Station: 3AW
Program: Mornings
Date: 10/02/2017
Time: 10:08 AM
Compere: Neil Mitchell
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia
NEIL MITCHELL: Simple terms, what do you pay for your health insurance, what does it cost a year, and is it worth it? I guess the other less simple question is, can you afford not to have it? It’s the nature of insurance, isn’t it? The Prime Minister speaking earlier was advising people to stay in private health insurance but there’s a process to this. Every year the health funds tell us how desperate it is, ask Government for large increases, the Health Minister goes public and says they’ve got to re-think it, then a couple of months later we get a rise around about five per cent. This year it’s an average of 4.8 per cent. I think the average family will be spending about four-and-half grand a year on insurance. Remember 13 million of us got some sort of private health insurance.

Calls. Does it work for you? What do you get out of it? What does it cost you? 96 900 693 13 13 32. What’s going on?

On the line, the chief executive of Private Healthcare Australia, the body that represents health insurance funds. Dr Rachel David, good morning.

RACHEL DAVID: Morning, Neil.
NEIL MITCHELL: Who’s rorting the system?
RACHEL DAVID: Look I don’t think it’s a matter of rorting, but over the last certainly two decades the cost of healthcare has gone up at about between six and eight per cent every year. And when I say the cost of healthcare, that’s the cost of hospital beds, nursing wages, medical devices and other goods used in healthcare, and the cost of paying doctors and other health professionals.
NEIL MITCHELL: So who’s getting the money?
RACHEL DAVID: So that money is being paid towards delivering health services, whether that be a hip replacement or a knee replacement in a hospital, which costs on average about $20 to $28,000 just for a simple uncomplicated procedure like that. Getting your tonsils out, the real cost of that’s about $5000. And it’s not just the individual procedures, but the fact that we’re all getting older and developing chronic conditions so we’re using hospitals more.
NEIL MITCHELL: Well explain this to me as reported earlier in the year. In Western Australia public system, a pacemaker costs $1920. On the list, on the private list, $11,440. That is a 496 per cent difference. Is that not a rort?
RACHEL DAVID: It is a rort and that’s something that we’ve been working very hard with the Coalition Government to address. Private patients are paying two to five times more for common medical devices like hip replacements and pacemakers.
NEIL MITCHELL: Well you see, you said there’s not a rort going on. This sounds like it. I mean, a catheter – $15 in the public system, $120. A 700 per cent difference. We’re getting coronary stents, the similar sort of thing. The cost of- some of the doctors tell me the cost of- some of the surgeons tell me that the cost of sort of hiring the operating theatre for half an hour extra for a minor procedure on the end of another one can be $20,000. I mean, this smells like a rort, it walks like a rort. Why isn’t it a rort?
RACHEL DAVID: Look, to give the Minister and his predecessor their credit, they’ve really shone a really strong light on this. And this is something that we are addressing, that’s why the premium increase this year is lower.
NEIL MITCHELL: Well who’s making money out of that rort? Where’s the money going?
RACHEL DAVID: Predominantly to medical device companies, the multinational medical device companies, and to a lesser extent to some hospital groups. But the problem is that the Commonwealth Government for many years has fixed these prices. The previous Minister made a decision that would no longer be the case, we would move to a proper market for medical devices and get the costs down. They’ve started that process and in good faith health funds have lowered the premium increase you otherwise would have expected, to pass the savings back on to health fund members.
RACHEL DAVID: So look, we are addressing it. And I think that there’s a lot more we need to do and more that we need to do to address that kind of regulation.
NEIL MITCHELL: Is it fair to say that while this problem continues, you might be addressing it but the people who pay in the end are the patients? Because the fees go up so you can cover the insurance.
RACHEL DAVID: That’s right, it is related to those costs. And that’s why the Federal Government and ourselves are working hard on a process to remove every bit of waste and every piece of toxic regulation like Prostheses List benefit settings, which pushes up medical device prices from the system.
NEIL MITCHELL: You’re a doctor of medicine, aren’t you?
NEIL MITCHELL: You’re not a mathematician. I was trying to work out the compounding interest. Over the eight years since 2001 – this is without allowing for compounding interest – the cost of health fund insurance has gone up nearly half – 44.8 per cent. In that period of time, inflation’s gone up 13.5 per cent. Something’s wrong.
RACHEL DAVID: Well Neil, that would reflect the cost of the whole health system going up. And you’ll notice that last year the public hospitals through this Commonwealth-state process got a 6.5 per cent year on year increase. So what we’ve got to do is governments, doctors, hospitals and health funds need to work to keep those costs down. So every bit of waste in the system needs to go. Every piece of out-dated regulation fixing prices at sky high levels needs to go. And that’s what the previous Health Minister started that process- we think it needs to happen a lot faster so we can continue to deliver lower rate rises than expected. And we believe that we’ve got the support of the current Health Minister to continue that process.
NEIL MITCHELL: Okay, how long were we stuck with increases around about five-six per cent -you’re saying this one’s lower than it otherwise would have been, it’s still around- just below five per cent. What are we going back 5.78, 5.5, five, 5.6, 6.2, 6.1. So it’s sort of around five to six per cent. How long are we stuck with that for?
RACHEL DAVID: Look I know this is tough for individuals and families, but we need to understand that there will always be some level of increase year on year simply because people are getting older, and people have more chronic conditions, and there’ll be more of a need for people to use hospitals. What we can’t tolerate is wasteful care occurring in the system, and people just paying grossly inflated prices for things like hips and knees and that’s what we’re trying to address.
NEIL MITCHELL: We’ve got to deal with waste but we’ve got to deal with profiteering as well. I mean, the companies that own the private hospitals, are they creaming it out? Have they got huge profits?
RACHEL DAVID: Look there are some issues in the system in terms of regulation that we’re trying to address. We believe that the less regulation in the system, the more we’ll be able to have robust contracting relationships with private hospitals so we can really deliver value for money for our patients. But just to be clear, the cost of some of these procedures and some of these hospital admissions that families would otherwise have to pay for or wait for is pretty high anyway. So a standard hip or a knee is going to be over $20,000 if you don’t have insurance.
NEIL MITCHELL: Yeah, but should it be? But should it be? If I’m paying 20 grand for a new hip, is somebody profiteering on it?
RACHEL DAVID: Well look, I think some of the input costs in healthcare are pretty high. Like you have some highly trained professionals, nurses and [indistinct].
NEIL MITCHELL: But the doctors tell me they’re not making a fortune. The specialists, I mean, not the GPs. But the specialists tell me they are not making a fortune generally. Is $20,000 reasonable for a hip replacement?
RACHEL DAVID: What we are doing is to benchmark a lot of these things, particularly on the medical device prices for the actual hardware that is used. And we’re working very hard with the Federal Government to knock some of the inflation in those prices right down to where it is overseas and where it is in the public system. So that process is underway.
NEIL MITCHELL: Alright, well…
RACHEL DAVID: I do think that more needs to be done.
NEIL MITCHELL: In the rest of the world- if I’m paying $20,000 for a hip operation here, what would I be paying in other parts of the world?
RACHEL DAVID: In some countries it’s hard to make a comparison but look, it’s because they have a very different health system sometimes with very few….

Sometimes in a lot of countries health insurance and private health is a luxury market only so the costs are very high. But for- in countries where there are large numbers of people with insurance, either public or private such as Germany, the UK and parts of the US, you’ll find that these procedure costs are on the high side, and it’s related to medical devices and in some cases hospital accommodation and wages.

NEIL MITCHELL: If I was to go through the annual reporting of the private hospital companies that are publicly listed, would I see what I considered to be excessive profits?
RACHEL DAVID: Look I think it depends on what you’d be comparing them to. The big hospital groups…
NEIL MITCHELL: Well, the rest of the world. The rest of industry. The reality check.
RACHEL DAVID: Yeah, well look, Australian hospital companies – the big ones – are very profitable.
NEIL MITCHELL: Well what sort of- what would they have increased in the past year, their profit? What percentage?
RACHEL DAVID: Look, I can’t answer that and nor am I an expert on what the appropriate return on investment in private hospitals is. However, what we need to do is make sure that our members and our patients are getting value for money for that. At the moment…
NEIL MITCHELL: Well we’re not. We’re not at the moment.
RACHEL DAVID: Yeah. Well at the moment with medical device prices the way they are, and the payments for some services the way we are, we can do a lot better. And that’s why Minister Hunt and that’s why the health funds have committed to a very detailed process to look at all of these things and see if we can get those costs down.
NEIL MITCHELL: Thank you very much for talking to us. Dr Rachel David, chief executive of Private Healthcare Australia, covering the health insurance funds.

I wonder if it might be too much to ask in the next hour or so but maybe by Monday we could get Ross Greenwood to go through the publicly listed private hospital companies – I mean, there are only a couple of them I think – and say okay, what profit are they making? What return on investment is that? And what percentage increase have they had in the past year? So in other words, if they’re all sailing along at about ten or 15 per cent increase in profit each year, and here we are paying more and more and more, I think there’s reason to question the operations. Excuse the pun. We’ll have a talk to Ross, see if that can be done today. If not today, for next week.

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