**Check Against Delivery
The Importance of a strong private health sector
Thank you. I acknowledge the traditional owners of the land on which we meet and pay my respects to elders past and present.
I appreciate the opportunity to speak to you today. I have had the opportunity to meet with representatives of a large number of health funds in the last few months. I have appreciated that opportunity, too.
I think it’s the start of a conversation - a conversation that is long overdue. There are a number of areas that we can work on together, and I think that we can do that constructively.
A few months ago in my National Press Club Speech – a speech that rankled a few health fund executives – not that this speech will be any different – I stated that I think that we have one of the best health systems in the world.
I also said that it’s not perfect. We can always improve.
But it is a health care system the foundations of which are worth protecting and building on. The AMA is committed to working with the Government and with you to do this.
Not only is it something that I strongly believe, it is supported by the evidence.
Despite the Government’s claims that the health system is out of control and unsustainable, the level of health care expenditure has remained steady.
Certainly, the Federal Government’s spending on health is not growing as a proportion of its total expenditure. It actually fell from 18.1 per cent in 2006-07 to 16.1 per cent this year.
The Australian health care system is not only affordable, it is effective.
We enjoy one of the longest life expectancies in the world, and it continues to increase. Increased life expectancy is not only a good result for us and for our children; it has implications for health care policies in the future.
Our public and private health systems work side by side. I am convinced that the balance between the two is one of the reasons that we have a successful health care system.
The private health care sector has also developed significantly. There is almost nothing that can’t be done in the private sector.
It wasn’t that long ago that high-end procedures were still the domain of the public system. That is no longer the case. I think that is a point that has gone unrecognised.
While the Australian health care system is effective, it is very easy to take the health system we have, and the benefits we enjoy, for granted.
It is even easier to undermine, even destroy, that health system. That is why the AMA will defend the foundations of the health care system and our patients.
So, what are the foundations of the Australian health care system that the AMA supports that are relevant to the private health insurance industry?
The AMA supports an Australian health financing system that ensures universal access for patients to affordable health care.
There should also be equity of that access. Funding must encourage appropriate clinical care.
It should incentivise patients to take some responsibility for their health and health care, support preventative health care services and measures, as well as encourage improvements in the quality of health care that lead to better health outcomes and a reduction in inefficient practices.
We must preserve the independence of the doctor/patient relationship.
By this, I mean independence to allow medical practitioners to exercise independent clinical decision-making where their rights to independently refer, with no interference in referral patterns, are protected.
The AMA supports the rights of medical practitioners to set their own fees and preserve the right to fee-for-service arrangements for medical services.
The AMA supports the community rating for private health insurance. The AMA does not support funding of services that are proven to be ineffective or which incentivise inappropriate clinical practice.
These are the foundations of the health care system. These are principles that the AMA believes are worthwhile defending. We are concerned that these foundations will be undermined as private health insurers enter the arena of general practice.
In developed nations around the world, managing the burden of chronic disease in ageing populations is the most important challenge for health systems.
Ageing, of course, not only refers to the fact that the proportion of people above retirement age has grown, but also that we are living longer.
Increased life expectancy means that we are, to some extent, victims of our own medical success, but it also means that we have more people living in the community with chronic disease.
We need to be effective in keeping those people well and keeping them in the community rather than allowing acute exacerbations or complications that lead to frequent and expensive hospital admissions.
The answer to this challenge is primary care, with general practice at its centre. Therefore, investment in primary care is the key to sustainability of our health care system.
The current legislative framework leaves health funds looking to fund general practitioner services that are not covered by Medicare, or to seek a ‘work around’ to the current legislation.
The Medibank Private/IPN arrangement is an example of such a ‘work around’. It is also an example, in the AMA’s opinion, of an undesirable model of PHI engagement in general practice.
The model does not appear to be one that can be extrapolated and applied across multiple funds. Such an arrangement, apart from being impractical, also jeopardises the principle of equity of access to the general practice.
Priorities for patients seeking an appointment with a GP have always been on the basis of clinical priority, not their insurance status. That foundation principle of equity of access to general practice must be retained.
However, the AMA does see potential for greater engagement between general practice and private health insurers. The AMA Council of General Practice has been looking at this area for some time.
At this point in time, the Council thinks there is scope to explore wellness programs, maintenance of shared electronic health care records, the hospital in the home, palliative care, minor procedures, and GP-directed hospital avoidance programs.
In going down this path, we must maintain universality.
We must also avoid arrangements that tie practices to only one insurer. Practices want to be able to offer services to all of their patients with private health insurance.
The AMA believes it is time for a discussion about how GPs could play a more prominent and central role in private health insurance arrangements.
By supporting a greater role for GPs through private health insurance arrangements, there is the potential for the coordination of patient care to be improved, for care to be provided in the most appropriate clinical settings, and unnecessary hospital admissions to be avoided.
The AMA believes that any move to expand the role of private health insurers should be carefully planned and negotiated with the profession to ensure that the outcome is in the best interests of patients, and does not compromise the clinical independence of the profession, or interfere with the doctor-patient relationship.
The Department of Veterans Affairs is doing some great work in chronic disease management with its Coordinated Veterans Care (CVC) Program.
The DVA is supporting GPs to provide comprehensive planned and coordinated care to eligible veterans with the support of a practice nurse or community nurse contracted by the Department.
The CVC program is a proactive interactive approach to the management of high acuity chronic and complex diseases.
It supports GPs to spend more time on these patients on a longitudinal basis. This is something that Medicare currently works against.
The CVC program recognises the non-face-to-face work required, including regular follow-up to see how patients are going, without relying on the patient returning to the surgery.
We need to look at how we can roll out this type of proactive approach with private health insurers.
The need to invest in a healthier future with better disease management, and prevention of avoidable costly hospital admissions, is obvious.
The way forward is surely to work together to see that we can come to an agreed model. We need a model that allows multiple insurers to engage with a general practice without undermining those foundations of our health care system that have served us so well.
There is a case for resourcing general practitioners through funding provided by private health insurers that assists in management of patients with complex and chronic problems - that small percentage that accounts for a disproportionate percentage of costs.
If we can agree on a model that ensures the integrity of the doctor-patient relationship, equity of access, and universality, then this is an area where the AMA and PHIs can work together.
That discussion can only proceed if the independence of the doctor-patient relationship is preserved.
We cannot have a situation develop where a doctor’s ability to order a test, prescribe a treatment, or refer to another doctor is influenced by a third party or ‘payer’.
That is a managed care system. We have seen it work or, more accurately, not work, in areas such as Workers Compensation schemes in Australia.
Not only are managed care schemes bureaucratic and expensive to administer, they harm patients.
Appropriate treatment is often delayed, or the referral patterns are influenced such that the referral may not be to the best person for that particular patient and their condition.
Protections against this sort of managed care must be in place.
As I mentioned at the beginning, the AMA strongly believes in a strong private health insurance sector. This includes healthy competition. Insurers will obviously want to differentiate their products.
It is interesting that differentiation of products, in terms of marketing, appears to focus on the areas such as extras or ancillary services.
A light is not often shone on the fundamentals of the policy, including the rebates paid to medical specialists and the implications for fees. This also includes the issue of exclusions.
The AIHW data tells us that PHI benefits for medical services grew by 5.5 per cent last year, but that you are taking a hit in the net benefits paid because the PHI rebate has gone down by 6.8 per cent.
I want to extend my thanks to those insurers in the room that indexed their schedule of medical benefits in November last year, and in July this year. You have carried the cost of the Government’s decision to freeze MBS indexation.
I will, of course, be interested to hear what you intend to do over the next few years.
I will come back to the implications for medical gaps for your members later.
In terms of private health insurance, the AMA would prefer to see a private health insurance market that does not have exclusion insurance products. Too often my members see patients who think they have cover, but don’t, because they purchased a cheaper product several years ago.
Sometimes treatment is planned and surgery is booked only to be cancelled shortly beforehand because the hospital’s health fund check reveals that the patient is not covered.
It is not an unusual scenario. I clearly remember one young lady in her 20s who presented with a brain tumour that required surgery. She couldn’t wait a year to change her level of cover.
Every day, the AMA office takes calls from members of the public who clearly don’t understand their product, but who have the expectation that they are covered.
I know that for those insurers in the audience whose policies have multiple exclusions, there are many upset calls to your offices as well. It remains one of the most common complaints.
There are still what I refer to as junk policies.
Policies that are there to satisfy requirements that avoid the Medicare levy surcharge. An example is the policy that covers admission to a public hospital as a private patient, but excludes admission to a private hospital.
These patients may get access to the surgeon of choice but they do not get to jump the waiting list. Timely access to theatres is a major reason to have private health insurance in the first place.
Given the ageing population, every hospital treatment policy should cover the very treatments for which people place most value on their private health insurance.
Perhaps this climate of ‘user pays’ that the Government has created is an opportunity for the private insurers to offer only comprehensive policies - or polices with limited exclusions - while still having excess and co-payment policies.
At the very least, the range of products in terms of exclusions should be limited.
And keeping with the theme of coverage, while I understand your need to ensure that you don’t pay benefits for services not covered by you, I cannot support pre-approval processes. By their very nature, they interfere with the doctor-patient relationship.
There is a very big difference between a process that checks whether the patient has cover from a process where a team of people, led by a medical practitioner, agree that a benefit will be paid before a particular treatment proceeds.
In a letter to me in August this year, Health Minister Peter Dutton said:
“The Government believes that the determination of a clinical treatment regime and the assigning of the relevant Medicare Benefits Schedule item number should be the exclusive purview of the treating doctor.”
The Minister said that a pre-surgery approval process by private health insurers would contravene the Private Health Insurance Act.
I am keen to work with you and the Department of Health to stop Medicare and PHI paying for purely, and I emphasise purely, cosmetic surgery.
This needs an agreed medical definition in the Health Insurance Act and the Private Health Insurance Act so that it can be legally enforced by the Department of Human Services and the private health insurers.
I know that you are interested in minimising benefit outlays for what could be described as ‘low value’ services.
Those of who you have been in the health sector for a long time, and those new to the sector who have done their homework, will know that the origins of today’s MBS were based on the most common fee charged in 1971, or thereabouts. The AMA set its fees on the same basis.
The perception in the Australian community that out-of-pocket costs for medical services are increasing is only partly true.
The reality is that private medical fees are essentially ‘controlled’ by the MBS and the private health insurers’ schedules of medical benefits.
The rates of acceptance by doctors of PHI schedules for private in-hospital services are the highest they have ever been. Over the past decade, we have seen a steady increase in these rates.
In June 2014, 89.7 per cent of privately insured medical services were provided at no gap. And 3.2 per cent were provided under ‘known gap’ arrangements.
Together, the MBS and the PHI schedules of medical benefits have moderated the average annual growth in expenditure on medical services to 4.2 per cent in the decade to 2012-13.
This is less than 5.1 per cent for total health spending, 4.9 per cent for the PBS, and 10.8 per cent for products bought by consumers at the chemist.
As for the 7 per cent that do charge a gap, the amount varies. The gap for many services is at or below the AMA rate.
A very small percentage charge higher fees and a very small number charge higher fees. That small number at the end attract a lot of attention.
It would be preferable if some of you were a bit more open and honest with your members that the vast number of services are provided at the level of benefit set by the insurer, instead of portraying isolated cases as the norm, or even going to the extent of briefing the media with specific cases.
The decisions to charge a gap are also influenced by the amount that the doctor receives if they use the known or no gap schedule of a particular health insurer.
The amount that the doctor receives varies tremendously. The public so far are unaware of these differences.
They are also unaware of the other out-of-pocket expenses that might be associated with some products, including new out-of-pocket expenses for radiology and pathology tests as an inpatient.
The AMA looks for ways to influence its members to charge reasonable fees. That’s a hard place for us to be in.
However, any discussion between doctors about fees is frowned upon by the ACCC. We can’t even discuss fees between different speciality groups, let alone within a speciality.
The AMA defends a doctor’s right to set their own fees and taking account of their practice costs, including earning a living commensurate with 15 years of training. We ask doctors to take a reasonable approach to setting their fees – and reasonable is a subjective term.
Now, before anyone says that reasonable fees can be defined in legislation that perhaps limits what people can charge, I just want to highlight the issue that we have with the relativities in the MBS.
I want to highlight how relativities create perversities in services provided, and perhaps in the fees charged.
In surgical oncology, there are marked fee discrepancies by cancer type.
For example, MBS item 30299 for sentinel lymph node is specific for breast cancer and has an MBS fee of $637.45.
The best MBS item number for the same operation for melanoma is 30332 for lymph nodes of axilla, which has a fee of $346.75.
This is an almost 50 per cent discrepancy for the same operation.
So, in theory, there has to be a 50 per cent difference in out- of-pocket costs for the melanoma patient.
There are examples all over the MBS like this that potentially drive billing behaviours positively and negatively.
For very serious conditions and procedures, most MBS items have long lost their relevance to the complexity of the procedure, the risk, the intense planning and multidisciplinary input, and the post-operative planning that is involved in treating and managing these patients.
On top of that, most practice costs are fixed. For instance, I don’t pay my nurse a lower wage because the MBS fees for the surgery I do are relativity less lucrative than for other surgical procedures that are done by other people.
So, any thoughts of regulating ‘reasonable’ fees by reference to MBS fees is not going to be useful.
Patient attitudes are also relevant.
I have seen fundraising events staged especially so that patients can have their surgery done by a particular person.
We know that people will happily pay for ‘cosmetic procedures’ but feel affronted if there is ANY cost associated with their cancer care.
Regardless of the discrepancies with the MBS relativities, medical practitioners have the right to be financially rewarded for significant post-fellowship training and expertise, particularly in sub-specialty areas.
The AMA will always advocate for doctors to maintain the right to determine their own fees according to their practice cost experience, and placing their own value on their professional skill and expertise.
The AMA does not support excessive fees. Nor does the AMA support billing practices that maximise the patient’s rebate in order to reduce their out-of-pocket cost for a fee that is reasonable.
In the meantime, the AMA, medical colleges, and specialist societies are looking for ways to deal with excessive fees from a professionalism perspective.
There has been a lot of discussion around quality of health care and its measurement, from both the medical profession and insurers.
Private health insurers want to make sure that that they are paying for effective services, and that their members are receiving good quality health care.
We need to take a more holistic approach to measuring and defining quality health care.
It is much easier to talk about than to do. However, too many times health funds assume that issues of quality have not been addressed by hospitals or by doctors themselves.
As doctors, part of our registration requirements includes CPD but also, for most of us, also includes some degree of participation in audit.
For the RACS, these annual requirements are clearly set out and have been in place for many years. Participation in morbidity and mortality audits is a regular part of practice.
Safety and quality are the responsibility of clinical governance units within hospitals. There are well-developed systems for investigation of incidents such as root cause analysis.
However, the most important driver of quality is the doctors themselves.
Apart from the obvious concern for our patients, we want to avoid complications. Further, we actively develop systems and protocols to reduce the incidence of these complications. The surgical checklist is such as example.
Measuring outcome and quality is difficult, and convincing Governments to do this is even more difficult.
There is also no remuneration for measuring outcome, which can be expensive when done thoroughly.
The approach to quality being taken by some health funds is a punitive one by not paying for certain complications or problems.
This is not a constructive approach, and fails to recognise that some complications, such as DVTs and infections, can be reduced, but they cannot be eliminated.
DVTs, for example, can occur despite the use of TED stockings, anticoagulation, calf compressors, and other measures.
One of the areas of neurosurgery that I have some expertise in is that of hydrocephalus. Hydrocephalus, or accumulation of fluid inside the brain, is often treated with a shunt. A shunt is a tube that incorporates a valve that drains cerebrospinal fluid from the brain, usually to the abdominal cavity.
Shunts are lifesaving but, as a medical device, they probably have the highest failure rate of any type of medical device.
Failure can lead to neurological complications or even death if it is not revised. The failure rate is about 30 per cent at 6 months for children, and 12 months for adults. Some patients, therefore, have multiple revisions.
For 13 years, I have lobbied for an Australian Shunt Registry as a quality assurance activity for neurosurgeons.
It has the support of neurosurgeons around the nation. The doctors want to do this. It has only just been funded and established.
It provides feedback to individual neurosurgeons about their performance on shunt infections and revision rates against de-identified peers for quality improvement. It also, hopefully, saves lives and reduces patient morbidity.
Finally, if we reduce the number of infections or revisions, it will save cost.
In an audit of shunt procedures performed over a three-year period at the Children’s Hospital Westmead, the costs of revisions and infections accounted for twice the cost of initial shunt insertions.
My point here is that there is a lot more scope for private health insurers to contribute to quality assurance activities and outcome measurement.
There can be a lot more constructive approaches than just a refusal to pay.
The AMA has a new mission statement. It is Leading Australia’s Doctors – Promoting Australia’s Health.
It is easy to sometimes paint the AMA as a self-interested doctors’ union.
We do protect the interests of our members but what motivates many of us in the AMA is the interests of our patients.
That is why the vast majority of us did medicine, why we are doctors in the first place.
Part of promoting Australia’s health is ensuring that the health system in which we work provides for the needs of our patients – and that includes the private sector and the role of private health insurers.
So, if the AMA believes that certain practices adversely affect the foundations of the health care system, if we believe that certain practices undermine the private health insurance industry or, of course, we believe that your fund’s practices are bad for patients, we will tell you.
And we make no apology for advocating in a public way when needed.
What I do appreciate is that many of you want to work with the AMA and build a sustainable private health insurance sector that benefits your members, and that benefits our patients.
I look forward to the opportunity of doing that work with you, and thank you again for the opportunity to speak with you today.
12 November 2014
CONTACT: John Flannery 02 6270 5477 / 0419 494 761
Odette Visser 02 6270 5412 / 0407 726 905
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