This week the Australian Institute of Health and Welfare released its Health expenditure Australia 2014–15 report.

This document contains a wealth of information about the way in which we allocate resources across our health system.

There are many interesting stories in this data which can help us understand how our health system works and what we can do to improve it.

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CTP, Compulsory Third Party insurance (Green Slips) in NSW are looking increasingly like a scam. In theory, if you are injured in a motor vehicle accident that is not your fault, all ‘reasonable and necessary’ treatment is currently paid for by your insurer. People might assume this means good, standard medical practice. This is not so.

In principle, patients are entitled to immediate and early treatment but the first problem is that insurers have up to 3 months to decide if they are liable for the accident. Payment can be delayed until the liability is accepted. Sometimes when two cars collide both insurers decide that the other is liable, and neither will pay. This is quite common. (more…)

In the coming weeks I will be posting articles on the high costs and corporate nature of pathology in Australian. The following article by Stephen Duckett in The Conversation, even though posted in February this year, helps set the scene. John Menadue

The Mid-Year Economic and Fiscal Outlook (MYEFO) set the cat among the pathology pigeons late last year. One of the government’s flagged changes, estimated to save around A$100 million a year, was to abolish the bulk-billing incentive Labor introduced in 2009. (more…)

See below a poster from NSW Health which is being displayed in public hospitals in NSW.

Readers may be interested to comment.

Two things interest me. The first is that the advertisement infers that if you have private health insurance you will get superior service in a public hospital. That surely attacks the principle that in public hospitals patients are to be treated according to their therapeutic needs and not on the basis of income or private insurance. The former CEO of Medibank Pte proposed that PHI members should have priority in Emergency Departments.

The second is that there is an inefficient churning of public money. The Australian taxpayer provides $11 billion p.a. in a subsidy to private health insurance. This subsidy is apparently to be used in part to pay bills for private patients in public hospitals. How much more efficient it would be for the Federal government to abolish the subsidy and adequately fund public hospitals. This churning of money is a symptom of the division of responsibilities in health in Australia and in the inefficiency of private health insurance.. The administrative costs of PHI are three times higher than those of Medicare. PHI premium increases over the last decade have been double the rate of CPI.

An overwhelming majority of Australians support a Royal Commission into the finance sector. Ian McAuley explains why.

We’re paying too much for a bloated financial service sector.A prominent example is Australia’s largest health insurer, Medibank Private, which in the last financial year absorbed just over a billion dollars of contributors’ premiums in management overheads and profits – $511 million as profit and $516 million as management expenses. Spread over its 1.9 million policies that’s $540 per policy holder.

Using a combination of subsidies and penalties (most notably the Medicare Levy Surcharge) successive governments have bludgeoned Australians into holding private health insurance, even though it has proven to be a woefully ineffective and high-cost mechanism of doing what Medicare can do so much better.

Out of every dollar that contributors spend on private health insurers, only 83 cents comes back as claims paid. By comparison, of every dollar that passes through Medicare and the Australian Tax Office, 95 cents is spent on health services.

It’s no wonder people are annoyed with private health insurers: in a recent survey 78 per cent of respondents agreed with the proposition that “private health insurers put profits before patients”. And it’s no wonder that the government’s stealthy moves to displace Medicare with private insurance met with so much resistance in the recent election.

When it comes to general insurance – the insurance that covers cars, houses and business assets – the industry’s performance is even worse. Health insurers, it turns out, are the leanest among a well-fattened lot. (more…)

In my article, ‘Down a different path in Melbourne: how Medibank was conceived’ written in 2000 for the Medical Journal of Australia (see link below), I described the history from 1967 to 1975 which led to Medibank/Medicare.  In that article, I highlighted one issue that drove Gough Whitlam’s determination to establish Medibank/Medicare. His concern was that “The Liberal and Country party Coalition’s voluntary health insurance scheme, supported by taxpayer deductions was wasteful and inequitable.”

The package of measures that introduced Medibank/Medicare abolished the taxpayer subsidy for private health insurance. When the Hawke government introduced a revised Medicare in 1983 it removed the private health insurance subsidies that the Fraser government had introduced.

The ALP today doesn’t understand the threat to Medicare of the $11 billion per annum  government subsidy to private health insurance. I drew attention to this in an earlier blog, ‘The Labor Party does not understand its own creation‘.

‘Down a different path in Melbourne:  how Medibank was conceived’.   Menadue article (1)