Department of health and ageing annual report 2002-03
OUTCOME 8 CHOICE THROUGH PRIVATE HEALTH
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- Navigate this page:
- PART 1: OUTCOME PERFORMANCE REPORT
- Reform of Private Health Industry Regulation
- Rules Application Processing System
- Outreach Services—Extension to Nursing Homes
- Performance Indicators (Effectiveness Indicators)
- OUTCOME SUMMARY—THE YEAR IN REVIEW
- Affordability of Private Health Care
- Participation Rates and Age Profiles
- Federal Government 30% Rebate
- Informed Financial Consent and Simplified Billing
- Review of Prostheses Arrangements
- Out of Hospital Insurance Plans
- Access to Private Health Services
- Private Hospital Access Taskforce
- Bush Nursing, Small Community and Regional Private Hospitals Program
- Consumer Understanding and Awareness
- High Quality Private Health Services
- Improved Ongoing Industry Relationships
- The Design of Appropriate Private Health Products
- Outcome 8—Financial Resources Summary
- Performance Information for Departmental Outputs
OUTCOME 8 CHOICE THROUGH PRIVATE HEALTHA viable private health industry to improve the choice of health services for Australians. Did you know...?Since the introduction of the Australian Government’s series of private health insurance reforms, the number of Australians with private health insurance has increased from 5.6 million to around 8.7 million. No gaps arrangements mean that these members now receive more than four out of five in-hospital medical services with no out-of- pocket expenses. PART 1: OUTCOME PERFORMANCE REPORTOutcome 8 is managed within the Department by the Acute Care Division. The Private Health Insurance Administration Council (PHIAC) and the Private Health Insurance Ombudsman (PHIO) also work towards the achievement of Outcome 8. Both produce their own annual reports. Major AchievementsReform of Private Health Industry RegulationIn 2002-03, an interdepartmental review of Private Health Industry Regulation was conducted to look at options to contain future private health insurance premiums to ensure the continued affordability of private health insurance for consumers. The Australian Government made a number of decisions following the review including streamlined processes, improved transparency and accountability of fund management, revising existing prostheses arrangements, introducing a rural and regional default benefit to replace the second-tier arrangements and developing new arrangements to enhance risk-sharing arrangements between funds. The Department commenced implementation of these new arrangements. Rules Application Processing SystemAs part of the Australian Government’s On-Line Strategy, and to support the move to less regulation for health funds, the Department developed a new system for the electronic processing of notifications by funds of changes to their business rules. The Rules Application Processing System went live in August 2003. ChallengesOutreach Services—Extension to Nursing HomesThere was a delay in establishing private sector Hospital in the Nursing Home trials to test the feasibility of providing acute care services to privately-insured older Australians who are residents of nursing homes as a direct substitute for admitted patient care. The delay was due to cross-portfolio legislative issues. Investigations are currently underway to ensure that the proposed trials will be consistent with the relevant Act. Performance Indicators (Effectiveness Indicators)
The Department’s performance against these indicators is discussed in the following outcome summary. Specific references to these indicators are marked by footnote. OUTCOME SUMMARY—THE YEAR IN REVIEWIn 2002-03, the Department continued to focus on improving health care options for all Australians through the ongoing implementation of reforms and a comprehensive review of the private health industry. The reforms are designed to make private health insurance more efficient, competitive and attractive to consumers. They are part of the Australian Government’s commitment to giving Australians greater choice in health care, while ensuring a sustainable and balanced health system for the future by supporting a private health sector that complements the public health system. The areas of reform identified in 2002-03 were: affordability of private health care; access to private health services; consumer understanding and awareness; high quality private health services; improved ongoing industry relationships; and the design of appropriate private health products. All six areas of reform were identified in the 2002-03 Portfolio Budget Statements. In September 2002 and April 2003, the Minister for Health and Ageing, Senator the Hon Kay Patterson announced a range of reforms to the regulation of the private health insurance industry. These reforms are the outcome of the Regulation Review of Private Health Insurance announced by the Minister in April 2002. The first stage, announced in September 2002, focussed on the key issues of streamlining the annual premium increase process for funds with increases less than the rate of inflation, reducing the rigour of product regulation to promote innovation and competition, improving the transparency and accountability of health insurance service providers to protect consumers, negotiating a more acceptable approach to eliminate some obvious ‘lifestyle products’ from the range of ancillaries cover, and establishing benchmarks in relation to management expenses. The Health Legislation Amendment (Private Health Insurance Reform) Bill 2003 (the Bill) was introduced into the Senate in March 2003. The Bill amends a range of health legislation to implement the reforms requiring legislative amendment from the September 2002 announcement. As at September 2003, the Bill had passed through the Senate. The second stage, announced in April 2003, focussed on the key issues of reducing the regulation of private insurance coverage of prostheses, encouraging efficiency by changing the model of reinsurance, cessation of the second tier default benefit and introducing a new rural and remote default benefit, and acceptance of the benchmarks provided in relation to management expenses. Each of these reforms and the impact on the private health insurance industry are addressed below. Affordability of Private Health CareThe Department has implemented a broad range of initiatives that have contributed to improving the affordability of private health insurance. This objective is being pursued through initiatives such as the Federal Government 30% Rebate, Lifetime Health Cover, no or known gap arrangements, informed financial consent and simplified billing, and the deregulation of prostheses arrangements. After the industry experienced financial losses in 2001-02, all private health insurance funds increased premiums in April 2003. Despite after- tax losses totalling some $60 million, the industry average premium increase of 7.4 per cent was only slightly higher than the 6.9 per cent increase that occurred in 2002. This increase compares with a 22 per cent increase in the level of benefits paid by health funds over these two years. The Department coordinates the annual premium round, scrutinising all proposed increases jointly with the industry prudential regulator, the PHIAC which announced the results of the process in March 2003. As a result of the Regulation Review, the annual premium increase process was streamlined for the April 2003 round. While all funds were required to submit detailed financial information and all proposed increases were scrutinised closely, less information was required from funds proposing increases equal to or less than the rate of inflation.
The number of people with private health insurance under the age of 65 was 7.41 million in June 2003 compared with 7.72 million in June 2002 up from 4.95 million in June 1999.1105 Federal Government 30% RebateThe Federal Government 30% Rebate on private health insurance continued to directly reduce the cost of premiums to consumers. This program gives Australians a 30 per cent rebate on the full cost of their private health insurance premiums no matter what their level of cover, income or type of membership. The rebate can be taken either as a direct reduction in the cost of a premium at the time of payment or claimed through the tax system. The total cost of assistance delivered under the Federal Government 30% Rebate for 2002-03 was $2.327 billion, consisting of $2.166 billion appropriated through the Department of Health and Ageing and an estimated $161.2 million administered by the Australian Taxation Office. Lifetime Health CoverIn the 1999-2000 Budget, the Australian Government announced the introduction of Lifetime Health Cover, which changed the way private health insurance operates. Lifetime Health Cover is a long-term structural reform designed to encourage people to take out hospital cover earlier in life and to maintain their cover over their lifetime. People who take out hospital cover with a registered health fund before they turn 31 and maintain that cover throughout their lifetime will pay a lower premium throughout their lives relative to people who delay joining. As a result of the Regulation Review, in 2002-03, the Australian Government will introduce a nominal birthday so that all the provisions of Lifetime Health Cover will apply from a single date each year, rather than on a person’s actual birthday. In future, the deadline for taking out private hospital cover without a Lifetime Health Cover loading will be the 1 July after a person turns 31, and the loadings will go up 2 per cent each year. This initiative will enable funds to advertise for new members in a more concentrated and efficient manner. The legislative amendments also make improvements to Lifetime Health Cover for new migrants, some expatriates and veterans. Gap Cover SchemesA major concern for people with private health insurance is when the medical and hospital charges for in-hospital medical treatment are above the combined Medicare and health fund rebate. These are referred to as out-of-pocket costs and are created by the ‘gap’ between doctors’ charges and rebates. The Department has continued to focus on consumer access to gap cover schemes that are non-contractual arrangements between health funds and medical specialists. This is designed to eliminate or reduce out-of-pocket costs for health fund members. ‘No gap’ health insurance covers the full cost of medical services provided by doctors in hospital. ‘Known gap’ health insurance covers all but a specified amount or percentage of the full cost of these services, and ensures that patients are advised in advance of treatment of the amount they will need to pay from their own pocket for the medical service. A review of Gap Cover Schemes was tabled in Parliament in December 2002. By June 2003, 37 health funds had approved gap cover schemes in place while 6 funds have arrangements in place that provide no or known gap cover under contract arrangements with hospitals and doctors. Figures to 30 June 2003 show that 66.9 per cent of insured in-hospital services were covered by a no or known gap arrangement at that time. This is an overall increase from 60.5 per cent at 30 June 2002 and 1 per cent at 30 June 1998.106
The Australian Government has decided to encourage a self-regulatory approach to informed financial consent in the first instance. To this end, the Minister for Health and Ageing, Senator the Hon Kay Patterson has written to relevant stakeholders and invited representatives to join an Informed Financial Consent Strategy Taskforce. The Taskforce will develop and implement a strategic plan to improve the incidence of informed financial consent. The Department provided funding to the Health Insurance Commission to develop electronic options to make it easier for doctors to provide the cost and rebate information necessary to allow the patient to make a decision about their treatment based on having details of associated costs. Trials of the electronic system will commence late in 2003. Alongside informed financial consent, simplified billing addresses consumer understanding of the insurance product through the simplification of fees and charges. There are three elements to simplified billing: the aggregation of a patient’s bills for in-hospital care, the streamlining of claims procedures and the provision of informed financial consent. The use of simplified billing by private patients continues to grow. This is a result of simplified billing being introduced as part of gap cover schemes. The percentage of Medicare in-hospital services claimed under simplified billing as a percentage of the total insured in-hospital services claimed increased from 24.7 per cent in July 2000 to 66.4 per cent in June 2002 and 72.3 per cent in June 2003.
The Department has held consultative meetings with all the major stakeholders to outline the proposed changes, and is currently facilitating meetings with the private hospitals and private health insurance funds to assist with the development of the design of, and implementation strategy for, the new arrangements. Out of Hospital Insurance PlansAs part of the Australian Government’s ‘A Fairer Medicare’ package announced in April 2003, private health insurers will be able to offer a product which is designed to ensure that those patients with high medical needs and costs have some cover and a level of affordability for their out-of-hospital care. In May 2003 the Health Legislation Amendment (Medicare and Private Health Insurance) Bill 2003 was introduced in the Senate. One element of this bill is an amendment to the National Health Act 1953 enabling health funds to provide this type of insurance. Access to Private Health ServicesWith high numbers of consumers choosing private health care, it is important that the private health industry positions itself now and into the future to meet the expectations and demands of the privately insured. The Department continues to monitor and liaise with the private hospital sector to ensure that a private sector perspective is considered in aspects of general health policy. The Private Hospital Access Taskforce (PHAT), the bush nursing hospital initiative, outreach services and work on private rehabilitation all ensure that the high level of demand for private patient services is met by appropriate access to private hospitals. Private Hospital Access TaskforceThe PHAT was established as a result of a strategic forum in February 2002. The PHAT contains departmental, broad industry and consumer representation. This Taskforce continued to meet throughout this financial year to discuss a number of industry issues, aiming to ensure that privately insured patients continue to gain admission to private hospitals. Bush Nursing, Small Community and Regional Private Hospitals ProgramThe Bush Nursing, Small Community and Regional Private Hospitals initiative provides an opportunity for small rural private hospitals to review and restructure operations to better meet the needs and expectations of their local communities. Funding has continued to be provided to hospitals to support access to a range of private health services. Strategic plans have been produced for each hospital to identify opportunities for refurbishment, business re- engineering or restructuring. Further funding has been provided to eligible hospitals to implement such changes. In many cases, hospitals have been able to broaden the range and scope of services that they offer and establish links with other health service providers in their area. During 2002-03, 40 of the 62 eligible hospitals throughout regional and rural Australia have been active in the Program. 36 of these hospitals have had Strategic Service Plans completed and 31 of these hospitals have received further funding to implement the service planning recommendations.107 Outreach ServicesConsistent with the Australian Government’s commitment to enhancing patient care options, private sector outreach services continued to be developed during 2002-03. On the advice of the Private Sector Outreach Services Working Party, the Minister for Health and Ageing, Senator the Hon Kay Patterson approved 16 applications for new or renewed private sector outreach services during the year. These services are now provided by 28 different facilities across Australia. Section 5E of the National Health Act 1953 requires the Minister for Health and Ageing, to arrange for an independent review of outreach services to be undertaken and the report of the review to be tabled in both houses of Parliament by 30 June 2003. The review was completed on time and found that, overall, stakeholders are supportive of private outreach services and generally satisfied with the application and approval processes in place. There was delay in establishing private sector Hospital in the Nursing Home trials to test the feasibility of providing acute care services to privately-insured older Australians who are residents of nursing homes as a direct substitute for admitted patient care. The delay was due to legislative issues. Investigations are currently underway to ensure that the proposed trials would be consistent with the Aged Care Act 1997. It is now envisaged that the trials will commence in 2003-04.
Private RehabilitationThe Department continued its work with the industry to improve classification and payment systems for private rehabilitation. In response to the Blended Payment Model Consultancy Report commissioned by the Private Rehabilitation Working Group, the Minister for Health and Ageing, Senator the Hon Kay Patterson accepted a recommendation by that Working Group that the payment model be implemented on a voluntary basis only. The Department continues to work with industry regarding increased standardisation of data collections between public and private sectors, including through its representation on the board of the Australasian Rehabilitation Outcomes Centre (a rehabilitation data collection and benchmarking agency which utilises both private and public sector data). Consumer Understanding and AwarenessThe Department is committed to working with the private health industry and other agencies to ensure consumers can have confidence in the private health experience. The Department will ensure that the industry provides consumers with quality information to assist them in their choice and use of private health insurance products. Consumer initiatives are designed to increase consumer awareness. However, a proliferation of information about private health insurance, produced by the health funds, the Department, PHIAC and the PHIO, is a potential impediment to consumer understanding. The Department is working with all stakeholders to ensure that well targeted information products work to enhance and inform consumer choices.108 The Key Features Guide helps to make comparison of products easier for consumers. While publication of a key features guide is voluntary, almost all of the health funds had produced key features guides and were distributing them to consumers. A number of health funds have also made their key features guides available on their websites. An Australian Government review of the functions of the PHIO was completed in 2002-03. In line with this and the Regulation Review’s focus on industry transparency and accountability, PHIO will be given greater powers in relation to complaint investigation and resolution. This includes the power to make a report to the Minister in relation to outcomes of investigations into a complaint and to make information about performance of the health funds readily available to consumers via a State of the Health Funds Report. The number of disputes as a proportion of complaints to the PHIO regarding access to private health services is indicative of consumer satisfaction with the choice of private health care. A complaint is defined as an expression of dissatisfaction with any matter arising out of or connected with a private health insurance arrangement. Complaints can range in level from a need for explanation of an issue to a dispute where the issue has not been resolved between the complainant and the health fund, hospital, doctor or other provider. At 30 June 2002, 15.4 per cent of all complaints were disputes. This figure fell to 10.8 per cent in March 2003 and was 18.9 per cent in June 2003. The increase in the last quarter was possibly due to the increased awareness of consumers about their private health insurance and the role of the PHIO.109 High Quality Private Health ServicesQuality in private health services ensure that consumers choose to use their private health insurance. The Department works on improving the level of choice for private health care through revising arrangements such as neonatal care and day only arrangements as well as ensuring the delivery of high quality health services through quality criteria and accreditation initiatives. The measure of consumer choice for quality private health care is demonstrated as the proportion of private patients of all patients in both public and private hospitals. The percentage continued to trend upwards to 36.8 per cent in June 2002 up from 35.6 per cent in June 2001 from 33.8 per cent in June 2000. These upward movements followed a decline to the lowest point of 32.8 per cent in June 1999.110 The Private Health Industry Quality and Safety (PHIQS) Committee coordinates and leads quality and safety enhancement initiatives in the private health industry. PHIQS achieves this through involvement in industry self-regulation, facilitation of quality improvement and information sharing and dissemination with private health care providers about best practice and quality initiatives in the private and public sectors. PHIQS assisted in the development of a core set of quality-related criteria for the accreditation of private hospitals and day surgeries and promoted an increased focus on quality use of medicines in the private sector. The Committee devised a strategic action plan in 2003 for its six working groups to support the work of the Australian Council for Safety and Quality in Health Care in the areas of safety and quality of medicines, accreditation, credentialling, performance measurement and consumer participation. Private Sector Quality Criteria have been developed and implemented during 2002-03. This means that a core set of quality-related criteria is being applied in the accreditation of private hospitals and day surgeries. Also due to the work of PHIQS, the majority of accreditation is being performed by internationally approved accreditation agencies, in line with the proposed national framework of the Australian Council for Safety and Quality in Health Care. Improved Ongoing Industry RelationshipsThe Department has working relationships with PHIAC, the PHIO, and the Australian Competition and Consumer Commission (ACCC) as well as wider relationships in the private health industry to support competition in the industry. A voluntary Code of Practice relating to contract negotiations between health funds and private hospitals/day hospital facilities has facilitated improved contracting relationships in the market. Compliance with this code continues to be monitored by the Department and the ACCC. The Department has continued to look after the interests of privately insured patients through its membership of standing committees such as the National Health Data Committee and the Strategic Planning Group for Private Psychiatric Services. The Department continued the ongoing review of the day only arrangements to ensure they remain in line with best practice. A particular emphasis was placed on length of stay and admitted patient care being provided in appropriate facilities. Following the second stage of the Regulation Review, the Australian Government decided to phase out the second tier default benefit by June 2004. It was replaced by a rural and regional benefit on 1 July 2003. Small private hospitals and day hospital facilities (those with 50 beds or less) in hard to service rural and regional areas which do not have a hospital purchaser-provider agreement with a particular fund will be eligible to apply for the rural and regional benefit, which is higher than the minimum default benefit. Access to the benefit is subject to such facilities meeting, on an ongoing basis, rigorous administrative, quality and safety requirements and demonstrating that they are vital to maintaining access to a reasonable range of private hospital services for their local community. As part of the Australian Government’s On-Line Strategy, and to support the move to less regulation for health funds, the Department developed a new system for the electronic processing of notifications by funds of changes to their business rules during 2002-03. The Rules Application Processing System is expected to come on line early in 2003-04. The Design of Appropriate Private Health ProductsThe Department attended industry forums to consider issues and concerns about product design and complexity and the implications of these for consumers. This action has led to informed discussions with the industry on product trends and development. As a result of the Regulation Review, the Health Legislation Amendment (Private Health Insurance Reform) Bill 2003 amends the National Health Act 1953 to reduce the regulatory burden in relation to health fund product design. Health funds will no longer be required to submit proposed products for assessment and approval, however, consumers will continue to be protected. The Department will be implementing a regime of performance indicators against which health fund products will be evaluated. The indicators will be based on the Australian Government’s private health insurance policy objectives and the relevant legislative requirements and the regime further provides for a range of sanctions to be imposed depending on the severity and/or frequency of any failure to comply. The details of the performance indicators are being developed in consultation with key stakeholders. Outcome 8—Financial Resources SummaryPART 2: PERFORMANCE INFORMATIONPerformance Information for Administered Items
Bush Nursing, Small Community and Regional Private Hospitals Initiative
Performance Information for Departmental Outputs
development of policy initiatives to make private health insurance more attractive to consumers and thereby support the ongoing viability of the private health industry sector.
Program Management, including: develop and trial models of reform to improve care and funding arrangements for patients accommodated in private hospitals; develop and implement strategies to improve quality and cost-effectiveness of care in the private sector; implement more effective arrangements for rehabilitation care in the private sector; facilitate the restructure of the rural private hospital sector to maintain appropriate access to private health services for privately insured consumers in rural areas;
recognition of hospital and day hospital facilities and special care nurseries for payment of health insurance benefits;
monitor the operation of Lifetime Health Cover; assessment of applications under the Lifetime Health Cover hardship provision;
monitor health insurance fund rule changes ensuring health insurance products and premiums meet the Government’s legislative requirements as set out in the National Health Act 1953 and Health Insurance Act 1973; and regulation of the default table and prostheses list for benefits payable by funds to recognised hospitals and day hospital facilities.
Agency Specific Service Delivery, including: make payments to the HIC and ATO for the administration of the Federal Government 30% Rebate on private health insurance; and ensure that participants have effective and efficient access to the 30% Rebate scheme through appropriate monitoring of HIC’s and ATO’s legislated service delivery functions in accordance with agreed protocols.
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