03/10/2016 - 15:27

Cost pressures push health shift

03/10/2016 - 15:27


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State and federal governments are using transparency and consumer choice as a weapon to cut costs in healthcare.

Cost pressures push health shift
OPEN WIDE: The federal government supports greater transparency and consumer choice in the provision of health services. Photo: Stockphoto

State and federal governments are using transparency and consumer choice as a weapon to cut costs in healthcare.

Could disruption be coming to a health professional near you?

Federal Health Minister Sussan Ley’s recent statements of support for a website called Whitecoat – a joint venture of private insurers that will allow users to compare health professionals such as doctors and dentists – form part of a push for greater transparency and choice for consumers.

“Empowering consumers to make informed decisions and be in control of their health care are key aims of the Turnbull government’s proposed reforms to private health insurance, and we are already getting on with the job of delivering them,” Ms Ley said in a statement.

But Whitecoat has not been welcomed by many of the practitioners on whom it seeks to shine more light.

The once-collegial atmosphere governing health service providers at every level appears to be breaking down, as budget-constrained governments at federal and state levels seek to use the disruptive force of transparency and choice as a weapon to whittle down costs.

The complex structure of the heavily regulated health market, with separate parts funded by state and federal governments overlapped by giant consumer-driven intermediaries in the form of health funds, big private hospital players and highly fragmented sectors for health professionals, makes the impact of disruption much harder to forecast than in simple spheres such as the taxi business.

The biggest driver of change, as with other industries, is the availability of technologies that provide consumers with far more information about price and service than ever before.

Underlying that are the cost pressures within government, which are starting to outweigh the desire to avoid upsetting the health sector, traditionally a political hard sell.

Health now represents almost 20 per cent of all government spending. In 2014-15 that was $110 billion, second only to social security and welfare, which is more than twice as big.

The bulk of that health spending is from the Commonwealth. In its 2016-17 budget, the federal government allocated $71.4 billion, or almost 16 per cent of total spending, to health.

However the states actually contribute proportionally more. In Western Australia, for instance, the $8.57 billion allocated to health is creeping towards 30 per cent of the 2016-17 budget.

Increasingly, the federal government’s answer is to move away from prescribed processes overseen by a growing bureaucracy. Instead it wants consumers to do the legwork by finding cheaper options among a greater array of choices.

At the same time it is squeezing consumer-focused health funds to assist by restricting their premium growth.

State governments are also acting. Where possible, they are nudging hospital patients to pay for treatment through their private insurance, rather than being serviced for free as they are entitled.

Constrained in what they can charge and limited by regulation in their actions, health funds have initially reacted by seeking to rein-in the cost of services they pay for, including those heavily marketed extras that are loaded onto policies in order to win business.

In a recent public statement echoed by other health fund leaders, HBF chief executive Rob Bransby said health premiums were not allowed to grow as fast as the 6 to 7 per cent annual rise in health costs, making services those fees were meant to pay for more expensive.

Mr Bransby suggested the key components of health inflation were hospital accommodation, specialist fees, and medical device prices. The health funds have singled out prostheses such as hip and knee replacement parts as the softest target among these, campaigning for the federal government to get a better deal for Australian buyers.

In complaints reminiscent of the angst around the cost of consumer technology from companies such as Apple, big multinational medical device manufacturers have been accused of charging Australians many times the price paid in other jurisdictions, with a lax bureaucracy doing little to resolve this injustice.

Mr Bransby said it was really just a slip up by the health authorities in WA that had revealed how much less state hospitals were paying for these devices, putting health funds on notice that they were forking out more than they needed to.

The health funds are also following the government lead in getting their customers to do some of the work for them. Just as comparative websites such as iSelect now give consumers greater transparency over health fund prices, the funds are now joining the game.

HBF has joined with Bupa and nib in launching Whitecoat, a comparative website that will potentially allow consumers – or ‘patients’, depending on your perspective – to rate prices and service quality on a whole range of health professionals.

Mr Bransby said the Whitecoat site was still being developed.

“We are keen to work with medicos and dentists as to what Whitecoat might emerge as,” he said.

“It is early days.”

But the disruption message is clear when Mr Bransby talks about HBF’s existing arrangements with dentists, prior to the advent of Whitecoat.

It has already struck pricing deals with 850 dentists on a practice-by-practice basis.

“I call that the Uber of dentists,” Mr Bransby told Business News.

He said it was a partnership model, in contrast to the approach of its fellow joint venturer in Whitecoat, Bupa, which has acquired 23 practices in addition to having an estimated 100 or more contracted.

Medibank Private also appears to have some arrangements with dentists in WA through its Members Own arrangements, through which it recently promised a free annual check-up to those eligible among its approximately 400,000 WA customers.

Mr Bransby said HBF was not a price setter in its arrangements with dentists, but was seeking to make the fees it paid more consistent across the practices it dealt with.

“We are trying to get standard fees across the board,” he said.

“You would expect provision of service to be the same from one to another.”

But WA’s dentists are certainly wary of the health funds’ increasing influence over their incomes, and the Whitecoat initiative has riled them.

Australian Dental Association WA president Kang Kim slammed the Whitecoat system and advised dentists to have their profiles removed from the site following the decision by HBF and Bupa to back what has been referred to as the TripAdvisor for healthcare.

In his association’s September newsletter, Dr Kim highlighted the decline in the economy and the growing issue in healthcare of ‘out-of-pocket’ costs, the gap the consumer has to pay above the insured amount.

“Naturally, healthcare providers and private health insurers have been the target of complaints from the disgruntled public,” Dr Kim said.

“In the past year, however, the value of private health care has been called into question, with concerns that consumers are not receiving adequate value from their policies.

“Since then there has been some attempt from the private health insurers to offload the pressure onto healthcare practitioners.

“This may be linked to the role of the (Whitecoat) website as a cost comparator.”

Dr Kim added that a cost comparator would divert responsibility for out-of-pocket costs away from the insurer to the health provider.

“Furthermore, it may assist in controlling provider fees beyond contracted provider arrangements,” he said.

The Perth-based president of the Australian Medical Association, Michael Gannon, also has concerns about Whitecoat and what it suggests about the direction of Australian healthcare.

On the AMA website, Dr Gannon questioned the deeper intention of the Whitecoat move, saying the potential for information asymmetry if insurers owned all the information could have unintended consequences for some patients.

“If the problem you’re trying to fix is unreasonable out-of-pocket expenses, there are other mechanisms of doing that, and we don’t actually have a major problem,” Dr Gannon reportedly said.

He also publically warned that private health insurers’ move to launch the online directory reflected a creep towards a more US-style of healthcare system.

“The last thing the AMA wants to see is a US-style managed care system in Australia where insurers, because of their huge market power, will have complete control over the care that patients receive,” Dr Gannon reportedly told SBS.


• Mark Pownall has a beneficial interest in Medibank Private shares.


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