Private health insurance review should look beyond doctor costs

"Patients are too smart to fall for the 'blame the doctors' line when it comes to private health insurance," Dr Phelps said.

"They are now paying more than they expected for a product that many have been induced to buy so they will want some positive outcomes from any review.

"People want to know all about the process that results in higher premiums and the commitment of a large portion of a family's household budget.

"They need to be assured that the funds operate efficiently and they need to be informed about the inadequacy of the Medicare patient rebates.

"The AHIA's Russell Schneider has been out peddling his usual line: 'If health funds need to increase their price to cover their costs, they are forced to go, cap in hand, to the government for approval. What other business would operate like that?'

"That's well and good, but now Mr Schneider wants doctors to go cap in hand to him and the organisations he represents - the health funds - for fee increases. That's a bit rich, even for the AHIA," Dr Phelps said.

As a proportion of all benefits paid, payment of rebates for inpatient medical services represents 8 per cent.

Payments to hospitals are 54 per cent and ancillary benefits 28 per cent.

Management expenses are 15 per cent of benefits paid.

Health funds provided $2.98 billion in hospital benefits, $1.54 billion in ancillary benefits, $300 million in prostheses, and $427 million in medical benefits in 2000-01. In the same year, management expenses were $843 million.

Dr Phelps said comments in the media by Catholic Health Australia's Mr Francis Sullivan are also off the mark. In today's Sydney Morning Herald, Mr Sullivan is quoted as saying that 'the "massive payouts" to doctors had meant "the pinch has been felt at the hospital bed".'

"Mr Sullivan has misrepresented the difference between rebates to patients and doctors' incomes," Dr Phelps said.

"In his reported comments, Mr Sullivan has provided no evidence regarding doctors' incomes. It is common sense to realise that with 50 per cent more people covered by private health insurance, more people will be using that insurance in the private sector.

"Mr Sullivan fails to mention that the decline in the private hospital share in total benefits has been driven predominantly by the rise in ancillary cover and benefits, and not by rebates for medical care.

"Further, he fails to mention that the increased level of activity in private hospitals is in proportion to the increased number of health fund members - the more treatment provided by doctors, the more revenue that goes to hospitals.

"To blame the doctors is a cop out," Dr Phelps said.

The Federal Government spent $15 million on an advertising campaign last year to promote the uptake of gap cover schemes and so should not be surprised that these schemes have been taken up - and that this has had a minor impact on the bottom line.

Costs have not increased because of doctors' charges. Rather, the health funds are covering the gap between the Medicare patient rebate and the doctor's fee - an amount previously paid out of the patient's pocket and now covered by the health fund.

Private health premium increases are fundamentally driven by what happens on the hospital side - of the benefits paid for inpatient care, hospitals receive 80 per cent ($2.98 billion out of $3.71 billion).

Dr Phelps said she would make these points clear in meetings with Health Minister, Senator Kay Patterson, and Health Department Secretary, Ms Jane Halton, this week.

CONTACT: John Flannery (02) 6270 5477 / (0419) 494 761

Sarah Crichton (02) 6270 5472 / (0419) 440 076

Attachments: Bar charts:

1) Components of Private Health Insurance Funds Expenditure 2000-2001 as Proportion of Benefit Paid

2) Private Health Insurance Benefit Paid for Hospital Accommodation Year ending 30 June 1998-2001

3) PHI hospital benefits per bed day cf. medical benefits per service