Why Private Health Insurance won’t improve our health

As highlighted by the Parliamentary Library, the introduction of private health insurance (PHI) into primary health care raises some significant policy and regulatory challenges.  In the following piece Dr Tim Senior expands on some of these issues and outlines implications of this move for population health, equity, health care costs and ultimately the future of our public health system.   This piece originally appeared in his blog The Influence of the Tricorder, and is reposted here in full, with permission. He writes:

As we play “will-they won’t-they” on the GP Copayment – currently rumoured to be dumped, but with the Medicare rebate frozen, that’s just a slow implementation of the co-payment. Health care costs keep rising, and presumably the government know this as they’ve just agreed to allow increases to Private Health Insurance premiums by an average of 6.2%. They rose by an average of 6.2% last year, too.

Of course, your tax subsidises this to the tune of over $6bn (yes, billion). Governments see Private Health Insurance (PHI) as being an important part of the health system mix in Australia. One of the budget KPIs is to maintain the number of people covered by private health insurance hospital cover. As well as rebates of 30% of the premium, the tax system penalises high income earners who don’t take out health insurance. And Peter Dutton, the former health minister, can even be seen spruiking health insurance.

What do the co-payment and Private Health Insurance mean for health policy?

Combining a liking for co-payments and PHI, this is my prediction for the worst case direction of future health policy under the current government:

1. Introduce co-payment somehow for seeing a GP. {Evidence – it’s happening right now}
2. Watch as Private Health Insurers and their members argue that clearly co-payments to see the GP should be covered by Private Health Insurance {Evidence – PHI already lobbying government on this}
3. Bow to this pressure – it’s only what the public want. Allow Private Health Insurance to cover General Practice. {Evidence – Government already allowing trials of this in Brisbane}
4. Private Health Insurers compete for customers by offering favourable access to GPs, and paying GPs more than they get from Medicare. {Evidence – this is the basis of the trial in Brisbane. Admin fee paid to practice, 24 hour access guarantee for members}
5. GPs opt out of Medicare system, as they get better paid and easier access to referral networks {Evidence – compare specialist care in public and private systems}
6. IPA, Private Health Insurance Companies and their customers argue they pay PHI so should be able to opt out of Medicare altogether. {Evidence – this would be the small government libertarian position}
7. Medicare gets progressively underfunded and seen as a second rate safety net rather than a universal health system. {Evidence – it’s already referred to as a safety net}

A look at Private Health Insurance through a lens of who actually needs good health care the most shows why this progression needs to be resisted.

Who has Private Health Insurance?

The Private Health Insurance Administration Council collect excellent statistics about PHI coverage.

Nationally, about 47% of Australians hold hospital insurance coverage. It has gone up slightly each year since 2010, and is fairly constant across the states (with more in the ACT and fewer in the NT).

Looking at insurance coverage by age, we see fewer being covered in their late 20s, and a big drop in coverage in the elderly.

Who doesn’t have Private Health Insurance?

It’s a statement of the obvious to say that those who don’t have health insurance are those who can’t afford the premiums. And that would certainly be true.

So, as people are more advantaged, they are more likely to have PHI (orange boxes increasing) and less likely to have a concession card (blue boxes decreasing).

This is all very well, but it is a well know fact that the more disadavntged you are, then the more health problems you have. (I am writing another post all about this, but you can see the stats before I write). 

The area in which this is most well known is in Aboriginal and Torres Strait Islander health, where the statistics are well known. Less well known is that only 15% of Aboriginal and Torres Strait Islander people in non-remote areas have Private Health Insurance. This is Australia’s specific example of the Inverse Care Law that applies generally. Those who need health care the most, get it the least.

Health Costs

Private Health contributes less than 8% of the total health spend (less than half the amount contributed by individuals themselves in out of pocket costs).

 What does Health Insurance buy – “For our members”?

Private health insurance have a difficult time selling you something in a universal health system. If the health system is going to give you high quality, timely care when you need it regardless of your ability to pay, what can they offer? This, I suspect, is one reason why the government want to turn Medicare into a safety net, rather than a universal health system – to generate a product to sell for profit. Private health insurance need to be able to convince you you’re getting something you wouldn’t otherwise get. That’s why it’s always “For our members.” Here are the options:

• Earlier access
  This is the big one. Private Health Insurance companies know that their main selling point is priority access. Waiting times in the public system are subject to a fair amount of political pressure, but everyone knows insurance will get you seen earlier. The boss of Medibank told the AMA that Medibank members should be given priority in the emergency department. There’s a trial going on right now in Brisbane between a group of General Practices and Medibank to give priority access. The ability to see a doctor earlier – independently of your need – is the main product sold by Private Health Insurance.
• Access to Allied Health
  This is another major one. Seeing a physiotherapist, or an exercise physiologist, or a dentist or a psychologist can be difficult in the public system, especially if it’s not part of a hospital admission. Medicare will only cover a limited number of these in particular circumstances.
• Higher quality health care
  You will receive high quality health care pretty much anywhere you go in Australia. That is, yes, you will always find people who are unhappy about their care, but health care is complex, and things will go wrong. However, public or private systems have no monopoly on things going wrong. And often, when things go wrong in the private system, people are moved to the public system for it to be corrected.
  It’s also worth remembering that in hospitals, it is the public system who is usually involved in education and training of future health professionals, which can make for high quality (and can also look inefficient on a balance sheet!)
• Friendlier staff
  No health professional goes into their job wanting to be rude. It’s stress and burnout that make this happen, which comes about from expecting too much of staff while giving them too few resources to do it. That’s why staff ratios might be good and cases less complicated. It’s easy to be friendly then!
• Nicer rooms
  This is often the case in the private system (though not necessarily if the public system charges your insurer for their services). I don’t see any reason for not having nice rooms in public hospitals. It just seems to be that we are happy to see out insurance premiums pay for it, but not our tax. Which seems sort of odd to me.

Remember that having private health insurance doesn’t solve all your health care problems. Most policies are subject to exclusions – are you covered for having a baby? Mental illness? You are with Medicare! There are also significant patient copayments, which are often unclear when the policy is taken out or when you start treatment.

We can see that private health insurance companies, and perhaps politicians who want PHI to take the pressure off the public system, and perhaps health professionals who might be paid more privately than in the public system all have an interest in ensuring that the publically funded system has long waits, limits to the professionals you can see and happens in less pleasant environments. Often this won’t be explicit – it may even be subconscious – but results in thinking of the public system as a safety net, not a universal system.

Summary – why private health doesn’t improve population health 

We’ve seen that Private Health Insurance is mostly bought by those who can afford it, who, by a happy coincidence are also those who are likely to be the healthiest. Clearly, there’s not too much profit to be made by paying out on insurance for people with more conditions, or needing more complex case management.

So when we pay over $6bn in tax rebates on private health insurance premiums, that’s money going from our tax to those who are already well off enough to afford PHI premiums. But not to those who have most illness or the most need of it. That money can’t help Close the Gap, for example, when it has no way of reaching the 85% of Aboriginal and Torres Strait Islander people in non-remote areas without Private Health Insurance.

And when we allow Private Health insurance premiums to rise by 6.2% each year, but freeze Medicare revenues, that’s paying more each year for the health care of those who need it least, while ensuring a cut in real terms for those who rely on Medicare, and ensuring they will have to contribute out of their own pockets. General Practices will gradually have to move away from communities that can’t pay to those that can.

When we allow Private Health to sell a product that allows us to jump a queue on the basis of our ability to pay, rather than our clinical need, then that moves those better off and less likely to have high health care needs to the front of the queue. This already happens in the hospital system, and will happen in General Practice if we allow it. Freezing Medicare rebates makes this more likely, as the only source of revenue to keep practices viable is patients.

And eventually, if Medicare is a safety net unused by those who are better off (where more political power lies) then it will be allowed to gradually wither as it serves only those without money, power or influence