New paper reveals extent of cost-shifting


A new discussion paper from the Department of Health has revealed the staggering extent to which state governments use public hospitals to generate funds from privately insured patients and how that is putting upward pressure on premiums.

According to the discussion paper, the percentage of public hospital separations funded by private health insurance increased nationally from 10.5 per cent in 2010-11 to 14.1 per cent in 2014-15.

In New South Wales, private health insurers covered over one-in-five public hospital separations in 2014-15.

A massive spike in Queensland reflects what appears to be a systematic approach to pressuring patients into being treated privately in the state's public hospitals.

“...the Queensland State Government brought in quotas in 2010 and annual growth in public hospital stays for private patients changed from 7% per annum before 2010, to 12% per annum after 2010," said Private Healthcare Australia CEO, Dr Rachel David. "Figures in the Department of Health discussion paper show that the percentage of public hospital separations funded by PHI in Queensland has increased by a massive 114 percent since 2010-11."

Dr David said a tacit encouragement of cost shifting has been growing across the states with some even reducing funding for public hospitals and setting quotas for 'own-source revenue'.

“Public hospitals are pressuring patients who present to a public hospital emergency department to use their private health insurance rather than the Medicare system. In fact, many patients who intended to be treated as a public patient are signed up after they are admitted. The end result is PHI policyholders are now subsidising the costs of public hospitals, despite having already contributed to these through their taxes.

“There has always been a stable number of private patients treated on an elective basis in public hospitals because of the nature of their condition, or because it is where their specialist works. What we are talking about here however, is the aggressive trawling of public emergency departments to try and convert as many patients as possible to private status."

She continued, “This practice is adding about $1 billion to the cost of premiums but it's also growing at an average of 12 per cent per annum. This drives up the cost of premiums and sometimes it puts pressure on the consumer when they present to the hospital unwell and are put in a position where they have to make a quick decision that can also lead to them incurring unexpected out-of-pocket costs."

The discussion paper finds that, if the number of private patients in the public sector had grown at the same rate as private patients in private hospitals since 2010-11, premiums in 2015-16 would have been about 2.5 per cent lower.

The finding aligns with a recent report from Catholic Health Australia (CHA) - 'UPSETTING THE BALANCE, How the Growth of Private Patients in Public Hospitals is Impacting Australia’s Health System'.

The CHA report found growth of private patients in public hospitals is shifting costs from the states to private health insurers with flow on impacts to consumers in the form of upward pressure on premiums.

“State and Territory Governments received a 6.5% increase in their annual funding from 2016. They should be held accountable not only for how this is spent, but for how Medicare-eligible consumers presenting to public hospitals are treated," said Dr David.

She added the issue is central to its work with government on the current PHI reform process.

“Clearly we need an auditable referral pathway for people coming through public hospital emergency departments if they are being pressured to use their private health insurance,” she said.

“There are a number of regulatory reform options which could improve the relationship between PHI and public hospitals including the removal of quotas and increase monitoring of private patient flows through public hospitals, and greater transparency on care being provided. 

“Consumers should also be provided with informed financial consent to avoid unexpected out of pocket costs; public hospitals should be required to share an appropriate level of data with health funds; and the practice of hospitals offering public patients financial incentives to use their PHI is inappropriate and should be banned.

“This will encourage Commonwealth and State Governments to increase transparency and reduce cost-shifting by highlighting the impact on health fund premiums and out-of-pocket costs for consumers. Public hospital cost-shifting to health funds adds more to premium costs than the average year’s premium increase,” added Dr David.