Submission to The Senate Community Affairs References Committee Out of pocket costs in Australian Healthcare May, 2014 1
Introduction The Queensland Nurses Union (QNU) thanks the Senate Community Affairs References Committee for the opportunity to make a submission to the inquiry into Out of Pocket Costs in Australian Healthcare (the inquiry). Nurses 1 are the largest occupational group in Queensland Health and one of the largest across the Queensland government. The QNU is the principal health union in Queensland covering all categories of workers that make up the nursing workforce including registered nurses (RN), registered midwives, enrolled nurses (EN) and assistants in nursing (AIN) who are employed in the public, private and not-for-profit health sectors including aged care. Our more than 50,000 members work across a variety of settings from single person operations to large health and non-health institutions, and in a full range of classifications from entry level trainees to senior management. The vast majority of nurses in Queensland are members of the QNU. In our submission we focus on the impact of co-payments and the role of private health insurance. We ask the panel to read our submission in conjunction with that of our peak body the Australian Nursing and Midwifery Federation (ANMF). On Medicare As nurses have a central role in the delivery of health services the QNU has a major interest in all issues relating to health funding, including payment and insurance schemes. We believe that publicly funded universal health insurance is an efficient and effective mechanism to distribute resources in a manner that ensures timely and equitable access to affordable healthcare on the basis of clinical need rather than capacity to pay. The private health sector has a legitimate and important role as an alternate choice for the provision of healthcare, however this should not be at the expense of publicly provided services (ANMF, 2011). We are concerned that the federal coalition government s continuing moves to dismantle Medicare in favour of a health system that favours those who can most afford it will undermine social inclusion. A strong focus on private health insurance will sustain a separation of private and public hospitals and further entrench a social division where one hospital network operates for the well-off and another for the remaining Australians. 1 Throughout this submission the terms nurse and nursing are taken to include midwife and midwifery and refer to all levels of nursing and midwifery including RNs, Midwives, ENs and AINs. 2
Medicare is the foundation of the Australian healthcare system and one of few institutions in this country that actually works towards social inclusion. As the national insurer, Medicare enables universal access to sound medical treatment at reasonable cost to the people. We acknowledge that where universal, free healthcare provides one approach, there are many sound arguments in favour of those with means paying more from their own resources, without private or public insurance. If Australians choose to share their healthcare costs, and we contend that this is the fairest method, then a single national insurer provides the most efficient and equitable means of doing so. Shifting Risk Policies which shift funding responsibility from government programs, such as Medicare, on to private health insurance (PHI) have a short-term attraction to a government concerned with containing fiscal outlays. But even the most well-designed policies to entice or force people into PHI are costly and inequitable (Doggett, McAuley, Mendaue, 2014). We do not dismiss projections that healthcare costs will rise as the population ages or that ultimately we may have to pay more in order to fund them. However, shifting more of the cost from government to private health insurers also shifts the risk to the individual consumer. Expanding private health cover may relieve pressure on public health spending paid for through taxation, but the outcome is illusory. Any tax savings will be immediately offset by even higher costs to provide the same service in the private sector with no better outcomes. The transfer of risk from the state to households represents a deliberate cutback of protection. Both formal retrenchment of the state and its inaction in the face of new risks has been referred to as the privatisation of risk (Rafferty & Yu, 2010). The corollary of the privatisation of risk is the development of new forms of finance and service provision, in areas such as health insurance, tollways, private schooling, superannuation, and mortgage backed securities. One result of the structural shift of risk onto labour and households is that they have become much more exposed to changes not just in labour market conditions, or even mortgage interest rates, but to a range of financial and economic conditions (Rafferty and Yu, 2010). These issues have emerged because the management of certain exposures is no longer undertaken by the state. Risk shifting to workers and households sees a vast array of products and services that must now be purchased. Australians now calculate and decide on whether to take up private health insurance, private education, and investment in an asset portfolio for retirement. Instead of guaranteed healthcare, we have to consider private health insurance. 3
Governments have assumed that individuals have the knowledge and skills to process large amounts of information and make decisions when the market presents them with an enormous array of choice. The outcome of the participation in mass savings and insurance schemes like defined contribution superannuation and private health insurance is to shift the risk from the state to the individual without any conscious knowledge by the individual that this is taking place. The Impact of Co-payments The Prime Minister and Health Minister have given strong indications that the federal government will introduce a mandatory co-payment for GP visits and media sources are speculating that means-testing will be introduced for other medical services (Heath, 2014). While the Treasurer will no doubt confirm these speculations when he releases the budget, the QNU is concerned that some people who would be deterred from visiting a GP by the introduction of a $6 co-payment may instead seek treatment at emergency departments in hospitals. This could lead to increased costs for government in hospital expenditure. We recognise that the Minister and indeed the Senate Select Committee into the Abbott Government's Commission of Audit (2014) have heard these arguments, however copayments may lead to cost shifting rather than cost saving. The estimates of savings are highly sensitive to people s behaviour. For example, if only one in four or one in five people who might otherwise have gone to a doctor decides to go to a hospital emergency department then there are no savings for the Commonwealth government at all and substantial increased costs for state governments through further pressure on the public hospital system (Duckett, 2014). Moreover, the South Australian Health Department estimated that a $6 co-payment for a GP visit would actually cost the Commonwealth and state governments almost $2 billion, because at least four per cent of people would bypass a GP and attended emergency departments for minor ailments instead (Hall, 2014; Brooks, 2014). 2 We suggest that the committee also considers the costs of the administrative burden that the co-payment would involve. The federal government has been loud in its claims that it will reduce red tape for business yet seems to find no difficulty imposing additional administrative costs on GPs and the Commonwealth. Studies have found that over a third (36%) of Australians with chronic conditions reported problems with accessing healthcare due to cost; 17% of Australians had skipped a medical treatment, test or follow-up recommended by a doctor, because of cost ; and 35% of 2 According to the modelling, the increased costs to the South Australian health system extrapolated across the country would add $1.99 billion to the nation's health bill. 4
Australians reported not accessing dental treatment due to its cost. When people are not able to access appropriate care, their condition can become more serious which results in increased expenses both to them and to the community as a whole (Doggett, 2009). A significant increase in out-of-pocket expenditure for healthcare may act as a deterrent for those who need to see a medical practitioner, allowing their condition to deteriorate. This will be a detriment not only to their own health, but ultimately to the healthcare system if they present to hospital at a later date in a more serious or complex state requiring a more costly course of treatment. The out-of-pocket healthcare costs in Australia have risen at much faster rates than most other countries, and this has already placed a cost-barrier in the path of low-income groups. Overall out-of-pocket costs amounted to 17.3% of total health expenditure in Australia in 2011-2012 (AIHW, 2013, p. 32). The Role of Private Health Insurance (PHI) Despite universal public health insurance, PHI continues to be a strong pillar of the health system, providing cover to a large share of the population. PHI has been successful in addressing some policy objectives, although outstanding challenges including important cost considerations remain. Private health cover enables choice of providers and may facilitate access to timely elective care. It helps to finance the development of private hospital facilities, thereby providing an alternative to public hospital care (Colombo & Tapay, 2003). PHI represents a means for accessing different hospital provision channels than those afforded by public insurance. PHI also provides cover for ancillary services not insured by Medicare. However, funds have historically not been allowed to cover the medical costs already subsidised by Medicare, because such duplication was perceived to undermine universal insurance. This has resulted in a prohibition to offer PHI products for medical care received in outpatient settings (GPs and specialist consultations, and other ambulatory treatments), a ban that has been maintained until present. We note there has been recent speculation that private health insurance may be expanded into primary care. The federal government would need to amend legislation to allow private health insurance to cover GP costs (Heath, 2014). The QNU does not support private health insurance offering coverage for primary healthcare without further modelling by Treasury on the impact of out-ofpocket expenses Another contentious proposition contrasts the substantial amount that the federal government pays to subsidise the PHI system via the rebate and other sources, currently estimated at around $5 billion per year with the operating costs of a large public hospital and associated services estimated at around $500 million. Duckett and Jackson (2000) estimated that if all government subsidies to the private health sector were redirected to 5
public hospitals, an additional 1.5 million cases could be treated in Australia's public hospitals. Further, if the costs of funding the rebate were redirected into public hospital funding, it could provide an operating budget equivalent to six large hospitals each year 3 (Willis, Reynolds & Keleher, 2009, p.56). Thus the PHI objective that ostensibly "takes pressure off public hospitals" could be more efficiently achieved by direct funding of public hospitals rather than through subsidies for PHI. This may be the real opportunity cost of the PHI rebate and produce a much greater impact on public hospital waiting lists. The dual public/private arrangements for financing healthcare for Australians therefore generate several points for consideration including: Equity of access issues arise from the relationship between Medicare and PHI; PHI allows for faster access to some medical and surgical services in such a way that tends to benefit those who are already socioeconomically advantaged; Incentives to increase the uptake and coverage of PHI have become expensive and may be acting to the detriment of funding to the public healthcare system. The amount of funding directed to PHI support is substantial and could provide significant additional funding to the public healthcare system; Federal governments support PHI on the basis that injecting additional private resources into the healthcare system relieves the pressure on Medicare. However, the evidence suggests that increased PHI coverage actually detracts from the capacity of the public system to provide healthcare systems (Willis, Reynolds & Kelleher, 2009; Duckett, 2005). The QNU does not support financial incentives to enhance the uptake of PHI. There is no logical reason why the government should protect the PHI industry in a way that other insurers are not. We strongly support a universal health insurance system to enable equity of access to all necessary health services for all Australians. The most equitable way for people who can afford to do so is to contribute more to the health system through our progressive taxation system. This could involve increasing the Medicare levy or introducing other cost-saving measures to increase productivity and innovation and target areas of particular waste and duplication. There are also significant benefits associated with implementing strategies to coordinate care more effectively and make the system genuinely more patient centred. In our view, PHI should be an optional extra. Private health insurers should be able to offer a wider range of services with the exception of those covered by Medicare, that is out of hospital medical costs and public hospital services, with minimal government interference or financial support. 3 This is based on 2000 data where the cost of funding the rebate was around $3 billion per annum. 6
Clearly, despite the incentives, the PHI rebate has not achieved any of its objectives such as relieving pressure on the public hospital system, making private health more affordable or keeping the cost of private health services down. It is not the government s responsibility to provide incentives for the private health insurance industry to attract buyers to its membership products. It is our view that the public monies currently expended on providing rebates to people to take out private health cover should more correctly be spent on ensuring a health system which provides access and equity to healthcare for all people in Australia. The PHI rebate is poor policy and public funds should not be used to support private insurance. Menadue and McAulay (2012) argue that PHI is an expensive and clumsy way to carry out the functions the tax system and Medicare do so much better that is to distribute funds to those who need healthcare. In itself it is an expensive financial overhead a $5 billion annual burden on the healthcare system 4. Its even greater economic impost is its general impact on the cost of healthcare. International experience that shows that PHI buys more expensive healthcare than tax-funded health insurance, but it does not buy better healthcare. The failure of PHI to ease pressure on the public system does not find a solution in socialised medicine (Menadue and McAulay, 2012). Replacing PHI with a strong, single national insurer removes incentives for over-servicing and over-pricing, but there are savings in private and public costs if there is less need for healthcare in the first place, through investing in preventive services. The QNU supports primary health initiatives, such as sun-safe and anti-smoking campaigns that improve long term health outcomes. This investment, particularly when it starts through childhood education can prevent many lifelong health and social problems. However, the ongoing battle between federal and state funding has seen the Queensland government withdraw from any area that it sees as providing this primary function. The cuts range from primary school health promotion to sexual health education. Failure by state and/or federal governments to provide ongoing adequate public health education programs represents an abrogation of responsibility and a wasted opportunity to realise potential gains. It is governments responsibility to undertake these programs because the private sector clearly will not. 4 The previous federal Health Minister, Tanya Plibersek (2012) stated that the PHI rebate is now one of the fastest growing areas of health expenditure, and cost taxpayers around $5 billion in 2011-12. 7
Conclusion - Exploring new options The rising cost of healthcare is a problem worldwide. There are no quick fixes and without a meaningful solution expenditure will continue to increase, patients will pay more and services will deteriorate. If an overarching goal for government is to improve outcomes relative to costs then a different approach is required to replace the incremental, fragmented watering down of the universal health system. Porter and Lee (2013) have proposed a model for change that moves to a high-value healthcare delivery system comprising six interdependent components: Organising around patients medical conditions and health needs rather than doctors medical specialty; Measuring costs and outcomes for each patient; Developing bundled prices for the full care cycle; Integrating care across separate facilities; Expanding geographic reach; and Building an enabling IT platform. Such a deep-seated approach would involve a major rethinking of healthcare delivery, yet its potential to save time and money would be far-reaching. The QNU supports a universal, patient-centred system that maximises value for money and is equally accessible to all Australians. This is the challenge for governments and one that should be open to discussion. Recommendations The QNU asks the Committee to: Reject any move to introduce a co-payment for GP visits; Request further modelling by Treasury on the impact of out-of-pocket expenses if the government allows private health insurance to offer coverage for primary healthcare; Recommend further research into high-value health systems such as that proposed by Porter and Lee (2013). 8
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Rafferty, M. & Yu, S. (2010) Shifting Risk, Work and Working Life in Australia: A Report for the Australian Council of Trade Unions, University of Sydney. Senate Select Committee into the Abbott Government's Commission of Audit (2014) Second Interim Report. Willis, E., Reynolds, L. & Keleher, H. (2009) Understanding the Australian Healthcare System, Elsevier, Sydney. 10