Calls to allow private health insurance to cover fee gaps

Health funds want to cover gap fees as part of Medicare reforms as one million Australians have taken out private insurance due to fears of a failing public system.

One million Australians, including the Wade family, have taken out private health insurance amid fears over the failing Medicare system.

Health funds are pushing to be able to cover doctors’ gap fees as part of national Medicare reforms as it is revealed one million Australians – many from battler outer-suburban and regional electorates – flocked to take out private health cover during the pandemic amid fears of a disintegrating public system.

Young lower and middle income families led the renewed take-up of health insurance that has reversed a decade-long exodus from the private system as elective surgery waiting lists blow out and emergency departments are critically overloaded.

Despite rising interest rates, stagnant wages and rapidly rising costs of living, these families say they no longer feel they can rely on the public system and are prepared to devote thousands of dollars each year from their stretched budgets to guarantee timely access to private hospitals as waiting lists for some elective surgery procedures stretch longer than a year.

“This is entirely driven by waiting lists,” Private Healthcare Australia chief executive Rachel David said. “Public hospitals aren’t offering the services that they used to, particularly in some outer suburban and inner regional areas where a lot of sea change and tree change populations have moved during the pandemic. People are realising the services are not available and then joining health funds.

“What we need to do is look after people on lower incomes who are struggling with cost of living at the moment, who are trying to do the right thing and pay something towards their healthcare.”

The Wade family from Werribee had to get private health insurance to protect their daughters.

Insurers say they are frustrated they cannot cover their members for a wider array of healthcare services and say if they could cover the entirety of their members’ healthcare, it would not only provide a better value proposition for consumers but would partly provide a solution to the crisis in primary care amid the collapse of bulk billing.

“It’s well past time to revisit the nonsensical legal restriction on private health insurers covering out-of-pocket costs or gaps for medical treatment out of hospital for which there is a Medicare benefit,” said NIB CEO Mark Fitzgibbon.

“Consumers are confused and see less value in private health cover, particularly when they’re younger and more likely to see a doctor outside a hospital. Private health insurance should be able to cover members wherever they meet the healthcare system.”

Members Health Fund Alliance CEO Matthew Koce agreed. “Private health insurers can cover the cost of a dental appointment, an optical appointment or a physio appointment, it seems strange that they can’t also help cover the cost of a GP appointment with extras policies,” he said.

Currently, legislation that governs private health insurance prescribes that insurers cannot fund any service out of hospital for which a patient receives a Medicare rebate.

The insurers’ call comes as the Albanese government moves to finalise a report of the Strengthening Medicare taskforce that is set to lay the groundwork for the biggest shake-up in health funding since Medicare’s inception. Labor plans to devise a “blended” funding system that would enable nurses, paramedics, dietitians and allied health practitioners to be paid out of the national public insurance scheme to perform team-based care in a generational overhaul of the fee-for-service model which only funds GPs and is “not fit for service” to combat chronic disease.

Federal health minister Mark Butler said he was determined to deliver “a much more liberated ability for all health care professionals: doctors, nurses, allied health professionals, to be able to contribute to the need that we have out there to deliver world class health care to Australian patients”.

As government prepares to release the report, the Royal Australian College of GPs stepped up its demands for an immediate tripling of the Medicare rebate and insisted all block funding under a blended system for allied health must be delivered directly to GP clinics to avoid “fragmentation of care”.

GP clinics have moved to wind back bulk billing on a nationwide scale in the past six months, even at times for pensioners and children. The average gap fee is now larger than the standard rebate for the first time in Medicare’s history.

“The problem is decades of neglect and underfunding has made it harder and more expensive to see a GP, and this has caused the crisis in our hospital system, with wait times blowing out and ambulances ramping,” said RACGP president Nicole Higgins. “We need short-term action now to stem the bleeding and improve access to care, particularly for those most in need.”

Despite the increasing costs of primary care, almost 760,000 Australians moved to take out private health cover between September 2020 and December last year.

Jacob and Rebecca Wade wanted to ensure the safety of their girls Grace and Hazel.

The outer western Sydney electorate of Greenway, which has an average taxable income of $64,000, had the highest new hospital cover take-up in the country from 2019-2021, according to analysis by Private Healthcare Australia. Blacktown, Macarthur and Chifley in Western Sydney were also among the top electorates for new private healthcare policies, along with Latrobe in Melbourne’s Outer Eastern Suburbs, and Lalor in the Outer South-west. Many thousands of new policies were also taken out in The Hunter Region of NSW, Ipswich and the Gold Coast in Queensland and Mandurah near Perth.

Australian Taxation Office statistics reveal approximately 42 per cent of people with PHI have an annual taxable income of $50,000 and under and 25 per cent earn $30,000 or less.

Prior to the pandemic, Rebecca Ramsay and her husband Jacob Wade, who live in Melbourne’s south-west, weren’t sold on private healthcare but as news spread about hospital wait times, they quickly changed their minds.

“We felt we needed private health insurance as adults, but not for the children. Prior to the pandemic we believed the children’s hospital sector was sufficient,” Mr Wade said.

When their first child, Grace, was born in 2020, at the beginning of the pandemic, she suffered recurrent tonsillitis and obstructive sleep apnoea and needed surgery.

“A tonsillectomy for Grace was done within 3 weeks of seeing the doctor with private health insurance versus what would have been an unknown wait time in the public system,” Ms Ramsay said.

The full-time nurse, who works at a nearby hospital, signed up for private health insurance in 2018 and was joined by her husband and daughter on a family plan in 2020. After the birth of their second daughter, Hazel, in 2022, the family began forking out $4632 per year for their coverage.

The Melbourne parents, with a joint income of $180,000 per year, said, like many, they’re feeling the strain of “huge childcare costs”, petrol prices and grocery bills.

Ms Ramsay backed the call to allow private health to cover more services, especially GP and specialists’ gap fees.