2018-19 Pre-Budget Submission - Bupa - Consultation Hub
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Bupa
2018-19 Pre-Budget Submission
Contact:
Dr Dwayne Crombie
33 Exhibition Street, Melbourne, 3000
T: + 61 (3) 9937 4834 E: GovtPolicyRegAffairsTeam@bupa.com.au
W: www.bupa.com.au/healthandcaring
1Bupa 2018-19 Pre-Budget Submission
Table of Contents
Executive Summary 3
About Bupa Australia and New Zealand 7
Summary of Recommendations 8
Private Health Insurance 13
Reform of the broader health sector 18
Aged Care 26
Broader policies for an ageing population 34
Executive Summary
Confidential 2Bupa 2018-19 Pre-Budget Submission
Bupa welcomes the call by the Government for pre-Budget submissions from individuals,
businesses and community groups on their views regarding priorities for the 2018-19 Budget. The
2018-19 Budget provides an important opportunity to consider reforms in Australia’s health and care
sector.
We begin this submission by focussing on reforms to private health insurance and the wider health
system. Our recommendations aim to help deliver better quality, more affordable and accessible
health care for all Australians, and flow through to a more sustainable public and private health
system.
We then look at reforms to aged care – covering funding, quality and workforce issues. We also
canvass broader reforms to policies for our ageing population, including end-of-life care and
dementia.
Private Health Insurance
Private health insurance is a vital part of Australia’s health system and our social fabric. Ensuring
Australians have access to timely, high quality healthcare is key to ensuring the current and future
prosperity of our nation. Over the last decade private health insurance has played an increasing role
in ensuring Australians have timely access to many key health procedures, including cardiac
surgery, cancer treatments and maternity services, as well as the vast bulk of elective surgery such
as hip and knee replacements.
As well as reducing the hospital burden, private health insurance plays a vital role in the everyday
lives of Australians by making many common health interactions affordable and accessible via its
General Treatment policies. These policies see Australian families obtaining funding from private
health insurers for important health services such as dental, optical, physiotherapy, podiatry, and
speech therapy, to name but a few.
Ensuring access to affordable and regular healthcare is vital to maintaining and enhancing
Australian’s overall health and reducing future year burdens. Bupa is proud of the significant
investment we make in families’ health needs, which sees many common treatments gap-free for
children. Ultimately, enabling families to have regular and early access to quality healthcare by
reducing the ever-growing financial strain on their budgets clearly aligns with the Government’s
emphasis on supporting Australian families whilst ensuring appropriate care is received early in life.
The recent private health insurance reform package announced by the Government was an
important first step in improving the affordability of private health insurance and simplifying choices
for customers. In this submission we identify one measure, the discount for young people, where we
believe changes are required to ensure its success, and the success of the package as a whole.
We also suggest further actions the Government can take in the 2018-19 Budget to support the
industry’s efforts to increase participation and address affordability:
• raising the Medicare Levy Surcharge to encourage greater contributions to the cost of their
healthcare by those who can afford it;
Confidential 3Bupa 2018-19 Pre-Budget Submission
• reforming the private health insurance rebate so its value doesn’t continue to erode;
• changing how private patients are treated and admitted within public hospitals;
• continuing reforms to prostheses pricing; and
• regulating the cessation of promotional join offers within the industry.
Ultimately, however, the pressure on private health insurance affordability will never be fully
addressed unless the underlying cost drivers which impact on the affordability of the entire health
system are addressed. We need to move to a system where the right care is delivered in the right
setting, by the right person, ensuring better quality care at the most efficient price.
The highest priority reforms should include:
• supporting more informed consumer choices through the provision of data on the
performance and cost of health;
• focusing on preventative health care;
• a series of trials to shift the emphasis from in-hospital to community care by removing a
number of the current disincentives to community care; and
• establishing a Productivity Commission review of the health system to produce a 10-year
roadmap for structural reform of the health system to deliver better quality, more efficient,
sustainable and affordable care that is centred on the needs of consumers.
Aged Care
It is well known that Australia’s population is ageing. The number of Australians aged 85 and over
(the major users of aged care services) is projected to more than quadruple by 2050, from around
0.4 million in 2010 to 1.8 million, according to the Australian Bureau of Statistics1. The Productivity
Commission’s report Caring for Older Australians identified a number of policy issues that will arise
from this growth, that collectively need to be addressed by Governments, industry and consumers:
• An increasingly aged population will result in a significant growth in both demand for and
spending on aged care services.
• The older population will on average be more affluent, and expect higher quality care and
greater choice over how they spend their lives.
• Demand will become more diverse due to changing patterns of disease and a wider range of
preferences and expectations.
• There is an expected relative decline in family support and informal carers.
1 http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/3222.0main+features32012%20(base)%20to%202101
Confidential 4Bupa 2018-19 Pre-Budget Submission
• There will be the need for a significant expansion in the aged care workforce.
Bupa contends that the urgent need to develop an adequate and sustainable aged care funding
model must be recognised as we look to address these key ageing policy issues. For without reform
to the existing funding model, it is inevitable that the quality of aged care delivered in Australia will
diminish over time - regardless of the effectiveness of the aged care accreditation, monitoring,
review, investigation, complaints and compliance processes.
Recent changes to residential aged care funding – particularly the indexation freeze and changes to
the Aged Care Funding Instrument (ACFI) complex health care (CHC) domain - are threatening the
sustainability of the sector and its capacity to provide high quality care to residents, including those
with complex care needs. These recent changes are making it increasingly difficult to provide the
high level of care required for residents with complex care needs, within the aged care home.
Where the care cannot be delivered in the aged care home, due to inadequate funding, people will
increasingly need to be unnecessarily transferred to, and cared for in, the more-costly hospital
setting. This is a very poor outcome for the resident, their family and the health and care system
more broadly.
Currently, Return on Capital Employed ratios in the Australian aged care sector are so low that
without reform, it is highly likely that most providers will not be able to continue investing in new
homes, refurbishing old ones, or buying out providers who may be forced to close due to funding
pressures. This threat to the sustainability of the aged care sector coincides with an expected rise in
demand for services by a growing ageing population and increasing incidences of dementia. We
need to avoid a situation like that of the United Kingdom, where ongoing reductions to aged care
funding have resulted in approximately 25% of acute care beds in hospitals being occupied by
people with dementia and aged care facilities continuing to close2.
It is much costlier to deliver care in an acute, hospital setting. The average revenue available to
provide care in the residential aged care sector is approx. $260 per day, significantly less than
the private ($1,239) and public ($1,400) hospital sector and inpatient palliative care (c.$950)3
Sustainable funding arrangements are needed to enable the delivery of quality care for residents
that is centred on their needs - supporting their independence and allowing them to live their final
years in comfort and with dignity and respect. It is also required to encourage long term investment
in the sector, so that the projected growth in demand for aged care beds and workers can be met.
Sustainable funding will help the sector attract, upskill and retain a high quality aged care workforce
– from geriatricians, to specialised GPs, nurses, care workers and other support staff.
Bupa recognises that in the current budgetary environment, it is not realistic to expect the
Government to increase funding. We therefore believe the Productivity Commission’s and the Tune
Review’s recommendations to move to market-driven aged care funding4, where people who can
afford it contribute to the cost of their personal care (while those who cannot afford it continue to be
2
Alzheimer’s Society https://www.alzheimers.org.uk/download/downloads/id/787/counting_the_cost.pdf
3
Australian Bureau of Statistics, Private hospitals – Australia, 2014-15; NSW Auditor-General’s Report to Parliament, Managing length of
stay and unplanned readmissions in NSW public hospitals, 2012-13; Palliative Care Australia, Submission to National Commission of
Audit, January 2014, p2.
4
Productivity Commission 2011, Caring for Older Australians, Report No. 53, Final Inquiry Report, Canberra. Part 2, page 24.
Confidential 5Bupa 2018-19 Pre-Budget Submission
heavily subsidised), should be seriously considered as part of much needed national conversation
on ageing and aged care. While we acknowledge it is often not a simple process to reform funding,
Australians expect and deserve high quality aged care - whether it be for themselves or their loved
ones – and urgent funding reform is required if we want to ensure Australians can continue to
access care that keeps them safe, well cared for and provides a good quality of life. COTA research
also found that consumers don’t mind if people are being asked to pay more if they have the
capacity to afford it. But they do want more choice and a better-quality system. 5
Ultimately, adequate funding is required to deliver quality aged care – not only to attract and retain a
high-quality workforce in the sector - but also to enable the delivery of complex, multidisciplinary
support for residents with complex care needs, enabling elderly people to access the care they
need, when they need it.
Broader policies for an ageing population
As our population ages, it is becoming increasingly important to consider a wide range of policy
issues, beyond the delivery of aged care, to ensure Australians can live well as they age.
Broader policies will be particularly critical for enabling a large number of people to live well with
dementia. Currently around 244 people each day are joining the population with dementia. Without
a medical breakthrough, the number of people with dementia in Australia is expected to reach
1,100,890 by 2056. There are an estimated 25,938 people with younger onset dementia, expected
to rise to 29,375 by 2025 and 42,252 by 2056. Dementia is the second leading cause of death of
Australians6.
Bupa believes there is a strong need for a robust national dementia strategy, as well as a framework
for determining effectiveness of programs and services. Without such a strategy, or rich and robust
outcome data and evidence, we cannot be certain that dementia programs and services are as
accessible, effective and efficient as they could be for Australians with dementia.
As a health and care company, Bupa is committed to playing a role in creating dementia-friendly
communities. In New Zealand, we have made progress in this area by working with many partners
in the sector to help people living with dementia to continue to do the things they wish to do –
helping them to be understood, supported and respected. We would like to work with Government
and other partners in Australia to build on this work, helping people living with dementia to live well.
Bupa is also passionate about end of life care and ensuring elderly people have choice at the end of
their life. This is an important issue and we would welcome an opportunity to work more closely with
the Government on this. In the next 25 years the number of Australians who die each year will
double. It is therefore imperative to consider how best to improve end-of-life care in Australia.
Care should be provided in a manner that gives people dignity, respect and the choice to die where
they want to die.
5 As stated by Ian Yates, CEO of COTA in The Australian, The Future of Aged Care Supplement, “Flexibility choice and certainty: sector’s
complex balancing act”, 24 March 2017.
6 https://www.dementia.org.au/statistics
Confidential 6Bupa 2018-19 Pre-Budget Submission
In a recent Bupa consumer survey, 86% of members agreed that end of life care should be more
openly discussed in the community7. However, most people do not speak up about the way they
would like to die, which means they often experience a disconnected, confusing and distressing
array of services, interventions and relationships with health professionals, imposing stress on
individuals and families at an already difficult time.
We recommend that the Government commit to commence a sensitive and mature debate with the
community on end of life care, with a view to giving people dignity, respect and the choice to die
where they want to die.
About Bupa Australia and New Zealand
In Australia and New Zealand, Bupa is an increasingly diverse health and care company. In addition
to our health, travel, pet, car, home and life insurances, we operate dental clinics, aged care homes,
retirement villages, optical stores, general practice (GP) services, rehabilitation centres, tele-health
services and wellness and medical visa services. Our purpose is to help people live longer,
healthier, happier lives. Bupa is not listed and this allows us to reinvest our profit into more and
better healthcare to deliver our purpose to around 32 million customers globally.
Bupa is the largest health insurance provider in Australia, supporting more than 4.7 million
customers in their health and wellbeing. We are also the largest privately owned residential aged
care provider in Australia, providing care for nearly 7,000 residents across a growing network of
more than 70 aged care homes.
We deliver a wide range of services for our customers through Australia's largest dental network of
more than 230 Bupa owned dental clinics, almost 40 optical stores and expanding audiology
services. In addition, we provide medical assessment services to some 250,000 onshore visa
applicants annually through our national network of purpose built medical centres and more than
160,000 case reviews by a skilled medical team of complex offshore cases on behalf of the federal
Government.
We recently opened a new state-of-the-art therapy centre in West Melbourne that’s been co-
designed with people living with disability and purpose-built to meet their needs. Our expansion into
therapy is a trial and a response to the NDIS to improve access to therapy for those who need it.
We are also making a difference through our Bupa Health Foundation. As one of Australia’s leading
corporate foundations dedicated to health, it is committed to improving the health of the Australian
community and ensuring the sustainability of affordable healthcare through collaborative
partnerships. Since inception in 2005, the Foundation has invested over $30 million in more than
100 projects that focus on translating Australian research into real health and care improvements.
Summary of Recommendations
7 https://presspage-production-content.s3.amazonaws.com/uploads/1950/bupafuturesurveyseries-agedcarelivingto100.pdf?10000
Confidential 7Bupa 2018-19 Pre-Budget Submission
1. Private Health Insurance
Bupa recommends that:
1.1 the Government amends the Discount for Young People so it applies for life, is
mandatory, and so the risk equalisation pool is also discounted.
1.2 the Medicare Levy Surcharge is rebased so it provides a stronger incentive for those
who can afford to contribute to the costs of their healthcare to do so.
1.3 a new bespoke indexation rate for the Private Health Insurance Rebate is adopted so
the value of the rebate doesn’t continue to be eroded, and the current freeze on
income tiers should be lifted immediately.
1.4 changes are introduced to charging private patients in public hospitals, namely:
• limiting private health insurance benefits to the medical costs of private treatment
in public hospital with no benefits paid to the hospital;
• removing the requirement to pay benefits for treatments in public hospital
emergency admissions;
• removing the requirement on health insurers to pay benefits for episodes where
there is no meaningful choice of doctor or doctor involvement;
• only allowing public hospitals to charge private patients if:
o they have contracts with health insurers, with the contract to allow provision
of data, compliance, monitoring and audits, as per arrangements with private
hospitals; and
o the patient signs a statement prior to admission, submitted to insurer at least
24 hours prior to hospitalisation, with the statement clearly spelling out the
additional benefits that will be received as a private patient e.g. choice of
doctor.
1.5 Further reforms are made to prostheses pricing, namely:
• in the short term:
o the Prostheses Price List should be amended so the new listed prices are the
maximum charge that may be raised by supplier or hospital, instead of a
minimum benefit payable by funds;
o the government should mandate that medical device companies disclose all
payments made to healthcare professionals;
Confidential 8Bupa 2018-19 Pre-Budget Submission
• in the medium term, a process to internationally benchmark all items is
introduced; and
• in the longer term, once more realistic prices have been established, prostheses
should be bundled into payments for procedures, rather than individually billed.
1.6 the Government regulate to prevent promotional join discounts being offered in the
private health insurance industry.
2. The health system
Bupa recommends that:
2.1 the Government works collaboratively with relevant bodies, including professional
associations, to develop a set of information that could be provided to GPs in the
first instance, to help patients choose the most appropriate health professional for
their referral. The information should include:
• agreed performance indicators to assess the performance of health practitioners,
with data to be comparable, reliable, appropriately aggregated and benchmarked,
and to account for external factors; and
• comparable and reliable data on costs for common procedures.
2.2 over time, the data is made available to the public through a ‘mydoctor’ or
‘myhealthprovider’ site, and the performance indicators should be used
professionally to support peer review.
2.3 the Government work with the specialists and peak bodies to facilitate the
widespread use and understanding of ‘open referrals’ that customers can take to the
specialist of their choice.
2.4 Australia adopt the green prescription scheme to further promote wellbeing and
reduce chronic disease burden, and in defined regions trial green prescriptions
being offered by other community health professionals that patients commonly see
(e.g. pharmacists, physiotherapists) as well as GPs.
2.5 the Government trial the expansion of some MBS items to community health
professionals that patients commonly see, for example telehealth by mental health
nurses, to ensure that patients get the right support at the right time.
2.6 the Government enable private health insurers to pay GPs directly through Eclipse
for visits on behalf of their customers. Health insurers would then recover MBS
payments from the Government and co-contributions from the customer. This would
enable health insurers to support their customers with earlier intervention in relation
to risk of chronic disease or other health conditions by providing them with access
Confidential 9Bupa 2018-19 Pre-Budget Submission
to information on their customers that they currently do not have.
2.7 the next National Health Reform Agreement include:
• targets to increase the amount of community based mental health and
rehabilitation care, with a commensurate reduction in growth of in-hospital
treatments; and
• ‘reward payments’ for states through offering them 50% of any savings achieved
through the switch to community based care.
2.8 the Government trial:
• a set of ‘hospital-substitution MBS items’ for psychiatric and rehabilitation
treatment in the community, which mirror the in-patient MBS items in terms of
benefits; and
• allowing top up payments for the ‘hospital-substitution MBS items’ in return for a
gap free or known gap treatment.
2.9 an industry approach is developed and trialled to assess patient level of
acuity/function to determine the appropriateness for inpatient care versus
community based options.
2.10 the Government engage with PHNs and other stakeholders to trial new models for
mental health referral and care that seek to avoid unnecessary hospital admissions.
2.11 the Government establish a Productivity Commission review of the health system to
produce a 10-year roadmap for structural reform of the health system to deliver
better quality, more efficient, sustainable and affordable care that is centred on the
needs of consumers.
3. Aged care
Bupa recommends that:
3.1 aged care funding is reformed to ensure sustainability, as adequate funding is vital
for the delivering quality aged care.
3.2 the Government seek out and carefully consider the views of Australians on the
Productivity Commission’s and Tune Review’s recommendations to increase
consumer contributions to aged care from those who can afford it, while providing a
safety net for those who cannot, before making any decisions on aged care funding.
Specifically, we strongly encourage consideration be given to at least increasing the
capped value of the owner’s home in the means test (currently $162,087.20), and
increasing the annual and lifetime caps.
Confidential 10Bupa 2018-19 Pre-Budget Submission
3.3 the Government give greater priority to establishing a highly skilled workforce,
where nursing and care is a more attractive proposition, by:
• reviewing aged care funding mechanisms to allow competitive wages to be paid
to aged care nurses, including flexibility (e.g. greater pay for those caring for
higher needs residents);
• encouraging and incentivising access to training and entry to the aged care
workforce by people from all diverse backgrounds;
• establishing initiatives to assist and encourage migrants transitioning to the aged
care sector – e.g.: encouraging the provision of English language and numerical
literacy courses or bridging programs; and removing visa restriction red tape that
limits ability of some migrants to progress in their aged care career;
• supporting greater retraining/reskilling of workers by quarantining part of the
Skilling Australians Fund for the aged care workforce;
• supporting the development of initiatives to attract graduates and increase
perception of nursing and care as a more attractive career;
• developing a quality assessment and focus on leadership, which is one of the
biggest factors in high-quality service delivery, including looking at ways to
attract and retain the best talent; and
• establishing a national registration scheme for Carers, which stipulates a
minimum level of qualification.
3.4 reforms to the aged care quality regulatory processes focus on aged care outcomes
or outputs, rather than inputs.
3.5 the Government establishes an innovation fund which seeks to promote the
development and adoption of digital technologies that enhance the delivery,
measurement and reporting of aged care.
3.6 a detailed consultation (with Government, providers and consumers) be established
to create a road map for delivering comparable and meaningful aged care outcomes
data
3.7 A national dementia strategy be developed to help determine priorities for funding
dementia in the future, with the strategy to be built on:
• Evidence
• National standards
• Transparency
• Data
• Consumer information
Confidential 11Bupa 2018-19 Pre-Budget Submission
• Training
• Environments
• Communities
• Incentivising and enabling innovation
• Reducing preventable hospitalisations.
3.8 the Government develop a proactive and sustainable approach to aged care funding,
that specifically encourages the development of expertise and skills in person-
centred approaches to care for people living with dementia.
3.9 case managers be introduced to help people with dementia, and their families to
navigate options available to them as they age and support decision making.
3.10 the Government commence a sensitive and mature debate with the community on
end of life care, with a view to giving people dignity, respect and the choice to die
where they want to die.
3.11 investment is made in creating dementia friendly communities - working with aged
care providers and other stakeholders to break down stigma and create
communities that support people to live well with dementia.
3.12 workforce strategies specifically focus on continuous improvement and best
practice approaches to dementia care.
Confidential 12Bupa 2018-19 Pre-Budget Submission
PHI Reform Package Announced October 2017
Bupa has welcomed the private health Insurance reform package announced on 13 October 2017
as an important first step in improving the affordability of private health insurance and simplifying
choices for customers. Many of the measures will require detailed consultation with health insurers
and other stakeholders to work through the detail of their implementation, and Bupa looks forward to
strong engagement in these processes.
There is, however, one measure where changes to its design are critical to its success, and the
success of the package as a whole.
Discount for young people
The original proposal for a Lifetime Health Cover Discount put forward by Bupa and other health
insurers included the discount applying for life if a person remained in private health insurance.
Thus, the discount would simultaneously be a strong purchase incentive and a retention tool.
The policy announced has the discount phasing out once a person is in their 40s, thereby reducing
both the purchase and retention incentive. This will significantly undermine the impact of this
measure. Indeed, the original modelling of a financially viable discount assumed the cost of
discounting premiums for current members under the age of 30 would be offset over a short period
by the increase in new members and increase in retention. If this offset does not eventuate due to
the weakened purchase and retention incentive, overall premiums could rise as a result of this
measure.
Two other elements of the original design were the discount being mandated for all health insurers,
and the risk equalisation pool also being discounted. The policy announced was for a voluntary
arrangement, and was silent on risk equalisation. We believe these two elements should also be
remedied ahead of implementation if the measure is to have the maximum impact on participation
by young people and take pressure off premium rises.
The current design, whereby a young person may or may not receive a discount if they join a health
insurer before they are 30, and has no guarantee that the discount will be retained if they change
policy or health insurer, is unworkable and offers little real incentive to young people.
Bupa recommends that the Government amends the Discount for Young People so it applies
for life, is mandatory, and so the risk equalisation pool is also discounted.
Further Private Health Insurance Reform
Community-rated private health insurance relies on participation by a wide and diverse range of
people. Government and the sector can support this through measures which create strong
incentives for participation and improve affordability.
Confidential 13Bupa 2018-19 Pre-Budget Submission
Participation
Medicare Levy Surcharge
The Medicare Levy Surcharge is an important Government lever to encourage stronger participation
in private health insurance by high income earners. However, over time the value of the Medicare
Levy Surcharge has been eroded, reducing its original impact on private health insurance
membership. It is now at a point where for some individuals and families the additional tax imposed
may be less than the premium to be paid, and subsequently the choice of many healthy people will
be to pay the levy, contributing to the decline in private health insurance customers.
Bupa recommends that the Medicare Levy Surcharge be rebased so it provides a stronger
incentive for those who can afford to contribute to the costs of their healthcare to do so.
Affordability
There are many factors that contribute to the cost of health insurance, and where reform could help
drive costs down and improve affordability – some, such as the private health insurance rebate,
increased charging of private patients in public hospitals and prostheses pricing, have already
received significant public attention, but others such as the cost of promotional offers, have had
limited public discussion.
Private Health Insurance Rebate
The Private Health Insurance Rebate was originally set at 30% of private health insurance
premiums for all. However, the introduction of means testing and a decision by the Government in
2012 to index the rebate by CPI from April 2014 (rather than actual increases in premiums) means
its consumer value has eroded over time. It is expected to fall below 26 per cent this year for
people under 65 years whose incomes fit into the base tier. This decline in Australian Government
assistance for consumers contributes to concern about affordability of private health insurance.
The current freeze on income tiers also compounds affordability concerns, as customers move to
lower rebates when their income grows in line with cost of living changes.
Bupa recommends a new bespoke indexation rate should be adopted so the value of the
rebate doesn’t continue to be eroded. This rate should be based on specific cost factors in the
health sector, which are what drive premium increases, rather than CPI. For example, the new rate
could match actual indexation of Commonwealth funding for public hospitals, which is capped at
6.5% a year from 1 July 2017.
We also recommend the current freeze on income tiers should be lifted immediately.
Private Patients in Public Hospitals
Confidential 14Bupa 2018-19 Pre-Budget Submission
Bupa is comfortable with our customers receiving treatment in a public hospital as a private patient if
that is their personal choice or it is the appropriate place for that treatment to occur - for example
complicated pregnancies, if the preferred surgeon only operates out of a public hospital, or if there is
no private hospital near where the patient lives.
However, we believe there should be much greater scrutiny of, and transparency regarding, the
information provided to members to help them make decisions to either elect to be a private patient
or exercise their right to be a public patient.
It is Bupa’s expectation that if Bupa customers are going to be charged as a private patient then
they would receive the corresponding experience aligning to the extra benefits being paid by Bupa,
such as choice of doctor as a minimum. In addition, they should be given written documentation
specifying the other aspects of the experience which would be different to being a public patient.
The information provided to patients should also outline the costs the fund will incur as some public
hospitals have incorrectly created the perception that going private will not cost the member. This is
incorrect, as it increases every member’s premiums.
Patients should know about costs up front and should not be pressured into using their private cover
but instead allowed to refuse once presented with all the relevant information. Current behaviour by
many public hospitals sees many Bupa members receiving a bedside visit after a procedure or
letters two or three months after an event pressuring them to declare their private cover and we
believe this is unquestionably inappropriate and contrary to the intent of private patient declaration.
In September 2017, Bupa responded to the Department of Health’s discussion paper on Options to
reduce pressure on private health insurance premiums by addressing the growth of private patients
in public hospitals. Bupa welcomed all the options for reform presented in that discussion paper,
however, we recommended that the priority for reform should be the following:
• limiting private health insurance benefits to the medical costs of private treatment in
public hospital with no benefits paid to the hospital;
• removing the requirement to pay benefits for treatments in public hospital emergency
admissions; and
• removing the requirement on health insurers to pay benefits for episodes where there
is no meaningful choice of doctor or doctor involvement.
In conjunction with the recommendations put forward by the Department, Bupa strongly
recommended that public hospitals should be limited to only being able to charge private
patients in the following circumstances:
• if they have contracts with health insurers, with the contract to allow provision of
data, compliance, monitoring and audits, as per arrangements with private hospitals;
and
Confidential 15Bupa 2018-19 Pre-Budget Submission
• if the patient signs a statement prior to admission, submitted to insurer at least 24
hours prior to hospitalisation, with the statement clearly spelling out the additional
benefits that will be received as a private patient e.g. choice of doctor.
These requirements would improve transparency, ensure members are provided with a genuine and
informed choice, and ensure the member receives an experience that aligns to the extra benefits
being paid by their insurer.
Beyond mandating the minimum requirement that a public hospital have a contract with health
insurers to allow the provision of data, compliance, monitoring and audits, Bupa notes it would be
beneficial for private health insurers to have the option of entering into greater contracting
arrangements with public hospitals, such that currently exist with private hospitals, and the ability to
negotiate business rules. For example, negotiating business rules as part of the contractual
arrangements could include defining what constitutes an admission (as currently what might
constitute a same day admission in the public hospital system can differ from that in the private
system). If an insurer is able to negotiate these business rules with a number of public hospitals,
this would lower costs and reduce differing charges based on the use of private or public admission
for a same procedure or admission.
Prostheses Pricing
Bupa welcomed the announced reduction in prostheses pricing in October 2017, and has committed
to pass on every dollar saved from prostheses pricing reductions back to our customers.
We believe, however, that further short, medium and long-term reforms are required.
In the short term, the Prostheses Price List should be amended so the new listed prices are
the maximum charge that may be raised by supplier or hospital, instead of a minimum
benefit payable by funds.
This is because:
• if left as minimum benefit payable, there remains a risk that customers could be charged out
of pocket gaps over and above the new price. Bupa has noted that there have already been
questions raised about gaps by providers; and
• there may be instances where competition may see one supplier wanting to undercut
another, and in this scenario, Bupa should be able to be charged the lower price rather than
the minimum benefit payable (which may be a higher cost).
We also recommend mandating medical device companies disclose all payments made to
healthcare professionals, similar to the existing disclosure requirements for pharmaceutical
companies under the Medicines Australia code of conduct. These payments are a conflict of
interest, and there is currently no transparency in whether clinicians are using products and devices
with which they have financial or organisational ties. Often these products and devices will not
necessarily be the most clinically and cost-effective alternatives.
Discouraging this conflict of interest will help enable hospitals to purchase the most clinically and
cost-effective products, particularly by being able to negotiate bulk purchases with fewer suppliers.
Confidential 16Bupa 2018-19 Pre-Budget Submission
In the longer term, this will make it easier to implement a bundling model, which will, with hospitals
negotiating more competitive pricing, enable insurers to contract for cheaper prices for their
members and therefore lower premiums.
In the medium term, we recommend a process to internationally benchmark all items, leading
to further reductions to prices for public and private patients in Australia. Bupa’s experience
operating in the UK and Australian markets shows significant differences in international prices - a
Boston Scientific implantable cardiac defibrillator is listed in the UK’s National Health Service (NHS)
for £19,787 which equates to $34,705 AUD. The same device in Australia is currently listed at
$46,800.8
In the longer term, once more realistic prices have been established, we recommend prostheses
be bundled into payments for procedures, rather than individually billed. Just as bundling has
led to reducing lengths of stays in the private sector and avoiding unnecessary days in hospital, so
too could bundling of prostheses lead to choice of prosthesis better aligned with cost-effectiveness
and overall outcomes, and reducing some of the perverse incentives seen currently. Bundling would
allow market-driven negotiation of benefits – with enhanced competition between manufacturers
leading to lower costs and a more sustainable health system – and lower premiums for health
insurance customers.
Promotional Offers
Currently, the Private Health Insurance Act permits the provision of promotional join offers to a
maximum of 12% in the first year of membership. The use of these offers has escalated
significantly over the last decade, with increasing numbers of complex offers being put into the
marketplace, from bicycles to frequent flyer points to cash vouchers to the simpler one month or 6
weeks premium free.
Bupa estimates that around at least $100 million of revenue is expended by funds in these offers
each year. This is likely to be a conservative estimate, as it is based on Bupa’s expenditure which
we believe is significantly lower than other large players as we do not actively promote these offers
in the market.
Key reasons for removing promotion join offers include:
• They are no longer appropriate given the increasing pressure of affordability;
• They are a considerable expense which, if ceased, would put downward pressure on
premiums as more of existing customers’ premiums would be retained by the funds rather
than being provided to third parties or written off;
• They are impacting detrimentally on the perceived value of health insurance; and
• The increasing use of promotional offers means that at any one time there are numerous
offers in the marketplace which continue to suggest that health insurance on its own is not
worth purchasing (and instead need to entice customers with additional products).
8 Pricing current at 14 December 2017
Confidential 17Bupa 2018-19 Pre-Budget Submission
Bupa contends that this approach is also decreasing the value of health insurance in the minds of
both prospective and existing customers.
Promotional offers simply encourage churn, and the focus of the churn becomes the promotional
offer rather than the details of the product being purchased. This is likely to be contributing to the
level of confusion consumers experience with their product down the line as at the time of purchase
the focus is misdirected from ensuring the correct level of cover.
Furthermore, the offering of promotional join deals is not seen well by existing customers. Bupa
does not actively promote offers in the same way as many of our competitors, however our historical
customer insights from existing customers (as opposed to new joins) have reflected that current
customer loyalty is not rewarded compared to new joins.
Bupa does not believe removing promotional join offers would have a negative impact on the
industry. Bupa contends that no one chooses to take out health insurance as a result of a one off
promotional offer. Instead, what it may impact is which fund customers choose to join. Therefore, we
do not believe the removal will impact growth or stop those who want to review and change their
coverage and fund from doing so.
Bupa believes this change will have positive impacts on the industry by helping funds to keep
downward pressure on premiums and increasing the focus on the actual value proposition of health
insurance increasing the value in the eyes of the public and our members.
Bupa recommends the Government regulate to prevent promotional join discount being
offered in the health insurance industry.
Reform of the Broader Health Sector
In addition to private health insurance, Bupa is also proposing reforms to the broader health sector.
Ultimately, the pressure on private health insurance affordability and health affordability more
generally will never be fully addressed unless underlying cost drivers in the system are addressed.
We need to move to a system where the right care is delivered in the right setting, by the right
person in all instances, ensuring better quality care at the most efficient price.
Choosing the right care
There is growing consensus in the health sector of the need to improve information in the market,
particularly regarding the quality and cost of services offered by health professionals, to support
more informed consumer choices. Currently, patients and their families do not have all the
information they need to make informed choices about the health and care that is most appropriate
to them, either in terms of treatment options or costs.
Performance of Health Practitioners
Even at the most basic level there is little or no information to guide patients on their choice of
hospital or specialist, let along their charges or quality of outcomes. This type of information is
Confidential 18Bupa 2018-19 Pre-Budget Submission
available in other countries and should be made available in Australia. When surveyed, 92% of our
customers agreed that patients should be given greater access to information about medical
specialists to make informed choices about their health.9
Bupa recognizes that performance indicators for health practitioners can be complex and potentially
sensitive, but they are also highly valuable. We believe that performance data should be
comparable, reliable, appropriately aggregated, benchmarked, and should account for external
factors such as more complex client case-loads. Once developed, performance indicators could be
used professionally to support peer review, and externally to support patient choice – in the first
instance, through provision of information to GPs so they can help their patients select the most
appropriate health practitioner for their referral. Eventually they could be made publicly available
through a ‘mydoctor’ or ‘myhealthprovider’ site.
Cost
Developing a ‘mydoctor’ or ‘myhealthprovider’ site would also provide an avenue to address one of
the most common consumer concerns – unexpected healthcare costs. Providing easy-to-access
and easy-to-understand information about typical medical costs is an important way to help people
understand their options, seek alternatives, and ultimately have greater control over their experience
in the health system. 79% of our customers said they are likely to use a specialist cost comparison
website. Ideally, information should be available at a national and state level, and as with
performance data, it should also be comparable and reliable.
We believe the Government should be involved in the initial development of data, both on
performance and costs, to ensure it is seen as independent and credible.
Bupa recommends that the Government work collaboratively with relevant bodies, including
professional associations, to develop a set of information that could be provided to GPs in
the first instance, to help patients choose the most appropriate health professional for their
referral. The information should include:
• agreed performance indicators to assess the performance of health practitioners, with
data to be comparable, reliable, appropriately aggregated and benchmarked, and to
account for external factors; and
• comparable and reliable data on costs for common procedures.
We further recommend that, over time, the data be made available to the public through a
‘mydoctor’ or ‘myhealthprovider’ site, and the performance indicators could be used
professionally to support peer review.
Open referrals
Access to the above information will allow customers to make more informed choices about their
health care. This could be further enhanced by greater use of open referrals by GPs – meaning a
patient can visit more than one specialist before making their choice, without needing to return to
9 Bupa Member Attitude and Sentiments Survey: 7 June 2016
Confidential 19Bupa 2018-19 Pre-Budget Submission
the GP for additional referrals. Having access to an open referral process would enable patients to
act on information regarding costs and possible consequences of various treatments.
The way in which specialist referral and pricing currently operates inhibits consistency, cohesion
and transparency and does not operate in the best interests of consumers. We also understand
there is currently resistance to open referrals by many specialists.
Bupa recommends the Government work with the specialists and peak bodies to facilitate
the widespread use and understanding of ‘open referrals’ that customers can take to the
specialist of their choice.
Preventative care
An important aim of our health system should be to keep people well for longer. While it is
recognised globally that there should be a strong focus on preventing disease and reducing ill
health, in 2013-14 only around 1.4% of total health expenditure in Australia went to public health
activities, which included prevention and health promotion. This proportion of expenditure has been
declining since it peaked in 2007-08 at 2.8%. Clearly, we need improvements, particularly in light of
the increasing incidences of chronic diseases, many of which could be prevented or reduced by
lifestyle changes such as changes to diet and physical activity, giving up smoking, and reducing
alcohol intake.
Bupa believes the right care for many people will be preventative care, but this requires a shift away
from the current emphasis on treatment.
Australia should formally adopt the green prescription scheme, where physical activity is prescribed
– where appropriate – to patients to drive prevention and early intervention for many conditions and
risk factors including mental health, obesity and diabetes. Studies have shown this scheme
produces tangible positive results for participants, including increased and sustained physical
activity levels and diet improvements. Results from a patient survey in NZ also reported that 73% of
participants noticed positive changes in their health.
This scheme would need to be paid appropriately through the MBS and should not be limited to
GPs. The Government could therefore trial in defined regions allowing the issue of green
prescriptions by community health professionals seen by patients most often, such as practice
nurses, physios, community social workers, psychologists and community pharmacists.
At the same time, the Government should trial the expansion of some MBS items to community
health professionals that patients commonly see, for example telehealth by mental health nurses, to
ensure that patients get the right support at the right time.
The Government should also enable private health insurers to take a greater role in preventative
health. This could be achieved by enable health insurers to pay for GP visits for its customers
through Eclipse, and then claim back the appropriate MBS payments from the Government along
with any co-contributions from customers. This would not involve any change in cover (i.e. their
insurance would not cover the cost of GP visits), but it would give health insurers access to early
information on MBS items charged at GP visits and specialist referrals, allowing us to contact
customers to offer preventative health options and/or access to programs offered by the insurer
(e.g. telehealth support). Better data would support early intervention with customers at risk of
Confidential 20Bupa 2018-19 Pre-Budget Submission
chronic disease and other health conditions, and improve the quality of advice to customers on
treatment options – for example, the benefits of pre-habilitation before many joint replacements, to
speed up and improve recovery. Insurers are currently able to proactively engage with patients
receiving in-patient services, but it would be better for our customers and our health system if this
occurred when health issues and risk factors are initially identified, rather than post-treatment.
Customers would need to opt in to these arrangements.
Bupa recommends:
• Australia adopt the green prescription scheme to further promote wellbeing and
reduce chronic disease burden, and in defined regions trial green prescriptions being
offered by other community health professionals that patients commonly see (e.g.
pharmacists, physiotherapists) as well as GPs;
• the Government trial the expansion of some MBS items to community health
professionals that patients commonly see, for example telehealth by mental health
nurses, to ensure that patients get the right support at the right time; and
• enabling private health insurers to pay GPs directly through Eclipse for visits on
behalf of their customers. Health insurers would then recover MBS payments from
the Government and co-contributions from the customer. This would enable health
insurers to support their customers with earlier intervention in relation to risk of
chronic disease or other health conditions by providing them with access to
information on their customers that they currently do not have.
Choosing the right setting
It is also critical that we shift the focus in Australia from in-hospital care to providing care in the
community (where it is clinically appropriate). Community-based care is not only more efficient, it is
also in many cases what our customers prefer, and in many instances results in the same or better
health outcomes. When surveyed, 82% of our customers said post-surgery rehabilitation should be
conducted at home or in the community rather than hospital, with this increasing to 84% for
psychiatric care10. A recent three-year Australian study concluded that despite inpatient
rehabilitation for a knee replacement costing more than 20 times above home-based care, there is
no difference in clinical outcome11.
Currently there are many disincentives to providing care in the community.
• There is supply driven demand for in-hospital care, arising from private hospital bed growth.
There are hundreds of new beds opening and even more in the pipeline, creating an
incentive to fill beds rather than consider where rehabilitation is most appropriately provided.
10 Bupa Member Attitude and Sentiments Survey: 7 June 2016
11 http://www.theaustralian.com.au/news/health-science/inpatient-rehab-for-knee-operations-is-no-better-than-recovery-at-home/news-
story/c7d9a9162d2079a8a8f1bee2581a4af1
Confidential 21Bupa 2018-19 Pre-Budget Submission
• Our fee for service payment system and the split in in-patient and out-patient care and
funding arrangements means providers are paid more when they treat a patient in hospital,
and there is no incentive to reduce the length of stay, or to build up the supply of home-
based or community care. If an outcomes payment model was in place, the incentive would
be to treat the patient in the setting that provided the best clinical outcome at the most
efficient price.
• In mental health, there are incentive structures for psychiatrists to treat in hospital, and third-
party arrangements between hospitals and psychiatrists.
• There are restrictions on MBS items which limit who can charge and in what setting.
• We can offer gap free and known gap to our customers for in-hospital care, creating more
certainty about costs, but are prevented for mirroring this for community care.
There needs to be greater shared incentives for specialists and providers to deliver services, when
and where appropriate, in the community, without compromising quality of care. Currently there is
demand from patients for community based services, but rarely is there adequate supply.
We do not underestimate the complexity of changing the incentives in the current system, nor the
risk that reforms simply create additional services with additional costs, rather than substitute
community care for hospital care where appropriate, thereby reducing costs. There is no ‘silver
bullet - rather, we propose a series of changes that could be trialled on a small scale, and then
rolled out more broadly if they achieve their objective without unintended consequences.
• In the first instance, we propose that trials focus on mental health and rehabilitation services
– two areas which are predominantly treated in hospital despite community care being a
better option for many patients, and two areas of growing cost to our health system.
• Some reforms could also be trialled initially in a single or small number of geographic
locations – for example in Tasmania, where there are few cross-border issues.
Trials are unlikely to work or gain support if providers or specialists are immediately financially
disadvantaged by transitioning to new arrangements. In some instances, there may be a short-term
cost to disrupt the system and change incentives, but in the longer term there will be a reduction in
costs if expensive in-hospital treatment is replaced with community based care.
Financial Incentives – the public system
The existing Commonwealth-State National Health Reform Agreement is predominantly focussed
on hospital services and activity based funding. As hospital services increase, the Commonwealth
shares the extra costs, which according to media reports have recently blown out by several
hundred million dollars12.
12 http://www.theaustralian.com.au/national-affairs/health/600m-hospital-bill-blowout-for-commonwealth/news-
story/2f9b2756a394717025c67bfdd3171045
Confidential 22Bupa 2018-19 Pre-Budget Submission
We believe the next agreement should include financial rewards for States who reduce growth in
hospital services through the substitution of community based care – focussing initially on mental
health and rehabilitation services, to ensure the incentives are effective before rolling out more
broadly. This could be achieved through a combination of targets, and sharing of any savings.
Bupa recommends the next National Health Reform Agreement include:
• targets to increase the amount of community based psychiatric and rehabilitation
care, with a commensurate reduction in growth of in-hospital treatments; and
• ‘reward payments’ for states through offering them 50% of any savings achieved
through the switch to community based care.
As is currently the case with public hospital services, publicly funded community care could be open
to public and private patients, subject to private patients genuinely electing to be treated as private
patients, and receiving benefits commensurate with their status as a private patient (see earlier
section in this submission).
Financial incentives – the private system
Under existing private health insurance legislation and rules, psychiatric, rehabilitation and palliative
care are all in-patient MBS items (with Medicare paying 75%), with a health insurer able to pay
specialists top up payments over and above the MBS schedule in return for a gap free or known gap
treatment for patients. It is possible for the same treatments to be delivered in the community as
hospital substitution services, however this comes with restricted funding arrangements whereby
specialists and providers can’t access the same MBS items, and can’t receive a top up payment for
offering gap free or known gap treatment. This creates a significant disincentive to offer hospital
substitution services in the community.
Bupa recommends trialling:
• a set of ‘hospital-substitution MBS items’ for psychiatric and rehabilitation treatment
in the community, which mirror the in-patient MBS items in terms of benefits; and
• allowing top up payments for the ‘hospital-substitution MBS items’ in return for a gap
free or known gap treatment.
This would encourage more treatment for psychiatric and rehabilitation care in the community, as
the funding arrangements would be incentivised in the same way as in-patient care (i.e. 75%
Medicare funded, the insurer to pay 100% up to the schedule fee, with the capacity to pay more if
there is a gap free or known gap arrangement).
In return for these changes, the Government could ask health insurers to create incentives in their
contracts with private hospitals that encourage more non-admitted services and seek to limit the
expansion in hospital treatments.
Confidential 23You can also read
