These appeared last week:
Private health cover could become unaffordable, Medibank warns
Michael Smith Health editor
Aug 22, 2024 – 9.46am
Medibank says it will take two years to return to market share growth after it missed a target to increase the number of Australian residents taking out private health insurance with the homegrown provider.
This was because of stiff competition from rivals offering cheaper policies, although it was partly offset by a surge in foreign students seeking cover.
Chief executive David Koczkar also warned that private health insurance would become unaffordable for many Australians if a campaign by struggling private hospitals to get insurers to tip more funds into the healthcare system was successful.
Medibank’s 60 per cent jump in net profit to $492.5 million was in line with market expectations, but the company’s shares fell 2.3 per cent after it missed its target to increase permanent resident policy numbers in the year to June 30.
The company’s earnings are under more scrutiny than usual as private hospitals step up a campaign to get profitable insurers to contribute more to the healthcare system. Key players in Health Minister Mark Butler’s hospitals inquiry are meeting on Friday.
Medibank said net resident policyholder growth rose by 14,400 during the year, or 0.7 per cent, which was below its forecast of between 1.2 per cent and 1.5 per cent. In contrast, non-resident policy growth jumped by 69,000 or 25.1 per cent, as more foreign students took up its private health cover.
“It is an intense competitive environment [for insurers] at the moment, and we do expect that to unwind over the next one to two years as the longer-term fundamentals of competition revert back to more normal settings,” Mr Koczkar said in an interview. Medibank expects to increase its market share in 2026 as the industry stabilises.
‘We won’t chase growth at all costs’
“We have seen some unsustainable and commercial practices, which are just not right for our business. We won’t be chasing growth at all costs,” Mr Koczkar said.
He was confident that growth would not be undermined by Opposition Leader Peter Dutton’s pledge to slash permanent migration and cut refugee arrivals, and the Albanese government’s move to cap foreign student numbers.
“We are under share in non-resident workers and visitors, and that is an area of focus for us to grow share regardless of what happens with visa numbers,” he said.
Mr Koczkar said industry growth would moderate this year, after the insurer reported a 14 per cent increase in underlying net profit to $570.4 million for the year to June 30, in line with expectations.
“We think market concerns for claims and margins appear overstated, partly offset by some near-term caution around resident policy growth,” UBS analyst Scott Russell said.
Medibank also announced that it had provided $63 million in one-off support for private hospitals over the past two years. Insurers do not usually report this figure. The insurer said this was a sign that it was supportive of the private system, even as hospital executives say insurers should contribute more.
Medibank’s COVID-19 reserve for the year ending June fell to $110.8 million from $290.1 million a year earlier. This will be wound up next year. The reserve was established to return funds to customers who paid premiums but could not use their cover during the pandemic.
Medibank declared a full-year dividend of 16.6¢ a share – a rise of 13.7 per cent.
Mr Butler is due to complete an inquiry into the private hospital sector at the end of this month. The threat of an exodus of patients from private health into an already strained public system is shaping up as a cost-of-living headache for the Albanese government before the federal election.
Here is the link:
Then we had this:
Private patients face Ramsay hospital lockout
Michael Smith Health editor
Aug 30, 2024 – 12.08pm
Millions of patients face significantly higher medical bills after the country’s largest private hospital operator said it would refuse to deal with insurers that did not agree to cover a bigger portion of unexpected cost surges in the future.
Ramsay Health Care, with 70 hospitals across the country, says it has put on hold plans to build or buy any more centres, citing low returns, and warns that even patients with insurance are turning to the public system because of big out-of-pocket bills.
“The shift in profitability from hospitals to health funds over the last four years or so has been significant and it has to swing back,” said Ramsay chief executive Craig McNally.
“We have been really clear over the last couple of years that if there are material shifts in assumptions on what future costs look like then we will bring insurers back to the table,” he told AFR Weekend. “If we don’t get acceptable agreement with health funds, I have been very clear, we won’t have agreements with them.”
Previously rare, hospitals have increasingly ripped up agreements with private health insurers, meaning customers of those funds can only use the hospitals if they are prepared to pay significant expenses themselves.
This month, the country’s largest non-profit provider with 10 hospitals, St Vincent’s, reached a last-minute agreement with NIB after threatening to walk away and leave the insurer’s customers paying higher prices.
UnitingCare Queensland, which owns and operates four private hospitals, this week threatened to walk away from its contract with the Australian Health Service Alliance, a large buying group representing 22 not-for-profit insurers.
Bupa customers were left without insurance at Ramsay hospitals for several weeks in 2022 after the two companies failed to reach an agreement on how to cover costs. Bupa, one of the country’s major health insurers, has more than 4 million customers.
Ramsay said it was not currently in dispute with any of the insurers it dealt with but that could change in the future.
Private hospital earnings are in the spotlight as Health Minister Mark Butler completes a review of the industry, which is battling higher costs and lacklustre patient volumes. Hospitals want insurers to pay more for their services. But insurers have refused, saying they should not have to bail out an inefficient private hospital sector.
A spokeswoman for Mr Butler declined to comment on Ramsay’s statement but said the government was looking into insurance funding as part of its review of the private hospital system.
Mr McNally said he was not confident the Butler review would provide a solution to the industry’s troubles, but hoped it would lead to decision-making about annual premiums – which influence insurer profits and payments to hospitals – being depoliticised.
But the insurance sector has accused Ramsay, and other hospital owners, of simply wanting to make more money at their expense.
“It is important to remember that Ramsay hospitals remain profitable in Australia. It’s just not as much profit as they would have,” said Rachel David, the chief executive of Private Healthcare Australia, a health insurer lobby group.
“The answer to the private hospital sector’s difficulties does not lie in health funds tipping an endless amount of money into the system. Their role is to decrease, not increase, health inflation, which is why we have a highly regulated premium setting process.”
Ramsay is one of the most profitable private hospital providers in Australia, although the company’s shares fell more than 7 per cent to close at $41.30 on Friday after it warned it would take years for patient margins to return to levels seen before the COVID-19 pandemic and said fast-rising wage costs were creating a “critical risk”.
Ramsay, which also operates hospitals in Europe and the United Kingdom, posted an underlying profit of $270.6 million, lower than the $278.2 million a year earlier. It had already downgraded earnings forecasts earlier this month.
Though it has hit targets, investors have abandoned the company because they are concerned about the long-term outlook for private hospital margins. More patients are seeking treatment in day surgeries and public hospitals as household budgets are crunched by higher mortgage payments, rents and utility bills.
Mr McNally said there had been a rise in patients with private health insurance going to public hospitals because they could not afford the out-of-pocket costs. The rate of patient activity in the current financial year would be slower than in the 12 months to June 30.
Health fund payments to hospitals rose 8 per cent to $18 billion in the year to June 30, according to figures released by the Australian Prudential Regulation Authority this week, while benefits hit a record $3.1 billion in the June quarter.
But private hospitals say that, accounting for inflation, payments were significantly lower than before the pandemic. The real decline in benefits paid per episode – the time an insured patient is in hospital – between 2019 and 2024 was 7.3 per cent, they said.
Out-of-pocket expenses per treatment in private hospitals also jumped to $437.51, from $408.38 a year earlier, highlighting the growing amount not covered by their insurance.
But Ramsay still expected to grow earnings despite the challenges facing private facilities. Mr McNally this year said at least 16 private facilities had closed in the previous 12 months across the industry.
“Our initial read is that activity levels have held up well, but pre-pandemic profitability levels may be unachievable from here,” Wilsons Advisory analyst Shane Storey said. “Capex investment levels were also subdued, sending a troubling signal.”
The trading update highlighted Ramsay’s continuing struggle with its offshore assets in contrast to its profitable Australian hospital operations. Those assets are under review.
Woolworths’ head of supermarkets, Natalie Davis, will succeed Mr McNally as chief executive of Ramsay in June, starting a long transition process in October.
Here is the link:
And we also have this:
Why Australia’s sick hospitals are on the brink
Australians are paying more for surgery in private hospitals than ever and there is no cure in sight for facilities struggling with record costs and fees.
Michael Smith Health editor
Aug 30, 2024 – 2.31pm
John Karagiannis realised something was wrong with his eyesight when he could no longer see his two sons clearly on the football field on Saturday mornings. He was diagnosed with cataracts after an eye test at his local Specsavers.
Karagiannis, 61, did not think twice about going down the private hospital path. He had had private health insurance since he was 18 and rarely used it. However, he was surprised by the out-of-pocket costs for what is one of the most common surgeries in Australia.
The IT project manager from Sydney says he paid about $5500 for surgery on both eyes, the initial consultation fee, the anaesthetist’s fee and the private hospital fees. He had to pay most of the bills upfront and wait for his insurer to reimburse him. Without private cover, he estimates the cost of the two surgeries would have been triple that amount.
John Karagiannis: “If I didn’t have the money, I wouldn’t have rushed out to do it.” Edwina Pickles
“Even with insurance you still have to fork out $5500, and you have to fork out a lot of it upfront. You really need to have a spare $5000 around if you are going to do it privately,” he says.
“You get some money back, and the process was pretty quick, but if I didn’t have the money, I wouldn’t have rushed out to do it.”
Karagiannis is one of millions of Australians paying record amounts for surgery, specialists and procedures in a private health system buckling under the strain of soaring costs and wages, and lacklustre patient numbers as more people switch to day surgery.
At the same time, 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.
A political headache
The cost of healthcare is shaping up as a key political headache for the Albanese government heading into an election which will be defined by the cost-of-living crisis. While health insurance is supposed to cushion the blow for the 15 million Australians with policies, out-of-pocket costs are soaring, leaving many wondering why they bother to fork out so much for costly policies in the first place.
Doctors and surgeons warn the high-level quality of care taken for granted in Australia is under threat as the symbiotic relationship between over-stretched government-owned hospitals, private facilities which are necessary to ease the burden on the public sector, and the health insurance industry, shows signs of unravelling.
Others argue it is time to reform the entire system as new technology and advancements in care mean people do not need to stay in hospitals as long as they used to.
Health Minister Mark Butler’s inquiry into the viability of the country’s 650 private hospitals has found “surpluses” in the system can no longer support ongoing investment, and notes a big shift to same-day procedures.
“In terms of incentive, the private hospitals need throughput and have no financial incentive to distinguish between whether they are providing ‘high value’ or ‘low-value care’, whereas the insurers do better if people stay healthy and stay out of hospital,” says Nick Coatsworth, a former deputy chief medical officer who now works in a Canberra hospital.
“Given that’s the case, the insurers actually do better in innovating and moving towards preventive medicine and short-stay hospital visits. Both parties need to make a profit, but one has a positive incentive that’s likely to improve healthcare, and the other perpetuates a legacy mode.”
Short-term solutions elusive
Butler’s review of the $22 billion private hospital industry has been collating data for the past two months, even though not all the big operators have co-operated, but it is not expected to come up with any short-term solutions before the next election.
The probe was triggered due to concern that the mass closures of private facilities would put further strain on the public system, where waiting lists are at record highs. However, the number of facilities shutting is disputed within the industry, with hospitals saying 72 have closed since 2019, but insurers and analysts saying almost as many have opened during that time.
One thing is clear, though. Private hospitals, which rely on volume to drive margins, are doing it tough. Ramsay Health Care, the nation’s biggest, is one of the few making decent profits, but it said on Friday that margins were pressured from huge wage increases. Analysts say its margins may never return to pre-pandemic levels.
Butler’s inquiry has also exposed the dysfunctional partnership between hospital operators and the insurers which provide most of their funding. Possible government intervention in the way billions of dollars of hospital funding is negotiated each year is one option on Butler’s table, although many do not see this as part of the solution.
UnitingCare Queensland, which owns and operates four private hospitals, this week threatened to walk away from its contract with the Australian Health Service Alliance, a large buying group representing 22 not-for-profit insurers. It is the second public spat over funding in the sector this year, with St Vincent’s also threatening to break up with health insurer NIB,
If the funding arrangements between big hospital groups and insurers collapse, the results will be disastrous for patients, with up to 2 million people potentially having to pay more for treatment if the Queensland row is not resolved.
“These are commercial negotiations happening between parties which can sometimes have friction in them. That is the norm rather than the exception. We have to look at whether that system is the best system,” says Health Department secretary Blair Comley, who is leading Butler’s inquiry.
“If and when it (the government) is going to do anything, I am not going to comment on that.”
Getting personal
Behind the scenes, the lobbying is aggressive and beginning to become personal. Hospital executives trying to keep facilities afloat are incensed the insurance industry is not stumping up more funds.
“The system is clearly out of balance and the disparity needs to be addressed in the interests of continuing to provide high-quality care to Australian patients,” says Australian Private Hospitals Association (APHA) president Christine Gee, who rejects suggestions that private hospitals are inefficient.
She says insurers made $800 million in net profit in the first quarter this year, a period when 20 hospitals closed.
The highly organised insurance lobby has hit back with a slew of data showing they are pumping record funds into hospitals, and sound commercial arguments for why they should not have to bail them out.
Australian Prudential Regulation Authority data out this week showed health fund payments to hospitals rose 8 per cent to $18 billion in the year to June 30. Benefits hit a record $3.1 billion in the June quarter.
The insurers seized on the data as evidence they are good corporate citizens and contributing their fair share to the system. But the increases are mostly due to the rising costs of providing services. Patient numbers are growing but at a lacklustre rate since the pandemic.
The hospital lobby’s analysis says there has been a 7.3 per cent fall in the benefits paid per patient since before the pandemic. While those payments jumped 12 per cent from June 2019 to June 2024 to $2975.94 using the nominal dollar amount, this was well below the 21 per cent increase in inflation in the same period.
Paying more
Regardless of whether you want to go down the rabbit hole of statistical interpretation by the industry’s various vested interest groups, the APRA data shows patients are paying more than they have in the past. There are also signs that Australians will defer surgery and specialist visits if costs keep rising.
A survey in June by the Australian Patients Association and medical appointments booking platform Heathengine found more than 60 per cent of people were delaying doctor and GP visits, more than half were putting off dental treatment, and 32 per cent were skipping a diagnostic test because they could not afford it.
The APRA data 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 per cent in five years, from $314.51 in 2019.
Data out this week also indicated some patients with private insurance were going to public hospitals because they could not afford the out-of-pocket expenses, according to hospital operators.
But insurers argue people who are covered are not suffering because 87.4 per cent 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.
Insurers also blame cost increases on what it says is a surge in volumes of medical implants and surgical supplies claimed from health funds since 2019. However, the body representing the device industry – The Medical Technology Association of Australia (MTAA) – rejects this, saying the average benefits paid for devices has fallen 17 per cent since 2016.
“Unfortunately, the facts and the analysis show where the money is really going – into health insurers’ own pockets.” MTAA chief Ian Burgess says.
The premium question
A record 15 million Australians now have private health insurance, but the chief executives of both Medibank and NIB have warned over the past week that numbers will drop off if premiums rise too much.
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 $4900, with patients paying about $880 in out-of-pocket cost, according to government data. Medicare pays around $1900 of those fees, and insurers typically pay $1800.
Insurers argue costs can be lowered by rethinking the traditional hospital model and getting more patients into day care, rather than unnecessarily long overnight stays where the chances of infection and other complications increase. Some in the medical profession disagree, saying the commercial interests of insurers would jeopardise patient care.
“Improved clinical practice and technology means procedures which 30 years ago may have required four nights in hospital, today can be handled overnight or even in the same day. The shorter the stay in hospital the better. The doctor makes this decision,” says Mark Fitzgibbon, the retiring chief executive of NIB, which has been investing heavily in remote access to doctors an–d pharmacists.
With some private hospitals on life support at a time when public facilities have too many patients, something will have to give.
Here is the link:
It seems clear we are on cusp of some major transitions as the costs of healthcare rise and the health insurers find it harder and harder to meet the rising costs. It seems very likely the Medicare system is going to increasingly struggle over the next few years and how it finally winds up is still not all that clear.
I suspect we will wind up with all parties having to tip more into the funding pool.
What do you think?
David.
