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Health Legislation Amendment (Gap Cover Schemes) Bill 2000

CHAIR —Welcome. I declare open this public hearing. The committee is taking evidence on the Health Legislation Amendment (Gap Cover Schemes) Bill 2000. I welcome Professor Fels and representatives of the Australian Competition and Consumer Commission. Witnesses are reminded that the giving of evidence to the committee is protected by parliamentary privilege. However, I also remind witnesses that the giving of false or misleading evidence to the committee may constitute a contempt of the Senate. I now invite you to make a short opening statement, at the conclusion of which I will invite senators to ask questions.

Prof. Fels —Thank you very much. I will make a short statement of about five minutes, I hope—not more than that. As you would be aware, the commission's first report to the Australian Senate on anticompetitive and other practices by health funds and providers in relation to private health insurance was tabled in the Senate on 12 April 2000. Submissions to the commission have clearly indicated that the medical gap is a major consumer concern and a key reason for public dissatisfaction with private health insurance. Examples are given on pages 146 and 147, and pages 176 and 177. For example, HCF noted:

Research has established a clear link between the medical gap and the decline in the number of people with private health insurance. It has a major effect on both the take up and retention of health insurance and as a consequence, the demand for private hospital and other private health care services.

There are currently some arrangements that health funds have in place to try to address the medical gap issue. The commission notes, in particular, that AXA Australia Health Insurance's Ezyclaim system is successfully delivering no gap cover to over 9,000 patients a month, with over 1,600 practitioners using the system. We discuss that on pages 101 and 102, and page 148. This is despite the firm philosophical opposition to contracts professed by many doctors and their professional associations. In this context, the proposed Health Legislation Amendment (Gap Cover Schemes) Bill 2000 will provide an additional mechanism for health funds to put in place no gap or known gap health insurance products.

As indicated in the report on page 151, the issue for the commission in relation to these proposed gap cover schemes, as with any types of gap arrangements, is that of compliance with the Trade Practices Act. The commission certainly welcomes the fact that the bill expressly states that the act applies to gap cover schemes, which puts the issue beyond doubt. Therefore, when putting these schemes in place, health funds, competing hospitals, competing providers and their associations will have to be mindful that their conduct is in compliance with the competition and consumer protection provisions of the Trade Practices Act. In particular, negotiations by associations, craft groups or other groups of competing providers with health funds on the terms and conditions of gap cover schemes would be at serious risk of breaching the competition provisions of the act. A health fund will, of course, be able to consult or to hold discussions with craft groups or other groups of competing providers and then choose to make its own independent decisions about the terms and conditions of its gap cover schemes. However, the persons with whom the health fund consults or holds discussions will have to ensure that they do not reach a collective agreement with each other on matters which may be anticompetitive, including, but not restricted to, the fees for the services they provide to fund members.

Regarding negotiations on other matters, the only example of such matters provided so far to the commission has been the issue of informed financial consent. On this particular issue, it is not likely there will be concerns regarding the requirements of the Trade Practices Act, provided the negotiations do not result in contracts, arrangements or understandings which have the purpose, effect or likely effect of substantially lessening competition or which can be characterised as an exclusionary provision—a so-called primary boycott—under the Trade Practices Act.

On the consumer protection side, health funds will have to be mindful that the marketing of these schemes is not misleading or deceptive or likely to breach other consumer protection provisions of the act. The commission's report has highlighted a number of consumer concerns with private health insurance and made it clear that health funds must provide adequate information to consumers about their health insurance policies. The commission would certainly investigate as a matter priority any allegations of breaches of the act in relation to gap cover schemes.

The commission has had preliminary discussions and correspondence with the Australian Medical Association and the Australian Doctors Fund and is currently conducting a round of discussions with health funds to assist both providers and their associations and funds to understand the implications of the act applying to gap cover schemes.

Submissions received by the commission have clearly indicated that consumers want no medical gap; however, if there is a medical gap, then they want to be informed about it, which leads to the issue of informed financial consent. For example, a survey of members conducted by HBF of WA found that: 91 per cent wanted to know their out-of-pocket costs before committing to treatment if hospitalisation was required; 88 per cent wanted to know if their specialist charged fees that were totally covered by insurance; 87 per cent wanted the doctor's medical gap to be covered as a part of health insurance.

HBF also conducted several focus groups on the gap issue and received the following comments from members:

`One of the biggest issues is the surprise of it. It is not something you can negotiate when you're in hospital. And the shock comes several weeks later when you find that there are a whole lot of contingencies that you hadn't thought of, like charging for individual dressings and medication.'

`Doctor recommends somebody but fails to recommend on price.'

`You're not going to go specialist shopping if you are under some sort of crisis. You just don't get the opportunity.'

`It's not a case of you can't negotiate, it's the degree of awkwardness. I've been in considerable pain and the last thing on my mind is talking about the fee with the person who is going to supposedly supply the remedy.'

`It would be good if the insurer had a list of doctors.'

`You ring up and say am I going to be fully covered on the table if I see Dr Jones. They could say no you'll have to pay so much, but I'll know beforehand and I can make a choice myself.'

A central issue coming out of these comments is that of the timing of information to be given to consumers/patients so that they can make truly informed financial consent decisions. Receiving the information at the time of treatment does not constitute, in the commission's view, informed financial consent. At the very least, consumers should be informed of the likely costs by the specialists at the time of consultation. However, this still does not give patients the real choice to go to another specialist if the fee quoted does not suit them. In the commission's opinion, consumers need information on likely costs prior to making an appointment to visit a specialist—that is, prior information must be meaningful.

For consumers to make informed choices about medical specialists, they need comparative information on quality and price of a range of practitioners. The importance to consumers of price information about medical services and the actual price paid for those services is highlighted by the current community demand for no gap or known gap health insurance products. Information about alternative specialists and their fees may be provided to patients by their referring general practitioners. However, the commission is concerned to note that there is an example where specialists appear to have blocked the ability of a GP to provide informed consent on fees.

Western Australia's general practitioners magazine reported in January 2000 that a GP had attempted to obtain details of fees charged by specialists in order to inform his patients before referring them. The GP regarded this as being `best practice—obtaining informed consent for his patient before referring them'. Notwithstanding the fact that the GP wrote to 20 or more specialists, only one offered detail of fees and three others indicated that they would provide this information at the time of referral. If this example reflects specialists' attitudes to informed financial consent, this is of serious concern to the commission.

The commission suggests in its report that health funds may be able to provide this information by setting up their own database of specialists' fees for their members to access. The commission urges health funds to explore and adopt such initiatives. The commission also suggests that professional associations could regularly publish directories of their members including, where specialists choose to do so, the fees they charge. That concludes my opening statement.

CHAIR —Thank you, Professor. Anyone else wishing to make any additional comments at this stage?

Senator CHRIS EVANS —Professor, could I start by coming back to your submission about the Trade Practices Act. Have you seen the section in the government's explanatory memorandum that talks about negotiation arrangements on an industry wide basis or with reference to a particular hospital, or groups of hospitals, or to particular craft groups. It seems to encourage and imply that this system will have that sort of collective behaviour that you expressed concern about. The explanatory memorandum seems to give endorsement to that. What is your view about? Is that appropriate?

Prof. Fels —The act, of course, makes clear that the Trade Practices Act applies. That is the first and key point in this situation. But since Commissioner Bhojani has dealt with this matter in some detail, we can give you some details.

Mr Bhojani —The commission's view in relation to the explanatory memorandum is that it is taken in isolation and you are obviously aware that it deals with the issue of the regulation impact statement. Early on in the memorandum itself it talked about the act applying in its terms to these arrangements. Clearly, it is envisaged I assume by the government that the act in its full force will apply to these schemes. In terms of collective negotiations, if we are talking about price information and so forth, you are quite right, that would not be possible.

There are a couple of circumstances where it might be possible if associations or craft groups were able to demonstrate public benefit and were able to have the process of collective negotiation authorised by the commission. That is a mechanism under the Trade Practices Act that will allow collective negotiations that might otherwise be at risk of breaching the Trade Practices Act. So that is one circumstance where you might be able to have collective negotiations. The other is where there is a group of providers that are owned by the same legal entity. For example, if a group of incorporated medical practices or a group of hospitals owned by the same company were to negotiate, they can lawfully, of course, negotiate on behalf of all of their hospitals or in the former situation on behalf of all of the medical practitioners.

Senator CHRIS EVANS —You think technically there is no problem with the explanatory memorandum, but there is a reason for caution. Is that a fair comment?

Mr Bhojani —Yes, but that particular sentence needs to be read in context. It should not be taken in isolation and out of context, I guess, is the best way that we would put that.

Senator CHRIS EVANS —There were reports last week of meetings between the minister's office and funds where they spoke about price responses, et cetera. Did you see in the reports about price increases for next year that there is going to be an industry wide approach rather than the sorts of principles that you have been elucidating? Do you want to comment on that?

Mr Bhojani —Yes, I am aware of the newspaper reports in relation to those issues. As I understand it, all it is is the minister urging health funds to not increase their premiums in that context. At the end of the day, the report certainly did not seem to make it clear that there was any arrangement reached one way or the other. It was a question of a minister for health making his views known that it would be appropriate in certain circumstances not to have huge pay rises. What the health funds then do, I guess, is the question of issue for us.

Senator CHRIS EVANS —I guess that draws the question about whether or not that is an anticompetitive behaviour, whether all health funds have been told how to respond to their pricing. Is that when it becomes an issue for you, if there is a message delivered to them about how they ought to put in their pricing mechanisms?

Mr Bhojani —There could be an issue of concern in relation to that. However, the other aspect to this, of course, is that we are talking about encouraging people to not raise their prices. So one again has to contemplate and consider the community detriment in that sort of situation as well. I am not sure how many people in the community would be upset at the fact that all the health funds decided not to raise their prices.

Senator CHRIS EVANS —But obviously a price rise not made one year generally results in a greater price rise the next year, doesn't it?

Mr Bhojani —Sure.

Senator CHRIS EVANS —Are you saying to me that provided the price rise does not occur, you do not have any interest in that sort of behaviour?

Mr Bhojani —No. What we are saying is that we would be concerned about it, depending on what the health funds decided to do and why, and what the consumer detriment was in those issues.

CHAIR —May I just interrupt there. This does not change in any way the justification of the funds that they currently have to provide to the government in terms of levels of reserves and so on. None of this changes that principle, does it?

Mr Bhojani —That is right.

CHAIR —Nor the approval process of the government?

Mr Bhojani —Certainly in the reports I have read nothing of that changes.

Senator CHRIS EVANS —No, but the concern is that collusion is occurring whereby the price to be set by health funds is agreed as some sort of political decision. That is where I would have thought you would have had some interest. Is that not right?

Mr Bhojani —We would have had concerns if it was being done for anticompetitive purposes or where it would actually have the effect, or the likely effect, of substantially lessening competition. It is in that context that we would have to approach the issue of what the health funds decide to do in response to whatever it is that anyone has said to them.

Senator CHRIS EVANS —So you would only work back if you thought, as a result of that sort of meeting, some decision had been taken about the way they price their products?

Mr Bhojani —Certainly, the reports I have read suggest that it was a futuristic issue: that nothing has actually happened as yet, that there has just been some urging on the part of the government.

Senator CHRIS EVANS —All right. The Australian Health Service Alliance, in their submission, talk about a single gap cover scheme on behalf of its 28 members. What is your view about that proposal under the Trade Practices Act?

Mr Bhojani —Provided the health funds were doing the issue of fee setting independently, then there may not be a problem under the Trade Practices Act. On the other issues, it would be the same as with all the other health funds and other providers. On issues like informed financial consent and so forth, it is a question of whether that substantially lessens competition. Our understanding is that they would be setting their schedule of fees for the purposes of the new schemes independently.

Senator CHRIS EVANS —I was just playing devil's advocate; I am not necessarily arguing against their proposition. I think they represent about 20 per cent or more of the industry and 28 different funds. Isn't that exactly what you are talking about: fee setting and one common arrangement?

Mr Bhojani —If they were doing it collectively, yes, that would be an issue of concern. But our understanding is that, for the purposes of the scheme, they will be setting their fee schedules on an independent basis.

Senator CHRIS EVANS —So everything else is the same and then they walk away at the point of setting the fees. Is that what you are suggesting to me: that they run a uniform scheme across the 28 funds and that they then arrive at the fee setting arrangement separately after that?

Mr Bhojani —The uniform scheme on all sorts of other issues would be an issue of concern for us if there were any evidence that it substantially lessened competition or was a primary boycott. But other than those sorts of issues, it just comes back to the critical issue about competition on fees: whether they are setting them collectively or whether they are setting them independently. Our concern would arise if they were purporting to set them collectively.

Senator CHRIS EVANS —What do you see as the ongoing role of the ACCC in the supervision and reporting of the gap cover scheme?

Prof. Fels —Principally as monitoring anticompetitive behaviour and, of course, continuing to do this report about anticompetitive behaviour. That would be the principal role.

Senator CHRIS EVANS —Do you think in your ongoing reports of this nature you will be including the report on how the gap schemes are operating?

Prof. Fels —Not a full-scale report, just the competition questions such as whether we have come across cases of anticompetitive behaviour in devising and establishing these schemes and so on.

Mr Bhojani —Could I add to that by saying that, in addition to the report, where we have evidence of a potential breach of the Trade Practices Act by health funds, hospitals or service providers—whether they be medical practitioners or allied professionals—we would investigate that kind of conduct for compliance with the Trade Practices Act.

Senator CHRIS EVANS —What is your view about how this will work and operate in terms of what issues are at stake for consumers who may feel that they have been prejudiced because they are not members of a no gap scheme, or in terms of certain doctors who will not treat them because they are a member of a no gap scheme? What is your role there? How do we monitor that individual relationship where consumers are looking for products and they are part of a scheme and they may want to use a particular doctor who is not part of a no gap scheme or an arrangement with that health fund? What is your role in all that?

Mr Bhojani —Our concern is in relation to consumer information, so that consumers are properly informed about who is and who is not participating in this process. At the end of the day it is up to each individual practitioner, hospital and so forth to decide whether they do or do not wish to participate in the scheme. There is no compulsion in it. Clearly, there is a community cry out for these sorts of schemes. Everybody has recognised that. It then becomes a question of whether the community is properly informed about the availability of these schemes, what they actually mean, and, if a particular practitioner does not want to participate in that scheme, do they have options, do they have other alternatives available to them?

Senator CHRIS EVANS —But will there not be issues about whether a particular hospital was generally part of a no gap scheme and whether a particular practitioner is then continuing to get work if he is not part of that scheme? Are there not a whole range of competition issues opened up there?

Mr Bhojani —There is potential for that to happen; it just depends to what extent practitioners embrace these schemes.

Senator CHRIS EVANS —But even if the majority of the profession embraces them, clearly not all will. In any system there will always be those who will not. I am just wondering how they are going to fit into it and what issues it throws up for us. What happens if a person is a member of a no gap scheme and a particular specialist at the hospital treats them who is not part of that scheme? What is the comeback then for the consumer?

Mr Bhojani —It is as it currently is. There are a number of options to create no gap products. As you know, there are the HPPAs, the MPPAs and the Easy Claim process which are not part of this legislation. This legislation will provide another mechanism for creating no gap and known gap products. It is in that sense another mechanism for delivering to the consumers no gap and known gap policies. If the medical practitioner does not want to participate in any of it, that is his or her choice and right. But, at the end of the day, presumably consumers will make a choice about whether they choose to continue to go with that practitioner, for a whole range of reasons.

Senator CHRIS EVANS —Are there not issues here for a consumer who is a member of a no gap scheme who does get treated by someone who is not part of that? If you get admitted to a hospital, surely there would be some discrimination provision for the hospital not to use a specialist because he or she was not a member of a no gap scheme. If they are operating in the hospital, if they happen to perform a service on you as a patient but they are outside the no gap scheme, what is the comeback for the consumer? In a sense they have not got their no gap because that particular service was not part of the system.

Mr Bhojani —That is clearly where we would come down on the side of the consumer and say that that is why informed financial consent is crucial. The consumer must have a meaningful choice before he or she takes that treatment. It has to happen well before they get into hospital and find out that they have a bill from someone who was not part of a no gap scheme. They need to know that before they have elected to take that treatment from those medical practitioners.

Senator CHRIS EVANS —Who do you envisage is going to provide that? Who is going to be the spokesperson for every medical service provided by a hospital? Who is in the firing line as far as you are concerned in terms of informed financial consent?

Mr Bhojani —I am not sure if it is necessarily the firing line. As the chairman has indicated, there are a number of sources of this information, including the health funds. They have the capacity to provide this information to assist their members. Professional associations have the ability to produce directories on a regular basis with pricing information to the extent that their members are happy for that information to be provided to the community. Individual members of the practising professions do have some sort of obligation as well. Professor Fels read out the example of the general practitioner in Western Australia who wanted to provide his patients with informed financial consent before referring them on to the specialist. Unfortunately, the specialist did not provide that information.

Senator CHRIS EVANS —But that defined the problem rather than the solution, didn't it? I am asking you what the solution is. This bill is not just an enabling piece of legislation. It does not define how one gets informed financial consent or who is responsible for it. I am wondering if the health fund is responsible for that in your eyes. For instance, let us say that you are a member of a no gap scheme and you get a briefing more generally via the health fund or the hospital about the billing that is to occur and then you get billed for other services that are not part of the no gap scheme or you find that the informed financial consent was not as full as it ought to have been. Who is responsible for that?

Mr Bhojani —It would probably be a combination of issues. Certainly I think the health funds need to take responsibility for adequately informing their members about the insurance products that they are providing and what it actually means. I would have thought that individual practitioners themselves, whether they be specialists or referring practitioners, have an obligation to ensure that the patients they are treating are properly informed about all aspects of the treatment that they are going to provide.

Senator DENMAN —I live in Tasmania on the north-west coast, which is fairly isolated. We have a couple of public hospitals—one semi-private—but quite often patients up there have to be transferred to Hobart because a procedure has gone wrong during surgery or some such thing. What if the patient is transferred to a surgeon, say, in Hobart who is not part of the no gap insurance mechanism and there has not been time to inform the patient that this is going to happen? I have an instance in mind that recently occurred.

Mr Bhojani —I am sure there will be circumstances where, due to clinical requirements, there is an emergency or a complication has arisen and things of that sort. With the best will in the world, if somebody is in a car accident, you are not going to be in the position to give them informed financial consent. In our view, that does not mean that the system should not be set up to ensure that there is meaningful informed financial consent for the vast bulk of situations, taking away those exigencies of emergency situations or complications that have arisen where it simply is not practical, in any sense, to try to achieve informed financial consent.

Senator CHRIS EVANS —What is your view on single billing? Do you see that as a necessary part of the development as well, that we end up with the single billing system?

Mr Bhojani —Certainly that is an issue of consumer concern, that there are multiple bills provided by practitioners. Obviously, if that can be reduced that is a desirable outcome but how that is done, obviously from our perspective, would be an issue of concern.

Senator CHRIS EVANS —It seems to me that that is all part of the informed financial consent, isn't it? Effectively, you are saying you are dealing with one person who tells you what this procedure in its totality is going to cost you and how you are going to be billed for it. It is quite a change from the current sort of practice, isn't it?

Mr Bhojani —It may well be, but I do not know that the responsibility necessarily needs to lie on one pair of shoulders—if I can use that term. It may be that, as long as collectively the information has been provided to the consumers in a meaningful way—and I emphasise in a meaningful way—to give them a proper choice well before the treatment so that they are well aware of their options well before the treatment, it would be adequate.

Senator CHRIS EVANS —If you are going in for a procedure, you would say that that would be the consulting physician or surgeon you see before entering hospital? Is that where you think you would get that sort of informed financial consent?

Mr Bhojani —Yes, and/or the health fund. The health fund has this information available to them. They should be able to provide it to their members.

Senator CHRIS EVANS —How do they know before you are going to claim what you are going to claim for? If you have to go in for a procedure, how does the health fund know what procedure you are anticipating getting?

Mr Bhojani —Presumably you have had some consultation or you have some understanding of what it is that you are going in for if you are going into hospital.

Senator CHRIS EVANS —Yes, but where is the health fund in that loop?

Mr Bhojani —The patient who is privately insured knows what rebate they are going to get back for that treatment. They could ring up the health fund and find out.

Senator CHRIS EVANS —So you think that informed financial consent means the patient contacting the health fund before they go in for the procedure to find out what will be paid for by the health fund.

Mr Bhojani —That is one option; it is not necessarily the only option. As I say, general practitioners, as they are referring patients to specialists, may be in a position to provide that information to the patient as well.

CHAIR —The specialists generally these days also tell the patient what their costs are going to be, don't they?

Mr Bhojani —Yes.

CHAIR —After the consultation, when they know exactly what the procedure is going to be. It is one of the questions and concerns, I suppose, that I had, Professor Fels, from one of the things that you were mentioning, and that was that issue in Western Australia about the GPs trying to get the information out of the surgeons in advance. I understand the process and the principle behind it, but sometimes the surgeons would need to see the patient before being able to give a definitive amount in terms of the costs involved, surely, without putting something up front. How does that jell with what you are trying to achieve and, say, what the GPs are in fact trying to achieve?

Prof. Fels —My impression is that they can give meaningful information about a number of their prices, though it will not cover all cases.

Mr Bhojani —That is right. It is an issue of getting at least an indicative quote, as you get in many other service sectors. In the legal sector, for example, you cannot be definitive as to what a court case is going to end up costing the client, but you at least have some idea, and some meaningful idea, of what it is likely to be. That is the sort of information that we would be looking for in the medical sector.

CHAIR —So it is the surgeon who is really the basic one, as opposed to the funds and the GP, who can give the definitive cost, at the end of the day, to the patient after consultation?

Mr Bhojani —Yes.

Senator DENMAN —If the procedure was more complex than was thought when the patient went in, and therefore costs more than the quote had been, how would you deal with that?

Mr Bhojani —Clearly, we agree that there will be contingencies where you cannot anticipate every outcome before the service has been provided. That will happen in every service sector, I would presume, but that still does not mean that you cannot—

Senator CHRIS EVANS —But if you are getting your car fixed, they ring you up and ask you whether you want the work done. I suspect if you are on the operating table it does not happen.

Mr Bhojani —Indeed, but—

Senator CHRIS EVANS —So I suspect it is slightly different.

Mr Bhojani —at least you know.

CHAIR —If the patient is comatose at any stage they may require additional services that they cannot then negotiate.

Mr Bhojani —That is right. But our view is that, because of those emergency situations, that does not mean that they should not, in the vast bulk of situations, get the best information they can on pricing information.

Prof. Fels —In the case of some legal charges, which is a little different, as you say, they often have some specified rate but they have some let-out clause for a complicated case. That is generally, if it is done properly, better than having nothing.

Senator CHRIS EVANS —There is a proposition from one of the other witnesses about publishing each of the schemes agreed by the minister in such a way as to allow transparency of each of the schemes and, I assume, the prices. What is your view about whether that would be a useful addition to the regime? At the moment the minister approves the schemes. I am not sure there is anything that actually requires those to then be published and for details to be made available to consumers.

Mr Bhojani —My understanding is that the health funds themselves will be going out not just publishing but promoting the schemes to ensure that consumers are aware of what the details of their schemes are.

Senator CHRIS EVANS —Will that be the detail, though, or will it be the generality?

Mr Bhojani —Our understanding is that it must be the detail. If we are talking about proper informed financial consent, then the public and the members of those health funds need to know precisely what it is that they are talking about.

Senator CHRIS EVANS —They would not necessarily be the agreements they reached with other parties, though, just what they are offering the consumer in terms of the product?

Mr Bhojani —Yes.

Senator CHRIS EVANS —One of the issues is who is in the no gap scheme, isn't it—who is the health fund in arrangements with that allow the consumer access to services?

Mr Bhojani —Yes.

Senator CHRIS EVANS —That is not necessarily going to be public, is it?

Mr Bhojani —Presumably, again, there is no reason why that cannot be made public by the health funds. They could identify which hospitals, which providers are part of the no gap schemes.

Senator CHRIS EVANS —Do you think that ought to be automatically made public?

Mr Bhojani —I cannot immediately see any reason why it should not be.

CHAIR —As there are no further questions, thank you very much for your attendance.

[2.41 p.m.]