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“Where insurers excel is in restricting access to care, and in recent years they have ramped up those restrictions to assure levels of profitability suitable to Wall Street. Those barriers to care include more aggressive prior authorization requirements, ever-increasing out-of-pocket requirements of health plan enrollees, and the elimination of doctors, hospitals and other healthcare facilities from their provider networks. In many cases, the eliminated providers are being replaced by the companies’ own providers.”
FOR years, Australian doctors and patients have viewed the US health system from afar and considered ourselves grateful our own health system does not operate in the same way.
On 24 December 2020, while most of us were looking forward to a Christmas after a long year of learning about R0, personal protective equipment and the relative merits of public health interventions, an application was received by the Australian Competition and Consumer Commission (ACCC) from Honeysuckle Health (owned 50% by nib health funds limited and Cigna health insurance companies). This application should be of concern to all Australians as it is a deliberate step towards US-style managed care. What is at stake is the future of Australian health care.
Australia currently has better health care provision in terms of outcomes, provided at less cost than health care in the US. This is evident in the most recent data from the Organisation for Economic Cooperation and Development (OECD) and the Australian Institute of Health and Welfare:
- Life expectancy from birth in the US (78.7 years old) is approximately 4 years less than the Australian population (82.8 years old).
- Preventable premature mortality, as measured by “potential years of life lost” expressed in numbers per 100 000 population, in the US (6600) is almost double the Australian value (3500).
- Length of hospital stay for acute care is less in Australia (4.1 days) than in the US (5.5 days).
- 5-year colon cancer survival rates in Australia are 70.7% (ranked 3rd in the world) compared with 64.9% in the US (ranked 9th).
- Coronary heart disease mortality, expressed in deaths per 100 000 population, is higher in the US at 109.6 compared with Australia’s 76.6.
- Health spending in the US accounts for 16.96% of GDP compared with Australia’s 9.33%.
A report by David Himmelstein et al published in the American Journal of Public Health in 2019 showed that health care-related expenses were a leading cause of bankruptcy in the US, something that is unthinkable in Australia.
The above data are very relevant to the recent discussion about the ACCC draft determination to authorise Honeysuckle Health (Cigna/nib health funds) to form a health services buying group.
Who is involved?
Cigna is a US for-profit insurance company that delivered to their shareholders in 2020, an adjusted earnings per share of US$18.45 by growing their revenue by 14% to US$160 billion. It currently ranks 13th in the 2020 Fortune 500 list. Their CEO’s compensation for the year was nearly US$79 million. This is very impressive, but it is part of the reason why the US has the world’s most expensive health care. Cigna has clearly demonstrated in the US how they make profit for their shareholders from health care.
Nib was the first private health insurance fund to list on the Australian Securities Exchange (ASX), in 2017. Initially a health insurance fund for workers at BHP steelworks, nib has expanded overseas and within Australia with several partnerships and takeovers and now also delivers life and travel insurance. In 2020, nib health funds had AU$2.522 billion in revenue.
The ACCC filed a case against nib in the Federal Court in 2017 alleging nib had engaged in misleading or deceptive conduct, unconscionable conduct and made false or misleading representations by failing to inform policy holders of its decision to remove coverage for certain eye procedures from its “MediGap Scheme” in 2015. It was alleged that, as a result, nib members who had undergone certain eye procedures were likely to incur increased out-of-pocket expenses. Nib had not given its members advance notice of the changes. These proceedings against nib were discontinued this year, after nib committed to continue to provide advance notice to its members of unilateral policy changes which are likely to result in higher out-of- pocket expenses for patients.
The widely acknowledged value proposition of private health care in Australia is to provide access and choice to quality health care. While it has been suggested by the Honeysuckle Health proposal that there will be a reduction in administrative burden and more patient choice with the expansion of buying groups, this has not been demonstrated in the US. Small and large practices have had to increase their administrative staff to negotiate health insurance contracts and to ensure compliance with different insurers. Instead of one schedule of fees, which we predominantly have in Australia, there may be a different fee schedule for each insurance company.
Patient access
Pre-authorisation is the process of confirming that a patient is eligible for a procedure or intervention based on their insurance policy, rather than clinical indication. Often it is sought from a non-medical person who ensures adherence to criteria set by the insurer. This may include defining the interval of cervical screening, referral for further investigations or eligibility for surgery.
This results in services being dictated remotely by insurance companies, or “managed care” rather than by qualified doctors who have assessed the patient in front of them.
Ultimately, it means that the insurance companies tightly control what the patient has access to and isn’t even a guarantee that the health insurance company will pay. In addition, there are many instances where insurance companies will provide obstacles to avoid paying out appropriate claims. This results in ongoing and repeat resubmission of pre-authorisation requests, subsequent delays to patient treatment and further administrative burdens for health professionals.
Some examples
Perhaps the most infamous example is that of Cigna and Nataline Sarkisyan, a 17-year-old with recurrent leukaemia who died while awaiting liver transplant. Cigna refused the liver transplant on the grounds that the treatment was considered experimental, investigational, unproven to be safe or effective. This was overturned after protests, media attention, political support and legal action. Unfortunately, she deteriorated a few hours after the decision was reversed.
Aetna, the third largest US health insurer, recently advised pain physicians and anaesthetists of nerve blocks that are considered to be “experimental and investigational” and, therefore, not eligible for funding. The list comprises nearly 40 blocks used for the treatment of chronic pain and acute post-operative pain. If something similar had been applied in Australia for the past year up to June 2020, approximately 500 000 patient procedures would have potentially been affected and not covered.
Plenty of further examples can be found when talking with anyone who has practised in the US or a search of social media: patients having a laminectomy rather than the less invasive microdiscectomy, as the latter procedure is not covered by the insurer; a patient with an incidental finding of a lung nodule on imaging for chest pain and the request for a positron emission tomography (PET) scan taking 8 months to approve and then on follow-up imaging and biopsy the patient’s lung cancer was deemed inoperable; patients only being authorised to have a magnetic resonance imaging (MRI) scan after they have had an x-ray and computed tomography (CT) scan, when only the MRI was clinically indicated; patients only able to have three physiotherapy sessions for non-traumatic chronic lower back pain before a cortisone injection is required, even when there is not a structural problem amenable to corticosteroid treatment; a doctor spending time on the phone with a US-based health insurer trying to explain that a patient needs a medication because the other medication the health insurer wants to cover caused an allergic anaphylactic reaction. The list goes on.
It is easy to see why the cost of administration of health care balloons and the quality of health care does not.
Patient choice
While pre-authorisation serves to limit access, the establishment of networks of health providers limits patients’ choice of health professionals. In the US, clinical time is used ensuring that patients are referred for further investigation and treatment by other professionals in the same insurance network. This can be quite involved in a country with over 900 private health insurance providers. While a full blood count may be the same across Australia, this may not apply to more complex pathology, radiology, procedural or allied health services. There may be a health professional who is more suitable for the patient or their condition who is “out of network” and therefore their services are not covered by health insurance.
“Bundled payment” models for obstetric care and joint arthroplasty have increasingly been offered across Australia by health insurers. They may be initially attractive for consumers as they promise a “no-gap” experience. However, they have repercussions for after-hours rosters and those involved in providing emergency, complex or non-routine care. For this reason there has been variable, if not poor, uptake of these offers, along with health professionals opting out once experiencing these professional constraints.
Emergency care is one of the most common reasons to receive care that is “out of network” in the US. The Consolidated Appropriations Act 2021 – also known as the “No Surprise Act”, was introduced in January to deal with this issue. Unfortunately, it will not fully protect all patients, as is the case of UnitedHealthcare (the largest US health insurer) who can deny or reduce coverage retrospectively for care in the emergency department if it unilaterally determined it was not an emergency. This caused a strong condemnation by the American College of Emergency Physicians and calls from the American Hospital Association to stop restricting patients’ access to care and putting patients’ health outcomes at risk.
The fiduciary responsibility of a for-profit company is ultimately to its shareholders. Thus, neither nib, Cigna, nor their alliance is primarily about improving patient health care.
In an effort to contain costs, health insurers regulate the availability of health services while maximising the income from premiums. A recent example in Australia is the AU$1.8 billion in deferred claims liability that was allocated during 2020 for a predicted increase in health needs arising from the pandemic. Only the not-for-profit HBF and insurer AIA have moved to rebate cash to their members. Rather than redistribute some of the deferred claim’s liability, the larger for-profit health insurers have increased premiums, nib having done so by an average of about 4.36%.
Managed care gives control of medical decision making to companies, not doctors, limiting the ability of patients to make independent health choices supported by their doctors. Alongside the lack of universal health care, this may be part of the reason why health outcomes are worse in the US.
If the ACCC authorises the proposal from Honeysuckle Health, then it will open the door for other for-profit US health insurance companies to enter the Australian health market and negatively affect patient access, choice and quality of health care.
In our opinion, the outcome of this ACCC determination will change the face of health care in this country and lead us down an US style health care model with:
- worse health and health care outcomes;
- higher costs;
- health insurance regulation and limitation to physician decision making;
- altered doctor–patient relationships by destroying the independence of patient-centred health care decision making;
- increased pressure on public hospitals as patients fail to see value in obtaining private health care;
- increased administrative burden on health providers; and
- increased burnout due to reduced autonomy and increased compliance requirements.
Private health insurers have proven public relations messaging, or “spin” that will support their cause. They will target doctors’ fees, despite the poor indexation of health funds reimbursements and Medicare over the last 35 years (consistently less than inflation) compared with practice costs, which increase with inflation each year. They will allege that the most common complaint from their customers is about doctors’ out-of-pocket fees, although these only make up a small proportion of complaints made to the private health ombudsman. They will make proposals to enter into agreements with medical specialists to not charge out-of-pocket costs, or “no-gap”, for health services which at first glance seems a reasonable goal, until it is realised that gaps arise due to poor indexation and reimbursements — nib’s indexation of anaesthesia items averaged over the past 9 years has been 0.92% per annum, according to the Australian Society of Anaesthetists’ Relative Value Guide (available to members), and in the past financial year, surgical items were indexed 1.5%. nib is the only insurance company to financially penalise patients with their no-gap policy, which offers particularly low patient rebates. This nib no-gap policy is the one that Honeysuckle Health will ask health providers to sign up to.
Ultimately, this really isn’t about medical specialists’ fees even if the health insurance companies’ large public relations teams make it appear that way. The Honeysuckle group is trying to use the ACCC to force medical specialists into accepting significantly discounted conditions and reduced clinical autonomy in order to maximise their profits.
The current Australian private health care system is world class in its ability to offer access, choice and quality. The Honeysuckle Health managed care proposal is about control, restricting choice to their networks and corporate financial gains.
Do we really want to have a US style for-profit system here, and is it in the patients’ best financial and health interests? We think not.
The ACCC has an opportunity to prevent the introduction of managed care into Australia rather than open the floodgates to the “for-profit insurance system” companies. The health care of all Australians is at risk and this decision has bigger ramifications than it initially appears. We implore Australian doctors and community members to consider the effects of this decision. We need to speak up against this proposal and seek legislative change that prevents managed care from taking over our health system in the future.
Managed care is not care; it is insurance-determined service provision.
Dr Pierre Bradley is an Adjunct Senior Lecturer in Anaesthesia and Perioperative Medicine at Monash University, Airway Lead for Tasmania and Victoria and sits on ANZCA’s Victorian Regional Council. The views expressed in this article are his own and may not reflect those of his employer.
Dr Suzi Nou is an anaesthetist in Melbourne and is President of the Australian Society of Anaesthetists and host of the Australian Anaesthesia podcast.
Dr Michelle Horne is a specialist anaesthetist with both a public appointment and private practice. She is trained in a wide variety of clinical areas and the delivery of anaesthesia.
The statements or opinions expressed in this article reflect the views of the authors and do not represent the official policy of the AMA, the MJA or InSight+ unless so stated.
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A counterpoint to the first comment below. Yes, as Prof Andrews lists, there are perverse financial incentives in the current private system. However, just as fee-for-service encourages overservicing, a salaried paid-by-the-hour public system favours underservicing. If we could start again and design a system from scratch, we would quickly realise all systems (including pay-for-performance, and even altruistic systems) have downsides. What we do know is for all our faults, our dual private-public system (with ongoing regulation to discourage both under and overservicing) *macroscopically* delivers better results for less spend. The proposed new ‘managed care’ system may sound good (who doesn’t want evidence-based care?) but in practice, the only evidence we have from the US is that it results in a ballooning middle-manager tier that *macroscopically* sucks up health dollars and delivers poorer outcomes. As Prof Andrews suggests – “follow the money”. The clue is in the title: managed care = more middle-managers making money. And CEOs.
There is a huge deal of corruption in the public and private healthcare systems in Australia. Specifically doctors in some very critical specialties such as intensive care are exploited to the core to give you what you all see as “the world class hospitals”! Constantly intimidated, harassed and bullied, they are “forced” to go to places risking their lives by “market forces”. The racket involves many politician doctors, medical administrators and international gangs who derive “kickbacks”. I do not see this new system in any way or form worse than what exists. It only seems to legitimise what is now a covert “whatsapp” driven doctor slavery perpetuated by hospitals. When you can accept companies without a physical address in Australia ‘dealing’ with medical administrators as Locum agencies which use specialists as “cash cows”, I can accept this model. First hand experience. Truth may hurt.
Why on earth ;would any reasonable democrati government not want the best outcome for its citizens in health care? Already heavily subsidised private health care premiums take $billions which could otherwise be destined for public health care. What a difference that would make to Medicare services. Please call this out for what it is – a protective multi million dollar infiltration exercise of the US private health care companies which never produce client-focussed care but rather limited care serving the ‘bottom line’ of the companies and their shareholders. Australians please wake up, Many of you were not alive, or not in Australia when Medibank then later Medicare were introduced to ensure every single Australian citizen can have essential health care regardless of your bank account balance. This in no way stops anyone from taking our private health insurance but ironically, in severe health crises the public system is always the one which provides the best and most highly used option in these cases. We Australians need to rail against the US system, with its very well documented failings, being brought in by our government by stealth to ultimately over time replace our world class, egalitarian health care system. The recent announcements by the LNP regarding the range of conditions and surgeries which will no longer be affordable for many ordinary working and/ or elderly people is only a foretelling of further inroads to our Medicare system.
Australia has one of the best health systems in the world, we take care of everybody. I have no idea why people think that the US and everything they do is great when it is far from true. In the US, the poor are forgotten about, if you want treatment you have to be wealthy or be in debt for the rest of your life and then some. We use to have the best telecommunications system in the world and look at it now it’s a mess and do we need to ask why.
Managed Health Care should not be allowed into this Country. It should be the decision of the patient with the guidance of their GP to which Specialist they see and then the patient with guidance from the Specialist as to what treatment they have.
Dear Pierre Bradley, Being a specialist of coloured and linguistically diverse origin, I see the existing private enterprise and public system systematically harbours bullying, discrimination, tribalism, racism, groupism where a select few doctors can form “territories”. The harm and pain such territorialism and overt racism does to independent practitioners like me are indescribable in words. A system where the referral pathway is not constrained by tribalism is a way forward in my view. Btw, most of the negative consequences are based on another country experience. And many “may be” even in that country. I have lived and worked in usa and I felt the problems were not caused by managed care alone. I am all for this partnership to bloom here and I think we doctors here stand to benefit.
Managed care is a commercial venture, not a health principle. Care is ultimately “managed” by non medical insurance employees who would be working to business KPIs to generate profits for shareholders.
The use of evidence based guidelines would be a a way of harnessing health concepts for business reasons, with the primary aim to keep costs down and generate profits, probably with a secondary marketing aim. There is nothing inherently wrong about this – just standard business practice. However commercial aims should not be confused with use of evidence based guidelines for the primary purpose of improving health or value of healthcare for the community. There is no reason for GPs to support managed care – unless they work for the insurer of course.
Dear Anonymous July 6th
Re SMH QLD Public?Private funded hospital.
This was published after our article was submitted and as far as I can tell is a private entity funding the building for public use operating on a lease funding arrangement for the next 20 years. It doesn’t make any mention of any interference in or on medical decision making or patient’s medical care.
It is a funding model to allow for expansion of public services and as far as I can tell without any limitations on medical provision or patients autonomy. This model has been used before and is not new, and really is just like commercial real estate.
Dear Anonymous July 5th
Re Very Biased
Everything in our article is referenced and accurate… if you choose to interpret it as a smear so be it. However, you can’t have it both ways by saying a few and then contradicting yourself with populism. Yes, we have a vested interest, it is patient care. And yes a number of medical organisations, private hospitals and other insurers have written similar things to us…. you can check in out on the ACCC website re Honeysuckle proposal.
It would be useful for you to clearly state what you believe the benefits are to this proposal, rather than stating you disapprove of our stance without any further substantiation. I refer you to Prof Andrews’s informed reply at the very bottom of the page which gives a different perceptive to ours.
And FYI I have a strong commitment to the public system and professional standards, and my main COI is that I have absolutely no wish to have an American Health Insurance system imposed on Australia. IMHO patients will suffer with this proposal in the long term.
And what sort of new model is this:
https://www.smh.com.au/business/banking-and-finance/stars-first-public-hospital-in-australia-to-be-funded-by-reit-investors-20210601-p57x5b.html
And why do you not oppose it? To me it sounds a “different” model!
Managed care is clearly an unmitigated disaster in the USA (for everyone except the for-profit insurance companies and their shareholders) and allowing the same model to enter Australia would be dangerous and idiotic. I can’t believe this is even being considered when our current system is far superior to that in the USA.
Very biased. This article seems to be a ‘smear campaign’ by a few with vested interests – that’s my view. Doctors like me who do not approve of current private operators will welcome this alternative. Please don’t succumb to blind populism. Ps I don’t have an iota or conflict of interest with any of these entities.
Andrews conveniently ignores the facts: better outcomes at more reasonable cost, and layers of “managed care” bureaucrats involved beforehand on both sides of the fence. “Well organised evidence based care” is the sine qua non of our present practice and “managed” well, is what we do.
These health funds are there to deliver profit to their shareholders, rather than return the profits back into better deals for their contributors: the patients.
From my discussions with colleagues in the US managed care can go as far as only allowing procedures /surgery to be undertaken by “approved” doctors at “approved” hospitals and can also limit the availability of come medications.
I am sure almost everyone knows this so I am amazed if there can be any support.
Beware of the indirect marketing activities of these companies that will involve “important” and “leaders” in the profession as well as politicians. They are very skilled at slowly altering established opinions for their benefit..
Dear Professor Andrews
I am in full agreement that GPs should be the gatekeepers to safe effective patients care however we have to be careful with terminology.
Managed care or value based care is terminology used by insurance companies to mask that they are for profit and controlling what therapies are available for offer based on their bottom line.
GPs practice evidence based medicine and coordinate health care for their patients ( appreciate coordinate and manage are similar meaning but it does have different connotations in the current context and political climate).
As an aside, I disagree that Anesthesia is a narrow field of medicine, in fact I think we have a lot more in common with GPs than is immediately apparent. We have extensive generalist knowledge across a whole range of specialities and the cover ranges from education to perioperative medicine, prehospital retrievals and community medical support events to intensive car. We have specific specialist knowledge of how to adapt the patient’s physiology with pharmacology to provide optimal stabilisation and conditions for what ever needs to get done safely. Similarly we listen to the patients needs and adapt their goals of care to their wishes and expectations.
Similarly, I don’t think generalising that private skims of the easy cases or does not take on patients with complex needs helps the message that we are trying to convey, My public work is very similar to my private and requires ICU support and the complexity of the patients are very similar, and sometimes higher. There are often very good reasons why complex cases get done in public relating more to logistics and having the full range of disciplines or specific specialist available on site, which has little to do with the perception of skimming.
Ultimately this is distracting from the real message that US health insurance companies are looking to introduced their for profit managed care into Australia unnoticed when we are dealing with COVID, catching up on the back log of surgery/ medical care and vaccination issues. It was very convient that it was submitted on the 24th December.
I think we can all agree we don’t want to go down an American style funding model.
What we all want is a cost effective system that has the patient first and foremost.
Great article, and excellent thoughts above. There is already a small campaign that’s been started with a number of organisations and societies – https://www.sendtheeaglehome.com.au/
Institutional support is great but if you feel strongly about it then there’s a form letter you can also send to your federal MP to reinforce the message. There are few doubts that Managed Care will lead to poorer patient outcomes and higher costs, so the time to act is now, before the first claws sink in.
The aim of HH is to have a workforce of health fund contracted doctors. There is no guarantee that any so-called cost savings from these schemes will be passed on to health fund members in the form of reduced premiums. In the US, the failure of managed care is simply that the “manager” who squeezes the providers, takes the savings into their own bottom line as a reward for squeezing. Despite its widespread application in the US, managed care has delivered the highest hospital spending per discharge (2016), and highest healthcare spending per capita (2017) the highest healthcare spending as a percentage of GDP (1980-2017) when compared with OECD advanced economies. The quality of care, as highlighted in this article, is not improved and there is no evidence to suggest otherwise.
“Managed care” places the patient at the mercy of the health fund’s contract with the doctor. This contract is not available to the patient (like the hidden contracts between private health funds and hospitals, which impact patient care but which the patient is forbidden to see). Managed care and transparency cannot coexist, since managed care is built around commercial in-confidence contracts that disguise any restrictions in treatment.
government will only listen to the voting public – we need a massive education campaign with real stories from real patients in USA – surely there are plenty of these.
The media needs education as well – it needs to be out there – a good journalistic expsose’ would be timely.
Australians have taken our health system for granted and need to learn what outsiders are trying to do.
The managed care system as practiced in the USA is a disaster. Apart from the problems as laid out in the article, the size and wealth of the overseas partner will see it quickly overwhelm nib and the funds will all be repatriated to the USA to the detriment of the Australian population.
I agree wholeheartedly but at the same time we need to reign in low value care, unnecessary procedures and egregious billing otherwise we are inviting these managed care companies into our sandpit.
Managed Care as a principle is excellent as we need to ensure the healthcare the tax payers provide to the community is necessary, high value, safe and effective. The issue is the model whereby it is provided and as always one needs to “follow the money” . Whilst private care is often more “efficient” this can be due to refusal to take on people with complex needs and skimming off the easy care areas. Where the providers are profit driven, as opposed to being community outcomes drive, there is a risk of perverse financial incentives taking over.
One should note, we already have perverse financial incentives in our system including: fee for service (more services = more pay/cost), procedures and operations generate more income than “talking” therapy and the biggest one – the state-federal funding rules.
I am fully in favour of well organised, evidence based managed care – this is what our GPs as the gate keepers should be encouraged to support. Interesting that the article above is written by people from a narrow field in medical care where fee for service outside the public sector is the main funding model. Whilst i agree with their concern re the “profit” issues in health funding, Drs’ profits in current funding models also need to be regarded realistically.