understand again why the Minister is doing the right thing by Australians, surely?
RACHEL DAVID: That’s right. But if you look at the profits of health funds, you’ll see that they’ve been pretty stable over the last few years. The pandemic meant that health funds weren’t paying for as many claims because of the lockdowns and slowdowns in services. And what they did during that period, they didn’t retain any of that extra money at all; that over that period, they made a promise they would not profiteer from the pandemic and paid back $4.3 billion to consumers over that period.

So that’s the first point I’d make. The health funds keep their profits pretty stable. And the reason they do that is that their profits are scrutinised and regulated by the Federal Government. You can’t set up a health fund and say, well, look I’m going to make- and register it as a health benefits organisation with APRA so forth, and then say, well, look, I’m going to make 20 per cent profit. They just wouldn’t let you do it. It’s a highly regulated and scrutinised industry and one of the only industries that made a promise to its members it would not profiteer out of the pandemic.

LUKE GRANT: But again, people were paying for insurance that they didn’t need due to circumstances out of their control. That was just the health fund doing the right thing. I mean, we shouldn’t get too carried away there, surely. I mean, that’s just- if the insurance was able to be used and it wasn’t, then fair enough. But it wasn’t able to be used. Isn’t that just doing what would be expected of any decent corporate citizen?
RACHEL DAVID: Yes, absolutely. And we were surprised, somewhat surprised, that it wasn’t more widespread in the economy, but absolutely. And health funds will continue to do the right thing. As I mentioned previously, they don’t want to spend a single- they don’t want to raise a single dollar extra in premiums that doesn’t have to be raised.
RACHEL DAVID: But there are some costs that are beyond their control and some costs that are within their control. So there are probably three buckets. There are costs they can’t control, which is the big one, inflation. And every week, we’ve now had hospitals come to the funds outside their normal contract processes asking for more money to chase inflation. So it is a problem in our sector at the moment.

The second bucket are the costs- sort of the internal efficiencies that they can find in the negotiations with the Department of Health. That’s what we’re working on at the moment. And then the fourth- then the third bucket are the things that the regulators are making health funds pay for, which are either too expensive or of low value. And so, that is the area which Natasha Robinson and The Australian newspaper was raising this morning, where health funds have been forced to pay some of the highest prices in the world – for technology for back pain that’s been found not to work – and rather than try and address the findings, certain manufacturers and suppliers in the medical device industry have been pushing back and basically bullying some of the academics that have been involved in showing and demonstrating that the technology is not effective.

LUKE GRANT: So this one I referred to that you also, Dr David, referred to Natasha’s work today: medical device- or the medical device industry, again, accused of employing similar tactics to the tobacco lobby. Very strong words. This is research from the University of Sydney revealed a pattern of intimidation by device companies, and we’re talking here specifically about spinal cord stimulators – implantable devices inserted into the back during surgery that send low levels of electricity directly into the spine to relieve pain in people with chronic back pain. And this University of Sydney review analysed the result of 13 clinical trials. They found it did not provide long-term relief and in fact might cause harm. Isn’t that enough to take it off the table?
RACHEL DAVID: You’d think so. And we’ve made some representations to the Federal Government as part of a review they’ve been doing of the technology that suggests exactly that. This is just an example of one of many where the health funds in this case are paying $60 million a year for this technology, which still continues to be used. The academic community and the research community has determined in multiple studies that it’s not effective. And yet, the regulations that are in place forced the health funds to pay for it, and not just to pay for the devices, but to pay one of the highest prices in the world for these things without good justification.
LUKE GRANT: So who can take this off the table? Can Butler take- the Minister Butler take this off the table during negotiations in the next few days? Or is there, with due respect, a highfalutin procedure where things get ticked off at four or five different stages and a minister can’t simply say, right, I’m happy with the research here? I’m the elected health minister, and I determine that we’re not going to spend 60 million of fund members’ money on things that we’re not convinced work. Who decides?
RACHEL DAVID: Well, look, the Minister ultimately, but he does need to take expert advice. Our understanding is that the TGA, the regulator of the safety of drugs and devices, is reviewing this. We would- obviously, to protect health fund members, we would like this to be done a little bit quicker.
RACHEL DAVID: And it’s currently happening. It has been quite a lengthy and bureaucratic process [indistinct]-
LUKE GRANT: [Interrupts] How long?
RACHEL DAVID: Well, this has been known for a while. This is technology that’s been on the market for about a couple of decades and never really fully tested, and it’s only been in the last couple of years that people have looked into it…
LUKE GRANT: Jeez. Yeah.
RACHEL DAVID: …When patients kept coming back after being treated with no improvement. And the last couple of years, they’ve looked into it and said, well, this is actually, you know, it’s actually not working.
LUKE GRANT: Yeah. Are there other examples like that, Rachel? That again, government or the minister could look at quickly and say to your industry around the premium increase, what about we do ABC based on the advice I’ve got? That’s, I think, the third bucket you mentioned, that’s got to provide you with something obviously.
RACHEL DAVID: Well, look, in some- in many areas, the cost of medical implants and surgical supplies in Australia are still way too high. The Government has been committed to reforming this. They know it’s a problem. And yet, the reforms have kind of, in many ways, been quite slow and have been side-tracked because of pretty heavy handed lobbying by a number of the groups that are benefiting from the prices being too high, namely the people that are selling them.
RACHEL DAVID: So look, we would like to see some of those processes sharpened up a little bit, particularly, there’s one in some of the products that are used. And these are generic, commonly available products. They’re not new fancy ones. They’re some of the things that have been used for a number of years. There is a process at the moment about the very high price of cardiac devices or heart devices that are used for, say, people that have had chest pain from heart disease, and these things are priced, in some cases, two to five times more in Australia than they are in other countries. That process has been delayed and delayed, and we would really like that brought to a swift conclusion now.
LUKE GRANT: Let’s talk again, hey? I don’t know if you’ll be around for the next few weeks, but these are issues we don’t hear enough about. We hear about the headline figure and we hear the Minister, you know, saying yay or nay. And then we hear the response. But digging a bit deeper, I think, would be beneficial for my listeners. So, if we can find time in the next few weeks, if you’re not too far away or if you’re still at work, I’d love to talk to you again.
RACHEL DAVID: On these issues and on cost of living issues, we will always be available to…
LUKE GRANT: [Talks over] Terrific.
RACHEL DAVID: …provide as much information as the public needs.
LUKE GRANT: Dr Rachel David, CEO of Private Healthcare Australia. Merry Christmas to you, Rachel. Thanks so much for your time.
RACHEL DAVID: Thank you.
LUKE GRANT: Yeah, we will have that conversation again. Thanks again, Rachel.
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