‘US-style managed care’ in Australia - The eagle that never landed


The chief executive of Private Healthcare Australia Dr Rachel David writes that the recent scare campaign raising the risk of US-style managed care has no basis in fact, experience or law.

There is an apocryphal story about a man discovered stranded alone on a remote Pacific Island sometime in the 1950s. Wearing a tattered military uniform, he had bunkered himself in and spent his days camouflaged and shooting at shadows, because he had not realised WW2 was over and the world had moved on.

The current campaign being run by a small subsection of the medical specialist professions on ‘US-style managed care’ taking hold in Australia is reminiscent of this tale. It is no coincidence the people involved are drawn from the highest-earning and most anti-competitive medical specialties.

To understand where this might be coming from, it helps to know what ‘US-style managed care’ actually is. While there has never been a strict definition, it broadly refers to measures brought in by US health funds in the 1980s and 1990s to control rapidly rising healthcare costs.  Following a consumer backlash, many of these have since been abandoned.

Some of the tactics used during this era included the pre-authorisation of medical treatments by health funds, the employment of doctors who were directed to use certain clinical guidelines and care plans by the funds, and the use of narrow networks of hospitals so patients faced big co-payments if admitted outside the network.

The ‘US-style managed care‘ narrative first appeared in Australia in the mid-1990s. The Keating Government introduced legislation to permit health funds to contract with hospitals as a means of transferring responsibility for cost control to the funds. Opposition health spokesman Michael Wooldridge nicknamed then health minister Carmen Lawrence ‘Captain America’. The scare campaign was born.

To cut to the chase, ‘US-style managed care’ is illegal in Australia. End of story. These are the facts:

  • Under Medicare and private health insurance legislation, health funds must pay benefits when a Medicare benefit is payable, regardless of whether clinical guidelines or care plans have been followed or not;
  • Pre-authorisation of treatment by health funds is not permitted;
  • Under the Health Practitioner Regulation National Law Act 2009, there are penalties for directing doctors and other health professionals to act against their patients’ best interests; and, 
  • Health funds must pay benefits for care in every hospital in Australia, through a default benefits scheme.

Scare campaigns run by vested interests using ‘US-style managed care’ as a slogan are baseless at best. But they are also puzzling – it’s hard to find a doctor with an actual example of managed care in Australia. What is it exactly doctors are worried about?

Australian health funds have no interest whatsoever in taking over the role of clinicians – it’s counterproductive to do so.  Unlike in America, where health insurance is often tied to employment, Australians can change health insurers at any time. Australian health insurers have a strong vested interest in keeping their customers happy and healthy.

While not wanting to be involved in clinical decision making, health funds have a role that extends well beyond simply passively paying claims. They have an interest in advocating for the highest quality and most cost-effective care for their members, and in helping their members stay healthy and informed about their medical care.

The following are examples of things supported by health funds that are not managed care:

  • Doctors providing informed financial consent and an upfront quote for surgery prior to admission – this is just common courtesy;
  • Health funds providing advice to patients who ask, about which specialists offer no-gap services;
  • Health funds investing in health services for the purpose of offering no gap treatment or clinician led centres of excellence;
  • Health funds investing in health services to ensure access to healthcare in a regional area;
  • Bringing healthcare to the patient through out-of-hospital care and telehealth if clinically indicated;
  • Cost-effective supply chain management and procurement, so wasteful costs aren’t passed on to patients; and,
  • Distributing and providing clinician feedback on independently validated evidence-based best practice guidelines, e.g. those provided by the Australian Commission on Safety and Quality in Healthcare.

The confected outrage about a buying group ‘Honeysuckle Health’ established by one mid-sized health fund is very hard to take seriously.  Buying groups have existed in private health insurance for decades as a means of reducing management expenses. The idea that adding another one will open the door to ‘US-style managed care’ at any level is fanciful under the existing regulatory regime for private health.

Health care is constantly changing. Australian health funds have a single interest – continually improving the quality and value of private health for their members.  The campaign run by a tiny number of wealthy, self-interested medical specialists hiding behind the outdated slogan of ‘US-style managed care’ to try and turn back the clock, is disappointing and short-sighted.  It’s time to stop fighting this imaginary war and focus on working together to improve what we are offering to our patients.