CHERE in the Media

Media Releases

14 July 2006

PRIVATE HEALTH INSURANCE REBATE ‘UNSUSTAINABLE’

The federal government’s 30 percent rebate on private health insurance (PHI) is unsustainable, according to a University of New South Wales (UNSW) academic who has researched the area.

“The rebate is a blunt instrument, relying on the notion that people with private health insurance are going to use it and take the pressure off the public system,” said Professor Denzil Fiebig from the School of Economics in the Faculty of Commerce and Economics. “It’s clear from our research that that is not the case.”

The government has spent over $2 billion every year on the PHI rebate since it was introduced in 2000.

“Fifteen percent of people are members of a health fund because of the financial incentives put forward by the federal government,” said Professor Fiebig. “For a lot of people, especially in the higher income brackets, it is clear that they are facing a negative price if they don’t have private health insurance, because otherwise it will be taken away in tax.”

Professor Fiebig has presented the findings of his team’s research to the Econometrics Society Australian Meeting in Alice Springs.

The researchers used figures from the 2001 Australian Bureau of Statistics National Health Survey to identify four broad categories of people with PHI, including those who identified themselves as taking up private health insurance because of the government rebate. The researchers referred to them as “financial” types.

“These “financial” types are no more likely to use the private hospital system than they are to use the public one,” he said. “This may be because they’re happy with the public hospital system, or it may be because of the out-of-pocket expenses they would face – even with private health insurance – in the private system.

“While private health insurance coverage in Australia has increased by 50 percent as a result of the rebate, that is not necessarily easing pressures on the public hospital system,” Professor Fiebig said.

The three other categories the researchers listed are: those who want choice; those who seek security; and those who have health as their primary motivator. Forty-three percent of people list a combination of reasons for taking up PHI.

“The irony is that those who are the recent converts to PHI – the “financial” types - are not using the private hospital system, yet those who have been in for five, ten or 15 years have a windfall gain,” said Professor Fiebig. “They would have had private health insurance regardless, but now they also benefit from the 30 percent rebate.

“Interestingly, the number of people with health insurance is decreasing again,” said Professor Fiebig. “It could be because people are disillusioned with what PHI has to offer and part of that could be increased premiums.”

The co-authors of the research paper, Does the reason for buying health insurance influence behaviour?, are Elizabeth Savage and Rosalie Viney from the Centre for Health Economics Research and Evaluation at the University of Technology, Sydney.

CONTACT DETAILS: Professor Denzil Fiebig, tel. 0411 303 965 or Susi Hamilton, UNSW Media unit, tel. 9385 1583 or 0422 934 024, email susi.hamilton@unsw.edu.au

Date Issued: 14 July  2006

Top health economist calls for caution in healthcare reform

University of Technology, Sydney health economics expert Professor Jane Hall last night (6.30pm 27th March) discussed whether Australians were getting good value for money for the 9.7% of GDP spent on health each year.

Director for the UTS Centre for Health Economics Research and Evaluation (CHERE), Professor Hall addressed more than 160 senior health sector stakeholders at the first UTSpeaks public lecture for 2006.

Professor Hall told guests that the healthcare spending currently accounted for $78.4 billion per annum.  “Much of this comes from government, but Australians also pay $16 billion per annum or $800 per person in direct out-of-pocket health costs, which is high compared to other OECD countries,” Professor Hall said.

“As a community gets richer individuals can expect to pay more for their healthcare. The problems start when health costs impose severe financial burden on families or people avoid seeking healthcare because of the expense,” she said.

“The issue is how we pay for future health care, what effect that has on individuals and families’ access to care, and what incentives it establishes for providers. To rein in healthcare costs while achieving efficiency and equity, we have to understand provider/ doctor behaviour. Whether it is fees charged, referral patterns or practice variations, only through research can we find the appropriate incentives to predict and control costs in the future.

“For example, the Medicare Safety Net was introduced to protect families at greatest financial risk. CHERE research has shown the scheme does more to benefit high-income families than those most in need. This shows how difficult it is to target schemes appropriately without detailed understanding of how doctors respond to funding changes.

“The impatience of reformers must be tempered so that the cure isn’t worse than the disease. There is increasing international evidence that poor design of funding and delivery systems is bad for your health,” she said.

Prof Hall believes that the provision of primary care in Australia needs well-considered reform.  “There is a lot of talk about medical workforce shortages in Australia, but current arrangements for the provision of primary care lack flexibility and fail to respond to the needs of the community. Healthcare provider roles are restricted to particular professional groups and this control is reinforced by payment mechanisms such as limiting MBS reimbursement to medical practitioners.

“There is ample evidence overseas that healthcare professionals, other than GPs, can adequately deal with routine complaints.  Alternative skill sets and training may be better suited to deal with some chronic conditions like mental health.  It is time for a major restructure of primary care to incorporate a multi-disciplinary and population based approach. But this has to be combined with a move away from fee for service to a mixed payment approach that uses salary, capitation and performance incentives,” she said.

The viability of private health insurance is another key area of research for Prof Hall and her colleagues at CHERE. 

“Premiums are continuing to rise at 7% p.a. and with this, the cost of government subsidies will rise.” Prof Hall said. “But calls for US style managed care are unlikely to be popular with Australians, and international evidence shows that managed care in the US has not successfully constrained expenditure levels.”

“Current arrangements for the provision of PHI are “not sustainable” and there is no case for maintaining the Government’s 30% subsidy for PHI. Prof Hall argues for a single public insurer, which offers different insurance packages, which cover comprehensive care, but with different levels of co-payments and deductibles.

Ends…

Further Information:

Kathy Scott

Communications Manager CHERE

9514 4741 or 0400 400429

Medicare Safety Net Funding Missing the Target

Medicare Safety Net Expenditure appears to miss its target according to Kees van Gool, Senior Research Officer at CHERE, The Centre for Health Economics Research and Evaluation, UTS.

The CHERE research has found that since its introduction in 2004, 90% of the $440 million spent on the Medicare Safety Net went to specialist services and 38% of this money funded IVF and private obstetric services.

Mr van Gool, who with his CHERE colleagues is conducting research into Medicare Safety Net expenditure, agrees that electorates with high GP bulk billing rates have lower Safety Net Expenditure.  However, Mr van Gool notes that only 10% of Safety Net expenditure is spent on GP services. The research also found that

• better health as defined by lower rate of premature death was associated with higher safety net expenditure

• the Medicare Safety Net does not benefit all elderly. Expenditure was high for the 75 – 84 year old age group but not for the 85 years and above age group.

“According to the government, the Medicare Safety Net was introduced to provide disaster insurance to people suffering from chronic illness,” Mr van Gool said.  “It is clear from our analysis that higher income electorates receive the most benefit from the Safety Net and the funding does not appear to be distributed  in the way it was intended.  It is time to re-examine the universality of Safety Net eligibility,” Mr van Gool said.

The CHERE research is based on analysis of 5 months of Medicare Safety Net Expenditure data from March – July 2004.  Preliminary analysis of the 2005 data released by Minister Abbott yesterday indicates that the findings from the 2004 data are robust.

9 MARCH 2006

Are Poorly Paid Nurses Bad for Our Health?

Are people who chose to enter the public service and work in caring professions such as nursing and teaching motivated by good works or money?  Should the government use financial incentives to improve public service productivity?

Professor Carol Propper is visiting the Centre for Health Economics Research and Evaluation CHERE at UTS, from Bristol University.  She is an international expert on public sector productivity and is delivering a CHERE public lecture on March 14 titled “Is Low Pay for Nurses Bad for Your Health?”

Carol is a Founding Member of The Centre for Market and Public Organisation, CMPO, which through research, seeks to understand the right way to organise and deliver public services.  Her research challenges the union stance which opposes scrutiny of workers’ performance and linking output to remuneration.

“Reforming public service delivery occupies a central position in the current policy agenda in many countries, Australia included,” Carol said. There is a growing body of evidence to suggest that public sector workers do respond to monetary incentives and that policy makers who ignore this do so at their peril.”

One study conducted by Carol at Bristol University looked at a group of 180 teachers who had been offered financial incentives in return for improved student outcomes. Although the ‘Performance Threshold Scheme’ was condemned by the teachers’ union, the researchers found pupils of the incentivised teachers were likely to score half a grade higher than their counterparts. “Our results suggest that teacher-based performance pay is a policy tool education authorities should consider as part of their drive to raise educational performance,” Carol said.

In Australia CHERE research has found that city hospitals have problems filling nursing positions and nursing shortages are likely to worsen as attrition rates are especially high among young nurses.

Prof Propper says this scenario is mirrored in the UK where it stems from the public sector regulation of pay.  “Nurses in big cities are simply not paid enough to compensate for the higher cost of living, so that even if motivated by altruism they can’t afford to work in big city hospitals.   We found hospitals in areas where nurses are paid relatively well compared with the private sector score higher on a range of performance targets.  Underpaying people harms productivity and in the health sector it can also damage our health”, Prof Propper said.

For more information or to arrange an interview with Prof Propper contact:

CHERE Communications Manager Kathy Scott Ph 9514 4741 or 0415 764 159