Dr Rachel David told ABC radio health funds have an obligation to make sure members get the best care at the best price

Station: ABC Sunshine Coast
Program: Mornings
Date: 5/8/2022
Time: 8:51 AM
Compere: Alex Easton
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


ALEX EASTON: Dr Rachel David is Chief Executive of private health peak body, Private Healthcare Australia. Good morning, Rachel, and thank you for joining us. So you heard what Tony McDermott just said then. What kind of implications could this have across the private health sector?
RACHEL DAVID: Well look, people are, in general, struggling with cost of living pressures at the moment. What the sector needs to do is to keep a lid on health inflation moving forward, because health inflation can gallop ahead much faster than CPI. The way that the- our system works and the way it’s regulated is it’s almost, the onus is almost entirely on the private health insurance fund to keep a lid on runaway costs. The same constraints on price rises are not applied to hospitals and doctors, but we have to negotiate with the Minister for Health on any increase in premiums, and over the last few years this has had a soft cap on it.

So we’ve really, really had to work hard to make sure that there are no wasteful costs galloping ahead in hospitals and in medical practice. So that’s really why Bupa has taken the stand that it has. The onus is entirely on the health fund, and it’s their job to keep a lid on wasteful costs.
ALEX EASTON: But at the same time, we do know there’s very high inflation, there has been a lot of pressure on health system. I mean, presumably, I think the disagreement was Ramsay was pushing for something like a 7 per cent increase and Bupa was insisting on 1.5 per cent. Presumably the hospital knows this, Ramsay’s knows this. They’re not going to say, well, we must insist on 7 per cent if 1.5 or something close to that is okay.
RACHEL DAVID: Look, I think that it’s fair to say that negotiations are still ongoing. But there is no way that any Federal Minister for Health at the moment is going to wave through a 7 per cent premium increase. So the health fund can’t pass those costs on to members.

What we are- what the health funds are trying to do is to ensure that they can work with hospitals to actively manage supply chains and inappropriate rises in costs. If I, for instance running my organisation, if a stationary provider puts up their costs or doubles their costs, I have to go out and manage the supply chain by finding other suppliers that will supply at lower costs – I don’t just pass them on to my members. I think that active management of input costs is what Bupa is seeking.

We understand that there is pressure on the hospitals side from workforce shortages caused by the pandemic and also by wage increases. This is an issue, it cost the whole sector, including in public hospitals. But that really means that we need to work that bit harder to address issues that are wasteful, like the runaway cost of medical technology in Australia, which we’ve been addressing as an industry, and also things like increased or inappropriately long hospital stays, for example. All of these things, in all of these areas, the onus is on the health fund to keep premiums low for members.
ALEX EASTON: In terms of the integrity of the private health system, just overall, though, we have had a general decline in people taking private health insurance over the last few years which, I think the last time I looked at it, that appeared to be accelerating even. Then you have this situation where people who have insurance from one of the biggest health insurers in the country potentially can’t access one of the biggest health- private health providers in the country. Does that then potentially increase that exodus from private health if it’s undermining confidence in the entire private health system?
RACHEL DAVID: I think you’re right on one point there, and that is we don’t want to be in a situation where people do lose confidence in private health – particularly now that we have record public hospital waiting lists, including even to get outpatient appointments. So, you know, going down the path of trashing confidence in the sector is not what we’re on about.

But I have to contest one point. Because of the waiting list issues, we’ve actually seen seven quarters of quite strong growth in private health insurance membership because of people needing to access care outside the very stressed public hospital system. I think that really means that we need to double down and ensure that the system remains affordable because really, you know, half the population relies on it to get access to surgery and in-patient mental health care.
ALEX EASTON: The- if we do have people having to use private hospitals because either whether – they’re leaving or whether they just don’t have any choice but to access a private- public hospital, sorry, because they can’t get into one of the Ramsay hospitals; do you have concern about what that means for the broader health system within Australia?
RACHEL DAVID: Look, I don’t think it will get to that stage. Bupa and Ramsay are continuing to negotiate. In fact, Bupa has offered to cover – and I think that just to take a step back, there are important consumer protections for a hospital that does fall out of contract with a health fund; the health fund still has to pay 85 per cent of the contracted price, even if it doesn’t have a contract; that’s in our regulation so claims will still be paid – and in fact, BUPA has offered to pay up to 100 per cent of the contract price for a period of time. So, for some months there’ll be no co-payments that need to be charged unless Ramsay goes ahead and charges extra co-payments.

So there’s no- there are important consumer protections in place so I don’t think people need to be alarmed in the short term. The parties are continuing to negotiate. Again, if worse comes to worse, people can always review their cover.

But I wouldn’t switch cover to something that, you know, might not meet your needs at the moment, because this still has a long way to play out. There’s really no need to be too concerned about the scare campaign on co-payments – this is sabre rattling. Co-payments- and again, BUPA has offered to pay the difference for a period of time.
ALEX EASTON: All right. We’ll have to leave it there because we’re running out of time. But Rachel, David, thank you so much for joining us this morning.
RACHEL DAVID: Thanks, Alex.
ALEX EASTON: Cheers. That is Rachel David. She’s the Chief Executive of private health peak body, Private Health Care Australia, talking about this dispute between Bupa and Ramsay Health.
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