Media releases

May 27, 2014

Improving health outcomes through policy design

Andrew Wilson, Medibank
Health Outcomes Conference, May 2014

In 2014, Australians enjoy a good health status and the succor of a first-rate, internationally-renowned health system. Our life expectancy is one of the highest in the world and Medicare ensures that all Australians have access to universal health coverage.

However, due to a number of factors pertinent to our current environment, such as the impacts of aging population, advancements in technology and increased usage of services as a result of chronic disease, healthcare costs in Australia are growing at an unsustainable rate, with hospital costs alone representing 38% expenditure (excluding capital expenditure).

Most significantly, there has been an increase in chronic diseases associated with lifestyle and ageing, which presents a major challenge for Australia's health and hospital systems. Currently, chronic diseases are responsible for around 70% of total healthcare expenditure and contribute to 50% of GP consultations. In short, they are the leading causes of disability and death in Australia.

Barriers to better healthcare:

Our health system was not designed with the foundations to manage the current chronic disease environment, which is hindered by limited connections between tertiary and primary care, and between private and publically funded care. In spite of recent inroads in this arena, with the introduction of Chronic Disease Management (services on the Medicare Benefits Schedule that enable GP-coordination of chronic disease healthcare), our system is still very much set up for acute episodic care on a fee-for-service basis.

Traditionally, the role of private health insurers has been as a passive payer of services. However, Medibank data reveals that just 2.3% of Medibank Members account for 49% of all benefit outlays. The growth in benefit outlays and increase in chronic disease means it is important that Medibank plays a bigger role in primary care.

Medibank research demonstrates that Australia's fragmented health system is of great concern to our members with chronic disease. Patients often feel confused by the range of options and find it difficult to navigate the health system, and are often unaware of the health services available to them. This all leads to an inevitable increase in unplanned and avoidable hospitalisation, the most expensive care setting.

While there have been attempts to address this situation, such as the introduction of Broader Health Cover in 2007, they have proved to be ineffective. Broader Health Cover (BHC) allowed health insurers to broaden their suite of products so they can cover hospital substitute services, chronic disease management programs (CDMP) and health and wellness programs. The rationale behind BHC was that health insurers would benefit because over time they would face fewer, less expensive claims and members would benefit because it would reduce pressures on premium increases.

Health insurance regulations:

However, the Broader Health Cover Scheme is impeded by existing legislation that stipulates health insurers cannot pay for the gap of services delivered in primary care. Yet, data from the Private Health Insurance Administrative Council (PHIAC) shows there has been steady growth in the number of Broader Health Cover services offered by funds, indicating insurers' willingness to offer these services to their members. For example, the number of people covered by CDMPs tripled from 3 million in June 2007 to 10.5 million in December 2012.

Leading policy - collaboration for improved outcomes:

In recent months, the debate has focused on how the system can be reformed to not only control the health cost curve, but to also improve health outcomes. This was highlighted in a recent Australian Financial Review opinion piece by Medibank's Managing Director George Savvides, in which he called for health insurers to be able to play a greater role in primary care and for regulations to be changed, especially for our complex and costly members.

However, private health insurers can't change the system independently; they must work together with primary care organisations and state and federal governments. Evidence internationally and locally shows that properly coordinated primary care, including collaboration across the care spectrum and incorporation of general wellbeing and social services, can have a real impact on disease progression and hospital admissions. This new approach is guided by the "Triple Aim of Healthcare", developed by the Institute for Health Improvement, which focusses on reducing costs, enhancing patient experience and improving health outcomes.

The legislative barriers that prevent private health insurance from providing effective care can be overcome by insurers working alongside primary care to develop programs for chronic and complex patients. We understand that GPs are often the entry point into the healthcare system. They also drive the majority of decisions around patients' long term heath needs. Crucially, private health insurers don't want to interfere in that relationship, they want to enhance it.

This space is one that Medibank is already active in. We are currently developing relationships with Primary Care Providers across Queensland to improve access to GP services for our members, with no out of pocket costs and faster access. The pilot recognises the fundamental role that primary care plays in the future of health costs and is aimed at promoting prevention and self-management.

In addition to the Queensland pilot, Medibank is also developing integrated care pilots with two state governments. We are in the process of creating a single service jointly funded by public and private payers which will enable GP-led, system-wide coordinated care for high utilisers, focusing on reduced hospital admissions / readmissions.

In conclusion, the dramatic increase in the prevalence of chronic disease has created the need for a review of the current health system and the role that all participants - including private health insurers - play in this. Through cross-sectorial collaboration, we can overcome regulatory barriers to achieve better coordinated and integrated care, to ensure that we really are working towards the better health of all Australians.

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