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PHI reforms in right direction, but more work needed

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The AMA has welcomed the Government’s reforms to private health insurance as a “start in the right direction”, but says much more needs to be done to make the sector more transparent and affordable.

On October 13, the Federal Government announced a raft of changes to the private health insurance (PHI) sector, following lengthy consultation and an ongoing consumer backlash against the industry.

The changes include encouraging younger Australians to take up PHI by allowing insurers to discount premiums up to two per cent for each year as an adult before turning 30, to a maximum of 10 per cent. This will be phased out by the time they turn 40.

Regional patients will benefit from policies that will for the first time include travel and accommodation subsidies for some hospital services.

A hierarchy of Gold, Silver, Bronze and Basic policy categories will be introduced to help consumers compare what is on offer.

But even policies under the Basic classification will provide mental health services, which are not currently covered under many polices.

Existing policy holders will be able to upgrade their cover in order to access in-hospital mental health services without having to endure a waiting period. And insurers will not be allowed to limit the number of in-hospital mental health sessions a patient can access.

Insurers will be able to keep premiums down by offering higher excess levels.

From April 2019, unproven therapies such as Pilates, yoga, homeopathy, aromatherapy, iridology and herbalism (among others) will not attract rebates.  

A prosthetics deal between the Government and manufacturers aims to reduce the cost to private insurers for the devices, and subsequently pass on savings to consumers.

In announcing the changes, Health Minister Greg Hunt said reform in the sector would continue, with the Private Health Ministerial Advisory Committee still examining issues such as risk equalisation.

“And we will work with the medical profession on options to improve the transparency of medical out-of-pocket costs,” Mr Hunt said. 

“The Turnbull Government is committed to private health insurance and we’re committed to supporting the more than 13 million Australians that have taken out cover.

“We are investing around $6 billion every year in the private health insurance rebate to help keep premiums affordable.”

The Opposition, however, has described the reforms as “too little, too late” and criticised the Government for not addressing the so-called “junk policies” that are hardly worth the paper they are written on.

Shadow Health Minister Catherine King said junk policies should be banned.

“The fact that the Government has broken its election promise and retained junk policies remains concerning to me,” Ms King said.

Consumer group CHOICE has also criticised the failure to ban junk policies.

AMA President Dr Michael Gannon said the announced changes to PHI would not solve the problem of a perceived lack of value in the services provided by the PHI sector.

Health fund membership has been falling by 10,000 a month, as premiums increase an annual average of 5.6 per cent.

Dr Gannon said Australia needs a strong and viable private health sector to maintain the reputation of the Australian health system as one of the world’s best.

But the reforms will need the genuine commitment and cooperation from all stakeholders to deliver real value and quality to policyholders.

“The framework for positive reform of the private health insurance industry is now in place,” Dr Gannon said.

“The challenge now is to clearly define and describe the insurance products on offer so that families and individuals – many of whom are facing considerable cost-of-living and housing affordability pressures – have the confidence that their investment in private health delivers the cover they are promised and expect when they are sick or injured.”

Dr Gannon welcomed the decision to introduce Gold, Silver, and Bronze categories for PHI policies and that standard clinical definitions will be applied.

“Importantly, the changes will provide better coverage for mental health services and for people in rural and regional Australia,” he said.

“The AMA advocated strongly for standard clinical definitions on behalf of our patients. What we need to see now is meaningful and consistent levels of cover in each category.

“While we had called for the banning of so-called junk policies, we will watch closely to ensure that any junk policies that remain on the market are clearly described so that people know exactly what they are buying and are not subject to unexpected shocks of non-coverage for certain events or conditions.

“Basic cannot mean worthless.

“We will continue to call out any misleading products in our yearly report card.

“Other areas that will need further investigation include the fine detail of the new prostheses arrangements, how and at what level pregnancy will be covered, and the review of low value care for things like mental health and rehabilitation.

“We welcome the removal of coverage for a range of natural therapies such as homeopathy, iridology, kinesiology, naturopathy, and reflexology, which the Chief Medical Officer has rightly declared as lacking evidence or efficacy.”

Dr Gannon said the AMA has concerns about the possible direction of ongoing work on out-of-pocket costs and the review of privately insured patients being treated in public hospitals.

“We will be pushing for the expert committee considering out-of-pocket costs to broaden its review beyond doctors’ fees.

“Doctors’ fees are not the problem – 95 per cent of services in Australia are currently provided at a no-gap or a known gap of less than $500,” he said.

“The out-of-pockets committee must instead focus on the issues that leave patients with less support such as the caveats, carve-outs, and exclusions; hospital costs; and inconsistent and tricky product definitions.

“We will of course support efforts to rein in unacceptably high fees in the small number of cases where they occur.

“And we will be vigilant on any moves to deny private patients access to care in a public hospital. This is a critical and complex area that needs careful consideration. It is especially critical if the Government is going to promote basic and public hospital only cover.”

Dr Gannon told ABC Radio that the changes were “perhaps” a start in the right direction, but that ongoing work was required.

“The one thing the Minister is up against, one thing that future Governments will be up against is the inevitable increase in the cost of health care,” he said.

“Health CPI runs at four, five, six per cent per year. We’re interested in some of the one-off savings that the Minister is going to be able to achieve, but it’s going to require ongoing work.

“The different players in the industry, the hospitals, the doctors, the insurers, need to continue to try and work with Minister Hunt on savings in the system. He’s come up with some good ideas here.

“So, for example, he has managed to negotiate some savings with the people who manufacture prostheses. That’s how he intends to deliver on cheaper hip replacements.

“But he’s got cost control when it comes to doctors’ fees. They’ve been in many ways frozen for nearly five years now. That’s not the problem in the system. The biggest problem in the affordability of private health insurance is the amount that’s going into the pockets of the for-profit insurers.

“Now I’ve spoken to the Minister about this. The genie is not going back in the bottle…

“There are too many tricks in the current system, too many carve-outs, and too many caveats. Too many people who find out they’re not covered for the first time when they’re actually sick.

“We went to the Minister and said we want to get rid of junk policies. We’re not overly excited about the idea of maintaining Basic, but he came back to us and other stakeholders and said ‘look we need to do something about affordability’. So I think, at least for now, we’re stuck with Basic.

“But as long as people know what they’re getting, as long as there’s no tricks on clinical definitions. People shouldn’t need to be six months into a medical degree to know what they’re actually covered for.”

CHRIS JOHNSON

 

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