Australia’s largest private health insurer, Medibank, has warned that “market failure” in the nation’s healthcare system is fuelling an increase in costs, making some surgical procedures more expensive here than in the US and Europe.
“The increase in prices cannot be explained by increasing complexity of procedures alone when the cost of a procedure in Australia is more expensive than in other comparable countries,” Andrew Wilson, Medibank’s executive general manager, told The Australian.
Mr Wilson pointed to a study which found cataract surgery in Australia in 2013 was more expensive than in the US and twice as costly as in Europe.
In Australia, the average invoice cost for cataract surgery was $US3841. In the US the cost was $US3762, and in The Netherlands it was only $US1610, according to the International Federation of Health Plans 2013.
While Australia’s health system ensured a high minimum standard of care, Mr Wilson said that the industry demonstrated “several characteristics consistent with market failure”.
“One consequence of this failure is that healthcare costs, including care, surgery, prostheses and insurance, continue to rise in Australia and we are not competitive compared to many other countries,’’ he writes in The Australian today. “Domestic price levels for medical procedures were more than twice the level of most European countries for hospital services in 2011.”
Australians undergoing other common procedures, including hip and knee replacements and heart bypasses, are also paying a significant premium to their international counterparts.
The study found that local hip replacement and bypass surgery prices were the second-highest after those in the US, and that a hip replacement in Australia was 38 per cent more expensive than in New Zealand and more than double the cost in The Netherlands.
Mr Wilson writes that patients should be given access to prices charged by specialists across the system.
“Consumers generally do not know whether the price represents good value or not and this can lead consumers to associate expensive care with quality of outcome, when in fact no such relationship may exist,’’ he writes.
“If it were possible to link specialist billing behaviour with health outcomes then, arguably, variation in charging practices could be justified.
“Unfortunately while such data undoubtedly exists it is unavailable to consumers, leaving them with little information to make informed decisions on medical specialists — a classic example of market failure.”
Executives throughout the industry concede that Australia is fighting a losing battle against ballooning healthcare costs, pointing the finger at spiralling wage costs, an ageing population which lifts the price of the average admission and other factors.
Australian Medical Association president Michael Gannon hit back, partly blaming insurers for the high costs.
“The one thing we do know is that insurers are trying to contain costs everywhere and it’s very difficult for the government and the industry if the industry is in profit mode,” he told The Australian.
“They are looking to cut costs wherever it is possible and there are reasonable and appropriate ways in which they can do that, and there are other ways which involve squeezing doctors, squeezing hospitals and squeezing patients.”
Rising wage costs, technological advances and other costs, including the rising price of drugs, were fuelling the blowout in medical costs, he added, as was the ageing population, which meant that the average patient undergoing surgery was more likely to present with a shopping list of other ailments, including heart or kidney disease.
Hospital executives argue that insurers are adding to the costs borne by consumers with packages that carry an exhaustive list of exclusions.
“Perhaps insurers could start with better information about what their policies include and don’t include,” Healthscope chief executive Robert Cook said, noting that more patients were turning up to hospitals with comparatively common afflictions only to find their policy did not cover it.
“The biggest issue facing healthcare I believe is the confusion with consumers over what they’re covered for,” he said.
Bupa, which sits just below Medibank as Australia’s second-largest private health insurer, has called for the government to push ahead with achievable healthcare reform.
Dwayne Crombie, managing director of Bupa’s Australian private health insurance arm, also argued for a more “visionary” discussion on reform, saying last week that there were a lot of people who would get behind a shared vision.
Mr Wilson also outlines that in its submission to the Productivity Commission inquiry into data availability and use, Medibank argued that failure in the healthcare system could be addressed, in part, by improving access to data and information.
The commission is looking at the benefits and costs of, and options for, making public and private datasets more available and how consumers can benefit, among other things.
Mr Wilson warned that in the absence of a fundamental redesign, the sustainability of Australia’s health system depended on it becoming more efficient and patient-focused.
“Medibank believes that a central element of such reform is the development of a competitive healthcare system,” he said.
“The information required for this is trapped in the system, and ultimately the benefits of better data linking and sharing would accrue to the users — those of us who are ever admitted to hospital or need to visit a doctor or specialist.”
Health Minister Sussan Ley announced last week the appointment of Tim Kelsey as the chief executive of the Australian Digital Health Agency.
The agency is responsible for all national digital health services and systems, with a focus on engagement, innovation and clinical quality and safety.