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13 Jun 2019


As the dust is settling after the election (I will leave the President to give a summary of his reflections in this regard) I thought it useful to examine in some detail what we need to do to rescue private medicine from the slow decay it is currently experiencing.

The quarterly health insurance statistics have just been released – they provide for sobering reading. Private health Insurance (PHI) coverage rates continue to whittle away, now down to 44.5 per cent. We are feeling the effect of this decline in the private sector – it is not just a number. The Government (or the Opposition) does not have an overarching strategy of how to deal with this – a notable omission in the election campaign. 

The AMA is seeking pointed and meaningful discussions with Government (and I think State/Territory AMAs should be active in this space with their Governments as well). Perhaps we should also include consumer groups, private hospitals and even the funds themselves (they often dance to a different tune though). The State/Territory angle should not be under-estimated as the COAG forum is clearly very important for driving essential policy reform. Moreover, each State/Territory Minister knows their public health system cannot handle extra patients all withdrawing from private health.

It is worth noting that health funds (bear in mind for-profit funds currently comprise nearly 70 per cent of all funds compared to only 16 per cent in 2005) have done very well improving and preserving their profit which currently stands at a robust $1.8 billion. In 2014 the PHI sector profit was around $1.4 billion – so a nice increase for them. During this same period the average medical gap has remained static at $60-61 during which time we have endured a frozen MBS rebate.

This is one indicator that gaps are not driven solely (or predominantly) by doctors. We are all familiar with the five-year freeze of the MBS rebates (which was inadequate to begin with). From 2010 to 2018, PHI premiums increased by a cumulative 49 per cent – compared with the health CPI cumulative increase of 40 per cent. By contrast, doctors were faced with a paltry 5.7 per cent increase in the MBS rebate. It is clear who is winning.

Nationally, Australians spent $29.4 billion on out-of-pocket health-related expenses in 2016-17. Most of this was on prescription and non-prescription medications ($10.8 billion or 37 per cent), dental services ($5.7 billion or 19 per cent), and other health care such as aids and allied health services outside Medicare ($6.7 billion or 23 per cent). Medical costs make up only 21 per cent of out-of-pocket expenditure for individuals.

In terms of outlays by funds for private specialists, again, the amount spent on doctors is only a small percentage. Of the $3,965 million in the December 2018 quarter paid by insurers for hospital treatment benefits, only $613 million was for medical services or around 15 per cent. The answer to the affordability problem is not doctor bashing. The statistics aren’t there to support it and this malicious diversionary tactic will backfire on the entire industry.

Perplexingly the benefit schedules can inexplicably vary significantly. Not just between insurer, but between state and territory. The resultant gaps are not borne from doctor fees being too high, but due to insurance companies paying hugely variable amounts which do not reflect the cost of providing the service.  For example, if a doctor does not have an arrangement with a fund, then only 25 per cent of the Medicare rebate is paid which drastically increases the gap for a service which might be completely covered without a gap in another hospital with another doctor.

Critically, if legislation forced funds to pay the same amount (e.g. the AMA fee), appropriately indexed and defined, for each item regardless of whether the doctor has an agreement with a fund or where the service is occurring, gaps would significantly reduce overnight.  

In the PHI report card last year the AMA highlighted total hip replacement and how the fund rebate can range from $329 to $1,120. The ALP election policy supporting cancer care shows that reform to ensure appropriate, indexed rebates for care can be entertained. Reducing gaps requires reform of the PHI industry and rebates, not forcing doctors to reduce fees. We must however always ensure our fees are reasonable and be derisive of over-charging and over-servicing. 

Widely differing rebates are incredibly confusing for patients. It isn’t addressed by the reforms to date, and it isn’t addressed by the Government’s new fee transparency website proposal. Doctors’ fees without information on insurers and MBS rebates will not inform patients about their out of pocket costs. Surely if we are going to do transparency of fees to help patients, let’s also demand transparency of rebates. This is not negotiable.

Our next approach around this thorny problem should include active collusion with consumer groups to strengthen our case. A carefully devised national campaign with succinct outcomes is required that encompasses effort from the entire AMA family as well as other stakeholder groups such as Colleges/Associations. The conversation needs to change and to this end we must be seen to be actively trying to manage egregious billing and extinguish administrative/booking fees. Primarily however, we need to promote high-quality medicine as our goal and not always be dragged into a defence of the cost of medicine. We do things well and have good outcomes – this is a good starting point for our renewed campaign.

Published: 13 Jun 2019