by Peter Davoren
Dr Peter Davoren is a staff specialist at the Gold Coast Hospital and President of the Doctors Reform Society.

The private health insurance rebate and Lifetime Health Cover legislation are measures introduced by the federal government with the supposed aim of assisting public hospitals.

These measures appear to have influenced many people to take out private health insurance. But making people feel forced to take out private health insurance does not assist public hospitals or reduce public waiting lists. There are several reasons for this.

First, casualty waiting times, access to intensive care and elective surgery waiting lists are what most people think of when they consider the pressure on public hospitals.

Whilst these services are essential and important, much of the work of our public hospitals goes into looking after the chronically ill. Chronic heart and lung disease, cancer, stroke and diabetes are the big killers in Australia and caring for people with such illnesses consumes vast resources.

It is well recognised that those people with chronic illnesses are more likely to be elderly and/or of low income compared with the general population, and people with limited income are more likely to suffer ill health.

The very people who rely most on our public hospitals are those least likely to be able to afford private health insurance. In addition, even if they could, they can’t afford the significant gap fees that come with private health care.

Research demonstrates that factors associated with holding private health insurance are high income, and income from investments or superannuation (Schofield 1997). Those on pensions and benefits, and those aged over 80 years, have the lowest levels of private insurance.

Those people who may find the money to overcome these hurdles are then faced with long waiting times before being eligible to make claims because of pre-existing condition rules. These people continue to use public hospitals.

Second, many people have taken out health insurance schemes with low premiums but high excesses or limits on what conditions can be claimed. The current affairs, TV and radio programs are already running stories on folk being treated harshly by the pre-existing condition clauses. These people still find themselves in public hospitals despite their private insurance.

Third, many people who have taken out private health insurance are young and healthy and do not use hospitals anyway. Encouraging them to take out private insurance cannot help public hospitals.

Fourth, the private health insurance rebate is not being spent on health care. It is a tax rebate. People joining a health fund are not necessarily getting any benefit.

Families who decide, on the basis of the rebate, to join a scheme with a $2000 premium are still spending about $1400 a year on insurance they may never need. Many well-off families, even without the rebate, would have happily paid a $2000 premium. These families are now $600 a year better off thanks to the government’s largesse with public funds.

If the federal government was sincere about improving public health care they would spend the rebate money on health - not on tax cuts. The cost of the rebate has been more than the Federal Government’s total assistance to the mining, manufacturing and primary agricultural industries combined!

Two and a half billion dollars a year could open and operate an extra sixteen 500 bed public hospitals. It absolutely dwarfs any monies the Coalition are putting into improving healthcare in rural and regional Australia.

Fifth, there is no evidence that having some of the population access health care in the private sector makes the public sector better off. Medicare still contributes 75% of the scheduled fee for all medical services, including radiology and pathology.

With the rebate money and Medicare’s contribution to doctors’ fees for private in-patients the Government could be providing in the public sector two thirds of all the services currently provided in private hospitals.

Three recent articles in the Medical Journal of Australia clearly demonstrate the fallacy that private medicine is good for the public purse. The first study (Duckett and Jackson 2000) compared the efficiency of public and private hospitals taking casemix into account. Technical, allocative and dynamic efficiency criteria were examined using data on hospitals from the National Cost Weight Study. The conclusion was that hospital care in the public sector is provided at higher levels of efficiency than in the private sector.

The second study examined how public and private patients in Victoria were investigated and treated if they presented to hospital with a heart attack during the mid 1990s (Robertson and Richardson 2000). Bypass surgery rates were similar in the two groups but privately insured patients were twice as likely to undergo coronary angiography and three times as likely to undergo balloon procedures. The findings suggest over-servicing in the private sector is the more likely explanation of the differences rather than under-servicing in the public sector.

The third study demonstrated that private patients can cost the government more money than public ones for the same procedure (Harper et al 2000). The cost of performing angioplasty and stenting of coronary arteries in a public patient in a public hospital is about $5,600. In contrast, the same procedure performed in the same room with the same equipment and the same technical and nursing staff on a private patient from the private hospital next door is $13,300! Further, the researchers estimated the cost of such a procedure in a typical private hospital and determined the public contribution to the expenses via Medicare payments and the cost of drugs. They discovered the cost to the public purse was $500 more for a private patient compared with the costs in the public system.

One additional issue not examined by these papers is the potential for significant adverse events that might occur as a result of the overuse of potentially dangerous cardiac investigations in private patients.

Sixth, and finally, it is impossible to expect that expanding the private sector will do anything to improve the shortages of specialist staff in public hospitals. There is no doubt that public hospitals do not commit adequate funds to providing reasonable levels of specialist staff and appropriate support staff.

At the same time, particularly in procedural specialties, there is a workforce problem in both the public and private sectors. Anyone who has tried to get an appointment to see an ophthalmologist, an ENT specialist or a dermatologist is aware of this.

If the public hospitals advertised tomorrow to increase such specialty coverage they would not be overrun by applicants. As the earning potential in the private sector is much greater due to the limited numbers of specialists and uncapped fees, it is virtually impossible to attract adequate numbers of specialist staff to the public sector.

The Medicare Benefits Schedule rewards procedural work above consultation work and it is therefore not surprising that the procedural specialists are the most difficult to attract to the public sector.

If the Federal Government continues to promote private, fee-for-service medicine, the earning potential for procedural doctors will keep increasing. This will attract even more staff away from public hospitals.

As public hospitals are almost exclusively the training grounds for our future health care professionals the nurturing of the next generation of specialists will be threatened further exacerbating the shortage of specialist staff.

Attracting more specialists is not the only answer to alleviating the problem of long waiting lists for elective surgery in public hospitals.

Professor Peter Baume in his report ‘A Cutting Edge: Australia’s Surgical Workforce 1994’ to the Federal Government a number years ago recommended the upskilling of non-specialist doctors to perform some procedural work.

The late, great ophthalmologist, Professor Fred Hollows, was able to teach people with limited medical knowledge in third world countries to remove cataracts - yet many of our elderly people are essentially blind because they cannot get a simple, 20 minute operation performed in a public hospital in anything less than about two years!

We don’t need a crystal ball or fancy economic modelling to see where our health system is heading.

As a percent of GDP the Americans spend almost twice as much as we do on health. They have poorer health outcomes than most OECD nations including Australia. Administrative and other costs are much higher.

With no universal public health insurance scheme like Australia’s Medicare, there are around 44 million Americans with no health insurance and 38 million under-insured. Medical bills are the commonest reason for bankruptcy in the US.

The government drives us closer to the American situation every time it spends our taxes to prop up a costly private health system at the expense of our efficient public system.

References: Duckett SJ and Jackson TJ (2000) "The new health insurance rebate: an inefficient way of assisting public hospitals" in MJA 172: 439-442

Harper RW, Sampson KD, See PL, Kealey JL and Meredith IT (2000) "Costs, charges and revenues of elective coronary artery angioplasty and stenting: the public versus the provate system." in MJA 173: 296-300.

Robertson IK and Richardson JRJ (2000) "Coronary angiography and coronary artery revascularisation rates in public and private hospital patients after acute myocardial infarction." in MJA 173: 291-295

Schofield D (1997) Private Health Insurance and Community Rating: who has benefited? Australian Institute of Health and Welfare, AGPS, Canberra:1, 6-12, 15-16, 20;

Schofield D (1997) The Distribution and Determinates of Private Health Insurance in Australia in the 1990s National Centre for Social and Economic Modelling (NATSEM), AGPS, Canberra:40-41

[ Doctors Reform Society of Australia home page]
[ About DRS ] [ Site Index ] [ Search ] [ What's New ]
[ Policies ] [ Media Releases ] [ Published Letters ]
[ Current Issues: online articles ] [ New Doctor: Journal of the DRS ]
[ Discussion Board ] [ Contacting DRS ] [ Joining DRS ]
[ Jobs] [ Links ] [ Archives ]