Labor short-changes patients

However attractive it may appear at first glance, Bill Shorten’s populist pitch to cap private healthcare premium rises to 2 per cent a year for the first two years of a Labor government, saving families about $344 a year, does not add up. In practice, it could cost patients more than it would save at a time when private hospital costs are rising by 5.2 per cent a year and public hospital costs by 7 per cent. Labor’s plan would not address the issues driving up health costs well above the inflation rate. A two-year cap would result, inevitably, in greater out-of-pocket costs for patients, followed by significant increases in premiums beyond the two-year limit. The Opposition Leader’s rhetoric about private funds “treating Australians like mugs, gouging people on the basis of a con’’ is overblown. Medibank Private, the most profitable provider, made an after-tax profit of 7.7 per cent last financial year. The industry’s average after-tax margin was 5.5 per cent.

The starting point for any debate on healthcare, often overlooked, is that none of it is free. Public hospitals are what taxpayers pay for. And cost increases are inevitable as Australia’s population ages and discoveries of better medical treatments and technologies become available. In 2015, the Productivity Commission noted federal health spending was set to increase by more than a third within 40 years. But there was plenty of scope, the commission concluded, for reforms to cut costs — by more prudent use of technology, better clinical guidelines and peer review, removing incentives that encourage overservicing and investment in preventive health. Vital as it is, preventive medicine also comes at a cost. Major increases in health spending in recent years have come from doctors referring patients for more scans, sleep studies, iron tests, thyroid examinations and other tests.

There is also scope for reducing bloated bureaucracies and waste through a joint approach between governments, the medical profession and public and private hospitals. Greater transparency and competition would also help. Out-of-pocket expenses, including doctors’ operating expenses, not covered by private health funds are forcing many private policyholders to rely on public hospitals for operations. As Bupa Health Insurance managing director Dwayne Crombie writes today, a third of people requiring joint and prostate surgery face gap costs of between $1000 and $10,000 while the average gap payment for private maternity care is $7000 to $8000 — beyond many families’ budgets. Dr Crombie’s observation that Australian hospitals on average send 41 per cent of patients to inpatient rehabilitation following joint surgery, compared with global best practice of 10 to 15 per cent, should be followed up.

Major savings are possible. Former health minister Sussan Ley’s reforms that made devices such as artificial knees, pacemakers, stents and intra-ocular lenses cheaper by introducing more competition among suppliers is an example. In a report last year, applicable to all Western countries, the OECD said a significant proportion of health spending was ineffective and wasteful. It singled out Australia as one of several countries with too many patients presenting to emergency departments. After its unconscionable “Mediscare’’ campaign in 2016, Labor’s credibility on health policy is poor. Mr Shorten’s rants against private health insurers do nothing to restore it.