Private health insurance under challenge – Grattan Institute and State Library Victoria Event
Good evening everyone. My name is Jo Vitale and I’m the director of collections here at the State Library this evening seminar is held on the homelands of the Wurundjeri people of the Kulin nation. I wish to acknowledge them as the traditional owners and to pay my respects to their elders past present and emerging along with the elders of other communities who may be here today. I’d like to give a warm welcome to friends of the library. Grattan Institute members and tonight’s speakers Linda Swan Michael Walsh, Liane Wells and Stephen Duckett. I’m pleased to be here this evening to welcome you all to this important conversation addressing Australia’s private health insurance crisis. Numerous recent reports from government consumer groups and peak health bodies have found that private health insurance is increasingly unaffordable owing to rising premiums. As Colin Krueger of the Sydney Morning Herald reports the ageing population is putting unprecedented pressure on the entire health sector especially the growing cohort of baby boomers who have become heavy users of their private insurance. At the same time the gap between low wage rises and high premium increases highlights the Affordable affordability problem for younger members many of whom are leaving the private health insurance system. As younger people drop out the pool of remaining insurance members gets older and more expensive for insurers. So what is the way forward for a system in crisis. I won’t pretend to speak to that but offer an interesting observation about Canadian friends at the Montreal Museum of Fine Arts. The museum has worked with medicine francophone to Canada to allow doctors to prescribe a visit to a maze a museum as part of a patient care plan. They cite significant evidence showing visits to cultural institutions can increase levels of cortisol and serotonin and contribute to patient well-being in similar ways to exercise. Could health insurance cover the ticket price to the National Gallery of Victoria’s latest blockbuster or give discounted tickets to the Melbourne Symphony Orchestra. Would that make a policy more enticing. Perhaps our panelists will have a view. Leading us leading tonight’s discussion is Stephen Duckett. Stephen is the Grattan Institute’s director of the health program. He has held top operational and policy latest ship positions in healthcare in Australia and Canada including as secretary of what is now the Commonwealth Department of Health. He has a reputation for creativity evidence based innovation and reform in areas ranging from the introduction of activity based funding for hospitals to new systems of accountability for the safety of hospital care. Stephen is joined by Dr Michael Walsh chief executive of Cabrini health. Liane Wells chief executive officer of the Consumers Health Forum of Australia and Linda Swan chief medical officer for Medibank Private. Please make them welcome. Applause. Thanks Joe and I too would like to acknowledge the traditional owners of the land that were the Wurundjeri people of the Kulin nation on whose traditional lands we are meeting and pay my respects to elders past present and emerging and this part of Melbourne the stretching up to eastern hill was a traditional meeting place of the country people in the bureau on people in times gone past and so it’s probably appropriate that we’re here meeting and sharing stories as well. And it’s probably also important to remind us that Aboriginal Australians have a life expectancy of about ten years shorter than non Aboriginal Australians. And so when we hear those acknowledgements of country we should be thinking about that as well. So Grattan has started work a series of work papers on health insurance. And tonight today we were last night we released a paper which outlined our framework for looking at health insurance and today I’m going to talk you through some of the the some of the facts underlying what we’re thinking about and also start to. Unveil some of the possible options where health insurance policy might evolve. Pointing out though that we haven’t we don’t necessary support any of those at this stage. So the first is a very traditional graph that you would have seen all the time and it’s if you look in the regulator’s website you’ll see this graph and it’s a bit of a misleading graph because there are actually two quite separate series up until about 1996. The graph shows insurance for public hospital services after about 1996. It’s insurance for private hospital services. But what you can see is that in the last 20 or so years private health insurance has been basically stable. That is the changes that took place in the mid to late 1990s brought health insurance for private hospital care up to about 45 percent of the population and 45 to 50 percent of the population and it stayed there for a while. And in the last couple of years we’ve started to see this decline despite all the policies that have been put in place over that period. Now one of the reasons that we’ve that the people are wondering about health insurance and possibly one of the reasons people are dropping out of health insurance is what others have called. That the jaws of death. And basically premiums have been going up like that. And average wages have been stable. These are in real terms. And so as people’s household income is squeezed then they’re saying well we can’t afford to have both the gas and the electricity and health insurance and so there are real crises here or real issues here of the increased rate of premiums. And so people are dropping out as a result. And so what we have here is the change in health insurance prevalence for people under 65 since over the last decade or so. And you can see that especially in the last five years all of the age groups under about 65 reducing in terms of their health insurance private prevalence. In contrast the the position for people over 65 is quite different. There’s a massive increase in the number of people over 65 with health insurance. So in addition to dropping their health insurance. What’s also happening is they’re changing the type of health insurance they have. And so here over the last 20 years or so we’ve got the change in the composition of health insurance. So if you had health insurance back in 1997 more than two thirds of you would have had health insurance which I would call top cover no deductibles no exclusions. You’ve got insurance for everything. This is for hospital insurance. Now if you have insurance only about a 12th or so of you have top cover this. No deductibles no exclusions the vast bulk of people now. Now have health insurance with deductibles that you have to pay the first five hundred dollars and with or with exclusions or both. This has meant there’s been a massive transfer of risk from the insurer to the insured population without much of an in the development of people’s understanding of the risk they’re taking on. And so when they go to use their health service the private hospital care they end up with an unexpected bill that they sometimes have signed up for but sometimes hadn’t thought about. So with the changing age composition there’s another thing that’s happening as well. Again we can see for the younger people people under 65 that the share of benefits or the share of the insured population has started to drift down and their share of the insured of the benefits paid out has drifted down more rapidly and the reverse is happening for people over 65. That is the proportion of the insured population over 65 going up but the proportion of benefits that are paid to that population is going up even faster. And this is this so-called vicious cycle for health insurance where they whether the younger people drop out premiums go up. Younger people drop out premiums go up and so on. So what are we going to do about it. Well basically as within an industry there are two sides to think about. There’s private care income in this private care spending and essentially they have to come into balance. Now they come into balance in the in the in the broad sense but in particular. They come into balance with different interest groups so the interest groups there are essentially four major major players. I could only fit three of them onto their. But basically you’ve got the private health insurers you’ve got private doctors you’ve got private hospitals and you’ve got private device manufacturers and sellers and some of them are interested in increasing the amount of spending in the health industry private hospitals for example want to get more patients want to get more revenue. Private health insurers want to keep costs down and there they’re on this terrible seesaw. And so it’s sort of like this Escher triangle if you look at this triangle you’ll see that although it looks like a triangle. In fact if you try and build it you can’t build it because it’s an illusion. And so reconciling the interests of private health insurers doctors and private hospitals is going to be one of the really complex issues in private health care policy over the next decade or so. So what are we going to do. It’s all very well to say here are all the problems but what are we going to do with those problems and that’s what we’re here to talk about tonight. Well if I could start by looking at the at the income side obviously what you’d want to do on the income side is if you want to have more people if you want to try and reduce the premiums so that you can attract more people into health insurance. Well you want to actually try and attract younger people into into insurance. And so one of the ways you might do that is to to provide subsidies for example and I’ll come back to that in a minute. But you might also want to try and change the attractiveness of private health insurance especially for younger people. You might also try to my. Attract healthier people through other strategies. One of them is the Medicare levy surcharge where you say do you put strong incentives on people on wealthier people to come into health insurance. Now one of the the problems of the subsidy strategy is that. The government has just introduced a whole lot of tax cuts tax cuts for everybody and it has said we are going to do these tax cuts at the same time as keeping the budget in surplus which means we have to have an unprecedented level of government spending constraint for the next decade. And so the government on the one hand is saying we are going to be really tough on spending over the next decade. It’s probably not going to come along and say we’re going to spend a whole lot more on health insurance. So then you might say. Can you actually deal with the hat how do you deal with the rebate. Why are we actually putting in a rebate. Why. Why what are we getting out of the rebate. Do we think private hospitals are something totally different from the public hospital system. So do we think private hospitals give people choice that they can’t get in the public hospital system give people additional amenity they can’t get in the public system give people speedier care that they don’t get in the public system and so they see private hospitals as a compliment something totally different or are private hospitals a substitute doing the same things that public hospitals do. And so you might say well if they’re doing the same things why don’t we subsidize them. The problem we have is that government has used both sets of language when it’s describing its policies. So we can’t really be clear about what government thinks it’s doing when it’s developing these subsidies and subsidies are quite extensive. So we have the cost of the private health insurance rebate is about six billion dollars a year. And the cost of the Medicare subsidies for doctors in in private hospitals private care in hospitals is about three billion a year. So it’s about 9 billion a year that’s being put into this industry and we’re a bit unclear about what it’s on about. So. The question about the MBA rebate is another one that said it’s 3 billion a year. And finally we’ve got the question of out-of-pocket costs. So if you want to reduce premiums you could actually make people pay more out of pocket. But if you make them pay more out of pocket they might be less comfortable about taking health insurance. And with all these surprise bills so they drop out of health insurance anyway. So I think overall the strategies. Policy strategies on the income side are actually quite limited. Which brings us to the spending strategies. Well here I think there is more opportunity for us to look at potential reforms in health insurance one on on the private hospital side obviously one. One way of improving efficiency thus reducing premiums is to reduce the payments. Now obviously Michael Walsh is here as a representative of people who probably prefer payments not to be reduced. But there are a number of strategies. So on the in terms of public hospitals we introduced activity based funding. First of all in Victoria more than 20 years ago but we have. But we we haven’t done the similar payment bundling and trying to drive efficiency through our payment strategies to the same extent in private hospitals as we’ve done in public hospitals. Similarly there’s a lot of unbundling occurs so care that used to be done and paid for as a single episode is now being paid for as two episodes. So if you have a stroke you might have some paid as an acute episode and some paid as a rehabilitation episode. There’s far more rehabilitation episodes per patient in private than there is in public. And the outcomes are the same. So we’re seeing. Possible ways of addressing that might be to change the policy about how we pay for care. We’ve also got the situation where we know that there are some surgeons for example who have a higher rate of admission of their patients into intensive care units or into with complications of care even after you standardize for the mix of patients they’re treating. So after you take into the complexity some surgeons have greater chance of their patients going into an intensive care unit. So then you say well should the patients know in advance that their surgeon is probably not as good as someone else’s surgeon. And my view is there should be more information put into the public domain about quality and there should be more information put into the public domain about price and they should probably go hand in hand. But it’s really hard. How to do that. Because as I said you’ve got to take into account the complexity of the patients. And there are also complexities about how you put into the public domain information about price. But one of the things you could do would be to encourage patients to go to those surgeons those hospitals where the risk of an intensive care unit admission is lower in which case the patient is better treated and the costs are lower. So there’s a win win situation. So we’ve got to think about can an information strategy work value based care is another one. So there are a lot of procedures which are on the Medicare schedule arthroscopy of the knee for osteoarthritis for example where the clinical benefit is quite low. If if at all. And so that’s still the health insurers have to pay for that whether there’s a clinical benefit or not simply because it’s on the Medicare schedule. We also might might want to try and reduce the number of admissions that take place. And here you might like to say well can we improve the incentives for for prevention. Can can the health insurers get information about what what’s happening to the patient before they come into hospital to try and intervene in some way give them free tickets to the MSO for example to try and reduce the likelihood of going into hospital. We’ve got a thing called the risk equalisation pool which is a mechanism where high risk or high cost patients have their costs shared amongst all of the health insurers. And now I think almost 50 percent of all admissions go through that risk equalisation pool which means no one insurer has an incentive to look after to try and reduce the try to improve the health of those patients and reduce their admission rate. So out our regulations really don’t help in trying to actually get the right incentives for prevention into the system. At the moment we’ve got a really peculiar system where the Commonwealth Government makes a payment to the states for looking after that as part of the Commonwealth State public hospital funding. The way the Commonwealth is designed that the state gets more money in total from Commonwealth and health insurance. More money for admitting a private patient than it gets for a bidding a public patient. So the state has an incentive to encourage the admission of private patients. This is absurd and I think contrary to what Medicare is all about. But it also means that health insurance have to pay an increase. There’s an increase in the number of private patients in public hospitals. We also have gap payments so a patient might have signed up to pay the first 500 dollars. Go to hospital. They recognize I have to pay the first 500 and then they get all these bills from the surgeon from the anaesthetists from the assistant from the pathologists from the radiologist that they weren’t expecting. And as it turns out the medical out-of-pocket costs. In almost every type of patient in almost every type of patient the medical out-of-pocket costs are greater than the hospital out-of-pocket costs. So if you think about it the hospital is trading person looking after them for five days or whatever it is. The surgeon comes in and the total medical out of pockets are greater than the hospital out of pocket. So what we’re talking about here when we talk about out of pockets we’re talking about medical out of pockets as the big problem. And of course these are almost uninsurable because the doctors can charge whatever they like and they’ve gone up a lot over the past few years. And so you’ve got to say what we need to be doing about changing that and changing the incentives on trying to reduce these out of pockets and there are other areas like prostheses that I won’t mention which are also got weaknesses. And finally you might want to be trying to change the the efficiency of the health insurers themselves because there’s huge differences. So last year we had I think the average fee increase was three percent or three and a bit per cent across funds. Some one fund went up 2 percent. One Fund I might add eight percent. So there’s huge differences in the premium increases between different funds. And so we’ve got to also be thinking about what are we doing to make sure the industry as a whole is as efficient. I don’t think there’s one simple answer. If there is one simple answer we would have done it a long time ago. We’ve got competing interests in this industry. There’s a whole lot of complexity so we can be quite sure that there’s no quick fix. But my point is we’ve got to be looking at a range of different solutions and a range of possible interventions to try and get the to address some of the underlying problems of the industry. And if we do get it right of course we’ll be able to build a structure which looks something like this where you’re trying to actually put together quite a complex building. Thank you very much. Look I think Steven sent a fantastic job of explaining some of the complexities surrounding private health insurance in Australia and I completely agree with his summary statement that there isn’t a single answer. There’s not a simple solution. I think one thing that you can lose when you look at the complexity of everything going on is the big picture that actually the health care system in Australia is very good. We know that our care in public hospitals and in private hospitals is very good. We know that from the outcomes that we can see and measure but we also know it from the patient experiences reported by people who go to public and private hospitals. So we also know that on an international basis our care in Australia is pretty good. So there is an element about not throwing the baby out with the bathwater we actually have got a good health care system in Australia. The issue comes when you look at the future and you look at what’s going to happen over the next five 10 or 15 years and then that’s when it gets very concerning because we can see the trends that have been happening for some time gathering some speed and momentum. And I think the the emphasis now is that we need to do something relatively quickly to change the curve. I think one of the areas that we haven’t talked about which is a big opportunity is the cost of prostheses in Australia. And I know that sounds a little like a single issue but when we look at the single impact of the fact that we pay far higher prices for prostheses in Australia than international comparable countries what that adds up to us as insurers is an ISA waste an unexpected or an unnecessary cost of about 500 million dollars. That’s an enormous amount of money that we’re leaving on the table. That’s something that we could put in place quite quickly. Reforms that we’ve already modelled could take some action on fairly quickly and I think what we should be doing is looking at absolutely there’s a range of solutions but which ones can we take and implement very quickly that will make some difference. And what are the ones that we need to look at over the longer term. So I think that some part of our issue is is picking the winners in the short term and the long term. Thanks Linda. Just as a factoid More than 10 percent of the increase in benefit payments over the last decade were prostheses with increased prostheses payments. So it is quite worthwhile addressing. Thanks very much Linda. Michael. Thank you Steven and good evening everyone so I’m I guess here to put a bit of a private hospital or health service provider perspective. I guess it doesn’t feel quite as broken as Stephen is portraying it on the ground. We have the numbers of folk who come through our doors are a little bit down on what they were three or four years ago but they’re basically reasonably stable and. I can assure you that the work that he’s done in the organization that I’m associated with is certainly worthwhile work. If it wasn’t done in Cabrini it would need to be done somewhere else. So I think that the reality is that there continues to be bipartisan support for a. Public and a private sector health. Health components of our system here. And that has worked well for it. As someone who’s worked extensively in both sectors I think there are things that the public sector does better than the private and there are things that the private sector does better than the public. If you ask people why they come why they take out private health insurance in my catchment and why they come to the private hospital. A lot of them will sites around access and other factors like local convenience and the like. So there’s certainly a place for it in in my opinion. It does raise the question about whether private hospitals or private health service provision is indelibly hooked up with private health insurance. And I think that is a key public policy question for the future. Increasingly. My organization and colleague organizations are undertaking public sector contracted work and that’s attractive to the public sector because we can generally do it as efficiently or more efficiently. So I think we need to disentangle the discussion of private health insurance from what private hospitals do. They’re just. Private hospitals are part of the health infrastructure of this nation. And for example something like two thirds of elective surgical procedures are done in the private sector something like half of cancer work is done in the private sector. So it’s unthinkable that somehow the private sector service provider would simply cease to exist. There is no way of relocating that volume of work to that to the public sector. Just a couple of observations I wanted to make on some of the points that Steven raised. I think that one of the things that I found most challenging in my time in in private health service provision is the. Is the mix and heterogeneity of payment arrangements we have with different insurers. So we would have contracts with I guess 15 different health insurance contracts. They all pay differently. Two of them will use the same method of payment and indeed one insurer will pay you differently for the same procedure. At one hospital to another hospital in addition to that as far as I can tell health insurance negotiations are sort of mainly historic. Like what you got last time plus or minus a bit. So that sort of move to a standardized price that the public sector. Across Australia now has gone to a sort of a benchmark price. That is some sort of indicator of efficient delivery of a service simply hasn’t happened in the private sector in private insurance. So we find if we look across the spectrum of our insurers there are some insurers that we work with where if we tally up what we make out of that work we’ll make a net loss every year. There are other short insurers when we tally up what we make we will make a bit of a profit and it’ll all wash out in the end so that we keep our heads above water. But it is some it’s in the very administratively expensive way of dealing with the payment side of the work. In terms of. I think one of the changes that Stephen advocated for and I would absolutely support is just much more transparency in terms of the way the pricing works and that applies not only for hospitals but also for the doctors. So doctors are absolutely critical part of the way private health has been established in Australia and the history of private health. I think Stephen’s paper does a great job of outlining that without venturing too much into the underlying politics that led it to be as it is. But we have certain constructs in Australia about how we deal with the organised medical profession and I’ve had a big a big part to play in the way things are constructed in Australia so we can say the Commonwealth is gradually moving in sort of baby steps to try and get more transparency on on pricing. Unfortunately understanding one bit of a treatment process that is what the doctor might charge is is really not going to help consumers all that much. What they want is well how much in total will my total hip replacement be. Not what’s the doctor sliver of that and what’s the pathology part and what’s the pharmacy part and what’s the hospital part. We need it all bundled together and I think that’s another step we need to take in. In terms of moving to the future. One of the real challenges that we face in getting our heads around this is the significant variation in clinical practice we see across across Australia. There’s been some national work done on this when you look at the atlas and you can see postcode variation in terms of what your chances are of getting certain procedures and the College of Surgeons a couple of years ago published a brilliant paper that looked at some common procedures and showed massive variation from one clinician to another in terms of things like length of stay their billing practices all sorts of things. So we need to get to grips with that with that challenge I think and standardization of payment would help in that regard. Stephen mentioned private patients in public hospitals. In my mind I’m not sure that’s. Necessarily a big problem but it is it is. It has over the last few years helped to put more pressure on the private hospital system because as as insurance has flattened out as Stevens graph shows and as people have shifted down in terms of their policy coverage in public hospitals less so in Victoria but but more so in some other states have really quite aggressively sought to try and attract privately insured patients so it just means more of the market share is taken out of the private hospital sector. There’s been a recent Victoria Auditor-General report into public patients in private hospitals which I think show raises some pretty significant questions that need to be answered and the Victorian Government has responded by setting up a review panel into that. Finally when we ask folks who live in our catchment. Why they take out private health insurance you’ll find that so we have a high uptake in in the in the Cabrini vicinity which is both in the southeast Melbourne High private insurance uptake and folk will cite different reasons for holding onto their private health insurance. It’s also an older population as Stephen touched upon in this graph. You ask them about their preference for private health insurance and about two thirds of them have that preference. You ask them about their preference for which hospital they will use it in. And there’s been quite a shift in their preference over the last five years or so. So that they’ve moved from a position where they would have had a reasonably strong preference to a private hospital to being now quite indifferent as to whether it’s a private or a public hospital. And I think that shows that folk are thinking more of at least some of their health decisions as a commodity something that they can shop around for something that there’s no perceivable difference in terms of the quality of the care they’ll get. And then they will weigh up. And so I think Stephen’s paper says the decisions of the wallet against the decisions of their the urgency of their health care needs. So. My own personal view is that this is absolutely the discussion we need to be having. I would like to see a really root and branch reform of the private sector something that’s a 2020 type reform not a 1970s type thinking which would recognize where the public sector is at now and where where the private sector should fit into that. And that goes to Stephen’s question about well are we essentially a substitute for the public for the public sector or are we somehow offering complementary services that warrant taxpayer subsidization. Thanks Stephen. I’m from the Consumers Health Forum and Stephen said so. It’s our job as a peak body at peak advocacy body really to reflect the views of what the community is saying about private health insurance. So of course for us that means we’ve got a really broad constituency because we’ve got to be listening to what people with private health insurance are saying about that about what they value and what they see. The problems are but we’ve also got to I suppose weigh that up take into account what the 50 percent or so in the population who don’t have private health insurance and how they perceive this issue. So it’s it’s some quite quite a balancing act for us from that perspective. So why do people have private health insurance that there are three main reasons we’re told that they take private health insurance out for. One is to have peace of mind to avoid waiting lists. One is to have a choice of doctor and in some areas this is a myth because people living in rural communities don’t often get that that choice and things like private rooms better facilities a nicer environment and access to those sorts of things are what of what people are their value. And I would agree with Linda’s point to that in a country like Australia. Quality is not so much the issue but the issue is access and affordability. And really that’s the heart of the issue private health insurance really should be doing something about helping people with meeting the costs of private health care and taking the pressure off of public hospitals. And we know that that’s where we have a problem. You know we were on the Commonwealth Fund rating and ranking of how we compare to other Western countries we were right up there in terms of delivery of quality care. But we’re down around I think number 11 on on measures of access and affordability so. So that’s that’s the core one of our core policy issues I think. So I guess back to private health insurance and. Whether or not people really see a need for it and I think the patent is pretty pretty polarized in that young people don’t. In general terms and older people do and I think one of the reasons for that is young people are pre Medicare pre 1980 for generation. They’ve known the Medicare system and for them generally well when they need care it’s usually not. Generally speaking in a crisis or an acute or emergency situation and our system responds It’s the older people they have a different view They they’re much more inclined to see private health insurance as essential they’re prepared to forego other spending choices in order to have it. And indeed as we saw from Stephen’s work there that they are the recipients of a greater and greater share of paid out benefits. But the report today you know our headline and now media release in response to it said well it’s actually asking and posing more questions than it’s giving answers. But that’s not a bad thing because I think you know what we’ve got to do is have the mature conversation about what the short medium long term solutions to these quite challenging policy dilemmas race. And in order to do that we’ve got to ask the hard questions. We’ve got to look at evidence and we’ve got to look at what communities expect. And you know I don’t know I’m the last one to have the answers on how you weigh up all the vested interests. But I think that’s our challenge. Look I think the recent reforms we’ve seen by Minister Hunt in this government. You know I think they were approached in a very goodwill way. The insurers and the government and the doctors and consumer organizations were around the table so we looked at things like transparency websites. We’ve seen measures introduced that are designed to better categorize private health insurance products into gold silver bronze bronze bronze bronze basic. I should know that should be imprinted on my brain. You know a whole range of measures measures there. I think there are about eleven or so that were designed to make the system more easily navigate able a little bit more transparent. I don’t know whether they’re going to take a leave or ability issue but but I think that’s the problem that the affordability issue that widening gap between premiums and household wage stagnation is really what’s biting people for those that value private health insurance as I said they’ll hold on to it and make that spending choice but for others you know we certainly hearing from our research that it’s becoming more and more discretionary if not luxury household spend. So you know is that is that what a what a health health product should be the other the other conundrum I’ve got that we’ve got I think he’s easy out of pocket issue it is a real policy conundrum because that. Alone is a really big factor in what’s eroding the perceived value of private health insurance in the community’s mind because Stephen said you know you can you can have private health insurance your you’ve got that comfort that you know if you have to get that a poor placement you can go in and have some you know a level of rebate level of assistance with that. But when you’re already paying four thousand dollars or whatever it might be for top gold private health insurance cover and then you’re told or it becomes obvious to you over time because no one gets a single quote these days. You learn about your surgeon’s fee you might be told by the surgeon about the need to just fee but all of those other cumulative out-of-pocket costs when they’re all added in the bill shock for people can amount to you know anything in the range of for hip replacement anything from you know four to nine thousand dollars. That’s real bill shock. So it just sets people back and they say well why am I paying for that and why why am I being coerced is probably too strong a word but why are why are all these measures in place like the Medicare surcharge levy. That’s that’s a stimulus to me taking out private health insurance when it’s actually health product. Ironically I can’t afford to use. I mean that just makes no sense. So I think out of pocket costs and that that being out here on the periphery when actually it’s quite a central issue to the question of value. And I think the other point or the other reflection I’ll make on one of the graphs that Stephen put up there particularly you know the 20 year period that we’ve had there is is there actually like an equilibrium concept is there a natural level of private health insurance coverage a kind of equilibrium that no matter what extra level of subsidy or no matter what extra you know set of policy levels we’re pulling. Are we going to get beyond. So you know I think we do have to ask the hard questions and I know there’s suggestions from some quarters that you know part of the solution is to continue to you know address the affordability issue by just some topping up the subsidy. I think you know that’s been taken our comments around that CEO CHF has been taken by some to say we anti subsidization certainly not our view. We are not anti subsidy we’re certainly not advocating that the subsidy be removed but I think what we would balk at is the suggestion that we just subsidize more and spend more. As Stephen was saying without asking the question about what is that the right solution. Is there a net benefit. To outweigh that cost. He’s the public interest best served by that. So just a few reflections and observations. Thank you. Thank you everybody. Anybody you want to make any comments on. I think the other issue that we haven’t really touched on I completely agree with the comment that the core issue is about affordability. We regularly survey our customers and they tell us that is the major concern major concern is the cost of private health insurance and the second major concern is out of pocket costs. Miles ahead of other concerns. So if we accept that there’s always quality improvements can be made but if we accept that the primary issue at the moment is around affordability either we have to create a world where the government has the ability to attract or raise more taxes to support more public health and allow that to be a more attractive option for people or we as private health insurers have to be able to raise our premiums and get more money in order to be able to pay higher for more services for our members which neither of which is going to be palatable at the moment in a world where we’re hearing very clearly that people don’t want to pay more taxes and they don’t want to pay more private health insurance fees. That’s just it’s just not feasible that that’s an option. So then you go hey we’ve got this fixed bucket. What can we do to get the most value added the money that we do have. That we’re already investing in part private and public care. And one area that’s increasingly being explored overseas is the idea that not all care has to occur in expensive inpatient hospital setting. There are alternative places where people can get care that are delivered in a much more cost effective way. And I think that is a real option for where we can look at better utilizing the amount of money we have. I think other than the immediate first low hanging fruit like prostheses costs the next thing we should be looking at is okay what do we do to be more efficient with the dollars that we’ve got. How can we more effectively use that in order to ensure that we get more value from the existing money we have. Thank you very much. Michael does Cabrini have any services in the home you or all your services on the Cabrini sites or do you get engaged with providing services outside really. We have quite an extensive range of out of hospital services. But it’s been a challenge for some insurers. They’ve paid for it for a while and then they’ve stopped paying for it and then they stopped paying for it again. It’s not in their comfort zone. What’s in their comfort zone is paying for an inpatient admission like they paid for last year and the year before that. When you start saying well we could we could avoid say heart failure. We Have A Heart Failure Program. We could avoid repeated admissions for folk who have unfortunate enough to have heart failure. If we provided certain services out in the community we even attached ourselves to a university research on this that demonstrated that a diminished hospital admissions. Just really hard to get the insurers over the line on this because it’s not it’s not in their comfort zone. And even if you get one of the larger ones you’ve still got the other 70 percent of your income to deal with. And I think I think one of the one of the real weaknesses of the legacy regulatory structure we’re stuck with is that it sort of precludes it’s got insurers have one of their arms tied behind their back really because there’s elements of the system. Now when we should be providing particularly older people with chronic conditions with an integrated picture the insurers can only cover certain parts of that the emergency department is another classic example very busy part of the services that we offer but not covered by private health insurance. So I just think for those reasons I just think there needs to be a fundamental revisiting fashion of what the regulatory scope of private health insurance is so that we can provide a better experience for those who take it out. Thank you very much. Over to you. Any comments or questions. Uh right here in the front row second row. Um is there a microphone that we can actually get to that second row. And it’s. And you can put your hands up so I can see you so I can work out who the next one is. So you think you were all sitting waiting. Only ask you about the merits of an area that is rarely discussed. I haven’t seen it in the in the Grattan pay power and other policy which is really policy not just economics and actuaries of health insurance industry using the costs of. You know I’m an expert in the energy sector. Took us 100 years to realize that just dealing with the efficiency of supply and delivery is not enough. We have to change consumer. And you know. Behavior to suit the system we have to put market forces that drive innovation in the right direction. And you know there are things like that. And again I’m talking about reducing the costs of of of of healthcare you know sugar tax has been discussed a lot. Why can’t. That subsidized part of the costs. We know the damage from diesel traffic particulate and nitrogen oxides. Why shouldn’t that pay know cost reflectivity is what I’m talking about. I participated in a huge very successful project in the United States remote patient monitoring again using technology we’ve got the NBN we’ve got Internet of Things to do something that couldn’t be done in the past. Again reducing the cost. So why isn’t this sort of demand side management being discussed. Does it have merit and if it does and that’s true policy that’s not just the economics and actuaries of insurance. So thanks so. The short answer is those things need to be on the agenda in part because they apply across the whole sector sugar tax for example a tax on sugar sweetened beverages will improve the situation. Public and Private remote monitoring is something you might think about in both public and private but here tonight we’re talking about private. And there are barriers some of which Michael alluded to about preventive work. So Linda do you want to talk anything about what the. Yeah exactly. Yeah. Thanks. So Linda do you want to say anything about the potential for that and what’s stopping you doing more. It makes complete logical sense that as a health insurer we would want to be investing in preventing our customers our members from coming on well because we would have vested commercial interest in making that happen. Best best possible customer for us is someone who’s healthy and lives forever. So we were incentivized to do that but unfortunately there is legislative barriers that preclude us from doing that as well as we would like to. Part of the problem is that when private health insurance was established it was really viewed as just paying for care in hospitals and it was designed in a way that actually makes it quite hard for us to fund preventative care. So bizarrely it would actually require less legislative change in order to get what you’re asking for and that therefore puts it into the long term category with you completely. But unfortunately we actually need to put in place some changes right now that’s gonna make a difference in the very short term. I think that’s something that we should look at is how can we change legislation to enable private health insurers to be incentivized to pay for preventative care. But that isn’t going to solve the problem for us in the next really. Unfortunately even in the next 10 years by the time preventative health care is a really long term solution and one that the government also needs to step up and take a bigger role then I’m completely on your side. It’s just not going to get us there in the time that we need. Hi Stephen I’m I just want to give another dimension that I really don’t understand in this space is the difference and the impact of the not for profit private and the full profit private in both the Earth or both. I was about to say in both the hospital sector and in the insurance sector and is that something that should come into the equation. I didn’t like that question. Thanks Alex. Um. Uh. So I don’t have any evidence about the difference between for profit and not for profit hospitals in Australia. MICHAEL might know something but I don’t have any evidence about one lot being more efficient than the other lot and I don’t know if anybody in Australia who’s done that work so I can’t say about that. I do have lots of gossips and anecdotes that I can tell you. Not in a public forum about some of the profit hospital chains and their behaviour but I don’t have any. Quantitative evidence. The issue about public and private. For profit and not for profit insurers. Is is quite interesting. We’ve done some work for our next report on which is looked at for example premium increases and they’re all over the place. It’s not it wasn’t consistent I think for us whether for profits were always more expensive and not for profits always cheaper or vice versa that there wasn’t much evidence of that. What we have got some evidence is about different different benefit to premium ratios. But I’m not sure that’s the right measure. So we’re still we are still looking at this. In our early stages I don’t have anything definitive to say. Maybe Michael or Linda do you want to say anything. I seem to recall that when the Productivity Commission looked at efficiency of hospitals it must be getting on for 10 years ago they had a bit of a crack at trying to unpick the difference between. For profit not not for profit private for profit private and public. And I found it very difficult to do based on the information that could get their hands on. And the the outcome was quite inconclusive really about whether one sector or the other was any more efficient or did anything much differently than the other. And again I’m not aware of. I’m not aware of any further studies along along those lines and I could only as Stephen says exchange anecdotes have. To do with both sectors really. The good news is we have in the room Calum who’s an intern at Gratton at the moment who is reading through all those papers at the moment and is quite disparaging about some of the quality of what was done. Oh I think that that you’re absolutely right the evidence not there. I think what we do know is that the those publicly listed private companies do make their results public. We should celebrate the fact that those results are public it’s also public the margins that those businesses make and the margins for private health insurance in Australia are not high. There are in other countries private health insurers who do make margins in the range of 20 percent. In Australia it’s more like 5 percent margin that is not in a in the world of private industry. That is not a large margin for a private business. So I think the idea that if we get rid of the profit put for profit element we’re going to solve the problem is very misguided. There is not a large amount of profit being taken from private health insurance in Australia. Further questions or comments. One one here in the middle and I have people put up their hands as well. Okay um I. I have one question which is around. Stephen you talked about there being two purposes possible purposes to private health insurance complement or a kind of replacement pace. And I was interested in the panelists views and then I had a question around if you were to send a reference to the Productivity Commission to unpack this question. What would your overarching reference be and what would the component parts be. And then I just had a comment around when you look at private health and this notion of taking care out into the community. I think it’s really important that we think about the externalities of that and particularly look at the costs that then families and most particularly women bear around the extra care work that goes on in that. So it’s a saving to the government it’s a saving to the company but it’s a cost predominantly to the women of the community. Thank you. Three questions there. I’ll put the public the substitute complement issued to the panel shortly. The working paper we issued last night started its life as a submission to the ALP process on the terms of reference of a Productivity Commission review and we were writing a paper that was about framing how you think about health insurance and how we think the. Productivity Commission should think about health insurance. Well that collapsed. But we have still got a draft set of terms of reference which were two pages long and basically we thought that everything ought to be on the table. Sort of what Michael was saying earlier that we need to step back and look fundamentally at the whole area private health insurance private health care and so on not just not just saying it’s going to be a narrow review we need if we are right really to be serious about this whole issue we’ve got to be prepared to look at everything and that’s what we said. But we will put it on the lower in the. The private health insurance folder on our harddrive than we might otherwise. The third question you raised was about. The assumption there is that necessarily shifting care from a hospital service to a home necessarily involves shifting some care burden onto the carers. And you’re absolutely right that is certainly true. But there are also benefits of of that shift as well. Benefits in terms of improved quality of life reduced rates of risk of infection and there are all sorts of benefits of a shift from an inpatient service to a home based service. So the issue is you have to weigh up those costs and benefits and you have to as you rightly point out look at the incidence of of where the costs fall and where the benefits fall. That is a general rule I think most people would prefer to spend some of their if they had a choice of either at home being supported. By a service of some kind versus in hospital meant most people would would would go for the in-home service. Not all maybe but most people would be interested in the views of others on the panel. There was just another study that came out this week U.S. based study on rehab at home so care after hip and knee replacement at home and what that study showed is that actually not only does it save significant amounts of money and it isn’t about giving more care or expecting more care to be delivered by the At Home Care team it’s about sending physios and notices and nurses and meals and everything you get in the hospital. You will get it in the home. But what the actual results showed is that there is a lower risk of death. There’s a row lower risk of morbidity there’s better outcomes from care in the home so you actually were actually at a point where it’s not should we not could we deliver care in the home. But we should be delivering care in the home where it is suitable because the outcomes are actually better and safer. I agree with Linda and I guess the only example I can give of that is some we do quite a bit of palliative care and the demand for palliative care in the home as opposed to the in facility palliative care is the growth is significant and it’s some although it is it is burdensome on families and loved ones. It’s a burden that they feel that they they wish to take on. So I think the risk of a lot of these discussions of course is that they tend to dwell on the economics but there’s a lot more about the health system than just the economics. There’s a lot of a lot about community preference and social preference and individual preference and I just think I agree with Linda we should be. The question we should be asking is well for certain conditions why are we not treating them in the community why are we not giving people that option rather than just defaulting to hospital admission and. I was struck when I looked at the latest ICD. A lot of Saudi’s see these statistics on the health system. We have a love affair with hospitals in this country. You know we waited to them. We used them a lot. I have a big chunk of our expenditure. We look different to peer to peer countries in terms of hospital utilization. And we are laggards on spending in or out of hospital services so I think this is another one of those fundamental areas we would we would review should we ever get such a review. Look from the community’s point of view. The other thing that we’ve really got to get on the ledger is what Michael is saying here is what what is it in the broad value equation What is it that people value. They they don’t want to go to hospital if they can avoid it. So hospital in the home alternative care models. So to your question about what is the scope of a review. You know we’ve got a big big reviews going on in mental health. I mean there’s crises in those areas. The policy conundrum we’ve got with private health insurance is probably of a similar scale in terms of as far as policy conundrum goes. So we gave a lot of thought to when the Labor Party were consulting pre the election on the terms of reference for four for review and absolutely everything needs to be on the table. It’s way too short sighted to just look at you know whether we need to make some tweaks and adjustments to the current is because that’s that’s got us where we’ve got us. You know know then the measures that were introduced back in October to 17 were as I said before said of goodwill measures but they’re not addressing and I don’t think are going to arrest the current. The problems we’ve got. So everything needs to be on the table. Carrot sticks and the broader questions about how do we finance through through the interplay of private public system and progressive innovative hospital alternative care. You know one of the things that CHF talks about a lot is that health is more than hospitals and medicines. And I think that’s a really important point. And thanks for your thoughtful comments today. It’s been very enlightening. I was wondering if you could comment on the intersection between health insurance out of and fee setting by medical professionals which I know it hasn’t been talked about so far but it strikes me. Medical charges in terms of physicians work is set by a question of what the market will bear and what the market will bear is greatly enhanced by the presence of insurance whether that’s at the Medicare or private insurance level. I’m just wondering whether unless we move to a situation where the benefit is provided as total compensation or not at all that unless we move to that sort of system and actually influence what the market will bear that we can keep throwing more and more money at insurance it will just simply result in the enhancement of income with practitioners a worthy outcome to some no doubt. But having. Lived in the states and they had a very good health insurance system which was enormously expensive and said Well what did it get me that I wouldn’t have got it gotten here well nothing. It just meant the person who is providing a service was remunerated many times over what a professional would get here is I’m just wondering are we chasing our tail to some extent unless we influence what the market will bear. Yep. So as I said earlier the evidence is that for most types of treatment the charges is the diagnosis related groups is the way we analyzed it. The out-of-pocket so doctors are way more than the out of pocket for hospitals and so the out-of-pocket issue in my view is is a doctor issue not a hospital issue. And Linda will be able to comment in a minute but it’s very very hard for the insurers to insure this when they’ve got no idea what the doctors are going to be charging. And then there’s so many doctors that they can’t actually negotiate with every one of them in the country and some don’t want to be negotiated with and they just want to charge whatever they like. So it’s a it really. And and the other point is each doctor thinks they are not the problem. It’s all the other doctors who are the problem. And that means each doctor doesn’t feel an incentive to work within the the overall system because they think what they’re doing is fair. And all the others all the problems or all the others and my fees are fair because I’m much better than everybody else and so on and so we’ve got a dealing with this issue. What what I’m struggling with is the patients complain a lot about all these surprise bills and getting multiple bills. Well if you want to move to a more rational billing system who gives the bill is at the private hospital that gives the bill on behalf of everybody. The doctors and everybody else because after all it’s the private hospital that chooses who the pathologist is but who the radiologist is and for that matter the surgeon has to be accredited or is it the surgeon who says we’re going to have one bill for the surgeon and one bill for the hospital and the surgeon bills for all the pathology that the surgeon orders all the radiology the surgeon orders all the the assistant and so on. So you know what. What is the right way of sort of introducing some accountability and some sort of agency into all of this. And it’s not at all clear to me what the right answer is. I hope I have the right answer in a few months time but it’s not at all clear to me right now what the right answer is. But Linda or Michael only I think I go back to my there’s short medium and long term solutions to this and certainly there have other countries where this has been a very big issue and our pockets have got out of control. They have implemented requirements where you describe where you either accept a price or you get nothing. So that is potentially a longer term solution. I think the what we’re actually starting to see at the moment is the market starting to scream a little about the current situation. I think the market is starting to respond if you look at for instance private babies being born in private hospitals. We’re seeing a significant decline in the number of mothers who are choosing to have their babies in private hospitals because of the large out of pocket costs associated with that. And that is changing provider behavior. So we’ve got a lot more doctors willing to talk to us about where would you be able willing to consider a bundled payment and more innovative models being described and talked about than we’ve seen for a long time. So in you’re starting to see the market actually exerting some pressure on the charges that doctors are prepared to to put to consumers. But I think one of the other things that we can do is try and just make the whole cost issue more transparent so it’s not going to solve the whole problem. But one of the issues we hear from our our members is that the worst thing is the shock. I don’t understand why I thought I was covered and what didn’t I get the right insurance because why I’ve suddenly got this big bill. And if we can help people understand that you know it is likely to cost you three thousand dollars out of pocket to have your hip done and this doctor likely to charge five hundred dollars out of pocket. And this one’s like they charge two thousand and they have a choice about it then that’s much more empowering and people are much less likely to be upset about that and I think that it’s not going to solve the whole problem. But if we can help people to make a real choice that will also drive some behavior in the providers as well because at the moment we don’t really have a free market. We don’t really have transparency of doctors charges and we don’t have transparency of outcomes. So there’s a very unfortunate belief that if you pay more you’re going to get better outcomes and all the evidence suggests that is just not true. So people are mistakenly thinking I’m paying three thousand dollars more but I got a better doctor and a better procedure. And so ideally what we get is transparency of cost and outcomes. So that really starts to drive a more empowered consumer and look at this work underway at the moment. I agree with with what Linda is saying there is no magic bullet here but there is work underway at the moment on a on a transparency website and you could be very cynical about that and say Well really what difference what impact is that going to have for people to be able to go to a website to be able to see you know doctor by doctor you know broad information about about fees and charges. But you know it’s a small foray but. That that small step towards a more transparent lens on somewhat what doctors are charging does give people agency particularly and this is what we are pressing for it CHF is if that’s accompanied with work on a national standard if you like of informed financial consent and some some more rigorous public education about the sorts of questions that people with armed the agency that additional transparent information about fees and charges could and should be asking of their surgeon of their hospital. Some really good questions things that these sort of the sorts of questions that people should be asking are well framed on the Private Health Insurance Ombudsman website but who knows that they’re there. So bringing those sorts of things to the fore and saying to people it’s actually okay. We encourage you to have a conversation with your orthopedic surgeon and have the bug and you know I know of at least three people in Canberra who have had that conversation with orthopaedic surgeons can we get this price down somehow. And the surgeons in in question there were were quite willing to drop price. So there you go. Thanks. Unfortunately that’s all we’ve got time for. I’d like to thank you all for coming along here tonight. You’ve given us some things for us to think about as we write our next reports. I’d like to particularly thank Lee and the CEO of the Consumers Health Forum Michael Walsh the CEO of Cabrini Hospital and Linda Walsh the chief medical officer of Medibank for coming along and sharing their excellent expertise first with us tonight. So could you join me in thanking them as.