Health insurance reform: the good, the bad and the ugly

LAST month, with some ballyhoo, the federal government announced what it claimed was the biggest shake-up of Australia’s private health industry in over 15 years. Among the key changes were:

• a requirement that insurers categorise their products as gold, silver, bronze or basic, depending on how much cover they provide;
• discounts on premiums for adults aged under 30 years;
• allowing customers higher excess limits for lower premiums;
• allowing customers to upgrade policies to include full mental health cover with no waiting period;
• providing travel and accommodation expenses to and from hospitals for rural and remote customers;
• scrapping of rebates for a raft of complementary health therapies; and
• slashing the cost of medical devices, such as pacemakers or joint replacements, for insurers.

Are these reforms the right ones, and what do they mean for doctors and patients?

They were developed in close consultation with the health insurance industry itself, so it’s no surprise that they were well received in that quarter. Medibank CEO Craig Drummond, for example, described the reform package as “essential to keeping premiums affordable for our customers” – a similar message to that of Private Healthcare Australia CEO Rachel David, who was also of the opinion that the reforms “will help reduce premiums and pressures overall”.

Australian Medical Association (AMA) President Dr Michael Gannon, who in the past has been scathing about the spruiking of “junk” policies, welcomed the reforms as a “good start”.

“The framework for positive reform of private health insurance is now in place,” he said, although he added several caveats. He said that the AMA would oppose any attempt to deny private patients access to care in public hospitals, and that it also had concerns about the direction of work on out-of-pocket costs.

“We will be pushing for the expert committee considering out-of-pocket costs to broaden its review beyond doctors’ fees,” Dr Gannon said.

He said that while we have a good public health system, “what happens is the whole show falls apart if we don’t support the private system”.

“There are some elements of Greg Hunt’s policy […] that are really good, and we want to support those. But we have a long way to go,” he said.

But Royal Australian College of GPs President Dr Bastian Seidel was a little less sanguine about both the reforms and the private health insurance industry in general.

“It’s been billed as this huge reform, but if you look at the details, there are some adjustments there, but I wouldn’t necessarily call it a major reform,” he told MJA InSight.

“What we really need is much more transparency, not just clever marketing. That’s something that’s very important to GPs, because every day patients are asking us what we think about private health insurance, whether we think they need it, and what we think they should be covered for. But it’s quite difficult to give any advice, because the transparency just isn’t there.”

Dr Seidel zeroed in on out-of-pocket expenses as a key issue.

“Often, we hear of patients paying significant out-of-pocket expenses for joint replacement, for example. And the amount depends on individual doctors and hospitals. Here in Tasmania, we had a hospital that charged a top-up fee no matter what the agreement was with the private health insurer. Quite often these expenses are only coming up after the first, second or third consultation, so initially patients might think there’s no extra cost and then further down the line it creeps in. That’s concerning.”

He said that doctors need to be aware that financial toxicity is a genuine side effect of treatment now.

“People need to know from day one what they’re signing up for, from the insurers, and from the doctors as well. There are a significant number of doctors out there asking their patients to top up their fees. That’s reasonable. But the cost of the consultation has to be known at the point of consultation.”

Dr Seidel cautiously welcomed reforms regarding mental health, which will allow patients to upgrade their policies to include access to mental health services without a waiting period.

“It’s a good move, but the devil might be in the detail. When do patients upgrade? Is it only when they’ve been diagnosed with a mental health issue, and how transparent is the upgrade process? Are there gap fees involved? We’ve got to be careful, and there’s got to be total transparency.”

But even that reform has its detractors. Writing in The Conversation, Professor Stephen Duckett, director of the Health Program at the Grattan Institute, described the mental health reform as a “tokenistic change that has all the hallmarks of a back-room compromise to avoid serious reform, such as banning mental health exclusion clauses”.

Dr Seidel said that he had a harder time with the discounts being offered in the overhaul to people under the age of 30 years taking out private health insurance.

“I’m struggling with it. The industry is really desperate to get new consumers on board, that’s always been at the forefront. But it’s a highly profitable industry that made over $1 billion in profit over the past financial year, and the taxpayer is subsidising it with over $6 billion every year as well. You have to wonder whether that’s actually money well spent. That’s a discussion we should have.”

He said that while all Australian taxpayers are subsidising the private health insurance industry, less than half are signing up.

“That doesn’t sound right in the 21st century. We need to look at where the health dollar works best. And I can assure you now, it probably doesn’t work best in the private health insurance industry,” he said.

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