‘Gaming the system’: How doctors bypass a 50-year-old health insurance ban

Doctors are admitting some patients to hospitals for procedures they can perform in their rooms, to spare patients out-of-pocket costs totalling hundreds of dollars.

Doctors are admitting some patients to hospitals for procedures they can perform in their rooms, bypassing a 50-year old ban on private health insurance to spare patients out-of-pocket costs totalling hundreds of dollars, according to the peak health fund lobby group.

Under Whitlam-era laws, private health insurers cannot fund out-of-hospital medical treatment, including GP and specialist visits, as well as diagnostics such as blood tests and ultrasounds.

Private Healthcare Australia chief executive Rachel David said while some doctors were attempting to eliminate out-of-pocket fees, or co-payments, for their patients, admitting them to hospitals for simple procedures was “gaming the system” and creating extra costs.

“You see doctors setting up day surgeries in their rooms and then billing health funds for a day admission when you know the person has just really had a consultation and some tiny little procedure,” Dr David said.

“They’re doing it so that they get some revenue but they’re also doing it to eliminate co-payments. You see that in some specialities like skin lesions. It happens a lot in ophthalmology when they’re doing things to people’s eyes that take five minutes and they’re saying ‘oh well, it’s a day admission’ and the person walks out without a co-payment. So there’s a lot of gaming that goes on around the edges in this area.”

Mark Fitzgibbon, chief executive of Newcastle-headquartered health insurer NIB, has witnessed similar behaviour. Co-payments can be hundreds of dollars per specialist visit.

NIB CEO Mark Fitzgibbon says allowing health insurers to fund out of hospital treatment would create more value for policyholders and the overall health system.

This is despite health insurers being allowed to fund treatments such as traditional Chinese medicine, even though the federal government’s Healthdirect website says “there is not enough clinical evidence” to know if it works for most conditions”.

The Whitlam government restricted health insurers to funding treatment in private hospitals when it launched the original Medibank in 1975.

Successive governments have had little appetite to overturn the ban, amid fears it would fuel inflation within the healthcare sector and create a two-tiered system in which those who don’t have health insurance must pay a gap fee.

But doctors are constitutionally allowed to charge whatever fees they like if they believe the available rebates are insufficient. This has led to the number of GPs exclusively bulk billing plummeting to record lows after Medicare rebates failed to keep pace with inflation.

For Mr Fitzgibbon, overturning the ban on health insurers funding out-of-hospital treatment would create more value for policyholders and the overall health system.

“PHI (private health insurance) should be able to cover members wherever they meet the healthcare system. Apart from the obvious consumer sovereignty, that would encourage market-based doctors’ fees, mitigate the perverse incentive to hospitalise patients and reduce so much reliance on public financing. Financing is already under acute stress because of a growing dependency ratio of retired Australians to working taxpayers,” Mr Fitzgibbon said.

“There is no evidence to support the scaremongering around a two-tiered healthcare system or the bogeyman of US-style ‘managed care’.

“Neither get mentioned in New Zealand where NIB is the second-largest health insurer and can offer cover for many out-of-hospital medical costs.

“In New Zealand out-of-hospital claims account for just 5 per cent of claims exposure. So, while the expansion would be slightly inflationary on premiums, the payback is enormous … (with) consumer attraction and the capacity of PHI to work more collaboratively with doctors.”

Mr Fitzgibbon argued that “in some ways it’s the current approach that penalises the likes of GPs and risks a two-tiered system”, citing a disparity in bulk billing rates across the country.

“Often the highest out-of-pocket (OOP) expenses are incurred in lower socio-economic or remote communities. Importantly, equity issues associated with OOP expenses can be better addressed by government through targeting incentives more sophisticated than those currently in place for bulk billing.”