Monday, February 20, 2012

What's an insurance company to do?

It looks like the Gillard Government might get their health insurance reforms through, and there is the standard "Our models are better than your models" stoush. Labor are claiming that 27,000 people will leave private health insurance as a result and Libs claiming it'll be 1.6 million. Whatever, private health insurance is largely a matter of philosophy - some people believe it is essential, others see little benefit in it. Personally, I'd much rather pay a higher Medicare levy so everyone gets the same access to health care, but we all know I'm a raving, bleeding heart lefty.

However, it seems both major parties agree that private health insurance is a Good Thing. Given that's the assumption they're working from, rather than fighting over how many people will drop out as a result of increased costs, why not consider options for offsetting the increased costs due to not subsidising rich people? One way to do this is to look at the costs of various kinds of medical care. An obvious candidate for this is obstetric care. I couldn't find any data on obstetric fees, but I had 3 children over 5 years and my fees tripled in that time. At the same time, many private OBs ceased practising in less affluent parts of Sydney. Newspaper reports and my OB suggested this enormous increase was due to insurance. If insurance has become that impossibly expensive, it's time for the Government to look at the causes. Without turning this into an epic, I'd suggest universal disability insurance would go a long way to addressing this problem. OB insurance is heavily affected by tragic outcomes during birth. If something goes horribly wrong, even if the OB wasn't actually negligent, everyone wants to see the family looked after financially. This is an expense that should be borne across the community. No doubt there are plenty of other areas of medicine where costs are artificially inflated for whatever reason. Don't misinterpret me here, I am not suggesting that health insurance companies should be working to reduce these costs. I believe the US has adequately demonstrated how disastrous that path is. But I do think this is what we have a Health Minister for.

All of that, though, is fraught and messy. It's not hard to imagine an inquiry into some area of health costs turning into a witch hunt and just making the whole situation worse, and I repeat, I don't want the health insurance companies themselves having opinions on how much health care should cost. So what's an insurance company to do to keep these 27,000/1.6 million customers? Well, if you can't reduce your specific costs, reduce your scope. Cover less. And here it gets really easy. Ditch the woo. Despite my total disrespect for private health insurance, we have the topmost, most expensive health care in the country (or close enough to it). This is a result of inertia after inheriting it from a previous employer. Here are some things it covers:

That's a bit fuzzy, it says "Naturopathy, Western Herbalism, Homeopathy, Iridology, Nutrition, Remedial Massage, Shiatsu and Bowen Therapy". Righto. I'm not entirely sure what "Nutrition" means here, because qualified dieticians are covered elsewhere. The sum total of evidence for the efficacy of these therapies would probably fit in the box that names them. This policy allows every single person covered by the policy to spend $700 per year on them. For our family, that represents $3,500 we could rip out of our health fund for therapies that either don't work, do actual harm, or work as well as Klinger's Keep Cool sugar pills. There's also this (included in the same $700 cap)

Whilst there is evidence for the efficacy of some chiropractic and osteopathy therapies, there's a whole lot of non-evidence based therapies provided under these banners as well. If we need to reduce the cost of health care, let's cut loose the stuff that has little or no evidence to support it. I've used acupuncture, and it worked, dammit! But if I want to go kick start my body's placebo effect, I don't think the rest of the community should be subsidising it. I can pay for my own woo.

While the individual costs for these services are an awful lot smaller than an average hospital admission, for example, they tend to be used much more often. Not least because they don't actually work. I was told by a physiotherapist that the nearly all complaints require no more than 3-5 visits to resolve. How many people have you heard describing months or years of chiro, osteo or other natural therapies? This study found that the average lower back patient made 10 visits to a chiropractor. That same study shows that chiropractic services are the most expensive way to treat back pain. If we want to reduce the cost of medicine, let's stick to funding evidence based medicine.

Every time my insurance company asks me about the service I got from a provider, they also ask me how they could provide a better service generally. Every single time I tell them to stop subsidising woo. Tell your insurance company too.


  1. I like the philosophy of "pay a higher Medicare levy so everyone gets the same access to health care", but its realisation requires a belief that the additional funding that moves from the private to the public health sector will actually go to provide better healthcare.

    Most of the people who work in the bureaucracy of that sector would have immediately added the word "outcomes" to my previous sentence. This is not the sort of rational thinking that efficiently spends money.
    Is it fair that somebody who can afford $500 a week for private health insurance gets potentially life-saving treatment before somebody who can't? (or "Why should the banker lives while the guitar-strumming singer/songwriter dies?"). No, but I think that without drastic change in mentality, a 100% public system would result to two people barely surviving, but not necessarily receiving top care.

    The public sector bureaucrats have clearly shown this sort of thinking when they brought us NAPLAN: paraphrasing - "the best way to ensure equality in education is to lower the standard for everybody to basic literacy and numeracy". Do we deserve that same high level of aspiration in our health system?

    On the other hand, I don't see that efficiencies gained in a desire to provide a greater dividend to shareholders necessarily imply improved care for the patients. In it's extreme, we'd end up with A US style private health system where "risk analysts" in "HMOs" decide what treatment is received. This is not something we should be seeking to emulate.

    At the very least, we need a strong public health system to ensure that the private health system remains honest. This also means lowering the barriers to entry and exit to move into a competitive market, something that's currently prevented by the age-based "Lifetime Health Cover" penalties. Get rid of that, private will have to pull their socks up and compete for people, rather than maintaining them through fear.

  2. [My comment copied from FB where MS's comment was also posted]
    The lifetime health cover clause is disgusting, and needs to go. And I agree that there are issues with the way the public health care system is run, but the private system depends heavily on the public system anyway. There is a huge overlap, and very often the private patient is receiving exactly the same health care as the public patient, or at least in exactly the same facilities. I didn't go into the changes that would need to be implemented in order to make a completely public system (or even a system that is 80% public) more efficient and workable, because it wasn't the point of the post. Still, no matter how you look at it, more money for the system is necessary. RPAH (but not all hospitals) have a great scheme where they ask people with private health insurance to come in as private patients and pay their excess for them. Brings private funds into the public system. I always take that option.

  3. I think some of the charges are way over the top - I am basing this on one visit to a specialist. I got $70 + change back from medicare, I paid $270 + change to the Dr. The medicare scheduled fee was $83. So scheduled fees and Drs fees are way out of whack. The specialist also told me that the procedure I should have would cost me abut $1000 out-of-pocket on top of what my health fund and medicare paid. This is for a procedure that my GP could do half of (or perhaps all of) in a long appointment that would cost me approx $85 + a $30 script from the chemist. So I'm going to ask my GP if he can do the whole lot. If not I need to decide whether the screening the specialist can do is worth the extra $915, day off work and resultant discomfort. Or I could wait months for it to be done through Medicare. I don't mind paying extra but $1000 on top of my private health care costs (for fairly simple day surgery) says to me that the system needs to be overhauled.

    1. Absolutely. I need a bronchoscopy, but was quoted similar out of pocket expenses. I know it can be done in the public system but haven't got around to organising it. I've almost certainly procrastinated longer than the waiting time will be in a public hospital. I find it very hard to believe that a Dr needs several thousand dollars for a 15-20min procedure.

      I definitely agree that the whole system needs an overhaul, I'm just not entirely sure there's anyone around who's capable of conducting it who wouldn't make it worse.

  4. It is a difficult one. Probably why it is still in the too hard basket.

    1. Sadly that's probably true. Not to mention the whole federal/state funding split nonsense. I can't even imagine who could have the juridiction to overhaul it properly.

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