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Balancing public and private as health insurers move into primary care

Some insurers are testing opportunities to expand their involvement in primary care. AAP Image/Mick Tsikas

Prompted by the government’s Commission of Audit, health policy analysts have spent the first weeks of the year vigorously debating ways to rein in Australia’s rising health budget and to make the system more efficient. A couple of quick-fix cost solutions have been proposed: imposing a A$6 co-payment on GP services and abolishing the private health insurance rebate.

The debate has also flushed out some interesting possibilities in the private health insurance area. In recent years, some insurers have been quietly testing opportunities to expand their involvement in primary care, through measures that would reduce hospital admissions (and therefore, costs) by keeping their members healthier.

But while innovative policy solutions and better health for members sound positive, we need to question the greater role private health insurers want to play in the provision of health care in Australia. This raises the question of how Australia’s mixed public/private health system can ensure access to high-quality care is not compromised.

New territory

Insurers have been restricted in what they can offer in the primary care space, as they are not permitted to insure GP services. Governments have been reluctant to remove this restriction, fearing that insuring the GP fee gap would put upward pressure on GP fees.

Medibank Private recently announced an adventurous trial partnership with IPN (a corporate provider operating a network of GP practices) to fund selected practices to provide special services for their clients. The selected practices will guarantee access (an appointment within 24 hours) and will not charge out-of-pocket fees for services (including after hours home visits) for Medibank customers.

Medibank Private is also a provider of some telephone support services for the public through a Council of Australian Government initiative managed by HealthDirect.

The Medibank Private-IPN arrangement has already met with criticism from some GP groups and there are suggestions that it might in fact breach the Health Insurance Act, which prohibits insurers providing coverage for Medicare-funded GP services. But Medibank Private says it is not paying for the services directly but contributing to “administrative and management costs” of the trial.

Incidentally, the Medibank Private initiative highlights the potential conflict of interest inherent in the government’s ownership of Medibank Private, particularly given its intention of selling the insurer. As the owner, the government’s interest is to achieve the maximum sale price and in that context, the GP trial is likely to be seen as positive.

However, as the regulator, the government might also be called upon to adjudicate on the legality of the arrangement. There is separation of interest within government (the minister for finance being the owner and the minister for health being the regulator) but perceptions of bias might need to be addressed.

Public-private balance

The Australian health system is a unique mix of public and private, with about 30% of health expenditure coming from the private sector. Despite this, the previous government’s health and hospitals reform process focused on the public with little attention to the private, aside from limited means testing of the private health insurance rebate.

The current health debate provides an opportunity redress that imbalance by recognising that both sectors play a critical role in providing an equitable, sustainable and accessible health-care system that meets the health needs of Australia.

There is, however, a strong argument for abolishing the private health insurance rebate – a savings figure of A$3 billion-plus annually is very attractive.

The claims that abolishing the rebate would spell the death of private insurance and result in unsustainable burdens on the public system are probably exaggerated as the various tax and other penalties for not having insurance could be retained and are very strong drivers for taking out insurance.

Further, the rebate is an open-ended commitment: for every dollar fees increase, the taxpayer pays up to 30 cents; while the Commonwealth has to approve products and fee levels it does not have that much flexibility in holding fees down, especially as they are largely driven by hospital costs.

Inevitably, this arrangement supports inefficiencies as the fee subsidy has no productivity criterion so the least efficient are unfairly rewarded.

The political wisdom is that tackling the rebate issue is politically fraught. However the Gillard government managed to introduce an – admittedly modest – means test for the rebate without major political fallout. The Abbott government has committed to reinstating it at some indefinite point down the track.

Given that the public purse heavily subsidises the private sector (particularly private health insurance), the government has a legitimate interest in ensuring that the private sector operates as efficiently as possible.

A healthy debate

Public and private funders have a mutual interest in developing health-care models that tackle chronic disease and deal more effectively with the health problems associated with chronic disease and ageing. These approaches inevitably rely more on primary care.

Rather than a public vs private approach, we need to explore models that make effective use of both. While there is some case to argue that the present public/private arrangements provide a two-tier system for hospital care, that is no reason why a broader public/private partnership in health should embed that disparity.

Further reading:

Let Medicare Locals find their feet and improve primary care

GP consultations are often more complicated than you think

Six dollar co-payment to see a doctor: a GP’s view

Paying doctors to keep patients healthy – if the price is right

Mind the gap: $6 GP visit proposal ignores the evidence

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