articles

First published: Monday, February 20, 2012

The biggest threat to Private Health Insurance (PHI) and the private hospital industry is a strong public hospital system which has the confidence of the public. The carrot and stick approach of successive governments playing with the PHI rebate and Medicare Levy Surcharge has made little difference to PHI uptake.

The family of my patient with a wrecked hip is considering paying for 2 years private health insurance (PHI) so that he can have his wrecked hip replaced. They can’t easily afford it on low/middle incomes with families. He definitely can’t afford it. Instead he relies on narcotic pain relief which constipates, nauseates, and confuses him. He’s not on the waiting list yet despite my referring him to a major metropolitan hospital 6 months ago. It might be another 6 months before he’s assessed by a surgeon and finally gets on a waiting list which could mean another year’s wait till surgery. Once he gets into the public hospital I’m quite confident he will get excellent care, as good as or better than at a private hospital. If he had cancer or another immediately life threatening condition he would quite appropriately jump the queue and receive excellent and timely care.

The Howard Government introduced the Medicare Levy Surcharge in 1997. It was the stick designed to punish higher earners with an extra 1% tax if they didn’t take out PHI. It had no effect. By 1999, PHI coverage had fallen from 50% in 1985 down to 30%. The stick was softened in 2009 by raising the threshold at which it cut in. Despite concerns from the industry and Coalition that the sky would fall in PHI coverage rose slightly over the next 18 months. The stick does nothing except raise revenue.

The 30% PHI rebate was introduced in 1999 as a carrot. Over the next 12 months there was a 1% increase in coverage. It didn’t work.

There was however, another stick lurking in the cupboard. Fear. In 2000 the Federal Government funded an advertising blitz from the PHI industry to promote the rebate and private hospital care. By default it was designed to erode public confidence in the public system. It worked. It was combined with a penalty if one didn’t join PHI before a certain age. More fear. Coverage rose from 31 to 45%. To further justify that fear the Coalition Government began to let its share of public hospital funding decline from the historic 50/50 split with States. By 2007 when Labor came to power the Federal/State funding split was about 40/60. To its credit Labor has injected substantial extra funding into public hospitals. It has not however, committed to a restoration of the 50/50 Federal/State funding split. Instead, it has committed to such a split for new funding only. So, by 2030 the split will still be 44/56. My patient might still be waiting.

Whilst means testing the PHI rebate will remove some upper class welfare and improve the budget bottom line, it will do nothing to help my patient and many like him. Fear however, is very motivating.  Whilst some of this fear is about the quality of care there is no evidence that such fear is justified and many doctors would recommend a public hospital before a private hospital for complex problems because they know the care is better in the public system. PHI advertising however, can play on that fear and the Federal Government does nothing to address it. The other fear is that of timely access. Once again this is generally unjustified if one has a life threatening illness. Indeed, access to a public hospital for a life threatening illness like pneumonia is probably better than to a private hospital, especially if the patient is elderly, as private hospitals don’t like patients taking up beds for long periods without needing an operation of some kind to generate more income for the hospital. As my example shows however, fear about timely access for non life threatening problems such as joint surgery, cataracts, and the like is quite justified.

The public system is not managing this issue of elective surgery well for a variety of reasons: demand has increased as our capacity to intervene has increased; Federal Governments have not matched the increased funding provided by State Governments to address that demand; 10% of admissions are for problems which could have been prevented by better care in the community but the Federal Government has initiated only small changes in community care to address this issue; the second most common cause of preventable admission is inadequate dental care and if the Greens had not persisted that issue would have been postponed; up to 10% of hospital beds are occupied by patients awaiting Aged Care places which is predominantly a Federal responsibility; there is a shortage of hospital specialists in public hospitals, but not in the private hospitals next door where resources abound courtesy of the PHI rebate.

The changes to PHI are reasonable but tinker at the edge of a two tiered system. My patient won’t notice. It is hardly surprising that the Coalition would support a two tiered system of health care. It is disappointing that the Labor Party which introduced Medicare has no plans to improve the public hospital system sufficiently to allay the fear in the public mind.

Tim Woodruff

Vice President

Doctors Reform Society

Consultant Rheumatologist (Arthritis Specialist)