Program: Beattie and Newman
Date: 7/05/2018
Time: 8:01 PM
Compere: Peter Beattie and Campbell Newman
| Campbell Newmann | But anyway, tonight’s not about the weather. It’s all about the issue of private healthcare, private hospitals, the public system. Tonight we’re going to let the private system have a really good shot at talking about some of the issues that they face because they get a lot of criticism about high premiums and the increases in those premiums and whether it’s value for money. But why don’t we start firstly with where it all happens, at the coalface in the hospitals. Sorry, I’m going to correct myself there. I’m getting a bit confused, it seems. Let’s start with the actual issue about insurance itself: the people who are paying the bills, that’s all of us.
And so we’re joined this evening by someone who represents the various health funds that’s Dr Rachel David. Thank you for joining us this evening. Well Dr David, just to by way of introduction for our viewers- we seem to have quite a delay this evening, sadly viewers. But you’ve been a health adviser to the Federal Minister for Health. You work for McKinsey in their health practice. You worked for CSL. I think you’d probably be quite proud of your role in the rollout of Gardasil cervical cancer vaccine, which has provided so much protection against cancer to young women and old women right across Australia. You’ve also worked for Johnson & Johnson. You’ve been with the Private Healthcare Australia organisation as their CEO for a couple of years, so welcome this evening. [Audio skip] might I kick off with a question about- why don’t you tell us a bit about your organisation, the funds that you represent, and what their objectives are? |
| Rachel David | Private Healthcare Australia is an organisation that represents health funds in terms of policy, advocacy, and negotiation. We represent about 22 funds, right from the bigger funds; Medibank and Bupa, to some really tiny employee-based and rural-based health funds, the kind of funds that represent teachers and nurses for example and that provide health care for those groups. Overall on membership, we represent 96 per cent of the market for private health insurance and the services that health funds provide to Australians. |
| PETER BEATTIE: | Okeydoke. Rachel. Well I’m glad that I join you. Sorry, I had a bit of a technical problem here in Melbourne but now I’ve joined you. So Rachel thanks for being with us. Let’s come to the heart of the issue, because there’s a couple of things I want to pursue, but firstly to be fair, let me give you a chance: what are the major issues that are facing your organisation? What are you worried about now? Are spiralling costs one of the challenges? Are you losing membership? What are your challenges right at the moment? |
| RACHEL DAVID: | Look, absolutely the biggest challenge for health funds is rising premiums because that is a very direct price signal to the consumer and the member that occurs every year. The reasons they go up is that health funds are paying for more health care both in hospital – the surgery and the mental health and obstetric treatment that people receive in hospital – but also we need to remember that health funds fund a lot of allied health and dental services. Forty million dental services are provided each year by health funds through reimbursement and directly through services. That’s more than state and federal governments combined, and that’s growing rapidly as well. |
| PETER BEATTIE: | Rachel, let me ask you this question then. So what’s been happening with premiums, say, over the last 10 years? That’s the first point. And secondly one of the other issues is that for example, my wife and I are in their 60s right, but we have pregnancy cover. When I rang to try and say well, hang on I don’t really need that anymore – Heavens forbid that I would ever need it -and I tried to rearrange my scheme, it was actually more expensive to get rid of it and move to another scheme. So two questions: how do I get out of the pregnancy cover and secondly, what’s been happening with premiums over the last 10 years? |
| RACHEL DAVID: | Alrighty, well, let’s start with the issue of the cover and one of the things that we need to remember is that in Australia health funds are bound by a certain regulatory system called community rating – which means that health funds cannot discriminate against individuals based on their health status and they can’t design products completely bespoke to the individual which matches their health status. That’s a different kind of system which is much more expensive for some people which is called risk rating. So every product that health funds have on the market has to cover a certain spread of conditions which means that all the members put their funds into a pool so that those members that become sick and unwell are covered and in turn as other people get older their health needs are met by the community as well.
Now, that concept flows through to the kind of products that health funds are allowed to design. There are products with certain exclusions that are designed to meet life stages. So there are products out there that cover a smaller range of things which are more appropriate for young people and people just entering the market, and there are products out there which are tailored to older people which exclude things like pregnancy and IVF, but they often don’t just exclude pregnancy and IVF because of that community rating issue, they have to bundle certain exclusions or inclusions together. Overall this makes- this idea of exclusions has been designed to meet the consumer’s need for an affordable product but it has made the system more complex as you’ve suggested, so it is difficult for a consumer to find a product that meets their specific needs just by calling one health fund. To fix that we’ve spent two years working with the federal government on a way to make the whole system more transparent by classifying products based from gold, silver, bronze and basic according to the level of cover but also the definition of each of the treatment areas that it covers. So people are very clear what it is that they’re purchasing. And the thing that will really help someone in your position, someone who’s looking for a product to meet their particular needs, we’re giving a much greater investment to the private health insurance Ombudsman’s website so all the products with the things they cover will be compared and that’s called privatehealth.gov.au, that website and that will receive a lot more funding so that by April next year it will be much easier to pick a product that’s both affordable and best meets your life needs. Now, you also asked about premium increases over the last five years- sorry, 10 years. You’d see if you look back to 2007 that premiums had risen pretty steadily at about 5 to 6 per cent per year as health costs are rising at about the same rate – and that was as a result of the baby boomer population coming through and starting to use much more hospital services such as hip replacements and knee replacements. Over the last two years the average premium increase has been less and that’s been due to a couple of reasons. The main one has been that the federal government intervened in the regulation of medical device prices to bring those prices down. They were becoming a major input cost driving up premiums because of a poor system of regulation in Australia which meant that Australian patients had to pay more than anyone else in the world and the federal government to its credit made some changes there which dropped the regulated price of medical devices without changing the range of things that were available. So that’s given some much needed relief for premium increases. |
| CAMPBELL NEWMAN: | Rachel, that’s an interesting point you just made. This might be a bit of a digression but when I was Premier I was absolutely flabbergasted and horrified when talking with families who had children with disabilities to hear the prices of items to support those young people compared to what they pay in United States and plus very strong restrictions on people being able to bring stuff into Australia themselves. So for example a wheelchair in the States might cost half what it costs in Australia for someone who has mobility issues. So is that what we’re seeing in this area of- in your particular area with these medical aids, these devices and the like? |
| RACHEL DAVID: | The sort of devices I’m talking about with private health insurance are the implantable devices or things that go in the body. So your plates and screws that are used to fix broken bones, hips, artificial hips, artificial knees, pacemakers and the lenses that go into people that have had cataract surgery. Now, in Australia we had a serious regulatory problem that had gone back about 10 years where the prices of these devices had been fixed far too high before the global financial crisis and didn’t allow the prices to come down in line with real market prices around the world. So the end result of that was that in about 2015 Australian private patients were paying about two to five times as much as anyone else in the world to access the same device in an Australian private hospital. Now, the Government was forced to intervene to bring those prices down and that was done through a range of measures mainly in negotiating with the multinational medical device sector and suggesting that there had been extreme inflation in medical device prices in Australia and we had to reach a more realistic level. That has been done and that has resulted in considerable relief for premium increases in the last couple of years. |
| PETER BEATTIE: | Rachel, just as an aside before I asked the question, I lived in the United States for seven years and I have to say what I paid for health cover in the United States was more than double what we pay here. Not that I want to see that as an excuse for not reducing my premiums, but I just want to make that observation – and the service was worse.
Let me get to some of the ugly issues here, Rachel, I mean obviously you mentioned earlier in answer to one of my questions that clearly health funds have got to cover the cost of providing the service. Do we have enough doctors in Australia? Are our – if you like specialty areas too prescriptive? Should we allow more doctors in? Should we train more doctors? Is that one of the issues a lack of competition in the system amongst the medical fraternity? |
| RACHEL DAVID: | Look what you’ve raised there, Peter, is an incredibly complex issue and one that the federal government has tried over many many years to invest money in attempting to resolve. The reality is we’re training more medical specialists in Australia than ever before. For the first time ever we now have more medical specialists than we have general practitioners and the incentives are for medical specialists to specialise in ever narrow areas and particularly in procedural specialties were under the Medicare Benefits Schedule system the way that the federal government basically pays for medical specialists services, the incentive is to do more procedures because that is what is paid the most.
So if you look at Australian Tax Office data you’ll see that the highest paid people in Australia are surgeons and followed by anaesthetists that are two types of medical procedural medical specialist. Now, because the federal government’s MBS program is uncapped, basically all of those medical specialists can go out, hang up their shingle and earn a living as a private practitioner wherever they want and then market forces to an extent operate but because the Medicare Benefits Schedule underpins their practice and because the information to consumers about the quality and price of medical specialists is not transparent, in fact what that can create is almost a provider induced demand in the system so that more services take place than in fact there are sick people in the community. And that in itself particularly in metropolitan areas where it’s said there’s an oversupply of specialists in some areas, that can actually drive up costs without really addressing the underlying disease in the population. It’s something that the Government has to be really mindful of as it funds medical training and provides funding for medical specialists to go into the community. Of course in rural areas they almost- they have the opposite problem in that they really struggle to hang on to medical specialists and medical specialists may not have enough cases in a certain rural area to be able to maintain their qualifications. So what happens there is there tends to be fly-in fly-out services to those areas and that in itself can be very costly as well. |
| CAMPBELL NEWMAN: | Rachel, let’s go back to the actual customers, the people who are paying the premiums. What’s your take on the feedback from the customers of the funds, the people paying those premiums, are they getting exasperated with the system? What are you seeing and what’s happening to membership numbers? |
| RACHEL DAVID: | Look, no one likes to see costs go up and the fact is that that annual premium increase is a very direct signal even though it’s actually far less than the increase to public hospitals year-on-year which is about 6.5 per cent. Because it’s a direct signal and it doesn’t come out of people’s taxes they see it and they get – particularly as wage growth has been very flat since about the last five to eight years – people have been increasingly concerned about it.
But the reality is when you survey people that are actual members of health funds who use their health insurance and particularly if they’ve been a member for a long time they tend to value the product and they get very anxious about anything that might cause them to need to reduce their cover or drop out. So the longer someone has been a member of a health fund the more they value it and the less likely they are to want to leave. So we see that about 80 per cent of people that are already members of health funds value the product and they know that it’s the only way that they can get access to certain types of admissions for elective surgery and mental health. But the problem that we see is at the prices that we’re seeing now how do we remain relevant to a new generation and younger people coming through? And that’s the issue that we have is that most of the dropouts and downgrades in private health insurance are from younger people even as we’re seeing some types of hospital admissions in younger people go through the roof, particularly in areas like mental health, addiction and eating disorders. |
| CAMPBELL NEWMAN: | Well Rachel, we’re just about out of time I’m afraid so I’ll probably have to wind it up, but we really want to thank you for coming on this evening. Also apologise for the technical problems we had at the very very beginning. But we’d love to have you on again to talk about issues in more detail, particularly perhaps post-budget? |
| RACHEL DAVID: | Absolutely. |
| PETER BEATTIE: | Thanks Rachel. |
| RACHEL DAVID: | That would be my pleasure. |
| PETER BEATTIE: | Thanks Rachel. All the best. |
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