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Issue #1653      August 27, 2014

Government agenda

Two-tier health system

Imagine a health system where private health insurance (PHI) companies decide which procedures, tests and treatments patients can have. Where these private funds undermine the right of patients and their GPs or specialists to decide their course of treatment. This is where Australia is headed. While the media has been focusing on the battle between the Australian Medical Association (AMA) and government over the details of the proposed $7 co-payment, Medibank Private has been quietly moving towards a US system of private managed healthcare. The Medibank move paves the way to the delivery of Medicare rebates through PHI companies and creates a two-tier health system with privately insured patients given priority over others.

In a pilot agreement with the Independent Practitioner Network (IPN), Medibank Private is paying an “administrative fee” to selected IPN medical centres. These centres undertake to see Medibank Private members within 24 hours and to bulk bill them. It also offers them access to out-of-hours care.

The GPs at the centres do not receive a direct payment from Medibank. Under the Private Health Insurance Act, PHI funds cannot subsidise individual doctors for medical services or cover the gap (co-payment) between a GP’s fee and the Medicare rebate. There are restricted hospital care and extra services –physiotherapy, psychology, remedial massage, optical, dental, etc.

Medibank has found a way around this by paying the centre an “administrative fee”, not the individual doctors. It plans to extend the model to more medical centres. It can then continue to bulk bill and the equivalent of the co-payment is paid by the insurance fund to the medical centre.

Medibank has attempted to rationalise its pilot program: “If Medibank can support GPs to assist its members to remain healthy and out of hospital, not only do members benefit but it also makes sense to Medibank from a business perspective.”

If appointments are tight, it would be more profitable for a clinic to take the privately insured patient and receive the “administrative fee” than an uninsured patient.

Questions have been raised as to the legality of the Medibank Private trial, as it undermines universal access by creating a two-tier system – immediate access to GPs with bulkbilling for private health fund members. Those without PHI cover (those more likely to be low income and the most disadvantaged) will wait longer or maybe not even get in.

One of the demands of the PHI sector is to be able to cover out-of-hospital medical services and process Medicare rebates. The government has plans to do this. The co-payment and abolition of bulk billing is part of the process. It is still problematic whether it will get through the Senate.

Corporate monopolies

IPN boasts on its website that it is one of Australia’s original founders of corporate general practice. In 2008 it was taken over by Sonic Healthcare Ltd, one of the largest diagnostic service providers in the world. It is Australia’s largest operator of private medical centres, having taken over Gemini Medical Services, Allied Medical Group, and Australian Locum Medical Services. It now has over 220 multi-disciplinary medical services around Australia employing 1,700 GPs and over 1,300 other health professionals.

It typifies the process of privatisation and monopolisation of medical and diagnostic services. Private health insurance companies have been undergoing a similar process of monopolisation through takeovers, mergers and heavy marketing. Two funds, BUPA (26.8%) and Medibank Private (29.4%) cover 56.2 percent of the market. The only other funds with significant membership are HCF (10.8%), NIB (7.7%) and HBF (7.5%).

When two for-profit companies the size of IPN and Medibank Private combine forces, it won’t take long for the others to follow if it proves popular. Such a combination paves the way for the PHI company to ultimately dictate everything from a visit to the GP, diagnostics, hospitalisation, dental treatment, specialists, etc.

Welcome to the US managed health care system where the GP or specialist phones the insurance company for authorisation for an MRI, surgery or a course of treatment. The only missing link is the pharmaceutical market. The pressure is on for the government to deregulate pharmacies. It was a recommendation of the recent National Commission of Audit.

Of course, denying people treatment keeps costs down and boosts profits. That is the aim of the game. The US has one of the worst and most costly health systems in the world. Millions of people cannot afford the care they need.

PHI funds could intervene before someone was treated in hospital and decide whether or not they would be covered by insurance if they went ahead with the treatment. Again, here is the US system of managed health care where bean counters in an insurance company determine surgery and other medical treatment or tests.

Some readers might remember the Michael Moore show where he campaigned for a patient to have a life-saving pancreas operation after a health fund had refused to approve it. That public campaign was successful. How many Americans are not so lucky? Is that what we want in Australia, bean counters in a for-profit insurance company dictating treatment? Hardly.

So why does the government want to go there? Firstly, it wants to completely privatise the health system, like everything else. Secondly, the power of BUPA and Medicare who clearly had a hand in drafting the health section of the National Commission of Audit are driving its agenda.


The Audit report sets the scene for an Americanised managed health care system. It bemoans the fact that private health insurers are excluded from covering services provided through Medicare. “This limits the health funds’ ability to assist in improving the health outcomes of the elderly and chronically ill at the point of diagnosis, which is usually when they initially visit their local doctor.”

The National Commission of Audit prepared for the Abbott government by former Business Council of Australia president Peter Shepherd proposed “Expanded private health insurance plans ... at a minimum, cover all services provided by Medicare and public hospitals ...”

It also proposed a co-payment of $15 or $5 for concession cardholders with a threshold of 15 visits, after which the co-payment would be halved. The government decided to go with $7 which would cut out after 10 visits for concession cardholders.

The Liberals are and always have been philosophically opposed to the pillars of Medicare and our public hospital system: universal access, comprehensive cover, bulkbilling and no-fee public hospitals.

The Audit argued in the same terms as Medibank: “In many cases health funds are not made aware of when their members develop medical conditions and find out only after the member has been treated in a hospital and seeks reimbursement from the fund. Allowing health funds to cover primary care settings would make it possible for them to be more aware of members’ health risks.

“Funds could assist members to manage chronic conditions in out-of-hospital settings. This change is also needed to underpin the requirement for higher-income Australians to take out private health insurance.”

Managed health care

Nowhere does the Audit express concern for the wellbeing of people. It is based on cold-blooded, neo-liberal, capitalist economics. Nor does it challenge proposals to spend almost twice the amount on the military and war preparations as health.

If PHI companies are allowed in the door to cover medical services, or even follow the Medibank model, the cost of premiums will rocket. The “administrative fees” must be funded – it won’t be at a cost to profits! Then there are the additional associated administrative costs as well as the new layers of profit built into such a system. Those without PHI will be seriously disadvantaged either by not getting in to see their doctor or by having to wait longer.

The patient/doctor relationship would be destroyed and the associated privacy of that relationship destroyed, with even more personal data out there for exploitation.

The government is now in the process of contracting out the processing and payments of Medicare claims and PBS payments – in other words privatising Medicare’s operations. Australia Post and the big banks are lined up. Shepherd has opposed this, describing it as a “substantial and potentially high-risk undertaking”. He is correct on that point. But so too is the management of refunds through PHI companies which he is advocating in the Audit report.

Greens legislation

Greens Senator Dr Richard Di Natale has introduced amendments to the PHI Act to safeguard the integrity and efficiency of our universal insurer – Medicare.

“It is necessary to clarify that such arrangements, which create a two-tiered system that favours the insured, are against the spirit and intent of the law,” Senator Di Natale said. “This Bill amends the [PHIA] to make it clear that private health insurers may not enter into arrangements with primary care providers that provide preferential treatment to their members.”

It will be interesting to see if Labor is prepared to support this bill.

The way forward for a better health system, and a cheaper one, is through the strengthening of Medicare with universal access to bulkbilling for medical and dental services, a greater focus on preventative health care and doctors on salaries rather than being paid per consultation.

Next article – Editorial – Executioner of people’s rights

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