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Issue #1695      July 29, 2015


Danger: Privatisation

The privatisation of Medibank Private has fundamentally altered the private health insurance (PHI) sector. Medibank Private, prior to privatisation, acted as a restraint on other private health funds such as BUPA, HCF and HCI. Now it is a share holding company listed on the Stock Exchange. It is obliged by law to put the interests of its shareholders first. That is, profits must by law come before patients!

This of course raises the whole question of private health insurance and the private hospital system.

Patients are the vehicle for making profits. Their hospitalisation, their surgery, their care and outpatient services are commodities.

Built into this private system are layers upon layers of profits:

  • Private health fund
  • Private hospital
  • Private pathology and xrays
  • Private cleaners
  • Private body hire companies for temporary nurses and other staff
  • Private catering for patients
  • Charging visitors for car parking
  • Private medical practitioners on blown out fees – and so on.

Every layer of profit adds additional costs to the system which ultimately come out of patients’ pockets through higher insurance premiums, gap payments for services and through the taxation system for the PHI rebate.

But that is not all. In their drive to maximise profits, there is a strong incentive to cut costs. This is done by such means as lower nurse-patient ratios, employing fewer permanent staff, excessive overtime, contract labour, using cheaper and inferior products, short-cuts in procedures, inadequate cleaning, food not meeting dietary requirements, faster turnover of patients.

Unfortunately, such practices are increasingly occurring in public hospitals but they are not driven by the profit motive. They are the result of decades of deliberate under-funding. Low salaries, long hours, understaffing and under resourcing are placing impossible pressures on nursing and other staff, to the point where their health is affected. Many have just left the system to find other types of employment.

The PHI industry, and it is an industry, promote their business as keeping pressure off public hospitals. They claim they are freeing up public hospital beds for the most disadvantaged.

This is nothing short of deception. The reality is every dollar more the government spends on subsidising private hospitals, on keeping an otherwise unsustainable system afloat, is one dollar less for public hospitals.

Australia is fast heading down the path of America. The listing of covered and not covered events is a slippery slope towards patients having to first gain the authority from their fund prior to surgery and other procedure. A bean counter in Medibank or BUPA, not the medical professionals along with their patients who they know, will be making life and death decisions.

The private health funds are feeding on the sick like vultures.

Australian Medical Association president Professor Brian Owler told the National Press Club on July 22 that Treasury estimates $57 billion in funding will be taken out of our public hospitals between 2017 and 2025.

The public hospital system cannot sustain such cuts. It is already reeling from past cuts putting in jeopardy its high quality care.

“Elective surgery is anything but ‘elective’. It includes cancers and life-threatening conditions,” Owler said.

“Meanwhile, people suffer. They can’t work and support themselves or their families. These patients are in pain, and debilitated.”

There is no end to the long waiting lists in sight.

Privatisation by stealth

The Communiqué issued by the Leaders Retreat on July 23 gave little hope. They are looking at “efficient arrangements” – code for “cutting costs”, cutting health costs. The GST is on the table along with an increase in the Medicare levy.

The government, however, is willing to rearrange revenue sources but “Tax increases overall do not represent tax reform,” said Treasurer Joe Hockey. He went on to say that overall taxation should be lower. That means cuts to government income.

Leaked documents from the Prime Minister’s department suggest the federal government is planning to cut $18 billion a year in support for public hospitals and leave states to fend for themselves.

The government point blank refuses to consider abolishing the PHI rebate, negative gearing, super tax rorts for the rich and the mining industry fossil fuel rebate let alone seriously address the question of transnational corporations not paying any taxes. At the same time it is hell bent on phasing out company taxation.

USA here we come

Negotiations between private health insurers and private hospitals are usually secret. Patients are not usually aware of this process but current negotiations with the Calvary group of hospitals have been made public.

Medibank is refusing to cover the costs of patients for 165 items which it claims are due to “preventable events” and hospital mistakes.

Some of these can clearly be attributed to a hospital such as leaving an instrument in a patient’s body when sewing them up after surgery. But others such as deep vein thrombosis or maternal death may or may not have anything to do with the level of care.

But, for patients, who have spent a considerable sum on private health insurance believing they will not be any further out of pocket, it can come as a rude shock when they are confronted with a bill of thousands of dollars.

But the key question is not which items or events are covered and which are not. It is the fact that a private health insurer (possibly more than one) has already started the process of determining what a patient is or is not covered for. There is also the question of lack of patient choice regarding hospitals and medical professionals –“choice” was one of the promises given when the former Howard government and the private funds tried to panic people into private cover.

This is taking Australia down the path of the US health system which has proven to be the most expensive and the worst amongst industrialised countries.

The Consumers Health Forum has called for the development of a clinically led national register setting out avoidable, adverse events where health funds would be exempt from paying benefits.

This is also going in the wrong direction. Private funds should pay up. Patients are not responsible. If a hospital is clearly responsible then it is between the private health fund and the private hospital to sort it out.

Govt props up private system

The government heavily subsidises the premiums of PHI through means tested and age-based income tax rebates. These rebates are a percentage of the premium paid. They presently range from zero for an individual on an income above $140,000 to 37.07 percent for a single person aged 70 or over on less than $90,000.

Labor introduced the means testing, to try to contain the impact of subsidy on the health budget. The cost of the rebate was growing at an exponential rate. It had already reached $6 billion a year – $6 billion that had been diverted from the public health system.

Privately insured patients do not expect to be out of pocket after a stay in hospital or day procedure. But depending on the health fund, the hospital and details of the policy, many patients are being hit with large bills and this is set to increase.

The under-funding of public hospitals is not just an attack on the most disadvantaged and vulnerable but a step towards privatisation of the public hospital system. Already public hospitals offer private beds and much of their work is contracted out to the private sector. The PHI funds also have their eyes on Medicare.

As the Abbott government continues with its cuts to hospital funding, the situation is set to worsen. The pressure will continue to mount for an increase in the GST or an expansion of its coverage to presently excluded areas such as health, education and fresh food.

Next article – Editorial – Helicopter jaunts and equality of sacrifice

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