Private hospitals teeter while they argue with insurers
Private hospitals say insurers are too profitable. Insurers say private hospitals need to operate more efficiently. Let’s get to the root cause of the system’s deepening problems.
Key Points
A government review into private hospitals finds they are under mounting stress as profits evaporate and investors retreat from the sector.
Private hospitals say health insurers should pay more but insurers don’t want to raise premiums and blame hospitals for making bad decisions.
National Seniors says only an independent Productivity Commission review will get to the root cause of the problem.
More private hospitals could close in the next 12 months and fewer will be built as profits drop and building costs increase, drying up investment dollars. In turn, that will place increased demand on the already stretched public hospital system
Meanwhile, a stoush between private hospitals and insurers over who’s to blame has escalated, with private hospital providers saying profitability has swung too far to insurers. Insurers say private hospitals need to operate more efficiently.
These are key insights into the yet-to-be-released Federal Government review into the health care system as revealed in the Australian Financial Review (AFR).
According to the AFR, the “private health system is buckling under the strain of soaring costs and wages, and lacklustre patient numbers as more people switch to day surgery.
“The health insurers that fund the system are warning they will not bow to pressure from hospitals to increase their contributions because it would force them to jack up premiums, making private policies unaffordable for many of their members.”
Meanwhile, some private hospitals blame variances in the amount health insurers pay for procedures at different hospitals for shutting down some services.
There are also reports confirming that the government review found private hospitals are “uninvestable and more will close”.
Builders and investors are quoted saying the sharp rise in building costs plus the collapse in yields following interest rate hikes had eviscerated the feasibility of building private hospitals.
One builder, who has developed three health-related projects, told the AFR that Australian property funds and wealth sovereign funds, once heavy investors in private hospitals, had abandoned the sector.
The system’s vested interests continue to blame each other. But this can’t go on.
National Seniors Australia’s call for an independent review to get to the root cause of problems with the system is needed now more than ever.
We want the Productivity Commission to review the private health system, with an emphasis on identifying ways to improve its value proposition to policy holders in general and older policy holders in particular.
It’s not just our policy. The Labor Federal Government proposed this in 2018 when it was in Opposition. Now is the time to put the idea into action.
The review could lead to a redesign of private health care with fit-for-purpose policy settings.
You can read more about our policy here and our Health Costs campaign initiatives that can bring down patient costs here.
Minister for Older Australians: e-petition
Recently, a dedicated Assistant Minister for Ageing was established to bring greater focus on the many issues facing seniors. While this has been welcomed as a great first step to address the challenges of an ageing population, more needs to be done to ensure older people are supported within the community.
The founder of National Seniors Australia, Mr Everald Compton AO (inspiration for NSA’s Community Champion Medal), has created a parliamentary e-petition calling for a dedicated Minister for Older Australians to “manage the growing impacts and contributions of older people, and issues affecting them, in a strategic, holistic and inclusive way”. The Minister’s role could include establishing a government agency separate to Services Australia (formerly Centrelink) to better support older Australians with issues such as the Age Pension, Medicare and My Aged Care.
Please click here to support this important parliamentary e-petition which closes on Wednesday 11th September.
Regardless of the hospitals’ and insurers’ blame-game, patients are paying more than ever, with many deferring surgery and specialist visits or dropping private health as costs keep rising.
The Australian Prudential Regulation Authority (APRA) found out-of-pocket expenses per treatment in private hospitals jumped to $437.51 in the June quarter, compared with $408.38 a year earlier. This is up 39% in five years, from $314.51 in 2019.
Insurers argue privately insured people are not suffering because 87.4% of in-hospital services have no medical gap fee. They say some private hospitals and specialist doctors charge those fees after being paid by a patient’s health insurer.
The AFR says the typical cost of a knee replacement in the private system is about $23,000, with insurers paying the bulk of the cost. Specialist fees are $4,900, with patients paying about $880 in out-of-pocket costs, according to government data. Medicare pays around $1,900 of those fees, and insurers typically pay $1,800.
Insurers argue costs can be lowered by rethinking the traditional hospital model and getting more patients into day care, but that is contrary to the private hospital model which is dependent on more patients maximising their stay and with that, funding.
