On the risks of private health cover of GP visits & the need for a “real” national conversation on health

In this post below, public policy expert John Menadue agrees with Health Minister Peter Dutton that we need a national conversation about health. He disagrees however that we are having one, saying we are instead seeing an “ill-considered and ideologically driven course” on both co-payments and the prospect of private health insurers being able to cover GP visits.

Quoting US super-investor Warren Buffet who has described the private health industry as “the tapeworm in the US health sector”,  Menadue’s article – cross-posted with permission from his Pearls and Irritations blog – says private health insurance involvement in primary care should be “strenuously resisted”, with international evidence showing it pushes up costs dramatically and does not improve health outcomes.

Primary practice has been until now off limits to insurers, despite their strong advocacy, but all eyes are on the current Medibank Private trial program in southeast Queensland that effectively subsidises GP services.

Announcing the pilot study earlier this year, Medibank said it aimed to allow members access to:

• A 24 hour guarantee – members will get an appointment to see a doctor within 24 hours of calling.
• No out-of-pocket expense – participating GPs have agreed not to charge an out-of-pocket expense.
• Access to an after-hours GP – after-hours home visits by a GP with no out-of-pockets.
• A range of one-off health assessments available to people at different life stages with no out of pocket costs.

Health Minister Peter Dutton recently told the National Press Club:

I think it’s a ridiculous situation in our country, given that half the population has private health insurance, that the first thing insurers know about is when I turn up to an emergency department with a heart attack and they get the bill for the anaesthetist and for the hospital stay. I believe very strongly that their money is wisely invested earlier in the process, invested earlier in the process so that they can help me address some of my lifestyle choices which might prevent me from becoming diabetic, or from suffering from heart disease otherwise, whatever the case might be.

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John Menadue writes:

Out-of-pocket costs in Australian healthcare and the $7 co-payment.

In my blog of  May 12 on health co-payments I set out my objections to the proposal including that we already have a very high level of co-payments, that they are a “dogs breakfast” and that the proposal on its own would be unfair. The debate has moved on since then which raises further concerns about a proposal which covers not only GP consultations but pathology and radiology tests and pharmaceutical prescriptions as well.

My first concern relates to process and where this co-payment issue might be headed. Minister Dutton has repeatedly said that he wants ‘to start a national conversation’ about health. I agree. But the minister doesn’t do what he has promised. He has barged in with a ‘solution’ to the “unsustainability of Australian healthcare”, without any ‘conversation’. In practice what he is proposing in the budget is a mechanism to kill bulk billing and clear the ground for private health insurance to fill the gap. Minister Dutton has said repeatedly that the government has an interest in greater involvement of private health insurance in primary healthcare. He said ‘we will be… looking over the next few years at new and innovative ways in which we might fund and deliver primary healthcare, including through partnerships with private insurers’. He has expressed interest in trials of private health insurance in primary care in Queensland.

In terms of equity and efficiency it is remarkable that the government proposes a $7 co-payment, but maintains the $5 billion per annum subsidy for private health insurance. That is real corporate welfare at the expense of low income earners and our health service in general.

The intrusion of private health insurance into primary healthcare should be strenuously resisted. The experience with private health insurance around the world is clear, particularly in the US. It pushes up costs dramatically and does not improve health outcomes. There is no benefit to the Australian community if the government saves $1 in official taxes, only to turn round and for the community to pay a lot more  in ‘taxes’ to BUPA, Medibank Private or NIB, for the same or an inferior service. Because of its intrinsic inefficiency private health insurance will always be more expensive than Medicare. Since 1999 average private health insurance premiums have increased 130 per cent whilst the CPI has increased by only 50 per cent. Private health insurance administrative costs are about three times higher than Medicare’s.

I have written extensively about the damage that private health insurance does wherever it gets a foothold. Its encroachment into primary healthcare as suggested by the minister is a much more serious threat to our universal system of healthcare than the co-payment in itself.

Warren Buffet has described private health insurance as ‘the tapeworm in the US health sector’. It is also true in Australia. Its expansion here should be resisted. Minister Dutton is quoted as saying that he ‘will never go down the path of a US style healthcare system’. But allowing private health insurance into primary healthcare would take us down the American path.  Private doctors and private hospitals have enormous power to set prices unless there is some effective counter. Multiple private insurers have little power to control these prices as the US shows. Only a single payer, usually a public payer, has the power to control prices

My second concern is that co-payments could discourage disadvantaged patients from seeing their GP. The COAG Reform Council has just reported that 5.8 per cent of Australians delayed or did not see a GP because of cost and 8.9 per cent delayed or did not fill a prescription from their GP because of cost. A co-payment will make that worse. It will force some patients to use more expensive and less appropriate emergency department services in public hospitals which are already under great pressure.

Third, the proposed co-payment will undermine preventive health services and continuity of care for people with chronic conditions. The best place to focus on prevention and at an early stage is in primary care. Any discouragement of access to GPs because of the co-payment would be detrimental to preventive healthcare. The decision by the government to abolish the National Preventative Health Agency is an indication of the government’s lack of concern on health prevention. The tobacco, alcohol and the junk food industries will be pleased with that abolition decision. A strong primary health care sector is the key to an equitable and efficient health care system anywhere in the world.

Fourthly, the best way to reduce costs and pressures in primary care is not through a co-payment but to move away from fee-for-service remuneration. This type of remuneration promotes ‘turnstile medicine’. Fee-for-service may be appropriate for occasional and episodic care but it is not appropriate for long-term and chronic care. We need a major review of remuneration practices in primary care with more emphasis on capitation and bulk-charges for chronic care to keep people well at minimum cost. The British single payer system has many advantages. One advantage is, The Economist put it, “doctors are paid to keep people well, not for every extra thing they do so they don’t make money performing unnecessary tasks and tests.” Addressing this remuneration question is far more important than a co-payment.

Fifthly, there will probably be unintended consequences for the $7 co-payment. If the co-payment takes effect, it is likely to result in an increase in doctor’s fees. The attraction of bulk billing for the doctor is that it removes the cost of handling and accounting for transactions. An invoice is sent directly to Medicare. Once the doctor is obliged to handle the $7 co-payment, another transaction occurs, either by cash or probably credit card. This inevitable patient/doctor money transaction will provide the doctor with an opportunity to charge above the bulk billing rate. As soon as doctors stop bulk billing, we can expect a rapid rise in doctors’ fees on top of the $7 co-payment.

Sixthly there are numerous other ways to reduce health costs and by billions of dollars, for example the duplication and gaps in health care between the Commonwealth and the States, the out of date list of medical services funded under the MBS, adverse events, archaic workforce structures and high drug costs resulting in us paying more than $2billion per annum than our New Zealand friends for equivalent drugs. But real savings in these areas means tackling vested interests like the AMA. The Pharmaceutical Guild, Medicines Australia, State health departments and the PHI sector. It is politically easier to attack the less powerful by a co payment.

Far from having a sensible and informed public discussion about health, Minister Dutton has embarked on an ill-considered and ideologically driven course.