The Falling Growth in the use of Private Healthcare - Q&A

Will you be sharing these slides, or do we wait for the paper to be published?

The presentation was recorded and can be viewed here. We will send the final report to registered attendees in a few weeks.

There has been many attempts to increase PH utilisation. Do you have any practical suggestions on how to increase private health utilisation? e.g. subsidies? And since policies and subsidies were so effective in the 90's, what do you foresee as an effective way to increase private health utilisation?

There is no magic formula, but in the end the consumer’s choice is central. To achieve informed patient decision, practitioners and patients must be willing to work together, and for this to happen transparency is key. Including the role of general practitioners in the referral process and the disclosure of fees of non-GP specialists for which the government has created a homepage. But information on quality, which is necessary to link funding to performance, is still not available.

What is the largest proportional decline in preventive medical procedures post-2015? That will likely be the type of procedure that causes health problems and becomes an issue later on.

We are not aware of a classification of preventive procedures in the AR-DRG system of classification. In addition, preventative health care is typically provided in primary care and not captured by our data on in-hospital services. This is however a great suggestion. The identification of preventive procedures using publicly available data is a topic on its own and will be left for future research.

What do you think is driving doctors away from private towards public hospitals? 

The decline in private health utilisation is one driver, but at the same time the number of medical graduates has increased dramatically in the past decade. We now have more young doctors and an increasing representation of female doctors, both these groups are more likely to work in the public sector.

Do you think specialists moved to the public sector due to an increased demand of patients in the public sector and higher wages, or because of the composition of public hospital work is more appealing to specialists, or something else?

The composition of public hospital work could be one driver, especially for young doctors. Although wages are lower in the public sector, we’ve seen an increase in full time equivalent non-GP specialists per capita of around 1.8% per year (larger than population growth). Younger doctors tend to work more in the public sector while they get established. But we also have evidence (from other work) that older non-GP specialists are also reducing their hours in the private sector.

The shift of non-GP specialists between private and public hospitals suggests supply chases demand. If private health insurance membership declines, the argument is this will increase public hospital waiting times. However, if specialists come across to public hospitals due to a reduction in private demand, won't this reduce the potential pressure on public hospital waiting times? Can you please comment?

This is what we would expect as long as public hospitals have the capacity (beds, time, infrastructure) to treat additional patients. The increase in servicing capacity by public hospitals is constrained by government funding. Unless funding can increase in response to higher demand, longer waiting times are likely inevitable.

You have shown that private patients increasingly choose to go in public hospitals by 45% (2.0% v/s 2.9%) which leads to increasing waiting time for public patients. How does this comply with Equity as a fundamental principle of the Australian health system?

This is an excellent point and one of the reasons why it is important to explore the consequences that a decline in the private sector can have in the public sector. The trend we show is for elective surgery and because of data limitations we can’t examine the trend in other areas. The main reason for people not choosing private treatment is uncertainty in expected out-of-pocket expenditures, which are driven by high fee variation among non-GP specialists and the increase in policies with exclusions. Both of these aspects could be addressed with increased transparency.

Given the urgent goal to improve the efficiency of the Australian health system and Equity as a fundamental principle of the Australian health system, then how is improving efficiency compatible with Equity?

At the moment, the Australian health care system follows a mixed model of the private and public sectors. If we see the whole system as a combination of both, improving the performance in one sector would have positive spillovers on the other.

If we don't know what the appropriate level of hospital services is, can we meaningfully analyse the value of increasing or decreasing levels?

This is an excellent point, if there is low-value or wasteful care being provided, then reducing utilisation would be ideal. But if the level is too low, we would observe a decline in population health. There is some evidence that the former is taking place but there is no data to examine what is happening to patients who are waiting longer to get treatment. Policy makers should explore this before making decisions. In addition, the private hospital market, if it is functioning well, can to some extent determine the appropriate level of care, as consumers weigh the benefits and costs of care. This is the reason government should attempt to improve the transparency of private healthcare.

Can you measure public investment growth to check whether the decline in private utilisation has been matched by public? I know Susan included elective removals but the dollars would be helpful to see.

Thank you for the suggestion. We observe a slight increase in public hospital funding growth post 2015-16, from an average growth of 3.5% per year between 2013-14 and 2015-16, to 4% per year between 2015-16 and 2017-18. This could be due to an increase in public hospital funding in response to increasing demand in the public system, however data on the growth of elective surgery additions outpacing the growth in removals, combined with longer waiting times, suggest that the decline in private utilisation has not been entirely matched by expansions in public hospital services.

2015-16 was a year or two in to the major states investing in clearing the elective surgery wait list. There seems to be a link between perception of public hospitals and PHI.

Thank you very much for this comment. This is something very useful to add to our research.

Don’t you think that the current funding model based on Fee-for-Service is fuelling the Supplier Induced Demand? 

Yes, to some extent. With the rise of chronic disease, the government is aware of the disadvantages of fee-for-service and they are revising the MBS and trialling a combination of fee-for-service and capitation payments for patients with chronic disease. However, there is still much to be done in this area.

Can I ask what kind of analysis is planned with all of this very interesting data and descriptive stats and trends, what research questions are planned on being answered

Thanks. We conduct research that helps inform policy in the creation of a sustainable health care system. This project uncovers the baseline and describes trends in the different areas that are influenced. The topics for our future studies include the medical workforce (understanding their work decisions), hospital funding, and the interface between the private and public hospital system.

Questions related to COVID-19

Can you see a change in composition (i.e, types) of surgical procedures when elective surgery restrictions are lifted?

The graph on COVID-19 uses data from all Medicare items by broad type of service (BTOS). The data is publicly available from the link below. While it is possible to examine particular MBS items, we haven’t examined differences in the uptake of surgical procedures after restrictions were lifted. It is important to note that public hospitals are funded by the States and Territories and therefore the MBS statistics for in-hospital services are in great majority provided to private patients. Expenditures for in-hospital treatment for public patients is not visible in Medicare statistics.

What positive impacts would you like to see on private health care, as a result of COVID-19?

A positive impact could be the decrease in low-value or wasteful care. Treatments that offer only a marginal increment in the health of the patient and of which some elective surgeries are part of.

Questions related to private health insurance

Is there anything specific that happened around 2015 that would have kickstarted the decline in PHI membership?

Regulation around PHI has been constantly evolving, but to the best of my knowledge, no major change in policy took place in 2015. Means testing for rebates was introduced in 2012 and from 2014, the government changed the formula to calculate these, resulting in falling rebates. Moreover, the increase in premiums in 2015 has been one of the highest in the past years. The increase was approved on the grounds that benefits paid by private health funds were also rising  (see more in this Conversation article). In 2015, there was a consultation on the value of PHI led by the Department of Health leading to the 2017 Senate Committee inquiry into the value and affordability of private health insurance and out-of-pocket medical costs. In summary, the decline in membership might not be driven by one single event but a combination of increasing out-of-pocket costs, affordability of PHI and its value.

Do you think PHI membership will increase again in the future?

Maybe, but is this the right measure? Not only is membership decreasing but people with private health insurance are choosing not to use it. This is something that should be accounted for.

If wages are not driving premium increases, what is? Profits?

By wages we do not mean wages of workers in the private healthcare industry, rather we mean wage incomes in the general economy, which is a major determinant of demand of private health insurance.

Have you seen differences over time in the take-up of private health insurance by income?

We see striking differences in membership by age. Young people are dropping coverage while people over 60 years old are taking PHI. Age is highly correlated with income, but I have no data to examine trends by income conditional on age. However, we do know that the thresholds of the Medicare Levy Surcharge can affect the uptake of PHI. Prior research has also shown that high income earners make up of the bulk of those who are insured.

Can you distinguish between memberships of people eligible for Medicare and those not eligible (temporary visa holders)?

The data we use on private health insurance membership is aggregated and has no information on the population that is not eligible for Medicare.

Some excellent presentation of data from our esteemed presenters and research work on this decades-old industry and relationship between public/private service delivery. What is the continuing and future rationale for taxpayer subsidies to private insurance industry whose business model will collapse without it? is this not clear evidence of market failure where an industry can only continue with greater taxpayer subsidisation, and lack of value per taxpayer dollar spent on healthcare?

Thank you very much. Australia has one of the best health systems in the world, but this is not an excuse to stop improving it. At the moment the contribution of the private sector to the overall health system is non-negligible. A well-functioning private sector can support the public sector. It is time to re-think how and where to best put an extra dollar, but before redesigning the system we need to ask what is happening to patients. Unfortunately, we don’t have much evidence on this yet.

PHI is personal choice. Why we should subsidize personal choices of the better off people? Especially Dental services which are not covered by Medicare, which de facto means that everybody pays for services available only to the better off people?

Please see the answer to the question above.