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Episode 5 - A/Prof Julian Rait on Private Health
73 Plays4 days ago
AMA Vice President A/Prof Julian Rait joins Dr Omar Khorshid and Dr Chris Moy to discuss private health in Australia.
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Transcript
Australia's Global Healthcare Status
00:00:02
Speaker
You're listening to The Waiting Room, a podcast by the Australian Medical Association with your hosts, Dr. Omar Khorshid and Dr. Chris Moy.
00:00:22
Speaker
Australia, as we know, has one of the best health systems in the world. When you look at outcomes like life expectancy or access to health care versus the amount of money spent, we are at the front of the pack.
Balancing Public and Private Healthcare
00:00:35
Speaker
But why? What is it about our system that makes it so good despite the many problems that we see day to day? For me, there are some clear answers. Our primary healthcare care system with private general practice at its heart, as well as our mix of universal healthcare through public hospitals and a busy, vibrant private hospital and private healthcare care system.
00:00:57
Speaker
The balance between public and private systems is critical for all sorts of reasons, but we're now seeing some worrying problems on the private side that risk long-term damage to our world-leading healthcare system.
Complexities in Private Healthcare
00:01:10
Speaker
Australia's healthcare system is notoriously complex, but to help us make some sense of what is going on in private healthcare, care we're privileged to be joined by Associate Professor Julian Wright, Vice President of the AMA.
00:01:21
Speaker
Welcome to The Waiting Room. I'm Omar Corshid and my co-host is Dr Chris Moy. G'day Omar and g'day Julian. Julian, look, um you know as a GP, I definitely see the value of private health insurance and be able to ah provide choice for my patients. But look, I mean, in terms of the the value to them, I mean, they see the cost of them. ah Patients see the cost and see how expensive it is for them.
00:01:48
Speaker
I mean, what do you say or how do you how do you put to patients the value of private health insurance to their health? And and ah in terms of the wider health system, why is it such an important aspect? Well, thanks very much, Chris. um Look, I think, as you're aware, I've worked in a number of health systems through my career and been aware of different models of financing them.
00:02:12
Speaker
um And, ah you know, one of the things that impresses me is always when I, you know, return to Australia, just how well the system works, particularly a relationship between primary care and and private non-GP specialists.
00:02:26
Speaker
And the value proposition is really around the fact that people have it can have a choice of practitioner and have an enduring relationship with that practitioner, whether it's for a short period or or for a prolonged period.
00:02:40
Speaker
ah period if they have a yeah ah chronic illness. And also, of course, as I think Omar has alluded to, we do this at a very ah modest expense compared to other
Healthcare Performance vs. Spending
00:02:53
Speaker
jurisdictions.
00:02:53
Speaker
ah One of the interesting things is that I was aware when I was working in the US, of course, of the Commonwealth Fund, which ironically with that name is ah is a US foundation,
00:03:04
Speaker
that was established in 1918 to look at the improving the efficiency of healthcare systems around the world. And Australia is consistently rated at the top of that list, and mainly because it delivers such good outcomes for a relatively modest cost. I think amongst the top 12 OECD countries, ah we rank at the top of ah the list for performance, but I think we're about number 11 or 12 in terms of our cost as a percentage of GDP.
00:03:34
Speaker
um And while those figures might sort of you know sort of give comfort to people, I think that the service that's delivered to people with private health insurance to this country is is really very good. People can access care in a timely way and have the choice of practitioner and also feel that their needs are really being driven by ah the practitioner being concerned about the patient's interests and not about some the interests of a third party
Trends in Private Healthcare Sector
00:04:01
Speaker
payer.
00:04:01
Speaker
So Julian, there are some clouds on the horizon that are going to affect a patient's ability to choose their doctor choose their hospital. Can you take us through yours and the AMA's main worries about our private system at the moment?
00:04:16
Speaker
i think If I could just return to the US, really, I mean that there's an increasing number of practitioners there that are independent of these third-party payers, that there's currently only about 40% or so of US physicians who work in practices wholly owned by doctors.
00:04:33
Speaker
And i can see the beginnings of the trend here where, like the... the balance of that number, increasingly people are employed by either, ah you know, health insurers, private equity forms firms or hospital groups.
00:04:48
Speaker
and And that obviously has the potential really to change the dynamic and mean that over time, the ah direction of care is not really sort of necessarily being driven primarily by the patient's interests, but by the interests of, ah you know, the third party payers and and their are bottom line.
00:05:08
Speaker
So i think that that's where we're heading and we're already beginning to see that, unfortunately, yeah Omar and Chris, with with what's been happening with two of our largest insurers, ah Bupa and Medibank Private, because ah Bupa has increasingly been taking a share of the interests in some primary care providers, ah most recently ah some mental health clinics and equally many bank private has entered the private hospital space by taking a very substantial interest in a private hospital here in Melbourne. And while i'm I'm sure that they have, you know, good governance processes, we just worry that over time that those might be eroded and we might see sort of like more interference with the
00:05:51
Speaker
ah clinical decision making by clinicians.
Risks of Managed Care
00:05:54
Speaker
So I take it what you're saying, Julian, in in simple terms is is managed care where the choice is taken out of to a degree out of the the the options for patients and also the referrers and the providers as well.
00:06:07
Speaker
um I mean, but while we're headed down this way, what has what has happened to get us to this point and what are the the tensions and the the issues that have have led to this? Well, I think there's the obviously the escalating out of pocket costs are and are an issue. ah that I think that ah the insurers and of course the ah government through the medical bedment schedule have actually restricted the amount that they're reimbursing.
00:06:32
Speaker
And in the case of private health insurers, ah they've increased their rebates by I think about by around 10% over the last five years, whereas their profits have increased by 50% in the same period.
00:06:43
Speaker
and clearly increasingly ah we're seeing that the funding of healthcare is being diverted away from the patient and being diverted to the yeah ah profitability of health insurers and other groups. So ah that is a particular issue because I think it it means that really that managed care is a very great risk in that sort of scenario. So Julian, I guess that goes around ah the issue of private health insurer sustainability and and the affordability of their products. If their products become so expensive, no one's going to buy them and therefore it all falls over and that's why they're pushing towards both vertical integration, owning the
00:07:24
Speaker
more of the hospitals, the referrers, the pathology labs, the radiology firms, e etc., um but also managed care. But the flip side of that equation is, of course, the sustainability of our private hospital sector.
00:07:38
Speaker
And we've seen some pretty worrying trends there as well, haven't we? Yeah, that's right. I mean, the the problem has been, again, that the funding has been restricted to the private hospitals by the private health insurers.
00:07:48
Speaker
um And we've seen over the past few years about 70 private hospitals have closed. And of course, we're also aware that HealthScope, Australia's second largest private hospital group, has been in receivership and will likely, in my view, be broken up and bought by a number of different players.
00:08:06
Speaker
But, you know, that... suggests to me that um there's ah less, I suppose, margin for those hospitals and certainly the private hospital health check which was conducted by the a government ah Department of Health last year showed that there was particular strain on many hospitals, that they were all ah pretty much either in the red or or close to it with only a few making a reasonable return. So in that setting, they can't invest in the sort of like new equipment and infrastructure that's required to maintain their standards and obviously continue to provide you know first-class care. So
00:08:49
Speaker
I'm very concerned that unless there's some sort of greater oversight of this sector, that we're going to actually see this increasing trend where ah insurers continue to sort of like pocket as you know substantial profits and and not really pass on sufficient funding to providers, whether they be hospitals or health practitioners.
00:09:11
Speaker
Julian, in terms of maternity care, which is really one of the the first um and theoretically most positive contacts that people will have in the use of their private health insurance as long as they have no major problems beforehand, i mean ah yeah mean, that does appear to be really the the a crisis point in in in in private health care at the moment.
00:09:33
Speaker
ah um Where
Challenges in Private Maternity Care
00:09:35
Speaker
does it stand at the moment and and and you know in terms of the the general ah major problems that are occurring in private healthcare? Well, I think you raise a very good point because it's really the yeah usual way in which people enter the private health insurance system is in the yeah when they're planning to have children.
00:09:55
Speaker
But the level of funding really support private maternity really has to support a viable and sustainable service. Now, we recognise the importance of maintaining a balanced private and public system in this regard because if we suddenly were to lose the private sector, there would be an enormous influx of of patients into the public sector and would very quickly overwhelm it. So it's very important that we keep the policy settings right to support the yeah private hospitals.
00:10:25
Speaker
um And I think also that what's been emphasised too is that um the the there's been obviously declining birth rate in recent years, which has obviously meant there's been perhaps some less volume for some of these maternity units.
00:10:41
Speaker
ah But equally, the costs ah have been rather fixed because it's you know just a ah very expensive part of the healthcare care system in order to fund. And I just don't think that there's been sufficient um I suppose, motivation to provide that support and keep these units going, bearing in mind, as you said, Chris, that they're very important as a entry point into the private health insurance system.
00:11:08
Speaker
And of course, Julian, around 70% of elective surgery is occurring in our private system. So if we see any significant reduction in throughput through the private system, ah it's very easy to see a huge problem for our public hospitals, which are already unable to ah cope with the demand of, in particular, their emergency workload, but of course also their very, very long elective surgical waiting lists.
Lack of Cooperation Among Stakeholders
00:11:33
Speaker
So we've heard ah fair bit about the problems. I think we're pretty clear that hospitals are in trouble, insurers think they're in trouble, but actually seem to be making quite a lot of money. um And ah there are concerns also about the affordability from a patient point of view, both of of medical gaps and and of private health insurance premiums.
00:11:51
Speaker
ah There hasn't been a lot of cooperation, despite the fact that you think all these players are pretty co-dependent. Not much point in having private health insurance if there's no private hospitals in which doctors can go and work and provide the care that people are insuring for.
00:12:06
Speaker
And yet we haven't really, in the last couple of decades, seen much evidence of progress. The AMA has proposed a solution being a private health system authority, um not a not a hugely attractive thing um to suggest yet another bureaucratic body in Canberra.
00:12:25
Speaker
What do you mean by an authority and and how would it make a difference um to this series of problems that we've got at the moment in private health? Well, I think the problem, Omar, is there's really no single body that's responsible for policy leadership.
00:12:38
Speaker
um And at the moment, we have, ah I suppose, oversight of the private hospital and private health insurance systems between several bodies, which includes the APRA, the Prudential Regulator, the Private Health Insurance Ombudsman and the ACCC. But the latter in particular is only really concerned about market power or competition. And none of them are really very concerned about how the patient might experience the the system and how much value is being returned to them through their ah premiums. so
00:13:10
Speaker
um Given that there's no single body, I think we need to have an independent authority ah that so can drive policy reform, ensure that the needs of patients, hospitals and insurers are all balanced.
00:13:21
Speaker
um I think as you point out too, Omar, the issue is that um there's no one really concerned about hospital viability at the moment and about whether the contractual agreements that are reached between hospitals and insurers are too ah far in favour of the insurers who obviously have considerable market power.
00:13:42
Speaker
um But equally, I think that there's issues around banding as well about you know exactly how various different procedures are ranked and how they're how they're funded.
00:13:53
Speaker
um And also prosthesis list is also a thing that's ah very, um you know, sort of in flux and not really sort of very transparent how the decisions are made around the funding of those items as well. So, ah you know, it really seems to me that we if we are to actually improve
Proposed Policy Leadership in Private Health
00:14:12
Speaker
the performance of the system and improve the ah funding of the various different elements, we're going to have to have someone who could have some oversight and actually look at the... yeah various different components and how they might be ah made to better work together.
00:14:26
Speaker
I will say though that the current CEO forum that's been established by the government and and which I sit on actually does seem to work in a default way a bit like we would anticipate a system or at least an authority working.
00:14:42
Speaker
It may not necessarily have all the yeah bells and whistles and the secretariat yet, but it's certainly got all the stakeholders together and we're seriously considering a number of reforms that might actually yeah translate into some improvements.
00:14:55
Speaker
I must say, having attended the a summit that the AMA ah set up on this issue, I was actually quite shocked as a GP that ah this is such a huge area of the the health system, which has these huge players, but really is to some degree is being quite driverless, which And then I started to understand why we ended up in you know hell in terms of places, things like you know um hospitals closing, um um um concerns about premiums and and and the sort of perception about private health insurance being ah being a ah problem.
00:15:32
Speaker
um and And I also started to realise, in fact, that really because it was such a huge problem that was so complex, it almost felt like... ah governments felt very scared to actually ah you know attack this issue properly and actually bite the bullet on this. um i mean what is the argument How do you argue to them that they really need to take control of this finally? There needs to be some level of control of this because we are going to, I think, get into a lot of trouble in this area and actually lose a really important and positive part of the health system which balances the health system in Australia if we don't get this right? How do we convince governments to to take this take take this seriously? I think you've got a good point there. I think that once you take responsibility for a problem, of course, you're accountable for its continuing ah success. And, you know, I would...
00:16:22
Speaker
completely understand a politician's reluctance to to take, I suppose, a totally hands-on approach to it. But on the other hand, I think setting up ah a private health system authority or a body like it ah would actually provide good policy advice. And so I think that that's certainly some way to sell it. But but I think also without...
00:16:43
Speaker
ask some intervention, we do risk the potential for the private health system to continue to be eroded and that in turn is going to put great stress on the public health sector. So um if the public health sector, you know, which is already, I suppose, underfunded and and creaking a bit at the seams, if if that has some further stresses put on it I think we could see you know some really very serious consequences for patients and for the system generally. So I think it's an argument to ensure that as a matter of risk management that patients and continue to get good health around the country. i think that this is an important part of the puzzle and to protect the system.
Regulating Insurers for Fair Practices
00:17:29
Speaker
Julian, um it It makes a lot of sense to have a a policy body that can advise government and make sure that there's there's some at least strategy behind what's going on in this very large sector. But we we do have the issue of the behaviour of the large insurers. You know, Australia used to have lots and lots of small insurers, but most people had full cover with small insurers.
00:17:50
Speaker
Now we have a situation where we've got very large for-profit insurers. um A lot of people have only partial cover and and are disappointed when it comes to claim time. ah Profits are soaring and yet patients gaps are getting bigger and bigger.
00:18:06
Speaker
The AMA has said some stuff in the past around the profits and and things like minimum payout ratios with but some insurers are paying out a lot less of their premiums back to the patients and and in claims than others.
00:18:19
Speaker
um And obviously there's a question too around their behaviour with contracts with doctors, their behaviour around vertical integration, buying general practices, hospitals, et cetera.
00:18:30
Speaker
do Do you feel that a private health system authority should rein in and set the rules around insurer behaviour? Well, it's interesting because, in fact, in you know certain parts of the United States, they have a minimum payout ratio for private health insurers.
00:18:45
Speaker
So, you know, and that's legislated floor. um And it's interesting that our insurers have fallen below the even the US floor at around 84%. So um ah yeah i think there is a genuine need for legislative reform to ensure that there is actually a minimum payout ratio.
00:19:04
Speaker
i think it should be around 88% to 90% would be where I'd be pitching it. And I think that... um really to ensure that there's continued investment ah going forward, I believe that that sort of a level is required.
00:19:20
Speaker
um But also I think that the other issue is that we can look at how the yeah private hospitals are ah functioning in terms of their capital return as well and whether they're getting a sufficient return to reinvest into the various different parts of their networks.
00:19:38
Speaker
The private health insurers, of course, have you know been very self-concerned. And you know in the past, as you correctly allude, Omar, that you know many of them were not-for-profits and really were focused on trying to give back as much as they could of their premium to their members.
00:19:54
Speaker
But with the entry, I think, of for-profit insurers, you know, the big ones like Medibank, Private, Booper and n NIB, i think we're seeing a different driver in the system where, as in the US, we're seeing this as a way to, ah you know, create and drive, you know, a whole new profit arrangement for many people, including obviously shareholders, which is being done, of course, at the expense of the members and the what they've contributed as premiums. so um and And also I think equally that um you know the the you know the efficiencies need to be sort of looked looked at too in terms of the number of private health insurers that are around. I think that a number of the not-for-profit players could possibly be um ah coalesced as well to improve their efficiency and reduce their overheads and particularly their management expenses.
00:20:51
Speaker
So Julian, if you you cast your mind forwards, where do you see this going? We've obviously got the CEO forum and men's government is is listening. There's at least some talking between the players, but our past history isn't great. Where do you think we're heading and and what can we expect in the next year or two during the you know before we hit the next election?
00:21:11
Speaker
Well, what I'd like to see, i'd like to see sort of more legislation, particularly around, ah you know, limiting the ability of the insurers to engage in vertical integration. i don't think insurers should be yeah owning healthcare providers at all. um And I think that the other thing is that we we need to also, as I think the HealthScope experience has shown, I think we need to put some guardrails around private equity ownership in health as well.
00:21:38
Speaker
Because clearly, um you know, so that has not worked out well and created a great deal of instability in the industry. So what I'd like to see is I'd like to see some further regulations and legislation to try and, I suppose, rein in some of the excesses of the private health insurers.
00:21:57
Speaker
And equally, I think having a private health ah system authority to oversee the system and develop more policy initiatives, I think would be a good idea. So I'm optimistic. I think that, you know, I think there is an appetite for reform. I think government does understand the need to stabilise the system and provide more certainty for the private hospitals.
00:22:18
Speaker
um And I guess that that's where I hope it's it's
Value of Private Health Insurance
00:22:23
Speaker
it's trending. And certainly the work that we're seeing at the CEA forum gives me some hope that there will be some positive policy announcements in due course.
00:22:32
Speaker
Taking it back to my little world and and and and looking at it from an overall perspective, so to some degree, ah the more I've understood this concept of a private health system authority. I mean, really, it's a combination of ah a strategy type organisation, but also an umpire that can bring some level of of balance and balance to the private health universe, but also some level of transparency and trust back to to the system so that my my my average punter patient who's sitting there just hearing problems all the time can start to actually trust that system again.
00:23:05
Speaker
Well, that's right. I think that many people looking on will be wondering whether they are getting value for money with their private health insurance. But, you know, obviously there there are concerns that people are hearing from from others about, you know, claims necessarily not always being easily ah honoured and equally, ah you know, not being necessarily able to see the doctor of their choice in the particular nearby hospital that that they would prefer to go to. So I think there is a risk that we will see yeah a reduction in in choice unless we act. And I think this is a very important part of the value proposition that people have with their private health insurance.
00:23:44
Speaker
also say that an organisation like that would be quite good in terms of actually making the case for private health insurance. Can I say in my own family... In my own family, ah I've been approached three times by close family members who've said, look, I think it might be time. I can't afford this. It's too expensive. i think I should stop. And I have begged them not to continue.
00:24:03
Speaker
And each of them have had a major medical problem at that point for which they have had the the treatment they had ah was so expensive and required so much care, ah prolonged care, that they will never, ever, ever be able to repay it by their premiums. i can tell you now.
00:24:20
Speaker
So it's insurance. I think that's the argument. I think the thing out there at the moment is that it's how much value I'll get in terms my physio back. And I think part of the the the job of such an organisation may in fact actually be to get back to the fact that this is actually insurance for for when you get really sick so you have the choice at that time.
00:24:38
Speaker
Absolutely. and And look, I can identify with that entirely, Chris. You know, I've had family members do exactly the same thing and then wind up in hospital a few weeks later with requiring elaborate treatment. So it's certainly always a problem, isn't it, that with any insurance, you wonder about the value of it until you actually actually need it.
00:24:58
Speaker
um And health insurance, of course, is something as you grow older, you will will increasingly be more likely to need. um As well as obviously you know accidents of other things happen throughout life too that can result in problems. I remember being a fit 42-year-old at one point and being wiped out in an accident where I got a flail segment and I thought, gee, that's pretty pretty rough, took me a while, but I was glad I had private health insurance there to be able to provide me with the care required.
00:25:30
Speaker
Thank you so much, Julian, for your time today. We are out of time, but I guess a final thought, I guess word for the day for me was trust ah that ah Chris mentioned. And if there's one thing a private health authority could do would be to create some trust between the players because at the end of the day, we know we have to reform if we're going to keep healthcare sustainable as our population gets older.
00:25:53
Speaker
Reform requires trust and we we haven't got it at the moment. And if this can go some way to creating it then it'll be a ah big step forward ah we look forward to seeing you all for the next episode of the waiting room
00:26:09
Speaker
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