3AW Interview with Dr Rachel David, Private Healthcare Australia CEO about private health fund coverage

Transcript

Station: 3AW
Program: Mornings
Date: 2nd March 2016
Time: 10:08 AM
Compere: Neil Mitchell

Interviewee: Dr Rachel David, CEO of Private Healthcare Australia

NEIL MITCHELL: Okay let’s have a look at your private health funds, your private health cover. They’re going up, the bill’s going up as much $200 a year. I think it’s an average increase, on average about 5.6 per cent, 5.59 per cent. Can you afford it? Can you afford not to have it? Because one of the frustrations is still the gap you need to pay despite paying large premiums. 96900 69313 1332. Can you afford it? Is it worth having? On the line the chief executive of Private Healthcare Australia that covers the funds, Dr Rachel David, good morning.
RACHEL DAVID: Good morning Neil.
NEIL MITCHELL: Herald Sun estimates that since 2002 fees have gone up 142 per cent compared to inflation 50 per cent. Who’s making the money?
RACHEL DAVID: Look Neil health funds really don’t take the issue of putting costs up lightly at all. Health funds life blood are their members. However, every year health costs rise above inflation, so the cost of medical devices and surgical tools up 10 per cent every year, hospital beds up eight per cent every year, the cost of surgery up nine per cent every year.
NEIL MITCHELL: So who’s making the money? No but where’s it going? I mean are you saying that the medical profession, the hospitals are making the money? Because 142 per cent increase compared to 50 per cent, that’s three times the rate of inflation since 2002.
RACHEL DAVID: So the benefits we pay out in terms of what we pay for those things are actually considerably more than the premium increase that we raise every- that we need to raise every year…
NEIL MITCHELL: So what do you mean? You mean you’re losing money?
RACHEL DAVID: So basically our- yeah our management expenses or the management expense ratios of health funds have gone down dramatically over the last 10 years. So health funds are introducing efficiencies to avoid passing all those costs on to consumers…
NEIL MITCHELL: But I just asked the point who is making the money?
RACHEL DAVID: In the health system costs are going up for a number of reasons. It’s to do with new technology. Utilisation of services as people get older and they want to live longer and live well, they’re actually using more health care. So we’re seeing things like knee replacements in some areas going up 40 per cent per annum in terms of the number of cases that we’re needing to fund, and…
NEIL MITCHELL: So it’s getting more expensive because people are using the system?
RACHEL DAVID: Yes, and that’s the same thing for the public system as well.
NEIL MITCHELL: So are you saying- I think you said nine per cent surgery costs have gone up. Is that because there’s more surgery or is there a rip off by surgeons?
RACHEL DAVID: No I don’t think in a sense it’s a rip off by surgeons. There’s a big variation in what surgeons do charge, but there are more of them and they’re doing more procedures because people are getting older.
NEIL MITCHELL: Fair enough. If I want to hire- if I’m a surgeon and I want to hire an operating theatre for a couple of hours, what does it cost me?
RACHEL DAVID: Look I can’t answer that because that will depend on the individual contract that surgeon has with the hospital. So if they were to go to a big hospital group like Ramsay they might be able to do a deal that means that it’s less than say if they were in a small hospital that doesn’t have those economies of scale.
NEIL MITCHELL: Well I’m told that these big hospital groups are making an absolute fortune. Is that right?
RACHEL DAVID: Look I think that would be an issue you’d need to ask them. The hosp…
NEIL MITCHELL: But you’re an expert in the area, but you would know. Are they making huge profits?
RACHEL DAVID: There are full profit hospital groups and not-for-profit hospital groups, just as there are for funds and their financial position is different. Some of the costs that we can control are our own management expenses and I’ve mentioned they are going down. We’re also working with the Federal Government on some more ways that we can reduce the cost of health care and the benefits we’re paying out without reducing the services to patients.
NEIL MITCHELL: So the doctors aren’t cleaning up, the hospitals aren’t cleaning up, you’re not cleaning up, we’re paying more, a lot more. A lot more.
RACHEL DAVID: Well that’s right but also the number of services that our members are getting is also increasing rapidly and that at its heart is really what’s happening. People are living an extra 30 years more than they were 100 years ago and they want to live that life in as good a quality as possible. People aren’t having a knee replacement and sitting on the couch, they’re having a knee replacement and wanting to go back to work.
NEIL MITCHELL: So where does it go then? I mean if this continues health insurance is going to become too expensive for us.
RACHEL DAVID: Well look I think this is an issue that the whole health sector needs to address and it’s an issue for public hospitals as well hence the discussion that some were having about tax and whether we need to actually raise the GST and taxes to afford to pay for public health. But in private health there are some things that we can do to make the system more sustainable. We’re in some very productive discussions with the Health Minister about that at the moment. One of the issues we are looking at is about the prices or the benefits that we are required to pay for medical devices which are the highest in the world. We’re looking at a way of bringing those benefits down to better reflect real market prices and we’ll be able to pass that value on to our members as soon as that regulation change comes through.
NEIL MITCHELL: The Herald Sun also reports the total premium revenue for the funds is 22 billion. Is that right?
RACHEL DAVID: Yes.
NEIL MITCHELL: Oh! Twenty-two billion comes in, how much goes out?
RACHEL DAVID: Well we pay in terms of a percentage I think- the benefits last year were paid out were about 7.4 per cent of revenue but the premium increase that we put up was only around six per cent and that stopped again. So in fact we are actually every single dollar of value that we can possibly pass back to the consumer we are, so really what you’re seeing…
NEIL MITCHELL: But in simple terms you’ve got 22 billion coming in. Twenty-two billion, I was staggered by that- in premiums…
RACHEL DAVID: But the cost of the services that we’re providing and the number of services we’re providing is going up [indistinct].
NEIL MITCHELL: But that’s why I’m asking you. You’ve got 22 billion in revenue coming in, how much is going out to provide the services and whatever else for your customers?
RACHEL DAVID: Close to 100 per cent of it.
NEIL MITCHELL: Close to 22 billion?
RACHEL DAVID: Yep. In terms of- we are providing two-thirds of the elective surgery and elective medical procedures that take place in Australia.
NEIL MITCHELL: We’ve got what, 56 per cent of the population, 13 million people have got health insurance?
RACHEL DAVID: Yes, 13 million Australians have got health insurance of some kind and that’s actually recently gone up.
NEIL MITCHELL: Okay. So you don’t think that will drop off now when the price is going up?
RACHEL DAVID: Look there will be a point- if we don’t do something to keep the system sustainable like address some of the issues that I’ve talked about like the inflation of medical device prices, then I think we will have a problem. But at the moment people are remarkably loyal to their private health insurance. It’s been very stable over the last ten years and people generally value the ability to have elective surgery when they want it and the place and with a doctor if they’re choosing. So what we need to do the onus is on us to make sure that we work as hard as possible with other stakeholders to keep the product affordable and easier to understand for consumers.
NEIL MITCHELL: Is there other gaps, in other words the amount of money the patient has to pay over and above their insurance payment, are they increasing?
RACHEL DAVID: Look we’re not seeing evidence they’re increasing but there is huge variability between practitioners. Health funds don’t have the ability to control what a doctor charges, that’s up to the doctor, but patients really need to be aware that for the same procedure there is a lot of variation and they really need to talk to their GP if they think they might experience financial difficulties with paying a surgical gap and make sure they’re referred to a surgeon and an anaesthetist who are not going to rip them off.
NEIL MITCHELL: I was talking to a doctor the other day, I was telling him horrendous figures about- admittedly this wasn’t in the Victorian system, horrendous figures to rent an operating theatre for an hour for basic work, basic- not a major operation by any means and they were very very expensive. Are those figures regulated in any way?
RACHEL DAVID: Look that’s an issue that is best addressed by the hospital groups. It is an issue that is entirely controlled by the hospital groups and the contracts that they have with the doctor, so it’s really the contract law that would be overseeing that particular issue.
NEIL MITCHELL: And if it cost ten grand to hire the theatre and a grand- a couple of grand for the staff and the surgeon and everything, how much of that do you pay?
RACHEL DAVID: Well we have to cover all of it.
NEIL MITCHELL: Well that’s the problem. If this rort is happening as described to me, and I repeat it’s not Victoria that I was told about and I’ve been unable to establish what’s happening in Victoria, if this sort of blood out of stone attitude is happening elsewhere, no wonder there’s a problem.
RACHEL DAVID: Well I think one of the important things is that the Federal Government is also aware of some of the issues that you raise and they have implemented a review of private health. One issue they are looking at is some deregulation, introducing some more competition into the system and a lot more transparency. We fully support that review and are in the process of negotiating some outcomes that we support and I think the Health Minister is really on the money with signing the life on some of this stuff.
NEIL MITCHELL: Okay. We’ll look further at it. Thank you very much for your time. Dr Rachel David, chief executive, Private Health Care Australia that covers the private funds.
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