The Australian Medical Association (AMA) held a Private Health Summit at Parliament House in Canberra last week to examine proposals for a new regulatory approach to the private sector. Croakey editor Jennifer Doggett reports that it was a timely and constructive meeting, despite some limitations.
And who knew there was such a thing as a “hot tub” model for health reform?
Jennifer Doggett writes:
The AMA’s Private Health Summit focussed on the launch of its proposal to establish a new regulatory authority to oversee the private health sector.
The summit’s focus on this proposal meant that it did not address some of the fundamental questions about the role of the private health sector in the Australian health system – an issue which has never been satisfactorily resolved since the introduction of Medicare.
The need for a broader debate on this issue was raised by some participants, who noted that stakeholder efforts (and government funding) might be better spent in ensuring Australia’s public health system was working optimally to deliver equitable and high quality care, particularly given the current cost of living pressures facing many in the community.
Other stakeholders made the point that the whole health system relies on the private system working well and that this is difficult to achieve when there is no single area of government that brings together all the key players to talk about the system and how to improve it.
While all stakeholders mentioned the need to focus on consumers’ needs, there was only one consumer group represented – the Consumers Health Forum – which limited consumer input into the discussions. The AMA told Croakey that they had consulted both CHF and CHOICE prior to the summit and had invited a number of other consumer groups to the event but none were able to attend.
Also notable was the lack of Indigenous health representation. While Aboriginal and Torres Strait Islander health services operate almost exclusively in the public sector, their experience in delivering integrated care and developing innovative funding models could have provided some useful lessons for participants.
The AMA proposal
AMA President Dr Omar Khorshid opened the event by illustrating the anomalies in Australia’s health system. He described the differences in access to care among his patients with similar clinical needs, depending on their private health insurance (PHI) status and financial position.
He argued that private health sector stakeholders currently are not working together to deliver the best outcomes for patients and that the Government has a role in ensuring the private health sector is working well, given their investment of around $10.5 billion in private health services (via the PHI rebate and Medicare Benefits Schedule).
This is one reason why the AMA has proposed the establishment of a new Private Health Authority – a government body to oversee the private health sector and to drive reforms.
Khorshid argued that the COVID-19 has demonstrated that change within the health system is possible, citing examples including the implementation of telehealth as one positive example (ironically the Government has since gone ahead with the removal of MBS rebates for longer telehealth consultations, drawing criticism from the AMA, although it has delayed some other planned restrictions, after concerns were raised by doctors’ groups, including the RACGP).
He stressed the need for substantial changes, saying that “this is not the time for timid reform” and in particular noted the need to improve transparency and value in the private system. As a first step, Khorshid suggested a need to develop a shared understanding of the reform agenda, one of the motivations for the AMA hosting the event.
Government and Opposition speeches
The Summit was the first health sector event since the election attended by both Minister for Health Mark Butler and Shadow Minister Anne Ruston.
Butler used the opportunity to highlight Labor’s commitment to implementing the Uluru Statement from the Heart as part of its efforts to reduce the health and life expectancy gap between Aboriginal and Torres Strait Islander people and non-Indigenous Australians.
While he did not directly address the AMA’s proposed Private Health Authority, Butler stated that Labor supports a strong public system underpinned by PHI.
He also discussed the need to assess whether current government policies were appropriate given the changing demographics of PHI use. The Minister said he welcomed feedback on the Medicare levy Surcharge and Lifetime Health Cover policies.
Ruston also did not directly address the AMA’s proposal in her speech but stressed her longstanding connection to the health system, having grown up in a rural community with a mother who was a nurse and also being on the board of her local hospital advisory council for many years.
Ruston expressed a commitment to working constructively with the Government and Minister Butler on good policy reform and stated that she felt that currently the health system was overly complex and needed to be simplified and made more sustainable.
She focused on the problems of cost-shifting across the health system, acknowledging that governments are often the worst culprits in this regard, and also suggested looking at health savings accounts as an alternative to PHI.
Insurer views
The private health insurance sector was represented by Dr Rachel David, CEO of Private Healthcare Australia, Mathew Koce, CEO, Members Health Fund Alliance, and individual health funds.
These speakers highlighted the increasing demand for care in areas such as mental health, which are not well served by the public system. They also noted that while there had been recent growth in PHI membership, this was principally from groups who were net claimers and so were unlikely to improve the sector’s long term viability.
The insurers were not supportive of the AMA’s proposal for a new private health sector regulator, arguing that the sector was already over-regulated by existing bodies, including the Australian Prudential Regulation Authority (APRA), the Australian Competition and Consumer Commission (ACCC), the Commonwealth Ombudsman, the Department of Health and the Australian Securities and Investments Commission (ASIC).
In response, the AMA stressed that its proposal was not about creating more regulation but streamlining the existing regulatory system to ensure it is fit for purpose. It also said that it was keen on a “regulator with teeth”, describing this as a “once in a generation reform”.
The key focus of the insurance sector was on how to increase the uptake of PHI by young people, on the basis that they would be net contributors to the pool of insured people and also would be more likely to maintain insurance during the course of their lives.
The insurers also pushed back on criticisms from the medical sector on the potential problems associated with vertical integration, arguing that this was a non-issue and was necessary due to failures in Australia’s public health system and the requirement for community rating.
Catholic health sector position
The Catholic Health Sector was represented by CEO of Catholic Health Australia, Pat Garcia, who stressed the pressures that rising health care costs were putting on insurance contracts.
He also highlighted the problems being caused by significant workforce shortages being exacerbated by the pandemic, immigration restrictions and high international demand.
Garcia argued that due to the closure (by a previous Coalition Government) of the Health Workforce Australia agency, the Department of Health does not have accurate data about the extent of workforce shortages and did not know how these should be addressed.
Describing the trajectory of the private health sector as “unsustainable”, he said that part of the problem was a lack of understanding within government about how the private sector works.
Private hospital sector views
The private hospitals sector was represented by Michael Roff, CEO of the Australian Private Hospitals Association, who highlighted the current pressures on private hospitals due to the COVID-19 pandemic, which has led to both reduced numbers of admissions and workforce shortages.
Roff argued that it was important not to see private healthcare through the lens of private health insurance but rather to shift the focus to consumers, saying that if this were the case, the system would be organised quite differently.
Roff stated that private hospitals are keen to provide new models of care but funders had been reluctant to pay for these, and stressed that out-of-pocket costs are a pain point for consumers.
He highlighted the need for respect between stakeholders, reminding delegates that industry level dialogue had been attempted in the past and not resulted in any gains.
Roff also stressed the importance of data sharing among the private health sector, saying that the Department of Health holds a lot of data that is not made available to stakeholders.
In warning stakeholders against a “one-stop shop” system of regulation, Roff cited the finding of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that this model creates a bias towards promoting the owners’ products above consumers’ interests.
Consumer representation
As mentioned above, consumers had a disappointingly low profile at the Summit and were represented only by the Consumers Health Forum of Australia (CHF), whereas the medical and insurance sectors had multiple representatives speaking at the event.
In a media release issued following the Summit, CHF expressed support for private health sector reform, adding that the AMA’s discussion paper was a “useful way of getting the conversation started”.
However, CHF cautioned against rushing to find a solution before first having a clear and shared understanding of where the problems lie, and an agreed vision of what stakeholders are trying to achieve. Their preferred option was to first undertake an independent review of the private health system in order “to identify the real pain points in the system and make some recommendations on how to fix them”.
“We need reforms that encourage integration and coordination across the public and private system. The proposed Private Health System authority has the potential to do the opposite, to fragment the system and make it more difficult to solve common problems workforce shortages and dealing with disruptions like COVID,” CHF CEO Leanne Wells said.
CHF also stressed the importance of reform measures focusing on increasing integration across the public and private health sectors and delivering the value proposition for all taxpayers, not just those who have private health insurance or use the private health system.
They also highlighted the importance of addressing broader issues, such as cost of living pressures, which may cause people to reassess their decision to have private health insurance and use the private system.
Medical technology sector position
The Medical Technology Association of Australia (MTAA) also attended the Summit, with CEO Ian Burgess appearing on one of the panels. He expressed the sector’s broad support for the AMA’s proposal and in a statement stated that the heart of any reforms to be considered needs to be the core principle of patient-centric ‘value-based healthcare’.
“Ensuring patients are at the centre of the charter for a new authority will be key to its long-term success in helping create a more affordable and innovative private health system. So too will having a consultative function to work with the key health stakeholders like doctors, hospitals, MedTech makers and consumers to address the current and future challenges and opportunities facing Australia’s private health system,” he said.
Burgess also highlighted the need for reform of the private health insurance sector to increase the value of insurance to consumers by addressing insurer operating efficiency, reducing hospital admissions, improving models of care, and increasing the focus on evidence-based medicines.
An expert’s challenge
Professor Stephen Duckett is the former Director of the Health and Aged Care Program at the Grattan Institute and is currently Honorary Enterprise Professor in the School of Population and Global Health and in the Department of General Practice at the University of Melbourne.
He presented some updated research from the Grattan Institute, which highlighted the increasingly older age profile of the insured population, leading to a higher risk pool which puts upward pressure on premiums.
He identified out-of-pocket payments as a key challenge for the sector, noting in particular the role played by a small number of “egregiously” billing doctors (Grattan research has shown that seven percent of all MBS services are responsible for 90 percent of gap payments).
Duckett challenged the sector to be realistic about the Government’s reluctance to increase the level of private health sector subsidies and coercive strategies and to consider the two remaining alternative pathways to increasing the appeal of PHI to younger people.
These he described as either a top down approach involving an increased role for government (for example, the AMA’s proposed regulatory authority) or a sector-driven response, based on a mutually agreed plan between stakeholders to improve the value of private health care (the “hot tub” model).
The latter approach would require all three of the spending interest groups in this sector (doctors, hospitals and device manufacturers) to make a contribution to reducing costs and to addressing current pain points such as out-of-pocket payments.
It could also be supported by insurers through reducing their profit margins and high executive salaries.
The AMA is still seeking input on its discussion paper and welcomes feedback from interested stakeholders.
• Declaration: Jennifer Doggett has previously provided consultancy services to the MTAA and CHF
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