Australian doctors and health insurance companies can't agree on much. But they do agree something must be done to increase the level of private health insurance coverage among the public.
The segment of the population with private health insurance has dropped to 32.5% since the introduction in 1984 of Medicare, a "free" universal government health insurance system. In 1983, 60% of the population was privately insured.
The problem with private health insurance is Australians have little reason to buy it.
It only covers private services provided in hospitals and has no relationship with primary healthcare. Moreover, it must compete against the free Medicare system, which, despite the downside of long waiting times, enjoys a reputation for high quality.
For privately insured patients, Medicare reimburses 75% of a government-recommended fee for services provided in hospitals. Medicare also reimburses 85% of the fee for out-of-hospital services. (The government has a list of recommended fees for various procedures, called the Medicare Benefits Schedule.)
Private health insurance funds are permitted by law to cover only the remaining 25% of the government-recommended fee for hospital services, and they aren't permitted to cover any out-of-hospital services. So when doctors of private patients choose to charge more than the recommended in-hospital fee, the patients must pay the difference themselves.
Tales of health insurance fund beneficiaries forced to pay large hospital bills despite having paid insurance premiums for years are common in Australian daily newspapers.
In contrast, public hospital patients, who do not have a choice of doctor, never pay anything for medical services-except the taxes to fund the system. But those taxes are also paid by people who hold private insurance.
Private patients who elect to be treated in a public hospital can face a large gap fee, while a public patient treated in the same hospital by the same surgeon walks out debt-free.
The situation has caused an exodus from the health funds by people who no longer believe choice of doctor and reduced waiting times are worth the cost. Young, fit Australians are electing not to take out private insurance, satisfied that Medicare will cover their needs.
As a result, the already squeezed public hospital system is being put under more pressure and waiting lists are growing. Waits for certain elective surgeries can be more than a year.
Private insurers, left with an increasing number of elderly and sick members and faced with the rising cost of medical technology, have been forced to raise premiums substantially.
To help solve the problem, the Liberal-National Party Coalition Government wants to make physicians and hospitals sign contracts that set doctors' fees. Supporters of such contracts believe capping physician fees would remove this wild card from the health insurance system and allow private insurance companies to offer 100% coverage for hospital stays. This, in turn, would entice more Australians into the private system.
To mollify doctors, the government promises it will enact legislation to ensure no interference in clinical decisionmaking by any third party.
But doctors aren't buying the plan, just as they didn't buy the previous government's effort to make doctors sign contracts with the health insurance funds themselves.
Australian Medical Association President Keith Woollard, M.D., describes the latest plan as a "sugar-coated suicide pill."
Such contracts with hospitals, doctors say, are akin to "U.S.-style managed care," and doctors are determined to block any moves to introduce such a system Down Under.
The Australian Health Insurance Association has accused the medical association of running a "Managed Scare Campaign" in what has become an increasingly bitter battle of words between the two organizations.
Although many people have rejected private health insurance as "not value for money," Russell Schneider, chief executive of the AHIA, says it is more affordable in Australia than in any other country in the world.
"Our coverage includes psychiatric services and a whole range of other things that go beyond that provided elsewhere," he says. "The difficulty we have is that against it is a free product. If everyone in the United States had access to Medicare, I very much doubt there would be a lot of private health insurance being sold."
Full hospital coverage costs about US$1,500 a year for a family and $750 for singles. Ancillary benefits can push the cost up to $2,200 for a family.
Doctors fear that if they sign fee contracts with hospitals or health funds, they will create the potential for third-party payers to have a say in the treatment they provide-by, for instance, denying coverage for certain procedures. Early contracts with private health insurance funds were held up as examples of interference and an erosion of clinical standards.
Woollard says the fundamental principle is the sanctity of the doctor-patient relationship: that doctors should be beholden to their patients and no one else.
"We certainly don't need managed care to improve our system, and the best way we can avoid all the drawbacks is to have nothing at all to do with it," he says.
Contracts are not the only solution the government has sought to the health insurance dilemma. This year's federal budget included a carrot-and-stick incentive approach of subsidizing premiums for people below a certain income threshold and increasing the Medicare levy by one percentage point, to 2.5% of taxable income, for higher earners who refuse to take out health insurance coverage.
The government also is looking to change the existing community-rating system, which ensures all health fund members pay the same premium, regardless of their age, sex or health risks. It's considering the concept of lifetime community rating, where people who enroll in health funds at a younger age pay cheaper premiums than those who postpone membership until later in life.
Woollard says the solution is twofold: reward long-term membership in private health funds and reserve access to the public system only for people who can't afford private health insurance.
"In five to 10 years, that is what will have happened," he predicts.
Schneider says it's becoming "increasingly credible" for a single payer to be responsible for a person's health. He believes all private healthcare should be covered by one system. That would involve expanding insurance coverage to primary-care doctor visits and other nonhospital services. But he advocates importing the best features of the U.S. managed-care system rather than a direct copy.
"If we can't get the price of healthcare for the over-65's down," he says, "I suspect political forces will nationalize the profession."
Kellie Bisset is a healthcare journalist based in Sydney, Australia.