In­sur­ers in $3bn re­form pitch to ALP



Aus­tralia’s health in­sur­ers are pre­par­ing for a La­bor gov­ern­ment with a pitch to Bill Shorten on a list of new re­forms they say can shave al­most $3 bil­lion from the sys­tem to drive an­nual pre­mi­ums lower.

Top ex­ec­u­tives from the na­tion’s big­gest in­sur­ers said that they were pre­pared to work with any fu­ture gov­ern­ment led by Mr Shorten and sup­port his plan for a Pro­duc­tiv­ity Com­mis­sion re­view of their sec­tor. But dur­ing a round­table, hosted by The Week­end Aus­tralian, the in­dus­try ex­ec­u­tives also warned that the pain of cost-cut­ting could not be felt by them alone and warned of chal­lenges they would face un­der Mr Shorten’s plan to cap an­nual premium in­creases at 2 per cent for the first two years of a La­bor gov­ern­ment.

NIB chief ex­ec­u­tive Mark Fitzgib­bon said it was “my­opic” to con­cen­trate on health in­sur­ance pre­mi­ums when state and fed­eral gov­ern­ments were in­creas­ing their spend­ing by more than 6.57.5 per cent a year on health­care costs.

“That tells me it’s not just a chal­lenge for health in­sur­ers,” Mr Fitzgib­bon said.

Health in­sur­ers have long ar­gued they are pas­sive pay­ers into the health­care sys­tem, but crit­ics have said in­sur­ers could be more ef­fi­cient and do more to take pres­sure off pre­mi­ums.

Aus­tralian Unity chief ex­ec­u­tive Matt Walsh said it was a myth that there was a “huge pot” of in­ef­fi­cien­cies the sec­tor could ad­dress to lower premium in­creases.

“We are squeez­ing the stone as hard as we can,” Mr Walsh said.

“We need the rest of the sec­tor to come to the party ... they have got their hands on most of the cost levers.”

A fed­eral elec­tion is due by May next year and, while Scott Mor­ri­son re­mains as pre­ferred prime min­is­ter over Mr Shorten, cur­rent polling points to a de­ci­sive La­bor win.

In a doc­u­ment pre­pared by in­dus­try body Pri­vate Health­care Aus­tralia to help the sec­tor mount its case to the La­bor Party, it was ar­gued that de­clin­ing pri­vate health in­sur­ance par­tic­i­pa­tion was putting the sus­tain­abil­ity of the pub­lic and pri­vate sys­tems at risk.

“The pro­por­tion of Aus­tralians with pri­vate health cover has fallen to the low­est level in eight years and by 2030-2035 it could drop to 30 per cent,” the re­port said.

The in­dus­try heads said that health­care in­fla­tion was now driv­ing a down­ward spi­ral in pri­vate health in­sur­ance par­tic­i­pa­tion that must be ar­rested be­fore it gath­ered pace.

In a re­port pre­pared for any fu­ture Pro­duc­tiv­ity Com­mis­sion re­view, should La­bor win gov­ern­ment, the health in­sur­ance in­dus­try out­lined 10 re­forms it be­lieved would help keep in­sur­ance af­ford­able.

Ideas pro­posed by the in­dus­try in­clude:

Elim­i­nat­ing un­nec­es­sary and harm­ful care.

Sub­sti­tut­ing hos­pi­tal care with af­ford­able set­tings.

Pre­vent­ing hos­pi­tal­i­sa­tion of com­plex pa­tients by set­ting up pa­tient-cen­tric care man­age­ment.

The pitch for re­form also in­cluded bring­ing the cost of med­i­cal de­vices, known as pros­the­ses, to in­ter­na­tional stan­dards and also elim­i­nat­ing de­fault ben­e­fits

for large hos­pi­tal groups. The pro­posed re­forms could re­duce health­care cost in­fla­tion to 2-3 per cent a year by 2030, ac­cord­ing to Pri­vate Health­care Aus­tralia, which it said would sig­nif­i­cantly re­duce pres­sures on health in­sur­ance pre­mi­ums.

It fore­cast that the sug­gested re­forms could save the in­dus­try $2.8bn in the next five-plus years, with half of that saved in the next few years.

Pri­vate Health­care Aus­tralia chief ex­ec­u­tive Rachel David said that on pros­the­ses re­form, the in­dus­try wanted a na­tional pro­cure­ment process with full ref­er­ence pric­ing and price dis­clo­sure. She said that would go fur­ther than the cur­rent pros­the­ses re­form in­tro­duced by Health Min­is­ter Greg Hunt and could save $500 mil­lion an­nu­ally in health costs.

“It is not the one-off ben­e­fit re­duc­tions on pros­the­ses (in­tro­duced by Mr Hunt) that is go­ing to make a dif­fer­ence given cur­rent util­i­sa­tion trends and tech­nol­ogy trends,” Dr David said.

“A whole of sys­tem re­form is needed to bring med­i­cal de­vice pric­ing more in line with the way the gov­ern­ment deals with phar­ma­ceu­ti­cals, which means not think­ing of this as an end­lessly grow­ing un­capped bud­get but a fixed bud­get.”

The in­sur­ance chiefs said La­bor’s planned Pro­duc­tiv­ity Com­mis­sion re­view would pro­vide a “tremen­dous op­por­tu­nity” for the sec­tor.

“The fun­da­men­tal thing the Pro­duc­tiv­ity Com­mis­sion should look at, and we will put this po­si­tion, is the co-fund­ing of out­pa­tients in cer­tain key areas,” Dr David said.

Med­ibank’s group ex­ec­u­tive of health­care and strat­egy, An­drew Wil­son, said it was im­por­tant to look at how the in­dus­try could work with the gov­ern­ment to change the care model.

He said that could in­clude in­sur­ers fund­ing ad­di­tional ser­vices and chang­ing some of the reg­u­la­tory bar­ri­ers that re­stricted what in­sur­ers could cover. Mr Fitzgib­bon added that the fo­cus needed to shift to how in­sur­ers could al­lo­cate re­sources away from fix­ing peo­ple, to pre­vent­ing and bet­ter man­ag­ing health­care con­di­tions in the first place.

De­spite the will­ing­ness to work with a fu­ture La­bor gov­ern­ment, should La­bor win the next elec­tion, in­sur­ers raised con­cerns about Mr Shorten’s 2 per cent cap on premium in­creases.

The in­dus­try body warned in its pro­posed sub­mis­sion for a fu­ture Pro­duc­tiv­ity Com­mis­sion re­view of the sec­tor that a tem­po­rary cap of 2 per cent premium growth, with­out any ac­com­pa­ny­ing re­forms to re­duce costs, would move a to­tal of 22 health funds into the red.

Aus­tralian Unity’s Mr Walsh high­lighted that funds could be forced to eat into cap­i­tal re­serves to weather the 2 per cent cap.

He ar­gued re­serves were built up over many years to pro­tect pol­i­cy­hold­ers from ex­ter­nal shocks or sud­den changes in li­a­bil­i­ties.

“Those re­serves are there to pay claims and if you de­plete that pool, the not-for-prof­its will take a long time to re­build it,” he said.

“There will be some re­ally rough out­comes for some of the smaller health funds.”

Source: APRA, UBS


Health round ta­ble speak­ers, clock­wise from top left, By­ron Gre­gory (Health Part­ners), John Van Der Wie­len (HBF), Matt Walsh (Aus­tralian Unity), Josh Ed­wards (CUA), Rachel David (Pri­vate Health­care Aus­tralia) and Mark Fitzgib­bon (NIB)

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