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Health insurers’ priorities all wrong

Toby Hall – The Australian
July 2019

Private health insurers and private hospitals have a symbiotic relationship. They rely on each other — need each other — to provide accessible, quality healthcare to 4.3 million Australians every year.

However, that partnership is under serious strain because of the self-seeking response of some insurers to the very real challenges in our health system identified in last week’s Grattan Institute report.

Private health insurance coverage has fallen to its lowest level in more than a decade. About 100,000 fewer Australians have private hospital cover today than a year ago, with the biggest drop among 20 to 39-year-olds.

There’s no avoiding the fact that many Australians under 60 — even those who maintain their memberships — are questioning the value of health insurance. For those who have left, nothing short of wholesale reform — beyond what’s already been achieved — will encourage them back.

And the problems in health insurance are flowing through to private hospitals as we struggle with softening demand for elective surgery, the steady flow of private patients to public hospitals, and ultimately reduced services.

Over the past 18 months, we’ve seen a number of private hospital closures and there will be more to come unless we see big changes.

For years, private hospitals have been forced to become more efficient in order to manage cost increases while still delivering quality care. This is a good thing.

In this environment, you would expect health insurers to responsibly do the same.

Instead, our experience at St Vincent’s is that particularly those insurers listed on the ASX — which seem determined to please shareholders first and foremost — are becoming more mercenary in their demands, to the point where, if we and other hospital providers were to acquiesce, it would compromise the quality of our care.

When I look at the contracts St Vincent’s is currently negotiating with several of these insurers, we have been presented with a range of conditions which, if implemented, have the potential to undermine the clinical decision-making ability of doctors, particularly in the areas of rehabilitation (for example, after a hip or knee replacement) and psychiatry.

Frankly, it reflects the health system at its worst.

The private health system is facing major challenges — we all recognise the need to work within an increasingly tighter envelope. But the response from the profit-driven insurers is to throw their weight around to protect their margins, never mind the best interests of their policyholders.

You can be sure these insurers are taking the same approach with other private hospital providers.

Meanwhile they congratulate themselves on their skyrocketing share prices.

The Grattan Institute’s report is the latest in a long line of observations from health economists, consumer groups, and policy experts that the private health system in Australia needs major reform.

St Vincent’s strongly supports that view. One idea that has been floated is a Productivity Commission inquiry. Another could be a “Gonski-style” examination by independent experts, which would sketch out new models for private healthcare in Australia and propose a plan of action for the next decade. Perhaps more than any other sector, healthcare is captive to vested interests that make genuine reform difficult.

Every proposed reform is seen by interest groups through the prism of “how does this affect my bucket of money?” as opposed to “how does this improve healthcare for Australians?”

In terms of private health, I can’t think of another industry where an external entity — in this case, the insurers — own your customers; dictate your business model; expect you to put up all the business costs including infrastructure, equipment, workforce and quality standards; and then seek to negotiate an ever-lower reimbursement for your work, while enjoying healthy government subsidies and increasing premiums on their members?

We have to break through the vested interests to establish a new model so that the quality staff, service and infrastructure of private hospitals can be better utilised by communities.

If we don’t find a way forward, the profit-driven health insurers will continue holding private hospitals — and their patients — over a barrel.

And if we stick to this path, it’s not hard to see a future where these insurers will more and more seek to dictate the care provided to their members, cutting out the views of expert clinicians, reducing patient choice, and directing members to the lowest cost providers, often of questionable quality.

And the long-term ramifications of that? A second-rate private health system which has lost the confidence of Australians, translating in longer waiting lists at our public hospitals.

And we all suffer under that scenario.