When did reform in health become a dirty word?

NEITHER side of politics can make a virtue of throwing taxpayer dollars at propping up failing health services, like maternity units. Their collapse is a product of government failure to act on well-established problems that need reform.

Politicians love pledging taxpayer dollars on big ticket announcements in election campaigns. Apparently, it shows us how much they care. In reality, it's lazy, often wasteful and rarely fixes anything.

A case in point is the alarming rate of private maternity unit closures, with most closing in the last three years.

There are many factors that make maternity care challenging. Birth rates in Australia are at historic lows. Midwives are had to come by. Having paediatricians on-call 24/7 is expensive.

Another is health insurance companies only include maternity at the Gold level of cover. Despite holding Gold cover, often for years, mothers-to-be are shocked to discover they are not covered for an obstetrician, meaning they can be up for $10,000 in out-of-pocket costs.

The health insurance industry's recent epiphany that this is a problem is incredulous to say the least. They've been knowingly selling maternity cover at top dollar to young people while being pretty confident it won't be used.

In fact, the upshot is private hospital births have fallen from around 30% a decade ago to 19% today.

Faced with these costs, it's not surprising people go public. And that's a problem for everyone. A Monash University study recently revealed that "baby deaths were 53% higher, stillbirths were 56% higher and death soon after birth was 48% higher in multiprofessional public care versus obstetric-led continuity-of-private care".

These problems can only be compounded by the forced exodus of patients from private to public hospitals, exacerbating pressure on an already struggling public system.

It's important to understand that the ability for private hospitals to provide maternity is not a volume or workforce issue. They make it hard, but they can be overcome.

So, even if Australians suddenly had more babies. Even if obstetrics was covered by insurance. Even if more midwives miraculously appeared. These will not stop private maternity units from closing, let alone see new ones open.

Noone makes margin on maternity care. It has traditionally been cross-subsidised from other areas of the hospital because it's an important local service.

But over the last three years it has become increasingly untenable. The Australian Prudential Regulation Authority reports that health insurance companies have banked record profits of over $5 billion during that time. They also rake in $3.5 billion a year in 'management fees'.

Yet, over those three years they short-changed private hospitals by more than $3 billion on the treatments and care they provide. It can come as no surprise to anyone that this is unsustainable. If left unaddressed, more services, indeed, entire hospitals, will close.

So whether you have more babies to deliver or extra staff to deliver them, when you're being underpaid for the services you provide, then delivering 100, 1,000 or 10,000 babies each year doesn't help. In fact, you are just compounding the funding shortfall.

The good news is it's fixable and fixing this funding crisis doesn't cost a cent. It would cost taxpayers and patients nothing. It does, however, require a bit of political will. Reform always does.

The funding shortfall to hospitals from insurance companies in 2022 was $660 million. That should have had Minister Butler on the phone telling them to pull their heads in or they'll be regulated. That didn't happen.
That, likely, emboldened insurers, who then withheld $1.135 billion in 2023. Again, no ministerial pushback. And, last year, a whopping $1.254 billion shortfall. Zip again from the Minister.

It is costly in many ways. The Monash research noted that the shutdown of private maternity wards could see taxpayers up for $1 billion a year to fill the breach.

Meanwhile, the Federal Government has committed $16 million to prop-up recently closed private maternity services in Hobart and Gosford.
Naturally, local communities will welcome the funding. But wouldn't a proactive approach to fixing the funding mess in the first place have been a better way to go?

$16 million, and counting, is a very expensive taxpayer band-aid applied after the fact, that would not likely have been necessary had the Minister been engaged in the deepening crisis in his portfolio two years ago, or even six months ago.

Only recently, in the context of an election campaign, has Minister Butler espoused restoring the funding ratio to private hospitals, noting of insurers:
"There has been a structural shift of where the money is going in the system. There is a shift downwards for private hospitals. There has been a shift up in profitability and management expenses of insurers. There needs to be a lift in the benefit payments ratio".

Better late than never. But there are scant details.

When asked in a recent media interview to match this pledge, Shadow Federal Health Spokesperson Anne Ruston dodged the issue. More alarmingly, she did so parroting the health insurance industry's talking points that they cannot afford it. Codswallop! Clearly, they can and without impacting premiums.

The Federal Government must accept the critical need to reform the funding mess that allows insurance companies to bank record profits while dictating inadequate pricing to hospitals.

Brett Heffernan is CEO for the Australian Private Hospitals Association. Published in the June Edition of Australian Doctor magazine (available by subscription only).

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