Private health costs could be cut by up to 10 per cent if private hospitals were more efficient and doctor ‘greed’ contained: report.
Private health insurance premiums could be cut by up to 10 per cent if private hospitals were made more efficient and doctor ‘greed’ was contained. That’s the view of the Grattan Institute in its report, Saving private health 1: Reining in hospital costs and specialist bills.
Authors Stephen Duckett and Kristina Nemet say that a handful of ‘greedy’ doctors charge their patients more than twice the official Medicare Benefits Schedule (MBS) fee. Only about seven per cent of all in-hospital medical services are billed at this rate, they say, but these bills account for almost 90 per cent of all out-of-pocket costs for private hospital patients – and patients are often not told of these costs in advance.
Some doctors also charge ‘booking fees’ on top of procedure and consultation fees. “These covert fees are not recoverable from private health insurance or Medicare, with the patient left to foot the bill,” the report says.
“The higher fees have nothing to do with the skill of the surgeon or the adequacy of the Medicare Benefits Schedule. The small minority of specialists who charged more than twice the schedule fee are simply greedy.”
If these high-charging specialists had imposed fees at 50 per cent more than the schedule fee but no more, patients would have saved more than $350 million in 2018-19, the report estimates.
Another key recommendation is that patients get a single bill if they are treated in a private hospital, instead of an “avalanche of separate and often surprising bills from the hospital, the surgeon, the anaesthetist and pathology and radiology companies”.
The report also advocates that private health insurers pay less to private hospitals. It’s a myth that private hospitals are more efficient than public hospitals, it says, and notes that patients stay nine per cent longer in private hospitals than patients with similar conditions in public hospitals.
“Paying private hospitals for treating a patient, rather than for keeping the patient longer, doing more tests or ordering more drugs, could reduce costs by more than $1 billion a year,” the authors say.
They also calculated a further $1 billion in savings if private health insurers no longer had to play for low-value or no-value care typically given in some private hospitals.
The total identified annual savings of about $2 billion could fund cuts in private health insurance premiums of seven to 10 per cent, the report estimates, and potentially save private health care in Australia.
Private health insurance premiums are set to rise again from 1 April 2020, with Health Minister Greg Hunt struggling to keep the increase to three per cent.
A jump of 3.2 per cent would be double the current rate of inflation.
The Consumers Health Forum (CHF) says that a single bundled bill to cover all private hospital costs, including the surgeon’s fee, would be a significant step towards clearing a way through the complex, multiple bills that bedevil the private system.
Chief executive Leanne Wells welcomed the report’s proposals. “As the report says, patients have little power to negotiate; they are at their most vulnerable and most trusting when dealing with their specialist, so the ‘egregious billing’ by some private specialists needs to be challenged by a more powerful entity: the private hospital,” she says.
“The difficulty for the consumer at the moment is that the myriad different bills often charged for a single episode in a private hospital makes it very difficult for patients to understand, let alone compare costs.
“A single bill would impose more discipline on a sector whose prices now vary dramatically …
“At the moment, it is the patient who is expected to bear all the risk of high unexpected costs. It is time for private hospitals and doctors to adopt 21st century standards of transparency and consumer care.”
The report recommends:
- From 2022, private patients should receive a single bundled bill for a hospital admission.
- The bill should be issued by the hospital and include all the costs of the treatment – hospital, diagnostics, prostheses and doctor costs.
- Private health insurers should pay private hospitals on the basis of a national fee schedule that takes account of the patient’s complexity. (This is the way public hospitals are now paid.)
- Patients should choose their medical specialists the same way they do now, but specialists should send their bills to the hospital rather than to the patient.
- Private hospitals should be able to charge patients an extra fee for each day of stay, or an extra bundle fee for the whole stay. These extra fees should cover any extra medical costs charged by specialists and patients should be told of these fees before they are admitted.
- The Australian Commission on Safety and Quality in Health Care (ACSQHC) should determine what diagnosis-procedure combinations are low value, and private health insurers should not have to pay for this low-value care.
- The ACSQHC should determine what diagnosis-procedure combinations are better performed in high-volume settings, and private health insurers should not have to pay for this care in low-volume settings.
- The Independent Hospital Pricing Authority should determine what hospital-substitute programs are effective, and private health insurers should be required to pay for these programs.
Would savings of this magnitude give you hope that private health costs could be better contained?
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