Medical care for profit: a hazard to public health
By Jonathan Singer
Public money is being spent to advertise the government's latest weapon in its drive to privatise health care. From July 1, the Lifetime Health Cover policy will allow private health insurance companies to impose a surcharge of up to 70% on premiums, based on the age at which a person joins the health fund.
The government already applies a 1% surcharge on the Medicare levy for individuals earning more than $50,000 per year and families with an income of more than $100,000 per year who have no private health insurance. It has also offered a series of rebates on health insurance payments: the latest version, which began on January 1, 1999, is 30% of the payment.
The government claims its support for private health insurance funds brings money from outside government revenue (taxes and the Medicare levy) to help meet rapidly rising health care costs, and helps to relieve the pressure on public hospitals.
The $1.6 billion annual cost of the rebate and higher Medicare levy could have been spent directly in the public hospital system and in expanding Medicare (which mainly pays rebates to private general practitioners, specialists, pathology and diagnostic imaging services) rather than being directed through the insurance companies.
However, much of the rebate does not fund health care. Instead, it has become a subsidy for those who would have remained in the private insurance funds anyway, as well as for those who have now chosen to join. A proportion of the windfall will be lost in the private funds' inefficient functioning. Medicare's administrative costs are about 4% of total revenue, whereas private funds' costs are 13%.
The proportion of people covered by private health insurance fell at a rate of more than 1% a year throughout the decade before the rebate was introduced. It reached a low of 30%, then in 1999 the trend reversed. Currently, just over 31% are in private funds.
This level of enrollment only marginally reduces demand for admissions to public hospitals. Australian National University academic Gwen Gray, writing in the summer 1999/2000 New Doctor, calculated the savings from the trend reversal to be just one-sixth of the cost of the rebate. Even the government predicts coverage will rise by only 2-3% due to the rebate.
Moreover, while the Medicare surcharge may be increasing overall private health insurance enrollments, it may be encouraging only partial coverage because any private health insurance payment provides an exemption from the surcharge. In 1999, the number of people with full private health insurance continued to fall.
Aiding the privileged
The federal government's policy favouring private insurance to fund health care has neither cut overall expenditure on health care nor reduced the burden on the government budget. It does, however, immediately reduce health care costs for the rich and, in the longer term, helps shift potentially profitable fields of health care funding and provision into private hands.
The premise of Lifetime Health Cover is that younger, healthier, people do not take out health insurance, leaving older people who are more likely to be unhealthy to pay higher premiums to cover the insurance companies' outlays.
The actual situation is that: people aged 80 or older are the age group least likely to buy private health insurance (the proportion is highest among those aged 50-54); the people most likely to buy insurance are the wealthy; and those who take out insurance are more likely to report good health.
The health insurance industry has been losing money for years. This in turn puts pressure on the profits of the private hospitals and health practitioners who charge more for treatments than the Medicare schedule, or who are working in medical fields that do not qualify for Medicare patient rebates, and therefore whose patients are largely privately insured.
The private health care providers want fees to exceed costs by as much as is possible. A submission by the Doctors Reform Society (DRS) to a Senate inquiry into public hospital funding in October pointed out that the average total costs per private hospital patient treated for heart disease by stenting and angioplasty (opening up the blood vessels) at the Monash Medical Centre in a 12-month period was $6151. The average revenue per patient was $14,050. The average profit per patient, therefore, was $7489.
Furthermore, government subsidies for the private treatments totalled $5586 per patient in rebates on private insurance, and drugs and equipment. The patient had to find another $8464 through insurance and direct payments. The equivalent average figures for public patients at the same medical centre were costs of $5510 per patient and revenue of $6355.
But unlike federal and state governments, which have held down the Medicare rebate schedule and cut public hospitals' budgets, the private insurers have been able to keep providers' fees down. As a result, high costs and increasingly expensive health care is principally found in the private sector.
Overall spending on health in Australia increased from 7.5% to 8.4% of gross domestic product in the 12 years to 1997-98, about average for the rich countries but well below the 14% of GDP spent in the United States, where private, for-profit medicine is the standard.
Public hospital and other Medicare expenditure rose from 3.7% to 3.9% of GDP in the same period. This was despite a 30% increase in services provided per person; the average cost of a public hospital admission rose only 4% in real terms in 12 years, due to health care workers' increased productivity and an increasing proportion of same-day admission and discharge.
On the other hand, spending on private hospitals is increasing by 8.4% per year and private health insurance premiums by 7% per year, according to the DRS. The DRS also states that "substantial over-billing is mostly confined to insured patients in private hospitals".
A right or a privilege?
The government wants to reduce the role of public health care to a lower quality residual service, subordinate to the private health care system.
The main service offered by private health insurance is quick access to "elective surgery". Public hospital waiting lists can go on for months, including some cases in which urgent surgery is required.
However, the DRS submission argued that waiting lists in some cases can help patient treatment and the efficient operation of surgical resources, but that people are suffering for long periods due to inadequate services. The DRS pointed out that the lists are subject to considerable manipulation.
In the face of overwhelming popular support for Medicare and public health services, governments must attack the idea that quality health care is a right for all. The Australian Financial Review in November reported that private health insurance industry figures had applauded the federal government's efforts: "One of the best things [the federal health minister Michael] Wooldridge has done over the last five years is to change the public's expectations of Medicare ... they certainly don't expect as much today", said Brent Walker, an adviser to private health insurance companies.
Yet the rise of for-profit health care (the proportion of health costs paid by governments has slowly fallen since 1984-85 to 68%) is a major threat to the quality of care.
Among general practitioners and specialists there is the danger of over-servicing. Some "treatment" borders on the scandalous, such as cosmetic surgery generated by the mass media-pushed stereotypes of beauty. According to Gray, the rate of caesarean sections for privately insured women is 46% higher than for women without private insurance; the World Health Organisation urges that caesareans be minimised.
Private hospitals in general do not treat more serious conditions because they cannot do so profitably. Nor do they provide the research and training facilities found in public hospitals. Often private hospitals are adjuncts to public hospitals. Even the larger private hospitals may place restrictions on some treatments (for example, abortions).
The public hospital system still sets the standard for hospital care. The absence of such a public safeguard in the aged care industry has resulted in horrendous levels of cost-cutting, in both accommodation and medical care, to boost profits.
Behind the nursing home horror stories of kerosene baths, maggot-infested wounds, average expenditure on food below that of prisoners and skeleton staffing levels, is the dominance of profit-hungry private enterprise in the aged care sector.
The March 23 Australian reported that, of 229 nursing homes visited by authorities between July 1998 and November 1999, "83 had failed to achieve satisfactory building and safety systems, while 67 were deemed to be unacceptable or posing a serious risk to the ability of residents to maintain personal, consumer and legal rights". More than a third of the homes were considered unsatisfactory in medication management, and a similar number in clinical care.
Meanwhile, cutbacks in public health expenditure have led to the general abandonment of institutional care for the psychologically ill — with few resources for care in the community being provided. The resources have also not been made available to address the grave health problems among indigenous people.
Hospital workers and supporters of the public hospital system have fought to reverse these trends. Recent actions by NSW doctors have helped to force the state government to announce up to $2 billion more for the health budget by 2003. In Queensland, the nurses' union and the Queensland Council of Unions have endorsed a campaign in defence of Medicare and public hospitals and plan to make it a major theme of the May 1 Labour Day marches there.
Fran Baum, president of the Public Health Association of Australia (PHAA), told Green Left Weekly that the best way the government could show commitment to its stated position of support for Medicare would be "by deciding to reverse the 30% rebate on private health insurance and divert those funds to the publicly funded system of hospitals and community health services".
'Opposition' complicity
Last month, ALP leader Kim Beazley, despite calling the rebate "a monumental failure", said it could not be scrapped. The Australian Democrats called only for its partial withdrawal through the introduction of a means test. Both parties are wary of taking a firm stand against private insurance, as this would point towards universal public health care funding and provision, driven by human needs, rather than private profit.
The argument of last resort for those that support private health care funding is that there is not sufficient public funding available to sustain the quality of care desired. The truth is that the funds have been and are available.
The PHAA and the Democrats have proposed increasing the Medicare levy by as much as 1% to improve health care funding. They believe such a tied measure would be popular and allow some immediate problems in health care to be solved.
However, health funding would continue to be marginalised; the bulk of government taxation and spending would remain under the direction of the rich rulers of this society. Only about 11% of government health care spending comes from the Medicare levy; general revenue must be increased and redirected to provide universal high quality public health care.
Polling has shown again and again that health care is a leading concern among the Australian people. A radical popular democracy, which would be based on and serve the interests of the overwhelming majority of the population — the working people — could establish national economic priorities and a government budget to satisfy this concern.