Is Private Health Cover Working in Australia?

Australia’s largest private health insurer Medibank Private has ended its contract with ACT private hospital group Calvary Health Care following months of negotiation.

Medibank and ahm policyholders (Medibank's discount offering) treated at Calvary hospitals will be covered under the terms of their existing contracts until August 31.

After this time Medibank will still meet a "significant portion" of costs but those 21,000 customers may face out of pocket charges from Calvary, which will be able to charge its own rates.

"Some members will potentially suffer as a result and that is unfortunate," Dr Boyd said.

Medibank has also pledged to honour contracts beyond the August 31 cutoff for pregnant policyholders and those with chronic conditions such as psychiatry, chemotherapy, dialysis or rehabilitation.

Calvary had requested an increase in the rates Medibank pays for services provided to its members, the insurer said the healthcare group were being inflexible in negotiations, with Calvary refusing to agree to its "quality and affordability criteria".

The Consumers Health Forum is concerned about the impact this will have on Australia’s health system; on the rising cost of health insurance for members and also for taxpayers.

“The failure of Medibank and Calvary to reach agreement on how much the fund should pay for its members to be treated at Calvary, and on what basis, has exposed the difficult issue of how to apply pay-for-performance principles to health care,” says CHF’s Chief Executive Officer, Leanne Wells.

The issues highlighted in the conflict also bring into focus avoidable adverse events in hospitals like falls and surgical mistakes, and unplanned readmissions - issues that add $42 million to hospital bills annually and ultimately get passed onto fund members. These issues further underline the need for greater quality and safety standards.

And perhaps an inquiry into the private health insurance industry.

“Central to health insurance is the need for greater transparency. It is impossible for consumers to assess a hospital’s value proposition in terms of performance record and costs.  How health funds set their benefits raises fundamental questions in assessing the worth of health insurance and private treatment.

“It should not be forgotten that health insurance rebates are now set to reach $6 billion a year for something that benefits just half of taxpayers, while the other half of the population waits longer for elective surgery or faces heavy out of pocket costs,” Ms Wells says.