Sky News Live Newsday program interview with Dr Rachel David on specialist treatment outside of hospital being covered

Station: Sky News Live
Program: Newsday
Date: 26/11/2019
Time: 4:18 PM
Compere: Tom Connell
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


TOM CONNELL: Meanwhile though, for more on this story on exactly what’s happening in private health, Dr Rachel David is the CEO of Private Healthcare Australia and she joins me now from Sydney. [Audio skip] a lot being looked at in the headlines at the moment. The key shift being looked at though, specialist treatment outside of hospital being covered. Anything in hospital basically is more expensive. So would this help with the private health costs at the moment?
RACHEL DAVID: It’s one of a key concern that patients with private health insurance have, that their care in the hospital is covered, but when they see their specialist out of hospital, it’s not. And only the Medicare benefit is paid, so they need to pay a co-payment. This is fine if you’re just having one surgery and it might be a one off thing, but for some people with chronic and complex conditions, this can add up to an enormous amount of money.

So look, the rules that govern private health insurance date back to the 1970s, and they restrict health funds to paying benefits in hospital for most things. So we are working with the government for certain chronic and complex conditions mental health, and some of the post-discharge rehabilitation or post-surgery rehabilitation that takes place. We’re working with the government on looking at making it easier for patients to get cover for those things in the community.

TOM CONNELL: When we’re looking at private health insurance, one of the big gripes is it doesn’t really feel like it works like insurance. You don’t get an upfront bill of what you’re all going to actually have to pay. When you have a car that’s smashed up, you know what excess you’ll pay for a windscreen or for a door, whatever it might be. At the moment, you have no idea what you’ll actually end up paying out of your own pocket. Is that an inherent issue that needs to be fixed?
RACHEL DAVID: Yeah, look, it is. And this was raised by the Grattan Institute in a report that it put out yesterday, in that it called for a single bill to be provided for services in private hospitals. Now, this has arisen as a problem Australian constitution, medical specialists operating in private are considered to be self-employed. But that’s another piece of ancient history. People expect, just like when they’ve got their car insurance, that they will get an upfront quote for going- before they go into hospital, and that they’ll get one bill when they come out. And with modern technology-
TOM CONNELL: [Interrupts] Would this put pressure on that quote as well, for what doctors could charge? Because you’d then think seriously about whether you would actually use any particular doctor, if it’s an astronomical bill, or even like you do with anything else – compare costs.
RACHEL DAVID: Yeah, I think it will make it easier for patients to compare costs and give that feedback to other people and GPs. We know there are a very small number, about seven per cent of doctors whose charging is way out of line with their colleagues and what people expect. And it will put pressure on those guys and help consumers to navigate around some of those very high-charging doctors, to someone of an equal .
TOM CONNELL: The issue according to some private health insurance companies is it’s getting harder and harder to justify being in the Australian market. Bupa is foreign owned – if it’s too hard to make money, will they just leave, and what would the impact be?
RACHEL DAVID: Look, I don’t think we’re anywhere near that stage at the moment. Australia has a really good health system compared to a number of countries around the world. In fact, in terms of outcomes, we’re close to being the best in the world. And we have solid commitment from Australian Government to the private market’s contribution to that. But we have a challenge, and that is we need to get a new generation involved in private health, understanding the benefits of private health and understand its relevance, and we are certainly-
TOM CONNELL: [Interrupts] Well, this is the thing, you say a long way from that, but the term that keeps getting used – perhaps you disagree with it – is death spiral.
RACHEL DAVID: I think one of the challenges that we have regulated in Australia is called community rating, which means everyone pays the same premium regardless of whether they’re sick or well. So if you have a number of chronic conditions, you pay the same premium as someone who’s completely healthy. That means there’s a cross-subsidy from younger people to older people. In the past that’s worked well because as younger people have aged, they’ve been cared for. But it’s started to break down with that very large baby boom population being bigger than other generations and claiming more than ever before. And that’s why we need a bit of extra push to get young people involved and maybe even some help from the government and from the sector to ensure they get value for money.
TOM CONNELL: Okay. I don’t think we ever want to go down the path necessarily of someone with a chronic condition- it’s a user pay system, almost, because what’s the point of insurance. But could it be tweaked a bit if people are accessing this system a lot, and young people are basically those dials a bit in terms of what they actually pay out of their own pocket?
RACHEL DAVID: Yes, look, I think that’s something the government and the regulators are looking at at the moment. We’ve had some initial discussions with them about making it easier for young people to get that first- to get to that first step on the ladder with private health. Certainly we can’t afford to see it go backwards- as a country we can’t afford to see it go backwards to where we were in the late ’90s with only 30 per cent of the population with hospital cover. If that happened, the taxpayer would need to fork out an additional $20 billion to actually cover the hospital care for those people in the public system. So that is really something the governments of both colours are keen to avoid. And by improving participation of younger people, you know, it will help to restore community rating. But the way it’s going at the moment, with a smaller generation of younger people trying to prop up a bigger generation of . It’s not working as well as it should.
TOM CONNELL: The other side of the equation is for private health companies to make a bit less profit. That’s what the Minister wants to achieve with limiting the increase to 3.25 per cent. Profit has been going up for companies. Why can’t they afford to be making a bit less money?
RACHEL DAVID: Well, I’d just correct you on one thing there. Over the last 12 months, the profit- the net margin of health insurance companies on average has declined by 100 basis points. But I think that in spite of that, we have a shared goal with the government to keep premiums as low as possible. There is nothing worse for a health fund than to be obliged by regulators to put their premiums up and see members leave. So I think we need to be really clear. We are doing everything in our power to keep premiums down. The reason they go up is precisely as I’ve said previously – because health funds are paying for more health care as the population ages.
TOM CONNELL: But what you are going up. You’re saying it’s less profitable in terms of the margin. Are we necessarily at the right margin in Australia? Perhaps health shouldn’t be something that- should see as bigger a profit yield?
RACHEL DAVID: Look, I think compared to other insurance types, health fund margins are pretty low. There are a number of not-for-profit providers out there and mixed business models. But by and large, the system that we’ve got at the moment is working well in terms of the performance of the businesses. And we don’t want to drive them to the wall to the extent when they can’t make- or they’re not able to make investments in their members’ health care, which they are at the moment. So I think we will be- we are on track to keep private health insurance affordable, and offer as low as possible a premium increase. And we need to remember as well, that the credential regulator has been very clear, that health fund driver of premium increases. The amount of health cover that funds provide is what drives the premium.
TOM CONNELL: Alright. Well, it’s an area the government has indicated that there could be some major changes in. We’ll see where they go and perhaps check in again down the track. Rachel David, thanks for your time.
RACHEL DAVID: Very happy to be here.
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