Spotlight on PHI
By AMA PRESIDENT DR MICHAEL GANNON
I recently had the opportunity to address the Senate Community Affairs Reference Committee Inquiry into Out-of-Pocket Costs in Australian health care.
It was a great opportunity to tell the broader political community and the public the facts about the costs of medical care, and refute some of the mistruths being peddled in the debate about doctors’ fees – and have it all recorded in Hansard.
The simple fact of the matter is that private health insurance has to be fixed. We are not the problem. But we are a key part of the solution.
Consumers – our patients – need to be able to afford insurance for themselves and their families.
We need a strong private system to complement our world-class public system in delivering universal health care.
It is human nature that people will not pay significant amounts of money for products if they do not know what that product is going to provide for them. Too many health insurance products do not deliver the basic care promised. They are junk. This is the challenge facing the PHI industry and the Government. Hence the Review.
Now for some facts.
Out-of-pocket medical costs are not the cause of discontent among consumers. Most consumers understand that they may need to contribute to the cost of their care.
The big problem for consumers – and the PHI industry and the Government – is that many believe that they are covered. They have paid good money for their insurance. They must be covered, they think. Surely?! But no.
In many cases, they have paid good money for a product that may simply help them avoid a tax penalty, or cover them for what they would get for free in the public system anyway. These policies are worthless. They are junk. And they should go.
Another fact – out-of-pocket expenses are not growing.
The proportion of health expenditure funded by individuals, not the Government or insurers, has remained relatively static at 17 per cent over the decade to 2015-16.
Importantly, of that 17 per cent, only 10 per cent is spent on medical services.
The spend on other health practitioners is 9 per cent, and other hospital outlays is 11 per cent. The majority of individual expenditure goes on dental services and pharmaceutical products.
The undeniable truth is that out-of-pocket medical expenses are a small proportion of the total amount that patients pay for their health care.
A myth being promoted by some is that medical expenses are the cause of increased premiums. Wrong.
Medical expenses are a small proportion of total benefit outlays for the insurers. Medical expenses, as a proportion of benefits, have remained static at around 16 per cent since 2007.
Compare this to the administration expenditure of the private health insurers, which is around 10 per cent. This means that it is costing the insurers almost as much to run their businesses as it is to pay for the doctors who treat their customers. I stressed this point to the Inquiry, and suggested it may require further investigation.
Another fact, which I highlighted to the Inquiry, is that the AMA does not support exorbitant charges or egregious fee setting. We know that some patients, due to various circumstances, have incurred very large out-of-pocket costs for their care. We need to understand why and how these isolated events occur.
The AMA firmly believes that providing informed financial consent is not only best practice, it is demanded by medical ethics.
The overriding message I provided to the Inquiry is that private health insurance must stick to its core business and reason for being – as a payer for medical services.
The PHI industry must not be allowed to move its business model towards the system in play in the United States – the infamous ‘managed care’ system where everybody loses out except the insurance companies.
That system allows the insurers to reduce their expenditure by controlling what services are provided to patients. As they put it, they seek to reduce ‘low value care’. These decisions are not a matter for insurers. This care may well be ‘high value’ in the eyes of patients.
There are already signs of this behaviour in Australia. It must be stopped.
We need to head in the other direction. There needs to be greater transparency about PHI products.
Health insurance products must be easy to understand. Payments should be made on clinical need. The ‘de facto’ risk rating system created through products with incomprehensible exclusions and carve-outs needs to cease.
Universal health care demands a strong private health system, and that system needs the support of the PHI rebate and retention of the community rating system.
Anything less is a threat to the healthcare system Australians rightly cherish.
Published: 14 Nov 2017