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Insurers pick wrong target in war on health costs

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AMA President Dr Michael Gannon has accused the major private health funds of “squeezing” patients, doctors and hospitals in pursuit of ever-greater profits.

Hitting back at Medibank Private claims that “market failure” in the health system was driving up the cost of care, particularly some surgical procedures, Dr Gannon denied do doctors were forcing up costs and instead blamed insurers for forcing more of the expense on to patients and providers.

“Insurers are trying to contain costs everywhere, and it’s very difficult for the Government and the industry if the industry is in profit mode,” the AMA President told The Australian. “They are looking to cut costs wherever it is possible and there are reasonable and appropriate ways in which they can do that, and there are other ways which involve squeezing doctors, squeezing hospitals and squeezing patients.”

Dr Gannon said costs were being driven by a mix of factors including the cost of prostheses, rising wages, technological advances, soaring drug prices and an ageing population, which meant that patients were increasingly presenting with a complexity of health problems.

But he said there was little evidence that doctors were responsible for driving up costs.

Dr Gannon said that while international comparisons were important, and it was understandable that Medibank was looking to contain its costs, the fact was that the “vast majority” of operations were provided at no direct cost to the patient.

He said that 86 per cent of operations involved no gap payment, and a further 7 per cent included a known gap of less than $500. Doctor fees typically accounted for between 5 and 7 per cent of the cost of elective surgery in a private hospital.

“So, when we look at the increase in the costs year-on-year in private health care, the doctor’s fee represents a very small part of that. The doctor’s fee is very rarely the issue,” he said.

Medibank Private Executive General Manager Dr Andrew Wilson has used a three-year-old report showing that Australians were paying among the highest costs in the world for cataract surgery and knee and hip replacement as evidence of market failure that was making the nation’s health system internationally uncompetitive.

Dr Wilson said patients were being denied access to the information needed to assess whether or not the prices they were being charged represented good value for money, such linking specialist fees with clinical outcomes.

“While such data undoubtedly exists, it is unavailable to consumers, leaving them with little information to make informed decisions on medical specialists – a classic example of market failure,” the Medibank executive said.

But the same study, the 2013 Comparative Price Report prepared by the International Federation of Health Plans (IFHP), showed for many common procedures such as childbirth, appendectomy and angioplasty, costs in Australia were comparable with those of most other developed economies, and well below those charged in the US.

It found that hospital costs per day in Australia were almost half of those charged in New Zealand and less than a third of the US cost, charges for MRIs and CT scans were moderate by international standards, while the normal delivery of a baby cost on average US$6623, compared with US$8307 in Switzerland and US$10,002 in the US.

Australian Private Hospitals Association Chief Executive Michael Roff accused Medibank of being “in a time warp” in its search for figures to justify Dr Wilson’s claims.

Mr Roff said cost comparisons in 2013 had been distorted by the strength of the Australian dollar against the US currency, and more recent 2015 data showed “Australia is indeed competitive based on the IFHP analysis, and is not the most expensive country by any measure”.

This included figures showing the cost of cataract surgery in Australia was 16 per cent cheaper than in the US last year, and was also lower than in the United Kingdom, he said.

Dr Gannon said all had an interest in ensuring the health system delivered value for money.

“It’s in the interest of all of us to look at good stewardship, reduce complication rates, contain costs where possible, that’s in the interests of everyone because ultimately it’s the taxpayers of Australia that foot these bills,” he said. “The doctor’s fee is a small part of the issue, but we want to work with Government, with insurers, to make sure that Australian taxpayers and, especially those who put their hand in their pocket for private health insurance, get really good value for money.”

Adrian Rollins