Narrow the gap

Greater transparency is the key to reducing out-of-pocket expenses in a complex and costly health system

For anyone who has a hospital stay looming on the horizon and who is also watching their healthcare costs, a recent series of reports by health insurer Medibank Private and the Royal Australasian College of Surgeons (RACS) makes for interesting reading.

Australia has standards of healthcare that are among the best in the world but what the Medibank/RACS reports show is that individuals are paying dearly for that care and that health is now a major budget item.

Using data from the past two years, the reports detail costs and out-of-pocket expenses – as well as other information on complication rates – for common surgical procedures.

Medibank, like other insurers, reimburses medical expenses according to the details of the policy – you can’t claim on obstetrics, for example, unless it is specifically covered by your policy. Also like other insurers, Medibank covers doctors’ fees if the doctors participate in their “no gap” or “known gap” contracts. If the doctor’s fees are more than the amount the fund has agreed to reimburse, then the “fee gap” is paid by patients.

On some procedures detailed, most patients escaped out-of-pocket expenses. With colonoscopies, for example, patients paid an out-of-pocket fee to the medical specialist in 9% of cases (averaging $272).

But that was low compared with other common surgery. People having a hip replacement paid out-of-pocket expenses to the surgeon in 42% of cases, and in 77% of instances for the anaesthetist, for diagnostics and for an assistant surgeon. Out-of-pocket expenses varied across states – they were charged in 95% of procedures in the

ACT, 79% in NSW, with lower rates in Tasmania and South Australia. The actual level of out-of-pocket fees was certainly not trivial: up to $5000 for the surgeon and up to $2500 for other medical services.

The challenge for households, considering these significant fees on top of their health insurance premiums, is what to do.

Health costs have for years been rising at a greater rate than inflation, partly driven by technological advances and the raft of new treatments now part of normal medical care. Australians already pay more out of their own pocket for health than most countries in the world. Of the OECD countries, only Ireland, Switzerland and US pay more for health out of their own pocket.

But health is different from other spending. People who are very effective at managing other areas of their budget have been hesitant about even discussing health costs. Health can be highly emotional; decisions about treatments sometimes have to be made quickly and at difficult times. Australia’s health system is a complicated mix of public and private, layered with tax rebates, tax penalties, safety nets and more. Information is confusing and in many cases not easily available.

So can consumers, without impacting on the quality of care they receive, better manage their health spending and minimise out-of-pocket fees?

The first point to make is that aside from the Dr Google instant experts, the vast majority of people acknowledge that their doctors and other health professionals are the ones who have the expertise and are therefore best placed to advise on health matters.

But there is still a role that consumers can play to get better value out of their health spending and keep a lid on their costs. Get the facts, ask questions

The major challenge in trying to understand and manage costs is information. Different doctors, hospitals and health funds all have their own levels of costs and reimbursements, and people need to find that out themselves. There is no single source of clear, comprehensive information.

That, says Leanne Wells, chief executive officer of the Consumers Health Forum, is completely unacceptable given the very large costs of health insurance and outof-pocket costs for many private medical services. She believes there should be an independent, authoritative website where people can easily check and compare costs.

In the absence of easily accessible information, she says people should be prepared to take time to assess needs and healthcare costs, particularly if you have a chronic illness.

For private medical services, ask for written cost estimates not just from the doctor/specialist but for associated costs including anaesthetics and diagnostics. The Consumers Health Forum suggests also asking the GP to provide two or three specialists’ names, and check what each charges and how much would be covered by your health insurance policy.

“When you’ve been referred to a specialist for potential hospital treatment, I’d recommend that patients plan ahead with a list of questions to take into a specialist consultation,” says Linda Swan, the chief medical officer for Medibank. “Being told difficult or distressing news can often lead to people forgetting what they wanted to ask.

“If you’re unsure about a recommended treatment or fee, ask for a second opinion,” she says. “You can call your insurer and ask for some advice – what you’re covered for and what you’re not, and whether there are other surgeons in your area who participate in gap-cover schemes.”

Increasingly GPs are being asked to advise on specialist fees alongside the health plan.

Bastian Seidel, president of the Royal Australian College of General Practitioners, says making patients aware of potential out-of-pocket expenses is important and many GPs routinely do this now.

Putting the onus on patients to do their own research, at potentially difficult times, is also not the answer, he says. “A patient diagnosed with prostate cancer should not have to be making these decisions. They should be able to have a GP to advise them.”

And that would be easier if fees were publicly disclosed. “If you see your GP, the fees are public and absolutely clear,” says Seidel. “It is very difficult for patients and GPs if specialists’ fees are not open and transparent. I can’t see any reason why the Australian Medical Association and all the colleges wouldn’t publish a standard procedure fee. Develop a good long-term relationship with a GP, and it is in their interests that referrals are optimal.” Public and private options

Almost 50% of Australians have private health insurance but that does not mean that it is in your best financial interests to use your private insurance for all your healthcare. If you are admitted to a public hospital, for example in a medical emergency, you will typically be asked if you have private insurance and, if so, encouraged to use it. This allows the hospital to claim reimbursement from the health fund, and obviously that is helpful to hospital budgets (which are always tight).

But whether this is in your financial interests or not depends on whether everything you will be treated for is covered in your policy, and whether you will be left with out-of-pocket gap charges.

In many areas of Australia, especially rural, you won’t have much in the way of choice – there is only a public hospital. In which case there may still be value

in having private insurance because it can provide choice of doctor (assuming there is more than one) and potentially faster access to treatment. But maybe not. In many public hospitals, public and private patients share rooms and have the same doctors.

Consumer Health Forum’s Wells recommends that, where feasible, people should check what specialist services they need in advance of use.

“As an example, many people pay out thousands of dollars for private obstetric charges when public hospital and support services are comparable to what is available privately. For other elective procedures which may have lower degrees of urgency, such as joint replacement and cataracts, check what services and waiting times apply in local public hospitals. Even if you already have private insurance, private gap costs may mean public hospital care would save you considerable sums.” Review your policy

Health insurers face ongoing criticism about the complexities and cost of their policies, and there is never a shortage of reports of people who pay premiums for years only to discover the first time they need hospital care that their policy doesn’t provide adequate cover.

The consumer group Choice in July urged the government to simplify health insurance after a survey found nearly half of Australians found the process of finding a suitable policy difficult.

“One of the biggest areas of difficulty for consumers is uncertainties about what their private health insurance might cover,” says Wells. “It is worth having a clear idea of exactly what is covered and any excesses involved, and to check this every year.

“These issues can become highly fraught for people who suddenly face the need for surgery and at that time of anxiety learn that their insurance does not cover what they thought it did. Assess thoroughly what type and level of health insurance you need and can afford, using comparator sites [the government site privatehealth.gov.au is recommended] and ensure you have in writing the health cover you have decided on and where it may differ from default policies.” Costs and quality

The Medibank/RACS reports detailed the cost variations for procedures across states and across the profession. Health insurer NIB offers similar data on fees for prostatectomy. In 2016 about 50% of specialists were performing the surgery and charging less than $3000, which was within NIB’s gap cover contract, so there were no out-of-pocket expenses. But 25% of doctors’ fees were upwards of $9500 for the procedure – obviously leaving hefty out-of-pocket costs.

The question is: what do you get for that extra money and do surgeons who charge high fees deliver better outcomes?

“There is absolutely no evidence anywhere in the world that higher charges translate to better outcomes,” says Mark Fitzgibbon, chief executive of NIB.

While he says there is enormous difference in prostate surgery outcomes between the good and not-so-good doctors – in terms of medical complications such as urinary incontinence and impotence – that data is not collected and published in a way that would be useful for people and their GPs when making specialist choices.

So NIB is working with other insurers to develop the Whitecoat website, which is pitched as the TripAdvisor of health. The website is live but at the moment is more useful as a directory of allied health practitioners with a small participation of doctors and specialists.

Fitzgibbon is confident that within 12 to 18 months Whitecoat will have patient-reported experiences and outcomes, and generally provide information that people can use to help in choosing doctors and understanding the financial implications of their choices.

Outcomes are a current major topic of discussion for the medical profession, and consumers seeking better value from their health spending will hopefully see more information provided not just by insurers but by the government in future.