Saving private health 1: reining in hospital costs and specialist bills

by Stephen Duckett

Private health insurance premiums could be cut by up to 10 per cent if private hospitals were made more efficient and stopped over-servicing.

A handful of ‘greedy’ doctors charge their patients more than twice the official Medicare Benefits Schedule fee.

Only about 7 per cent of all in-hospital medical services are billed at this rate, yet these bills account for almost 90 per cent of all out-of-pocket costs for private hospital patients – and patients are often not told of these costs in advance.

Some doctors also charge ‘booking fees’ on top of procedure and consultation fees. These covert fees are not recoverable from private health insurance or Medicare – the patient is left to foot the bill.

The higher fees have nothing to do with the skill of the surgeon or the adequacy of the Medicare Benefits Schedule. The small minority of specialists who charged more than twice the schedule fee are simply greedy.

If these high-charging specialists had imposed fees at 50 per cent more than the schedule fee but no more, patients would have saved more than $350 million in 2018-19.

And patients should get a single bill if they are treated in a private hospital, instead of the present avalanche of separate and often surprising bills from the hospital, the surgeon, the anaesthetist, and pathology and radiology companies.

As well as reducing the bills paid by private patients, private health insurers should pay less to private hospitals as well. It’s a myth that private hospitals are more efficient than public hospitals. In fact, patients stay 9 per cent longer in private hospitals than public hospital patients with similar conditions.

Paying private hospitals for treating a patient, rather than for keeping the patient longer, doing more tests, or ordering more drugs, could reduce costs by more than $1 billion a year.

Private hospitals also provide more care than public hospitals that is of little or no value to the patient. Private health insurers could save about $1 billion a year if they no longer had to play for low-value or no-value care.

The total identified savings of about $2 billion each year could fund cuts in private health insurance premiums of 7-to-10 per cent.

Capturing these savings and passing them on to patients in the form of lower insurance premiums could save private health care in Australia.

Patients would be the winners under this blueprint, because their out-of-pocket medical costs and private health insurance premiums would be lower.

Read the media release