December 4, 2015

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Medibank welcomes the Australian Government’s consultation into the future of private health

insurance policy. As Australia’s leading private health insurer, Medibank looks forward to working

with stakeholders from across the private health sector to improve transparency, affordability and

value for consumers. Medibank has provided a detailed submission to the Australian Government

setting forth its approach to these goals. This Summary Position Statement outlines these

initiatives and is provided in the interests of furthering public debate on this important policy area.

□ □ □

Private healthcare has played an integral part in the well-being of Australians for decades,

improving access, choice and health outcomes. However, driven by a sustained rise in benefits

paid for healthcare services, private health insurance is facing a significant challenge. Premiums

have been increasing by up to 6.5 percent per year over the past decade, a trend that contains

significant implications: left unchecked, private health costs could nearly double over the next ten

years.

A key factor behind the growth in premiums is Australia’s ageing population. The participation

rate of the over-65 population is the fastest growing segment of the insurance market, increasing

from 42 to 52 percent over the past ten years. This trend is set to only increase in the future and

because older people tend to consume more healthcare than those aged under 65, there is a

pressing need for insurers and providers to minimise avoidable admissions through prevention

and disease management programs.

Costs are also rising due to market failures. In some cases, today’s regulatory settings have lost

relevance and weakened competition leading to low-value practices that come at the expense of

consumers. Addressing such regulatory issues would redistribute value to consumers, in the

process creating a more transparent and customer-centred private health system.

Medibank notes the ongoing review of private healthcare is not happening in a vacuum – parallel

efforts include the Medicare Benefits Schedule Review Taskforce, the Primary Health Care

Advisory Group, the Harper Competition Policy Review, and the Reform of Federation discussion.

Medibank welcomes the opportunity to consult on these reforms to ensure that they collectively

further the three principles defined above.

GUIDING PRINCIPLES FOR PRIVATE HEALTH REFORM

The proposed recommendations in this submission all share the common trait of being

consumer-centred. Medibank has focused on three guiding principles to benefit consumers:

transparency, affordability, and value. We believe addressing these three elements for all

Australians is a shared goal of Medibank, the Australian Government, and the broader healthcare

community. Below is a brief definition of each guiding principle:

■ Transparency, in this context, means making insurance cover and health information

understandable and accessible for consumers and the healthcare community.

Transparency benefits consumers in three ways. First, consumers can make informed

decisions about their coverage and care, and avoid unpleasant surprises, thanks to simpler

cover and better information. Secondly, providers can use wider information sources to

make better care decisions. Finally, insurers can use member data to better prevent and

manage diseases, thereby improving outcomes and reducing premiums.

■ Affordability refers to maintaining overall premiums and out-of-pocket healthcare costs

at a level that motivates consumers to participate in private health insurance. Affordability is

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a priority for Australians: personal disposable income has fallen for four quarters in a row,

for the first time in 50 years, while debt-to-income ratios have tripled to 152 percent since

the 1990s.1

Driven by benefit outlays, premiums have risen by an average of over 6 percent over the

past five years, causing many policyholders to downgrade or cancel their private cover. This

has a significant knock-on effect on public access to care. Increasing the affordability of

private health insurance is thus essential to sustaining the national health system.

■ Value is defined as improving the quality and efficiency of the consumer offering, regardless

of the overall price level of a product. This focuses on eliminating waste and delivering high

quality healthcare, which is pivotal to long-term sustainability. For instance, insurers should

have the incentive and mandate to better manage their aged and chronically ill populations

outside of hospitals. The importance of creating value for consumers needs to be

considered hand-in-hand with affordability.

NEAR-TERM RECOMMENDATIONS ON WHICH GOVERNMENT SHOULD ACT

Medibank recommends seven specific regulatory changes – linked to the guiding principles of

transparency, affordability and value – that together could create up to $3 billion of value for

consumers and in doing so lower premiums by up to 16 percent. This, in turn, will increase

the attractiveness of private insurance and reduce the pressure on taxpayer funded public

providers.

Medibank recommends the Australian Government adopt the following seven interrelated

reforms:

1. Improving information sharing for consumers and insurers – Improving transparency of

price, performance and quality information for consumers, providers and insurers would

contribute to better choices, better health outcomes and greater efficiency. Consumers need

more information to make better decisions in choosing providers and services, such as user-

friendly comparisons of cost and quality. Transparency can also be improved by making the

obtaining of consumers’ properly informed financial consent compulsory for providers before

they provide healthcare services. Publicly reporting quality metrics for healthcare providers

has also been demonstrated internationally to encourage better health outcomes. If made

publically available, Australian Government-held health data (such as MBS and PBS data)

could give health professionals a more complete picture of a patient’s health background,

resulting in better care decisions. With permission from their members, insurance companies

could use individual health data to offer targeted prevention, early intervention and pathway

management. Improved transparency is beneficial for the entire health system.

2. Standardise and simplify benefits, terminology and cover – Consumers would benefit

from simpler cover with clear terminology and the removal of restricted services. An industry-

agreed definition of a minimum-coverage product with no restricted services, no contract

based co-payments and increased excess limits, would contribute to fewer negative surprises

for consumers. Designing products to reduce unnecessary variation in referrals to services

such as rehabilitation is estimated to hold between $150 million and $330 million alone in

benefit reduction potential. Whilst delivering cost savings, this reform would primarily improve

transparency for consumers.

3. Ending cost-shifting from public hospitals to privately insured consumers – There is

significant flow of value from privately insured consumers to public hospitals, as public

hospitals increasingly encourage privately covered members attending public hospitals to use

their private health cover. In doing so, many patients are pressured to waive their right to

access universal public hospital services at no cost, as provided for, and paid for by, all

Page | 4

citizens. Restriction of billing by public hospitals to private insurers, and regulation prohibiting

public hospitals to discriminate against privately insured patients, would result in a projected

$510 million to $1,030 million in cost savings. This reform would primarily improve

affordability.

4. Introduce prosthesis reference pricing – The current prices set in the Prostheses List are

inflated relative to peer health systems domestically and overseas, benefiting manufacturers

and private hospitals at the expense of consumers. A reference pricing system for

prostheses, using domestic and international benchmarks, could return an estimated $800

million to Australian consumers. Furthermore, while the Prostheses List aims to insulate

suppliers from considering cost in selecting prostheses, some private hospitals are favouring

certain suppliers in exchange for large discounts. This reform would primarily improve both

value and affordability.

5. Restrict the impact of second tier default – Privately insured people are currently denied

the full benefits of competition for the cost of hospital care by the second-tier default safety

net. This safety net requires insurers to pay uncontracted hospitals a high minimum fee for

service. This has led to large hospital provider groups holding disproportionate power over

contract negotiations, driving up costs and therefore premiums. Adjusting the second-tier

default rates to reduce providers’ market power, while adopting measures to protect patients

from high hospital co-payments, is estimated to lead to cost savings of between $250 million

and $620 million for consumers. This reform would primarily improve affordability.

6. Reform premium price setting – Allowing private health insurers to make price changes

with the oversight of an independent statutory authority such as the Australian Competition

and Consumer Commission (ACCC), rather than the current system of premium approval by

the Minister for Health, would foster greater price competition and improve the affordability of

private health insurance. An important step for lifting this constraint would be shifting away

from the synchronised 1 April premium adjustment date. Increased price competition is

estimated to reduce consumer premiums by approximately $75 million to $150 million. This

reform would primarily improve value and affordability.

7. Incentivise early uptake of lifetime health cover – Reducing the starting age for Lifetime

Health Cover loadings from 30 to 25 would encourage consumers aged 25-29 to participate

in private health insurance. This would lower the overall risk of the covered pool, leading to

estimated savings for consumers of $110 million. This reform would primarily improve

affordability.

The recommended reforms can greatly improve transparency, affordability and value across the

health system. Transparency is at the forefront with consumers being offered clearer cover and

better information, making product choice easier and more informed. They would also be

equipped to interact with clinicians and consume health services in a more value-conscious

manner. Insurers and providers could draw on public databases to prevent and manage diseases

more effectively, further improving population health.

Consumers would also derive significantly more value from appropriate utilisation of cover and

services. Removing the profit motive from providers’ selection of prosthesis suppliers and

integrating rehabilitation referrals into the patient’s episode of care, are two examples of reforms

which would improve health outcomes for patients as well as value-for-money.

In total the reforms could significantly improve affordability. Together, the seven

recommendations have the potential to decrease consumer expenditure by up to $3 billion

per year, equating to a potential reduction of 16 percent in insurance premiums. Exhibit 1

shows the impact of the reforms on total premiums.

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EXHIBIT 1: POTENTIAL IMPACT OF REFORMS ON AFFORDABILITY

POLICY OPTIONS WHICH RISK HARMING AFFORDABILITY, TRANSPARENCY

AND VALUE

We believe the seven reforms described above can substantially improve the Australian private

health system. However, there are currently three additional options which have been suggested

by various entities which we view as a significant threat to the sustainability of private healthcare.

We describe these three issues and outline our concerns below:

1. Introducing risk rating in private health insurance – Community rating allows for

affordable, equitable and inclusive private health insurance coverage for all Australians by

ensuring high-risk and elderly consumers do not have to pay excessive private health

insurance premiums. Moving to risk rating without protecting affordability for members aged

over 60 is projected to increase premium costs by up to $2.5 billion per annum for this

segment, which would translate into a 41% participation decline for older Australians.

Community rating should be maintained to uphold private health insurance as an essential

and accessible part of our healthcare system.

2. Broadening the GST to healthcare, including private health insurance premiums –

Imposing Goods and Services Tax (GST) on private health insurance premiums would

decrease participation in private health insurance, with negative consequences for the public

healthcare system. The GST loading would effectively increase premiums by nearly $2 billion

per annum. Keeping private health insurance premiums GST free will support the affordability

of private health insurance and preserve the affordability of the overall Australian healthcare

system.

3. Removing or reducing the rebate on general treatment cover – The general treatment

rebate supports affordable premiums for consumers and encourages participation in hospital

insurance. Modelling shows that a million Australians receiving this rebate could be driven

away from general treatment insurance if the rebate were removed, and hundreds of

thousands could downgrade. Many of these would also drop or reduce their hospital cover.

800

250–620

150–330

110

510–1,030

75–150

Potential impact on premiums$ Millions Percent reductionReform option

Standardise benefits, terminology and payment for hospital cover2

Disclose price, performance and quality1

End cost-shifting from public hospi-tals to privately insured consumers

Introduce prosthesis reference pricing

Restrict the impact of the second tier default

Reduce starting age for lifetime health cover

Reform premium price setting

0.8-1.7

2.7-5.3

4.1

1.3-3.2

0.6

0.4-0.8

Medium to long term, significant consumer value – not calculated

1 Impact from increasing transparency is likely to be large, however this has not been modelled for this submission2 Modelled impact limited to reducing low-value referrals to rehabilitation; total impact likely to be significantly higher

Page | 6

The rebate on general treatment products should be preserved as a critical enabler of

affordable private health insurance.

LONGER-TERM OPTIONS FOR REFORM

In addition to the short-term reforms described above, there are three longer-term measures

which the Australian government should consider to enable additional improvements in

transparency, affordability and value for consumers: (1) switching to a prospective risk

equalisation system; (2) establishing superannuation-like accounts for paying premiums after

retirement, and insurance cover that provides rest-of-life coverage for an upfront lump-sum

premium payment; and (3) incentivising employers with tax benefits to provide private cover to

their employees..

□ □ □

By adopting our proposed seven recommendations, avoiding the three policy options which could

adversely impact privately insured people, and exploring our longer-term reform options

described above, the private healthcare system in Australia can be enhanced to improve

transparency, affordability and value for consumers, leading to increased participation, and

higher-quality care for consumers.

Background: the role of private health insurance in Australia

Australians benefit from a health system that delivers effective and accessible care. We enjoy

a life expectancy of over 83 years and our self-reported health scores are among the OECD’s

highest.2 However, the affordability of this system is becoming increasingly challenged – health

spending has outpaced economic growth for years, rising from 8.3 to 9.8 percent of GDP

between 2003 and 2013.3 At the same time consumers are demanding greater transparency into

their own health data and care.

For over a hundred years, private health insurance has played an integral role in supporting this

system by improving the quality, affordability and access to healthcare in Australia. Today, the

majority of Australians – over 13 million people, representing 56 percent of all Australians – hold

an insurance policy covering them for hospital and/or general treatment.4 In addition, total

Commonwealth and State Government contribution to healthcare – at 6.3 percent of GDP – is

below OECD average.5

Private health insurance helps Australians in two key ways: 1) it provides a greater choice and

range of benefits for consumers, and 2) it supports the public health system by reducing demand

on that system.

PRIVATE HEALTH INSURANCE PROVIDES GREATER CONSUMER CHOICE

Consumers benefit from a greater choice and control, such as choosing to be treated by one’s

own doctor, shorter waiting times for elective surgery, access to services not covered by

Medicare (such as dental, optical and physiotherapy), and having more say over when and where

to be treated.

Australian Government support through the $5.9 billion private health insurance rebate makes

these benefits for Australians possible. It is this rebate, together with our community rating

structure, that puts Australia amongst the leading healthcare countries, with one of the highest

private health insurance participation rates in the world.

PRIVATE HEALTH INSURANCE SUPPORTS THE PUBLIC HEALTH SYSTEM

The private insurance sector supports the public system in several areas, for instance:

■ Hospital admissions – private insurance funds four out of every 10 hospital admissions in

Australia, representing 31 percent of all days of hospitalisation.6

■ Surgical procedures – private insurance funds over 60 percent of elective all surgery in

Australia.7 This reduces waiting times for elective surgery and lowers demand for hospital

beds in the public system.

If the public system were required to cover the private health system’s capacity, it would cost

government an additional $11 billion to $13 billion beyond current expenditure.8

To summarise, Australians currently achieve impressive health outcomes, due in large part to

their complementary public and private health systems. However a combination of demographic

trends, industry dynamics and regulatory issues is making private health insurance less

affordable, creating a need for careful and balanced reform.

Industry Context: the rising cost of healthcare and potential sources of value for consumers

THE RISING COST OF HEALTHCARE

Private insurance is an essential complement to the public health system in Australia. It offers

flexibility and choice to members about the location and timing of their treatment, as well as the

ability to choose their own treatment providers. It also allows for more timely access to care and

offers ancillary services not available through the public healthcare system.

While private healthcare has brought many benefits, its costs are rising. Over the past five years,

total benefit outlays for private hospital and ancillary services grew by 6.6 and 7.2 percent,

respectively, compared with average cost growth of 2.9 percent in public hospitals. This growth

has significant implications: if private health costs continue to grow at the same rate for the next

decade, benefit outlays will double.

As illustrated in Exhibit 2, cost growth is due to a combination of three factors: the increasing

number of participants, increasing episodes per participant, and increasing benefits per episode.

EXHIBIT 2: DRIVERS OF HEALTH CARE COSTS9,10

Total benefit outlays

2.9%

7.2%6.6%

Private -Ancillary

Private -Hospitalcover

Public -Hospital1

CAGR, per cent, 2010-2014

Benefits paid per episodeCAGR, per cent, 2010–14

Number of participantsCAGR, per cent, 2010–14

Episodes per participantCAGR, per cent, 2010–14

2.3%

0.6%2.0%

Private -Ancillary

Private -Hospitalcover

Public -Hospital

2.5%1.6%

Private -Hospitalcover

Private -Ancillary

Public -Hospital

0.5%

1.8% 2.3%2.8%

Private -Hospitalcover

Private -Ancillary

Public -Hospital

X

1 Public hospital expenditure only

Page | 9

As shown above, growth in expenditure is mainly due to increases in service volumes. There are

more people in private healthcare, and they are each consuming more services. Unlike the public

system, private healthcare is unrationed and thus more exposed to increases in demand. Growth

in participation levels have also contributed to the growth in volume.

Another key driver of volume growth is the ageing population. Australia’s over-65 population is

not only growing, but also increasingly participating in private health insurance. As shown in

Exhibit 3, the over-65 segment has shifted from 43 percent to 52 percent of all participating

Australians over the past ten years. This trend is expected to continue, with the private healthcare

system expected to bear an increasing share of the ageing population’s healthcare needs.

EXHIBIT 3: PARTICIPATION RATES IN HOSPITAL COVER BY AGE OVER TIME11

In addition to the rise in service volumes, healthcare prices are increasing across the board,

further increasing the total costs of delivering private healthcare. Exhibit 1 shows benefits per

episode grew by 1.6 percent in private hospital cover, and by 2.5 percent in ancillary cover.

MARKET FAILURES IN THE CURRENT SYSTEM

Private healthcare expenditure has increased by an average of $840 million per year between

2009 and 2015.12 This growth in expenditure has been captured within a concentrated group of

stakeholders in the private healthcare value chain, in the form of higher than normal profits,

leaving other stakeholders in the chain worse off. At the root of these imbalances lie market

failures which have been created by the current system.

0%

10%

20%

30%

40%

50%

60%

70%

706560 9085 95807555453015 5020 3510 405 25

Participation in private hospital insurance by age groupPercent of population, June of each year

Age

2000

20152009

1998

2006

2009

2003

2008

2012

2010

2000

2015est’d

2001

2002

2011

2013

1999

2005

1998

2007

2014

2004

Participation rate

2003

Page | 10

Market failures are dynamics caused by the rules of a governing system, which motivate and

enable stakeholders to capture excess value to the detriment of other stakeholders and/or the

overall system. Regulations governing Australia’s private health system affect decisions and

performance at every stage of the value chain, as stakeholders rationally seek to maximise their

stake in the surplus value.

By way of example, below are some of the current market failures in the Australian private

healthcare system:

■ Prostheses value capture – Australia’s Government regulated Prostheses List sets

minimum reimbursement levels that are nearly twice as high as domestic and international

benchmarks, reducing consumer affordability by up to $800 million per year. Manufacturers

are thus receiving excessive prices (and profits) due to regulation. Furthermore, private

hospitals negotiate bundled discounts with manufacturers, sometimes purchasing

exclusively from a favoured vendor who offers the best discounts. This weakens the

Prostheses List’s intended goal of insulating providers from considering cost in selecting

prostheses.

■ Second tier default benefits for hospitals out of contract with insurers – Currently, the

second tier default benefit arrangements require insurers to pay uncontracted hospitals a

minimum fee for service. This rate is 85 percent of the average paid to comparable

contracted hospitals in that state. Unlike contracted hospitals, non-contracted hospitals are

not restricted in charging additional out-of-pocket costs over and above the fee received

from the insurer, including rates that go beyond the fee that they would have received if

contracted. These arrangements were originally designed to protect small providers in

negotiations, minimising the risk of being out of contract with insurers and providing a fall-

back position. However, this has created an uneven balance of power in negotiations, giving

large providers significant power in negotiation with insurers. Insurers are effectively faced

with the difficult decision of either accepting higher than reasonable rates from providers,

which will drive up member premiums, or risk having members pay significant out-of-pocket

costs on top of the insurer paying near full-amount. In the latter scenario, members are

often required to pay out-of-pocket costs prior to admission – leaving many in a difficult

financial situation at an already stressful time.

■ Increase in rehabilitation referrals – Rehabilitation is a significant expenditure item for

private health insurers, totalling over $600 million per year. Australian Government

legislation mandates minimum benefits payment for same-day and overnight rehabilitation

services, with few safeguards to ensure appropriate usage. As a result, rehabilitation

separations have consistently increased by 15 percent per year, doubling over the past five

years.13 There has been exceptionally sharp growth in rehabilitation services provided in-

house within acute hospitals.

One cause for concern is high variability in referral rates across hospitals – for instance,

rehabilitation referral rates for hip replacements vary between 7 percent and 76 percent

across the 20 highest-volume hospitals. Hospitals with in-house services tend to refer more

patients to rehabilitation, potentially due to the direct financial benefit they receive.

As there is no evidence suggesting that high-referring hospitals have a significantly different

case mix versus the average, these high referrals may provide little or no value to patients.

Proponents have argued better health outcomes with this increase in referrals. However,

Page | 11

many of these health outcomes measures, such as functional independence measure (FIM)

scores, are self-reported by the providers who make the referrals. As examples of the

market failure, Medibank research has uncovered rehabilitation facilities who provide less

than one hour of treatment per day, and facilities where no treatments are provided over the

weekends.

This has significant implications for consumer value and affordability: if high-referring

hospitals achieved average overnight rehabilitation referral rates, total rehabilitation

expenditure would decrease by approximately $150 million per year. Bringing hospitals to

top-quartile referral rates would increase consumer savings to $330 million per year.

■ Over-servicing induced by fee-for-service structure – Healthcare professionals are

compensated on an activity basis for virtually all services. This can create ‘supply-induced

demand,’ wherein providers financially benefit from prescribing and delivering treatments,

even in cases where patients derive little or no benefit.

Furthermore, the current MBS structure requires insurers to pay for listed procedures

regardless of evidence of efficacy for the procedure or value to the patient. An independent,

systematic review of MBS items has identified thirteen procedures with significant

expenditure with little, no, or unproven value such as arthroscopic surgery for knee

osteoarthritis and surgery for obstructive sleep apnoea.14 These procedures are sometimes

used in favour of evidence-based and more cost-effective, alternative treatments.

Medibank supports the ongoing reviews of primary healthcare and the MBS, which are

addressing this challenge through measures such as defining narrower patient profiles for a

given procedure, limiting the maximum frequency of procedures, and potentially moving

towards a value-based or capitated model. The recommendations below are consistent with

this direction – for instance, connecting data sources on cost and health outcomes can shed

light on priority areas where the current funding model may not be appropriate.

While many market failures are driven by the regulatory system, some are not motivated by

regulations. They are instead caused by inadequate contractual arrangements between insurers

and providers, such as the increase in case mix upcoding, or by the lack of disincentives, such as

medical specialist out-of-pocket maximums. While some insurers are working to correct such

issues, they persist and in doing so impact on consumer value-for-money. Two examples of such

market failures are described below.

■ Increase in case mix upcoding – There has been a pronounced trend towards higher-

complexity coding from private hospitals: Category A benefits, for Diagnosis Related Group

(DRG) episodes with the most complex case mix, have increased by 7.3 percent per year,

while Category D benefits, for the least complex case mix, have declined by 3.7 percent per

year. Category A now comprises a full third of patients, versus a fifth in 2010. This growth

rate is more than twice as high as the growth rate of Australia’s over 65 population,

suggesting that changing demographics can only explain a small part of this trend.

High variance in incorrect coding suggests that some providers may tend to over-claim high

complexity. In a recent audit of 6,400 Category A cases across 36 private hospitals in

Australia, Medibank found ‘error’ rates ranging from 6.8 percent to 39.2 percent, with an

average of 13.5 percent. Exhibit 4 below illustrates this variation in error rates. Since

insurers can only process 10 percent of questionable claims, and hospitals are not

penalised for coding incorrectly, the current system may create a bias towards ‘upcoding’.

Page | 12

EXHIBIT 4: DRG CODING ERROR RATES ACROSS AUDITED HOSPITALS

This trend has significant financial implications. If Category A expenditure had grown in line

with Category B and C over the last 4 years, then total 2015 benefits would be $420 million

lower than actual levels. As less than half of this can be explained by demographics, the

balance is effectively a transfer of value from consumers – through higher benefits, and

thus premiums – to private hospitals.

■ Variation in out-of-pocket costs charged by medical specialists – Many medical

specialists are billing more in out-of-pocket expenses than Medicare and private health

insurance benefits paid, and this billing behaviour is highly correlated with the

socioeconomic status of patient pools. In some cases, provider charging appears truly

extreme: Medibank claim records demonstrate one medical specialist charged $678,000 in

out of pocket expenses over the period of a year, for just 180 billed services in addition to

claiming Medicare and private health insurance benefits.

If it were possible to link specialist billing behaviour with health outcomes then arguably

such variation in charging practices could be justified. Unfortunately while such data

undoubtedly exists it is unavailable to consumers, leaving them with little information to

make informed decisions on medical specialists – a classic example of market failure.

IMPACT ON CONSUMER AFFORDABILITY AND VALUE

One consequence of these market failures is that healthcare is expensive in Australia compared

to other countries. Domestic price levels for medical procedures were over twice the level of

most European countries for hospital services in 2011. Similarly, an international comparison of

9%

16%

7%

11%

24%

22%

14%

39%

19%

Percentage error rate by hospital, 2014-15

Page | 13

six comparable countries in 2013 found total physician and hospital costs for hip replacements

and bypass surgery in Australia were second only to the United States. In this analysis, the cost

of hip replacements in Australia was 38 percent higher than New Zealand, and more than

double the cost in the Netherlands.15

The increase in prices cannot be explained by increasing complexity of procedures alone: the

cost of the same procedure in Australia is more expensive than in other countries. For instance,

Exhibit 5 shows the average invoice cost for cataract surgery in Australia was greater than that

for other comparable healthcare systems, including the United States and New Zealand.

EXHIBIT 5: COST OF CATARACT SURGERY IN SIX HEALTHCARE SYSTEMS16

A 2014 report by the Grattan Institute reported a similar variability in the cost of care in the

public healthcare system, where costs in some hospitals were two to three times more than

others in the same state to deliver the same care.17

□ □ □

The accelerated growth in healthcare costs, driven by both price and volume, and the

disproportionately high profit margins of some of the stakeholders in the private health insurance

value chain are ultimately hurting consumers. Reforms need to address the market failures

described above, and others, to recoup excess pools of profit for Australian consumers. The

reform goal is to bring more transparency to the private health insurance industry, make

premiums more affordable, and deliver better value-for-money to consumers.

3,8413,762

3,384

2,016

1,610

1,038

AustraliaNetherlands United StatesNew ZealandArgentina Spain

Average invoice cost; US$, 2013

About Medibank

About Medibank

At Medibank, we stand For Better Health.

These three simple words sit at the heart of everything we do. They define why we exist and what

we stand for. For Better Health means seeing every interaction with our members as an

opportunity to build a relationship. It means we promise three things:

■ Better Choices – we help members make positive health decisions and feel in control of

their health.

■ Better Confidence – we ensure members feel confident about their health and offer genuine

peace-of-mind.

■ Better Outcomes – we advocate for an improved health system that produces quality health

outcomes at a sustainable cost.

We provide health insurance under two brands: Medibank and ahm. Our Medibank brand delivers

a premium, full-service offering, giving Medibank members better access to health services and

advice. Our ahm brand is focussed on giving members maximum value. Altogether we cover 3.8

million private health insurance members Australia wide.

To better meet their needs, today and into the future, we are pioneering a range of innovative

healthcare initiatives. Our approach to optimising health is guided by the “Triple Aim of

Healthcare”, developed by the Institute of Healthcare Improvement, and focusses on the following

elements:

We further extend our health expertise to other populations. This is most clearly seen in our

management of the national, integrated healthcare system for the Australian Defence Force. This

system provides seamless access to quality healthcare for over 80,000 ADF personnel – from

point of injury or illness to recovery. We are proud of the role we play in delivering care to this

important group and the position of trust we have established.

Medibank is also one of the largest telehealth providers in Australia, delivering a range of

publically available healthcare services via phone, online and video, including nurse triage, health

coaching and mental health counselling services.

Page | 15

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Australia, Focus on the States Report Series, No.2.

2 Organisation for Economic Co-operation and Development 2011, Compendium of OECD Well-

Being Indicators.

3 Australian Institute of Health and Welfare 2014, Australian hospitals 2013-14 at a glance,

viewed 3 December 2015,

http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=60129551482.

4 Private Health Insurance Administration Council, June 2015, Competition in the Australian Private Health Insurance Market. Research Paper 1.

5 World Health Organisation 2015, World health statistics 2015.

6 Australian Government Private Health Insurance Administration Council 2015, Competition in

the Australian Private Health Insurance Market. Research Paper 1.

7 Australian Institute of Health and Welfare 2015, Admitted patient care 2013–14: Australian

hospital statistics. Health services series no. 60, cat. no. HSE 156.

8 Based on total hospital spend of $12.8 billion in 2013-14. Insurance

Benefits Trends. Accessed from http://www.apra.gov.au/PHI/Publications/Pages/Statistical-

Trends.aspx

9 Australian Institute of Health and Welfare 2015, Admitted patient care 2013–14: Australian hospital statistics. Health services series no. 60. Cat. no. HSE 156. 10 Australian Prudential Regulation Authority 2015, Statistical Trends In Membership And Benefits Data Tables, accessed 3 December 2015, http://www.apra.gov.au/PHI/PHIAC-Archive/Pages/PHIAC-Archive-Statistical-Trends.aspx

11 Internal Medibank Analysis

12 Australia Prudential Regulation Authority 2015, Private Health Insurance Benefits Trends,

viewed 3 December 2015, http://www.apra.gov.au/PHI/Publications/Pages/Statistical-

Trends.aspx

13 Medibank analysis of internal hospital separations data

14 Elshaug AG, Watt M, Mundy L, Willis CD 2012, ‘Over 150 potentially low-value health care

practices: an Australian study’, Medical Journal of Australia, vol 197, no. 10, pp 556-560.

15 International Federation of Health Plans 2013, Comparative Price Report: Variation in Medical

and Hospital Prices by Country.

16 International Federation of Health Plans 2013, Comparative Price Report: Variation in Medical

and Hospital Prices by Country.

17 Duckett, SJ 2014, Controlling costly care: a billion dollar hospital opportunity, Grattan Institute,

Melbourne.