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OSMAN:

From Schwartz Media, I’m Osman Faruqi. This is 7am.

Australia’s health care system is facing unprecedented amounts of pressure.

Our public health systems have been cut back for decades, and now the private system is facing a death spiral… with younger Australians opting out of increasingly pricey insurance options.

Today, senior reporter for The Saturday Paper Rick Morton on why some health experts are worried that Australia’s health care system is becoming more and more like the expensive, privatised model in the United States.

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OSMAN:

Rick, there's been some reporting over the past week about proposed government changes to the way Medicare works for medical procedures, it does seem pretty controversial and it seems to have kind of come out of the blue. Can you walk me through what's actually going on here?

RICK:

Yeah. So the government’s had a review now for five years looking at almost 6,000 items on the Medicare benefit schedule. It's attracted a lot of attention this week, particularly from the Labour Party who consider themselves, you know, the parents of Medicare saying that the Morrison government is cutting it. That's not quite the case. And what's actually happening is they're updating about 1,400 different items on the schedule. So there's new ones, amendments, updates. Some have been deleted because they're kind of old practises or not quite clinically relevant anymore.

But it's kind of been distracting. It's not really the main game because there are, as we found out last week, there are many other forces at play in the health system and there is a sickness, but it's not quite the Medicare benefit schedule changes that have been ventilated this week.

OSMAN:

Right. So even if these changes to the way the Medicare scheduling system works aren't the main issue here, it seems like they might be providing us a good opportunity to talk about, just the state of Australia's medical system right now. After covering the story for the past week, what's your assessment of where things are at?

RICK:

Well, it's kind of, you know, teetering on... brink is a strong word, but it's certainly teetering on the edge of something that we need to be careful about; which is this idea that people have been talking about for some time now, which is that, you know, maybe Medicare, maybe the health system, is tipping towards this Americanisation of health.

Archival Tape -- Unidentified Announcer #1:

“Everyone, please welcome Dr Omar Khorshid.”

Archival Tape -- Dr Omar Khorshid:

“It's an honour to address the National Press Club.”

RICK:

In fact, Dr Omar Khorshid, who's the president of the Australian Medical Association, said exactly that at the National Press Club last Wednesday.

Archival Tape -- Dr Omar Khorshid:

“So our first pillar of reform is General Practice.”

RICK:

When he was talking about the real issues in the system.

Archival Tape -- Dr Omar Khorshid:

“If we are to have any hope of stemming the tide of chronic disease in our nation, we must bolster this first line of defence.”

RICK:

The problem has many faces but two stand out in particular. The first is this long term erosion of bulk billing sustainability in the public health system.

And so there are now actually whole parts of Australia where you can't find a bulk billing doctor or it's really very hard. And that, you know, in terms of patient choice and trying to find the best treatment or advice, that's a really important factor of the health system that is kind of imperilled at the moment.

And the second is private health insurance. The model that we rely on has private health insurance in it.

Archival Tape -- Dr Omar Khorshid:

“It's an ailing system. Membership of insurance has declined, prior to Covid, for five years in a row.”

RICK:

And this system was meant to take pressure off the public system, but instead it's actually going into a death spiral.

OSMAN:

That sounds pretty significant. And there's a couple of different components to what we're grappling with. Maybe let's start with the erosion of bulk billing that you're describing. Can you tell me about that, and what's going on there?

RICK:

Yeah, so bulk billing for those who don't know is when a doctor has, you know, their time and treatment fully covered by the government. So they charge the fee that is exactly what the federal government rebate is under Medicare. And no money has to change hands. They just charge the government directly. You don't pay. And that's amazing. It's great for universality in the health care system.

Archival Tape -- Unidentified Commentator #1:

“Medicare will provide every permanent resident with basic health insurance.”

RICK:

When Medicare was set up, the system was actually designed around this idea of making sure that bulk billing was the leading edge and it was good for patients, it was great for GPs.

Archival Tape -- Unidentified Commentator #2:

“And every Australian from newborn babe to Prime Minister, can share in the cheapest, simplest and fairest health insurance scheme Australia's ever had. Medicare.”

RICK:

Over time, the successive government changes have made bulk billing less attractive to GPs.

Archival Tape -- Unidentified Commentator #3:

“If the cost of visiting the doctor keeps rising under John Howard, imagine what will happen to Medicare.”

RICK:

Who are increasingly charging more for their services. And sometimes, you know, quite a lot more than the bulk billing threshold.

Part of the problem is that indexation of Medicare item rates haven't been increasing with the cost of living, and certainly not with the cost of average weekly earnings, over many decades now.

Archival Tape -- Unidentified Commentator #4:

“In 2014 the coalition government first announced the freeze would continue for another two years, although GPs were excluded and did get an increase. In 2015 they expanded the freeze to GPs.”

RICK:

So, you know, in the past decade, both the coalition and Labour have instituted what were effectively indexation freezes on the Medicare benefits schedule saving the budget well over one billion dollars. You know, Labor's last effort just before they left government, when Nicola Roxon was the health minister, saved $660 million just by moving the indexation schedule back eight months. So, you know, that's a big change to how healthcare works in this country, but there is a little bit more to it than that.

OSMAN:

OK, so that's the bulk billing side of things. You also mentioned the way that the private health insurance model operates. Can you explain that for me?

RICK:

Yeah. So the president of the Australian Medical Association, Dr Omar Khorshid, talked about this when he appeared at the National Press Club.

Archival Tape -- Dr Omar Khorshid:

“Young people are leaving insurance and being replaced by older Australians whose health care needs are greater.”

RICK:

The way he explained the issue is one that we've been watching happen now for quite some time, which is that young people are leaving private health insurance and they're being replaced by an ageing population.

Archival Tape -- Dr Omar Khorshid:

“Their need for spending is greater. They're putting pressure, therefore, on the premiums which keep going up...”

RICK:

Way more older people are joining private health then young people are. And this is leading to an increase in premiums, because older people have a tendency to claim more from their policy; whereas young people have a tendency to pay their policy and actually not draw down it very much at all.

Archival Tape -- Dr Omar Khorshid:

“And if we don't do something soon, it is going to be critical”

RICK:

and so this is now reaching a point where premiums are becoming unaffordable and the people who are meant to, kind of, keep the system working are not. They don't see any attraction whatsoever in joining.

So it’s even more expensive, so even more young people refuse to join because it looks more unaffordable; which again puts premiums up because more older people are in the system and drawing down on their claims and, you know, so on, so on ad infinitum.

That's the core problem in private health at the moment. So it's not looking particularly sustainable today at all.

OSMAN:

Hearing you describe those kinds of challenges, it really does make me think of the US healthcare system, which is so heavily reliant on a complex, you know, private system of insurance. It sounds like that might be close to where we're heading. I mean, do you think that Australia's health care system and the way, the trajectory that it's on,is getting closer to that U.S. model?

RICK:

Well, here's the problem, right, the private health sector is very influential and carries a lot of weight. But certainly they have an existential problem.

Since the mid 90s, their view is the only way to solve this existential problem, which is, you know, reach crisis point is to introduce this kind of cheaper model where they get to control so many different layers of care, dictated from the private health insurance at the top, which means that people like you and I don't actually have that much choice. But the private health funds get to control the costs. So they save a lot of money. And this is the American system. It's this constant search for cost efficiencies. That is where we are going to be heading.

OSMAN:

We’ll be back in a moment.

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OSMAN:

Rick, we're talking about changes to Australia's health care system and in particular the ways that might make it become more like the US health system, which I think most Australians understand is far less fair and much less accessible than what we have here. Can you tell me a bit more about how exactly these changes are happening?

RICK:

Yeah, so the key term is ‘managed care’. This is the term that first emerged in the United States where it's technocratic principles kind of allegedly reduce the cost of providing for profit health care while simultaneously, so they say, improving the quality of that care.

Basically, it's a model where private health insurance agencies take contracts with specific health care providers like hospitals, groups of doctors, clinics, in order to reduce the costs of services to patients. But here's the kicker. That totally removes choice from the patients.

And it does that by basically the private health fund dictates to the patient ‘we will pay out, you know, X amount of dollars for your care. But you have to go to this doctor. You have to go to this hospital, and we are going to tell the doctor exactly what kind of treatment they can do’. And so that allows them to control more of the system, kind of vertically integrated. So they control it from the hospital, to the GP to the local fever clinic, to the kind of primary health care networks. And because they can control what is and isn't done, they can kind of shave costs off, but that doesn’t give the patient freedom to kind of really take their care into their own hands.

OSMAN:

And so is there any evidence or signs that that is starting to happen here in Australia Rick?

RICK:

There are some early signs. This is not a theoretical argument at all. In August last year, Medibank Private purchased a 49% stake in an east Sydney private hospital.

In January this year, the insurer paid about $40 million for the medical centre business My Health, which is a group of shopping centre GP practises serving about 1.2 million people across 80 clinics in three states.

OSMAN:

I actually think that's one of my GP clinics.

RICK:

Oh, is it?

OSMAN:

Did not realise it was owned by Medibank Private.

RICK:

Well, it is. It is now. I think the deal has been inked.

And in December, private health fund giant NIB sought permission from the Australian Competition and Consumer Commission to form what they call a buying block with Honeysuckle Health, which is a joint venture between NIB and the American health care and insurance company, the Cigna Corporation.

Archival Tape -- Unidentified Commentator #1:

“Having health insurance just isn't enough. You need a partner. Like Cigna. Cigna has your back, and your knees. 24/7”

RICK:

The buying block would ‘collectively negotiate and administer contracts with health care providers’. Now, the ACCC released a draft determination last month that proposed to give the alliance the green light, for at least five years, with some conditions. But the move has spooked almost every medical group in the country.

Archival Tape -- Dr Omar Khorshid:

“Insurers, though, are not sitting still. They are moving to reduce their costs, to keep their premiums affordable. But in doing so they’re contracting doctors, they’re squeezing hospitals…”

RICK:

The issue, as Dr. Khorshid told the Press Club, is the potential for Honeysuckle to apply ‘managed care’ principles to its contracts...

Archival Tape -- Dr Omar Khorshid:

“using these contracts to change the behaviour of doctors in order to limit those costs. And this, in our minds, is moving Australia down the path of US style managed care.”

RICK:

Now NIB says that won't happen because Khorshid says that's simply not good enough for them. And he and almost every other medical group in the country are very sceptical.

Archival Tape -- Dr Omar Khorshid:

“The US health system is the worst in the world by many measures because of its extraordinary expense, and the fact that there are gaps, there are inequities that we would be ashamed of if they occurred in Australia…”

OSMAN:

Yeah, these are pretty significant changes to the way our healthcare system works. When you have big private insurance companies actually purchasing and getting into the delivery of, you know, primary health care services themselves. I mean, where is the government in all of this?

RICK:

That's a very good question. I was talking to quite a few people this week and they're saying, you know, even with ideology factored in, the government isn't really doing anything to attack Medicare, but it is kind of dying by neglect.

We need to do really big things relatively soon to protect this system, because once you go down this track, you don't go back. And this stuff is really expensive.

So, you know, governments have been cutting Medicare for, you know, 30 years with indexation freezes, with indexation not rising at the cost of living or wages. And, you know, there are incentives to move people across to private insurance. And that's the government's preference. Their preference has always been to boost private health insurance to, you know, as they say, take the pressure off Medicare. We're getting a two tiered system as we speak. And if we get some of those awful elements from the American health care system into Australia, then it just gets worse. And that's not something we want to approach. It's not something we want to do, because once you scramble that egg, it cannot be unscrambled.

OSMAN:

Rick, thanks so much for your time.

RICK:

Thanks, Osman, I appreciate it.

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OSMAN:

Also in the news today…

The federal government has granted permission to the Murugappan family to reunite in Perth. Priya, Nades and their two daughters Tharnicca and Kopika will live there in community detention.

No decision has been made on their long-term visa situation, with Immigration Minister Alex Hawke stating that this decision does not create a pathway to a visa.

And Victoria recorded two new local cases of Covid-19 yesterday. The cases are linked to an outbreak in an apartment complex in Melbourne’s Southbank.

The apartment building has been placed into lockdown for 14 days.

I’m Osman Faruqi, this is 7am, see ya tomorrow.

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