Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Address to the Royal Australian College of Medical Administrators, Melbourne, 29 August 1997

A little over two years ago, my son was admitted to hospital for two days in intensive care. Over the next six months I received 60 bills for that two day admission.

If that wasn't bad enough, I actually remember addressing some surgeons about six months later and complaining that 60 bills had turned up and someone up the back of the room piped up and said, 'how do you know it's the last?'

I am not the only person who is annoyed about these things. My offices in Canberra and Melbourne receive letters from thousands of people who complain that 'out -of-pocket' expenses are one of the primary gripes they have against the private hospital sector and prove a turn off for them keeping up private health insurance.

The evidence overwhelmingly demonstrates that the problem of billing and the 'gap' has directly lead to people dropping out of private insurance. When surveyed, 13 per cent of those Australians who have dropped out of private medical insurance say they did so because of the gap.

Today I wish to speak to you about reforms which could well lead those same 13 per cent and others to take up private health insurance again.

If we are able to at least stabilise health fund membership, we will have achieved more than any other Australian Government has achieved in the last fifteen years.

For the longer term these reforms will lead to the preservation of some of the essential features of the Australian health system.

They will lead to an increase in quality care in private and public hospitals.

They will underpin the preservation of Medicare. It cannot be stressed too often that Medicare will only survive in this country if a healthy proportion of the community has private health insurance.

To preserve the outstanding features of the Australian health system, in particular free and universal access by all Australians to the highest quality medical and hospital care, this Government is proposing crucial reforms to private health insurance.

Like the Private Health Insurance Incentives Scheme which came into force only last month, these reforms show the Government is doing everything in its power to make private health insurance more attractive, more affordable and more effective and so ensure that Australia maintains its world class health and hospital system.

Let me now outline what those reforms to Private Health Insurance are.

The first set of reforms will make contracting between funds, hospitals and doctors more attractive.

The proposed legislation will allow doctors to negotiate, directly with the hospitals in which they practise, contracts for above-schedule medical benefits.

This will be permitted only where the hospital in turn has an agreement with a fund for 100% cover (or known out of pocket costs).

In short, doctors will no longer have to negotiate only with the funds - a key objection that the medical profession has raised and steadfastly maintained since 1994.

Contracts will be negotiated by the people directly involved in providing care to patients, who will then be able to provide services with substantially decreased out-of-pocket expenses.

This legislation will remedy the dismal failures of the Lawrence Legislation. Labor's push for contracts with funds and doctors have had a virtually zero take up which has left the community still exposed to unanticipated out-of-pocket medical bills.

These arrangements would give greater certainty for consumers - either through informed financial consent so that they know in advance the out-of-pocket costs, or even better by securing arrangements for 100 per cent cover for their bills.

The medical profession has consistently said that their objection to contracts was based on concerns about so-called US-style managed care, where funds have used their market power to dictate and limit clinical decisions.

The decision to provide incentives for hospitals to secure minimum arrangements with doctors shows we have listened t the most important people in the health system: the consumers. This legislation provides informed consent for the public, so that the public know how much it is going to cost them before they go in. Secondly, it provides simplified billing and thirdly quality. The hospital has to get accredited and there's got to be a complaints mechanism.

But perhaps the most remarkable thing about this initiative is that it achieves all this by actually offering more to doctors and private hospitals alike.

This answers the concerns of doctors. In allowing individual doctors to contract with hospitals under specific conditions, the Government is implicitly recognising the pivotal role of the relationship between the private hospitals and doctors.

Doctors clearly do not wish to negotiate with funds and clearly prefer to form their own relationship with a hospital and develop long standing ties with them accordingly.

The proposed changes would permit doctors to contract with hospitals to the advantage of both, and allow funds to pay medical benefits above the MBS - another key demand that the AMA and bodies such as the College of Surgeons have long campaigned in favour of. We will also give doctors an unprecedented guarantee - one that no other profession or group of workers enjoys in their relationship with their customers or employers.

We will amend the legislation to ensure that the principle of general professional freedom is enshrined and protected in law - and we will require every contract to include a similar enforceable safeguard.

We recognise that the principle of professional freedom has an almost sacred quality to parts of the medical profession. The perception that it could be under threat accounts for some of the fearfulness amidst the medical profession that we have seen in media comments over the last few years.

With this proposed legislation, there are no grounds for the medical profession to be concerned about so- - called US style managed care.

Doctors can no longer say their professional clinical independence is being in any way compromised by contract arrangements.

That doesn't mean that nothing will change, but it does mean that change will respect and protect the traditional and basic clinical freedom of the medical profession.

The very premise of this reform is that rather than leave any scope for health funds to attempt to dictate medical care - to intervene in the doctor-patient relationship as health funds and health maintenance organisations have done in many parts of the United States - there will enshrine in law, a protection of doctor's professional freedom to determine clinical decisions on clinical grounds, within what is generally accepted by the medical profession.

Quite simply, there are no more excuses and no room to hide for those doctors who wish to charge undisclosed amounts above the Medicare schedule fees.

And there will be excuse for an aged pensioner receiving 60 bills for a two day hospital stay, as I did last two years ago.

This is a victory for quality. Our reforms to date give the private health sector all the help it needs t address the issues which have contributed to the current troubles.

Ladies and Gentlemen,

I believe that the private hospital sector now has a real incentive to work with their doctors and achieve something that is actually in the interests of the public.

I am, however, mindful of the difficulties facing private hospitals. The Government is therefore proposing in its new legislation new protection for hospitals.

The recent decision of a major fund to tender selectively and reduce the number of hospitals for which it will provide 100% cover has caused concern and even alarm in some sectors.

I believe it is essential that hospitals of a required standard that miss out on contracts are able to remain viable so as to maintain choice for patients of their doctors.

Consequently, in the proposed legislation, a "second-tier" default benefit, at a higher level than the existing default, will be introduced. This level will be around 80-85 % of the average contract fee paid by each fund to its preferred suppliers - considerably higher than the current level of about 40%.

This "second tier" default benefit will be payable by the funds to hospitals which do not have a contract, provided those basic conditions of billing and quality are met.

This means hospitals of a high quality standard, which are denied a contract with a particular fund, will nonetheless have a secure floor of financial certainty.

These reforms are a major boost for the private hospital sector and for those private hospitals willing to demonstrate they are interested in the concerns of consumers and in quality care.

The opportunity is there for those working in the private hospital sector to create a new future for private hospitals and for their patients.

These reforms will deliver an important benefit to private healthcare consumers if private hospitals enter into contracts with doctors.

If they do so, the proposed changes will improve the regulatory environment for private health insurance.

These changes will help health funds to move towards arrangements which improve the co-ordination of community, acute and post acute treatment in the private sector.

They will lead to the long overdue and vitally important simplification of billing and a curbing of out-of - pocket expenses.

And unlike so-called US managed care where funds make clinal decisions on patient care with both eyes on the balance sheet, there is an opportunity for those who are interested in quality care - doctors and medical administrators to name just two groups - to work towards high quality cost-effective care for Australians in private insurance.

A thriving private health sector means Australians have the chance to choose their doctor, their hospital, the timing of their treatment.

These reforms mean greater quality care for all Australians not only in private but in public hospitals as well.

Media contact:

Bill Royce, Dr Wooldridge's office 02 6277 7220