Dr Rachel David spoke with ABC Radio Perth about PHI premium increases

Station: ABC Radio Perth
Program: Statewide Mornings
Date: 5/3/2024
Time: 8:46 AM
Compere: Nadia Mitsopoulos
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


NADIA MITSOPOULOS: First though, I want to go to Dr Rachel David who is the CEO of Private Healthcare Australia. Good morning to you and thank you for your time.
RACHEL DAVID: Good morning, Nadia.
NADIA MITSOPOULOS: A 3 per cent increase across the industry, can you live with that?
RACHEL DAVID: Look, this is a very controlled process that we go through in cooperation with the Federal Government to review the data and set the price for private health insurance. And this year, we’ve been particularly thorough through an iterative, or a process that’s gone to and fro, because we are acutely aware that we’re in a cost of living crisis and the funds don’t want to put premiums up by a single dollar. They don’t want their members to leave or get discouraged.

One of the things we’re grappling with, however is, as the Minister correctly identified, the cost of hospital care is going up. So not only are the number of procedures going up that we need to fund, the cost of those procedures is increasing and that’s because of inflation in the areas of recruitment, power and food that’s impacting hospitals. And so, fortunately, as a result of the process that we’ve been through we’ve been able to contain the cost of health insurance significantly below inflation and also below some of the really stratospheric rises we’ve seen in some other insurance types.

NADIA MITSOPOULOS: Okay. First of all, people say they feel slightly offended. I’ve got to say, on the text line, when we’re comparing the cost of a car or a house to your health, they’re saying they’re two very different things. But just on those huge costs that you talk about because the insurance industry, they wanted 6 per cent. Can you just give us a bit more of an understanding about those cost increases that you’re talking about and what sort of procedures?
RACHEL DAVID: Sure. So the 6 per cent that was referred to, that was the underlying rate of health inflation for the previous 12 months, so that’s what health costs have gone up by. And by tightening their belts and making savings themselves within their own businesses, health funds have been able to make some changes and come in at that 3 per cent level.

But for the cost they need to cover two things. One is the number of procedures that they’re covering has increased by 10 per cent over the average as they’re catching up from the slowdown in the pandemic. And secondly, the cost of those procedures is increasing.

So the biggest proportion of those costs is the stay in hospital. And for hospitals to deliver quality care, they need to pay their staff well and they need to, obviously, purchase power, food, surgical supplies, and so forth. And it’s the cost of those things that has gone up significantly and that’s what we need to cover.

NADIA MITSOPOULOS: And is it generally older patients? I mean, we have an ageing population, is that adding to those pressure points?
RACHEL DAVID: Certainly, people aged over 65 account for the majority of the costs for surgery. So, the common procedures – joint replacements, hip and knee replacements, cataract surgery, and then as people get into the frail age category, more cardiac procedures. As they have more hardware stents and valve replacements added that are used in heart treatment, they utilise more of those. So, yes, the older population will claim more. But many people in the older population and aged over 65 have been with health funds and contributing for a number of years.

And under our system, where we don’t charge more for people who are sicker – it’s called community rating – under our system that’s the social contract that you enter into with a health fund. So you contribute, you might not claim much for a while, but when you’re older the real cost of the procedures that you’re claiming for could end up in the hundreds of thousands of dollars.

NADIA MITSOPOULOS: Dr Rachel David is my guest, the CEO of Private Healthcare Australia. Look, I’m getting a lot of calls on this – and I will take your calls, and I can take your calls up to 9:00 if you like, lots of texts coming in as well. 1300-222-720 is the number – do you think a lot of those increased costs, and we’ve read about this before, are justified? Because there’s been complaints before about the high cost of some of these medical procedures.
RACHEL DAVID: Okay, look, for the most part the hospitals have genuinely been impacted by inflation in the general economy which accounts for rises in recruitment, wages, power, and food. The one area that the health funds feel is not justified is the cost of commonly used medical- surgical implants like hip and knee replacements and surgical supplies used in Australia. These are all, for the most part, imported from some big multinational companies around the world. And in Australia, we’ve consistently paid 30 to 100 per cent more than other countries, which accounts for way more-
NADIA MITSOPOULOS: [Interrupts] 30 to 100 per cent more?
RACHEL DAVID: Yeah. So a number of other countries have managed to control the unit cost of these implants. In Australia, we have not been good at that. The prices have been regulated and their benefits to health funds are obliged to pay for these things have been regulated tightly by the Federal Government. But, for a number of years, this was neglected and the prices that they set did not fall in line with global market prices.

So there’s been a process that the current government has in place to reduce some of those prices over time. But, unfortunately, it’s been very slow as the multinational companies and their lobbyists have pushed back.

NADIA MITSOPOULOS: So if we- are you arguing then, if that was unregulated those costs would come down?
RACHEL DAVID: Yeah, actually they would because it would enable health funds to pay a certain amount per procedure, a bundle per procedure, so that any commonly used – we’re not talking about new or fancy innovative things, but some of the commonly used things in surgery like plates and screws, if the health funds would pay a certain amount per procedure it would enable the hospitals to procure what they needed for that procedure. And there would be no incentive to sell or to drive sales of extra goods to the hospital, and that would help bring prices under control.
NADIA MITSOPOULOS: I’ll leave it there. Good to talk to you. That’s Dr Rachel David there, the CEO of Private Healthcare Australia.
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