Is private health dying and will managed care finally kill it? The consumer perspective. 

That’s the title of a panel presentation I gave this week to the Australian Medical Association’s national conference.

The combination of an ailing private health insurance system and the prospect of the rise of so-called “managed care” may present a gloomy outlook for many in the medical profession. But while it might pose risks, I would argue such a move could also provide potential opportunities for doctors and consumers.

What’s not to like about a health care system where the drivers are geared towards a more evidence-based, less wasteful, safer and more affordable private health system? 

CHF has for some years voiced the concerns of many consumers about the ballooning cost of private health insurance along with the accompanying “bill shock” of out-of-pocket costs when patients actually use their insurance for private treatment.

Now we have the entry of new business models introduced by some health funds to form buying groups that would collectively negotiate and manage contracts with healthcare providers with the aim of reining in unbounded medical fees.

The medical establishment and the AMA has voiced its concern that this development would shift management of care towards the health fund, that it might restrict choice and discourage shared decision-making by doctor and patient about care. So far the Australian Competition and Consumer Commission has not been overly swayed by such arguments.

But there are patient concerns around clinical autonomy. People want their doctor to be in a position to provide the most appropriate care for them. 

Care needs to be personalised and, ideally, involve shared decision-making between the patient and treating doctor and medical team. The inclusion of a third party in the doctor-patient relationship can be detrimental there is no doubt - but does not need to be. It depends on the form it takes, its intent and the process for arriving at the managed care plan.

Consumers fear it makes for a ‘cookie cutter’ approach to health care and is a clear move away from a patient-centric model of care.

However managed care could still involve shared decision-making tools and in fact could strengthen this by making such tools a requirement and part of the development of the care plan and treatment.

While it could reduce variation in treatments it could also mean a reduction in low value care and help ensure care is evidence-based.  

Such a development could make private health insurance more attractive and private health care more attainable for some consumers.

The evidence of the impact of full-blown managed care on quality in the USA appears to be mixed and rightfully arouses much concern.

But the current reality in Australia is hardly distinguished.  Studies show that we currently have 60 per cent of health care delivered in line with the evidence, 30 per cent lower value care or that not in line with evidence and as much as 10 per cent actually doing us harm.

If some of the tools of managed care, like peer reviews and valid care pathways, could shift that split and increase the proportion of evidence- based care then we could see better health outcomes benefitting both clinicians and patients.

Of course, shifting behaviour that challenges the core of health care practices will take some effort.

But we are already seeing an influential force at play in the behaviour of consumers who have in recent years been dropping out of health insurance and turning more to public hospital care.

Private health insurance premiums have been going up by more than inflation for two decades. Recent policy incentives have slowed the rate of growth but premiums, especially for gold level policies, are becoming out of the financial reach of many people.

Our Out of Pocket Pain survey in 2018 found that significant numbers of respondents were billed gap costs of $10,000 of more for common treatments for cancer and other conditions.

Apart from the consideration of cost, there are other significant factors at play in people’s choice: access, choice and quality.  These are all part of the ‘value equation’ for consumers as they weigh up whether or not to take out, or retain, private health insurance and use the private system.

It is clear that timely access is a dominating influence in people’s decision to take out health insurance to enable them to have private care when they need it rather than waiting for months for a bed in a public hospital.

There has recently been a slight spike in health insurance numbers that is thought to have been triggered by COVID-stimulated concerns about public hospitals.

On the factors of quality and choice, there is a perception amongst some consumers that private health care is better/higher quality than the care in the public system. There is no evidence to support this view as a general statement.

This is linked closely to choice and access adding to a better patient experience. It would be good if private health services would use patient recorded experience measures (PREMs) more consistently and publish the results in a way that consumers can understand so that people could see what other patients have to say.

Managed care, in some of the less intrusive forms it could take, will not necessarily kill off private health. Interference in the doctor-patient relationship is sacrosanct, but measures that strive for improvement could be a plus.

But there are longer term influences at play, including consumer expectation for “user friendly”, transparent and accountable practices that challenge the practice of high out of pocket bills.

People under 40 have grown up with Medicare and expect it to be there when they need it. They pay their Medicare levy and some pay the Medicare Levy Surcharge.

Paying for private health care has become more discretionary


About the author

Leanne Wells

Leanne Wells

Leanne was Chief Executive of the Consumers Health Forum of Australia from 2014 until August 2022