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We are privatising public hospitals – and we don’t even know (Part Two)

Following on from the background piece on private patients seeking care in public hospitals, Martyn Goddard explains the driving force behind this practice and outlines how this continuing trend is undermining some fundamental tenets of Australia’s universal health system.

He questions why this trend has been allowed to develop and highlights the urgent need to address the inequities in funding and access to care resulting from current funding arrangements.


Martyn Goddard writes:

Within a few weeks we will find out how much of the work in our overcrowded public hospitals is directed to private, fee-paying patients.

According to data from the Australian Institute of Health and Welfare, 17% of admitted patients in Australia’s public hospitals two years ago were private. The numbers and proportions have been rising inexorably for many years, so when the new data is released in May we can expect more private patients and, proportionally, fewer public patients.

Two states set the pace: New South Wales on 26% and Tasmania on 22%. And that was in 2016-17. The others follow: Victoria on 15%, Queensland on 14%, Western Australia 10%, South Australia 12% and the ACT on 12%. Even the Northern Territory, manages 3%.

It’s a myth that private patients bring much-needed funding into public hospitals, helping them to treat more public patients. The reverse is the truth.

Good information has only become available for Tasmania, which is also the state with the nation’s most egregious system. Here, all the money for private patients – from Medicare, private health insurance and elsewhere – goes into a pool run by and for the senior doctors who have the right of private practice in the hospital. From this pool, 95% of the money is distributed to those senior doctors. The other 5% goes into a research fund.

The money going to doctors from private patient schemes is in addition to their public salaries. The national average salary for a senior medical officer employed full-time is over $320,000 a year.

Hospitals lose out

The hospital gets nothing for all the other costs of a private patient’s treatment. Nothing for the people who do most of the work, the junior doctors and nurses. Nothing for cooks, cleaners or administrators. Nothing for the buildings or the equipment.

To make it worse, the Commonwealth refuses to fund these patients with the usual 45% of the national efficient price, on the basis that it’s already paying for Medicare and the private insurance rebate. The hospital gets only a fraction of the usual activity-based funding.

The result is that for those 22% of admitted patients, the public hospital loses an average of $1,800, compared with treating the same patient publicly. Over a year, that amounts to at least $43 million in Tasmania and probably more – a sizeable amount in a small system that is already so grossly under-funded.

A nationwide problem

All states have these systems, with local variations. By no means all senior doctors are in these schemes: some refuse to join for ethical reasons and others have few or no private patients.

No such figures are available for any other state. No research has been done.

Nowhere else is the per-patient loss likely to be as high as Tasmania’s $1,800. But nowhere is it likely to be zero. In larger jurisdictions, although the average individual amount may be lower, it can add up to an impressive figure. If the extra cost in NSW of treating a patient as private is, say, $900 – half the Tasmanian amount – it would represent an annual loss to that state’s public hospitals of more than $345 million. Nationally, it would amount to over $820 million.

Underlying drivers

The driving force behind these schemes seems to be the very high earnings of senior specialists in the private sector, where they have almost untrammelled pricing power and often rake in millions of dollars a year. State governments, unwilling and unable to match these inflated amounts, offered the right of private practice in public hospitals to boost doctors’ incomes without adding to hospital budgets. The system grew from there and has been aggressively defended by those benefiting from it.

A compounding reason is that so few people know the effect it is having on public hospital finances or how it discriminates against non-paying public patients. There has been no research into the area. Even those nurses and others who encourage public patients to “convert” to private are unaware of the impact of what they are doing. If they knew, they might stop.

Activity-based funding

The introduction of Commonwealth activity-based funding also seems to have worsened the problem. Before, states were given block grants and it was up to them how it was spent. Now, funding is directed at each patient and those treated as private are easily identifiable.

The most evident unfairness is in elective surgery. Nationally, public patients have to wait two and a half times as long for their operations as those treated as private. In NSW it is closer to three times and, in Tasmania, over three times.

It is usual for there to be two elective surgery waiting lists. One, for private patients, is short. The other, for public patients, can be very long indeed.

Someone who sees a surgeon for a first consultation in his or her private rooms has already skipped the “hidden” waiting list most public patients have to endure before being put on the official waiting list. That process alone can, and often does, take years. At the Royal Hobart Hospital, 25% of public patients needing urgent neurosurgery have still not been seen after waiting for eleven months just to see a specialist and to be put on the waiting list for surgery. For semi-urgent cases, the figure is three years.

At the same hospital, 25% of public patients needing semi-urgent ear, nose and throat surgery are still waiting for that first consultation after three years and four months. If they are classed as non-urgent, it’s five and a half years.

Private patients in the same public hospital can miss all this.

Surgeons can, and sometimes do, manipulate urgency categories to favour their lucrative private patients even more.

Policy questions

All of this raises many policy questions. Why have we allowed the most basic ideal of a universal health system – that people should be treated on the basis of need, not wealth – to be so fundamentally debauched?

Why do we allow wealthier people to buy their way into the nation’s public hospitals ahead of someone who is sicker, but poorer, than they are?

Why has this not been properly researched? Why is there so little transparency? What are our health ministers doing?

And why are some doctors so greedy, and with such an overweening sense of entitlement, that they insist on these iniquitous schemes?

Martyn Goddard is an independent health policy analyst based in Hobart. He is a former member of the Pharmaceutical Benefits Advisory Committee, the Australian National Council on AIDS and Related Diseases and its clinical subcommittee and was health policy officer for the Australian Consumers’ Association (Choice). Before all that he was a journalist and documentary producer, mostly at the ABC.

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#IHMayDay17
#IHMayDay18
#LoveRural 2014
Croakey Conference News Service 2013 – 2019
2013 conferences
Australian Centre for Health Services Innovation Forum 2013
Australian Health Promotion Association Conference 2013
Closing the Credibility Gap 2013
CRANAplus Conference 2013
FASD Conference 2013
Health Workforce Australia 2013
International Health Literacy Network Conference 2013
NACCHO Summit 2013
National Rural Health Conference 2013
Oceania EcoHealth Symposium 2013
PHAA conference 2013
2014 conferences
#IPCHIV14
AIDA Conference 2014
Congress Lowitja 2014
CRANAplus conference 2014
Cultural Solutions - Healing Foundation forum 2014
Lowitja Institute Continuous Quality Improvement conference 2014
National Suicide Prevention Conference 2014
Racism and children/youth health symposium 2014
Rural & Remote Health Scientific Symposium 2014
2015 conferences
#CPHCEforum
#CRANAplus15
#HSR15
#NRHC15
#OTCC15
Population Health Congress 2015
2016 conferences
#AHHAsim16
#AHMRC16
#ANROWS2016
#ATSISPEP
#AusCanIndigenousWellness
#cphce2016
#CPHCEforum16
#CRANAplus2016
#IAMRA2016
#LowitjaConf2016
#PreventObesity16
#TowardsRecovery
#VMIAC16
#WearablesCEH
#WICC2016
2017 conferences
#17APCC
#ACEM17
#AIDAconf2017
#BTH20
#CATSINaM17
#ClimateHealthStrategy
#IAHAConf17
#IDS17
#LBQWHC17
#LivingOurWay
#OKtoAskAu
#OTCC2017
#ResearchTranslation17
#TheMHS2017
#VMIACConf17
#WCPH2017
Australian Palliative Care Conference