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THE REVIEW OF THE HEALTH LEGISLATION (PRIVATE HEALTH INSURANCE REFORM) AMENDMENT ACT 1995

CHAPTER 4 - ISSUES RELATED TO THE REFORM ACT

Introduction

4.1 While the purchaser-provider agreements discussed in Chapter 3 were the major initiatives contained in the Reform Act, a number of other reforms were introduced which have had an impact on private health insurance. Many of the submissions to the inquiry commented on the implementation of these aspects or on other issues associated with the reforms. In this chapter the Committee will discuss these reforms under the general issues of community rating, billing reform, consumer concerns and data collection.

Community rating

4.2 The community rating principle is the cornerstone upon which the Australian health insurance system has been built. It has ensured that all Australians have access to private health cover without discrimination in relation to age, family circumstances or state of health. In practice it means that participants in private health funding pay the same amount for the same level of cover irrespective of their demands on the system. In simple terms community rating is commonly described as resulting in the elderly and the chronically ill being subsidised by the young and healthy.

4.3 Community rating is supported by the reinsurance scheme which balances a component of risk across all funds. Reinsurance protects funds with expensive, ie elderly and chronically ill, members by sharing their costs across all funds. Basically, money is transferred from funds with relatively low-cost members to those with high-cost members. The administration of the reinsurance account arrangements is undertaken by the Private Health Insurance Administration Council (PHIAC). [1] The Australian Private Hospitals Association (APHA) commented that:

Reinsurance is an effective method to redress fund benefit imbalances arising from community rating. It does not, however, address the fundamental difficulty of community rating that healthy members are not receiving benefits commensurate with their outlays on health insurance. This leads them to drop insurance first, resulting in a worsening risk profile for the insured population and increasing premiums. [2]

4.4 The principle of community rating enjoys broad support by all parties within the industry, including widespread political and public support. [3] The Queensland Department of Health typified this view by endorsing the retention of community rating not only from an access and equity point of view but to ensure that people in the high risk group are not forced out of private health insurance. [4]

4.5 However, there are problems seriously effecting the operation of community rating in its current form. The decline in the number of people retaining private health insurance includes a significant number of young and healthy people. Their departure makes it more expensive for an insurer to provide for the elderly and unhealthy. Premiums rise and more young and healthy members leave private insurance. Health Care of Australia (HCoA) summed up this dilemma for the delivery of health care by stating that:

The disincentive for the community at large to take out expensive health insurance produces two scenarios people either pay for private health when required, out-of-pocket, or they encroach further upon the public purse through accessing the apparently "free" public health system. [5]

4.6 The Australian Private Hospitals Association suggested that `the term community rating is now a misnomer...[It] reflects the risk profile of the insured population only, rather than that of the general community'. [6] Other organisations similarly submitted that the principle was being undermined or eroded. [7]

4.7 The AMA summed up a range of views about community rating which were put to the Committee when it stated that:

The principle has been eroded by the dramatic decline in the overall number of people privately insured to the point where most of the community is not included, by the segmentation of private insurance products, deep discounting for corporate clientele and self risk strategies by individuals now permitted in the Medicare environment. [8]

4.8 Organisations variously proposed that community rating could `no longer be promoted in its present form', [9] that its real objective `should be addressed in a different way' [10] and that as the principle underpinning private health insurance it needs to be reconsidered. [11] MBF encapsulated this attitude in the title of its paper - `Community rating - At the crossroads'.

4.9 A range of modifications or refinements to the principle of community rating have been proposed, with a number receiving support from various organisations. These have included lifetime community rating whereby members joining at a young age could be offered a lower premium than members joining later, discounting for long membership, and permitting a larger and more flexible range of insurance products. [12]

4.10 APHA has advocated that if any `refinements' are made to community rating, two goals must be met:

• those people currently holding private health insurance, who would be worse off under alternatives (eg the elderly in a move to risk rated insurance), must be protected from any adverse effects; and
• any proposed scheme must be able to meet future health care financing needs better than the current system. [13]

Conclusion

4.11 The Committee recognises the reality of the current situation in relation to the principle of community rating whereby gradual evolution is occurring. Issues which were raised in a number of submissions, such as the need to redefine the principle or refine its operation by allowing relaxation within existing parameters to permit the introduction of new and differently targeted products, will be considered by the Committee in greater detail as part of the second stage of this inquiry.

Billing reform

4.12 The need to reform billing procedures has been widely recognised as necessary to improve the private health insurance system. The Reform Act provides for the establishment of an Aggregate Billing Advisory Committee (the Billing Committee), whose membership is to consist of the Departmental Secretary, and nominations from the Australian Medical Association (AMA) and Council of Procedural Specialists (COPS), the three Hospitals' Associations, the Australian Health Industry Association (AHIA) and Consumers' Organisations. The Billing Committee's functions include the requirement to investigate and recommend to the Minister on the most appropriate way of moving to a system of aggregate billing for an episode of hospital treatment, covering all hospital and related services including medical services. [14]

4.13 The Department of Health and Family Services (DHFS) advised the Committee that it wrote in June 1995 to the specified organisations seeking nominations for membership. However, the AMA and COPS declined to nominate a representative for the Billing Committee. DHFS noted that the AMA `cited as a major obstacle to improved billing arrangements the specification in the reform legislation that only patients treated by medical practitioners with contracts are able to assign (to the funds) the Medicare benefit in respect of in-hospital medical services'. [15]

4.14 The AMA argued that `the previous Government used the efficiency of the billing system afforded to contracted doctors as a means of forcing doctors into contracts with the funds...[Its actions] denied improved billing capabilities to patients who attended non-contracted doctors'. [16] However, the AMA advised the Committee that if the Health Insurance Act was amended to allow direct billing for private hospital services, the profession `would work with the other sectors of the industry to establish a voluntary aggregate billing system'. [17]

4.15 DHFS decided that, although other Associations sought to be included on the Billing Committee, it was not a sensible idea to proceed because `having the Aggregate Billing Advisory Committee without the AMA is pretty much like having Hamlet without the prince'. [18] The Billing Committee has not been convened.

4.16 The Committee considers it regrettable that the Billing Committee was not established, but commends the willingness of the AMA and other parties to now progress billing reform. DHFS was optimistic in its comments about the possibility of the Billing Committee being convened in the future, by recognising that the concept is one which everyone is interested in pursuing and that it was not beyond `the wit of people to come up with an aggregate billing system' which would overcome current differences of view. [19] The Committee notes the assurance given by DHFS to the AMA and COPS that:

the Department had not closed off any options for an aggregated billing system and that as members of the [Billing] Committee they would have the opportunity to put their views on the best system to both the Minister and Parliament. [20]

4.17 The Consumers' Health Forum (CHF) expressed disappointment at the lack of progress towards a single billing system for private hospital episodes. It referred to feedback from consumers which:

suggests that the fragmented and confusing billing system, together with the lack of informed financial consent arrangements is still causing a series of nasty and distressing surprises. CHF emphasises that until some predictability and competitiveness is introduced to the billing practices of private medical practitioners, it is likely that significant out-of-pocket expenses will continue to cause private health consumers financial hardship and result in disappointment with private health insurance products and private hospital experiences. [21]

4.18 Whilst there is general, but not as yet universal, agreement within the industry on the need for billing reform, there are differences at the direction it should take.

4.19 AHIA expressed a strong preference to retain the status quo, believing the legislation will work best if it is allowed to operate unchanged. Nevertheless the AHIA offered an alternative approach which it suggested may `facilitate the situation in the interests of contributors'. [22] See the section in Chapter 3 on gap insurance for details of this proposal.

4.20 Medibank Private believed that to achieve the concept of a single bill would require `almost universal cooperation amongst funds, hospitals and the medical profession'. It suggested that:

Rather than pursue the single bill concept, the establishment of agreements between financiers (funds) and both hospital and medical specialists will present an opportunity for consumers to receive no bills the accounts being raised directly with the financier who processes the account and remits payment to the provider according to their agreement. [23]

4.21 HCoA believed that `reduced (if not single) billing should be the aim of nearly all private health care industry players'. [24] Similarly, APHA acknowledged that `standardisation and simplification of billing and payment regimes is an industry issue'. [25] HCoA referred to its research showing that separate bills for the main doctor and associated anaesthetist was not the real concern to the patient. It argued that no patient would object to insurance covering doctor `gaps', but that the resolution of the issue required the full support of the medical profession and the insurance funds. HCoA found that the real concern:

is the volume of billing by the additional service providers in the episode of care. These include the hospital, pharmacy, physiotherapy, pathology, radiology, intensivists, residents, dietitian, speech and occupational therapists, social workers and others. The hospital accommodation bill has been addressed by a "100% cover" initiative by the industry for some time. The other bills are the ones to which the industry, including the government, should be working together to place under the umbrella of single billing. [26]

4.22 The AMA, whilst not nominating a member to the Billing Committee, has been developing jointly with the APHA a proposal representing `a broad industry view' on the question of aggregate billing. The AMA informed the Committee that the proposal, outlined in a paper titled Aggregate Billing Industry Position, had broad support from a group comprising private hospital and health insurer representatives, and medical representatives including COPS and AAS.

4.23 The AMA/APHA proposal considers that the key features of any successful introduction of aggregate billing would be that there be realistic expectations about what can be achieved, that the new arrangements be voluntary, that the billing system be made so efficient and attractive that doctors will want to use it rather than being forced to use it, and that there be no expectation that doctors forego their right to submit accounts to patients.

4.24 The basis of the proposal is to enable patients to assign benefits to a third party, with expertise in billing systems and access to relevant technology, who can also receive and disburse payments. This could be achieved by amending s.20 of the Health Insurance Act to enable patients to assign their Medicare benefits to a third party for private in-patient episodes of care. It is argued that:

Such an amendment would enable a private hospital, a billing agent or any other third party acceptable to doctors, hospitals and patients, to aggregate doctors' accounts, arrange payment by health insurers and Medicare of appropriate benefits, disburse monies to the doctor and arrange gap payments by the patient as necessary. [27]

4.25 The AMA/APHA proposal advocates that if progress can be achieved on the question of more efficient billing arrangements and the aggregation of accounts, informed financial consent becomes a more easily resolved matter.

Conclusion

The Committee strongly supports the necessity for urgent reform of the billing system and recommends accordingly.

Recommendation 11:

Recommendation 12:

Private Health Insurance Complaints Commissioner

Establishment, functions and powers

4.26 The Reform Act provides for the establishment of a Private Health Insurance Complaints Commissioner (the Complaints Commissioner). The Complaints Commissioner's Office, which is based in Sydney, became operational on 4 March 1996 and has a staff of five. The Office is indirectly funded through a levy on the private health insurance funds based on contributor numbers. The levy is collected by DHFS and paid into the Consolidated Revenue Fund, with the Complaints Commissioner then being funded through a one-line appropriation in the budget.

4.27 The main functions of the Complaints Commissioner are:

• to deal with complaints which may be made by health fund contributors, health funds, hospitals and medical practitioners about matters associated with private health insurance arrangements;
• to investigate the practices and procedures of registered organisations;
• to publish data about complaints;
• to make available certain information to the public; and
• to make recommendations about regulatory and/or industry practices relating to registered organisations. [28]

4.28 In dealing with complaints, the Complaints Commissioner may make inquiries, undertake investigations, make recommendations, request conciliation and refer matters to other bodies. However, the Complaints Commissioner submitted that her functions, powers and duties are not as clearly and fully prescribed as they are for other similar dispute resolution bodies, comparing her functions and powers with those contained in the Ombudsman Act 1976, the Superannuation (Resolution of Complaints) Act 1993, and the Health Complaints Act 1993 of the ACT. The Committee was informed that:

For example, the Complaints Commissioner can examine health funds records and rules but has no express powers to interview staff or any other people. There are no powers to make or request copies of records. There are no sanctions applying to health funds or their staff for failure to comply with requests for information... There is no right to examine practitioner and hospital records... Remedial powers are confined to making recommendations to health funds, practitioners and hospitals. The Complaints Commissioner cannot direct that specific action be taken and there are no sanctions for failure to act on a recommendation. [29]

4.29 The Complaints Commissioner proposed legislative changes to deal with complaints management and financial accountability and to allow for delegation of powers, which would assist in providing an effective and efficient operation over the next few years. A particular area of concern related to the powers of investigation and enforcement of recommendations. The Complaints Commissioner suggested that additional powers in this area, modelled on provisions in the Ombudsman Act and other legislation, be provided, [30] noting that:

This dearth of [investigative] powers is unusual for a complaints body. While the health funds have been most cooperative in dealing with complaints to date, stronger investigative powers with associated sanctions are needed to give the Complaints Commissioner credibility, especially when dealing with complaints from practitioners and hospitals. [31]

4.30 APHA also supported in-principle proposals to strengthen the investigation and enforcement powers of the Complaints Commissioner, subject to the form of the proposals. [32]

4.31 Other areas suggested by the Complaints Commissioner for amendment included:

• conducting such investigations as the Complaints Commissioner considers appropriate;
• proceeding with informality and speed, and generally improving flexibility in dealing with complaints; power to conciliate between registered organisations and complainants;
• discretion to decline to investigate or discontinue action in certain circumstances;
• discretion as to form of advice that complaint will not be investigated; prohibition on disclosure of personal or otherwise confidential information obtained in the course of duty;
• protection from civil action; and
• delegation of all or any powers and discretions conferred by the Act. [33]

4.32 When questioned by the Committee on the adequacy of the Complaints Commissioner's powers and functions, DHFS advised that the establishment of the Complaints Commissioner was a new procedure and the Department was uncertain as to the extent of functions and powers which would be required. The Department agreed that perhaps with a few more months experience of operation it would be timely and sensible to discuss with the Complaints Commissioner possible changes to her powers. [34]

Operation of the Complaints Commissioner

4.33 The establishment of a Private Health Insurance Complaints Commissioner has been welcomed in the community sector, [35] although certain health funds were more circumspect. The Health Insurance Restricted Membership Association of Australia (HIRMAA) expressed support for the provision of a complaints resolution system to cater for appropriate concerns that cannot be resolved within the funds normal administrative systems. However, it was concerned that the system which has been created is not a cost effective process for the number of complaints which have been referred. HIRMAA considered that the funds' financing of the Complaints Commissioner's Office through their levy `to be an unjustified expenditure of members funds and recommends a review of this arrangement be undertaken (with industry consultation) to determine what would be a more appropriate and cost effective solution'. [36] Medibank Private expressed similar concerns with value for its members' money and suggested combining the Complaints Commissioner with PHIAC, arguing that this would provide administrative efficiencies, concentrate private health sector consumer rights and product information functions, and ensure a more comprehensive understanding of the industry. [37]

Nature of consumer complaints

4.34 The majority of complaints made to the Complaints Commissioner's Office are by telephone (including a nationwide, toll free complaints hotline), or in writing, by fax or in person. The Complaints Commissioner has advised that between 4 March and 4 August 1996 her office had received 319 complaints and 297 general inquiries. [38]

4.35 The Complaints Commissioner has been examining the complaints received during the relatively short period of her operation to identify any patterns in the problems raised, which may require further remedial action by funds, service providers or government. The Complaints Commissioner has indicated that to date health funds have been cooperative in attending to complaints quickly, without significant differences of opinion over remedial action.

4.36 The most common complaints have been with benefit entitlements, including level of cover, amount of benefit and lack of notification of changes to benefit entitlements; and with waiting periods, in particular the pre-existing ailment rule. The Complaints Commissioner has suggested that the majority of complaints indicate that consumers do not understand what their policy covers or what they can and cannot claim from their policy. [39]

Conclusion

4.37 The Committee considers that the operation of the Complaints Commissioner's Office in the period since its establishment has demonstrated that it provides a valuable contribution to the health industry and its consumers. The Committee acknowledges that the limitations in the powers and functions referred to by the Complaints Commissioner may affect the service provided to consumers, although this has yet to be demonstrated on such a limited period of operation. The Committee believes more time needs to be given to assess the types and quantity of complaints and the effectiveness of their resolution before making any firm recommendation as to any possible expanded role and powers for the Complaints Commissioner.

Recommendation 13:

Private Health Insurance Administration Council

4.38 The Private Health Insurance Administration Council (PHIAC) is established in Part VIAA of the National Health Act, which sets out the Council's powers and functions. Its major functions include:

• to monitor the financial performance of registered health funds to ensure statutory reserve requirements are met;
• to administer the reinsurance account arrangements;
• to collect and disseminate financial and statistical data, including tabling of an annual report to Parliament on the operations of registered health funds; and
• to establish uniform reporting standards for funds.

4.39 The Reform Act provided PHIAC with additional functions which include:

• to collect and disseminate information about private health insurance to enable consumers to make informed choices about private health insurance;
• to distribute copies of the Private Patients' Hospital Charter to funds for distribution and display, and to make copies of the Charter available through PHIAC's office. The existence and availability of the Charter should also be publicised in PHIAC's brochures and other publicly available documents;
• modelling, evaluation and research of data derived from the Hospital Casemix Protocol (HCP).

4.40 PHIAC's implementation of these additional functions is discussed in the next sections.

Private Patients' Hospital Charter

4.41 The Reform Act inserts a new s.73F into the National Health Act which provides for the Minister to issue a statement called the Private Patients' Hospital Charter (the Charter) that:

• informs people of what they could, as contributors, reasonably require from registered organisations, medical practitioners, hospitals and day hospital facilities; and
• advises people of matters to consider in making decisions about becoming contributors to such funds.

4.42 The Charter was gazetted on 10 January 1996 following consultations with organisations representing hospitals, doctors, health insurance funds, consumers and State and Territory health authorities. Legislation requires that health funds, the Complaints Commissioner and PHIAC make copies of the Charter available to contributors and the public. DHFS indicated that over 250,000 copies of the Charter in brochure or booklet form have been distributed and that a reprint is in progress. Once reprinted the Charter will also be available in private hospitals. [40]

4.43 The initial distribution of the Charter to registered health funds was organised and paid for by PHIAC, which also makes copies available to the public at its office and by mail upon request. PHIAC advised that its staff are briefed to mention the Charter to casual inquirers regarding private health insurance. [41]

4.44 The Committee received conflicting evidence as to the benefit of the Charter. The Consumers' Health Forum (CHF) submitted that the Charter `represented an important step towards recognising the rights of private patients, and improving awareness in the community of these rights'. [42] Conversely, MBF wrote that `the Charter has been of interest to virtually no health fund members (who were not consulted on the legislation's so-called consumer services). Funds have been forced to display the Charter in branches, but there has been little response from members'. [43] While DHFS advised the Committee that there has been no formal process for obtaining stakeholder feedback on the Charter, [44] PHIAC indicated that feedback from its telephone inquiries was `very positive' as people found the Charter `useful'. [45]

4.45 A perceived deficiency in the Charter was highlighted by the Privacy Commissioner who commented that `the statements in the Charter on confidentiality do not appear consistent with the provisions in section 73G [of the National Health Act relating to the disclosure of patient information]'. [46] In fact, the Privacy Commissioner considered that the section may well override patient expectations and other undertakings about the protection of patient information currently contained in the Charter. The Australian Doctors' Fund (ADF) also noted that `it is of great concern that this Charter makes no mention of the legislative provision [s.73G of the National Health Act] with relation to the disclosure of patient information'. [47]

Conclusion

4.46 The Committee considers that the Charter is an important component in the education of consumers about private health insurance and in particular as to their rights and expectations within the system.

Recommendation 14:

Information dissemination

4.47 Consumer awareness and information on health insurance products have been a continuing problem for the private health industry. Consumers require information to enable them to make considered decisions on complex issues such as which fund to join and in determining which insurance product is most suitable for their particular circumstances, to understand the detail of their policy and its coverage and to be aware generally of their rights including recourse to complaints processes at Commonwealth or State level.

4.48 To enable consumers to make informed choices about private health insurance, PHIAC met its new legislative requirement to collect and disseminate information about private health insurance through the production and distribution of a booklet entitled Insure? Not Sure? This document complements the Charter.

4.49 Insure? Not Sure? provides a range of information about Medicare and private health insurance, how private health insurance works including general rules affecting the privately insured, the types of private health insurance cover and questions to ask a private health insurance fund either before or after joining.

4.50 Insure? Not Sure? has been published in English only. PHIAC submitted that, according to advice from health funds, `there is very little demand for information on private health insurance in languages other than English'. [48] In fact, it had not received any requests for the booklet in languages other than English. The Committee suspects that this may be a case of being unable to request something if its existence is not known! PHIAC advised that nearly 300 000 copies were sent to health insurance funds to be available through their shopfronts. [49] The Committee believes that PHIAC needs to be more pro-active in providing information to NESB communities.

4.51 The Committee considers that Insure? Not Sure?, which is an informative and useful booklet for consumers, would have greater impact with a wider distribution and by ensuring that when displayed it was clearly differentiated from insurance fund product advertising.

4.52 The Reform Act introduced provisions which improve the availability of relevant health insurance information to consumers, through the establishment of a Complaints Commissioner, and the distribution of PHIAC publications, such as Insure? Not Sure?, and the Charter. These initiatives are a positive start but from the evidence the Committee received there is still a long way to go. The CHF, whilst expressing disappointment at the lack of progress in relation to a number of key issues of concern to consumers, did note that consumers are `starting to reap the benefits of improved information about private health insurance, including the private patients' hospital charter'. [50] However, the Complaints Commissioner indicated that the complaints received by her office during the short period of its operation suggested that `members [of funds] need to be better informed about their membership and benefits'. [51]

4.53 Evidence to the Committee indicated that confusion and ignorance among consumers about private health insurance apparently remains widespread. Unfortunately, the major players in the industry attribute blame to each other and consider the problem to be the responsibility of others to rectify.

4.54 APHA argued that the expanding array of insurance products leads to significant costs in providing meaningful customer information. Many fund members are unaware of the nature of the health insurance product they have purchased and are completely ignorant of the range of non-hospital costs, such as medical, surgical or allied health services, that may be incurred during an episode of hospital care. APHA notes that as a result, hospital staff are required to spend considerable time with each patient contacting the relevant fund to establish membership details and personally explaining this information in terms of the particular fund and fund product to which the patient belongs. APHA believes many difficulties `can be ameliorated through improving the level and quality of information provided to consumers... Ideally, where possible, consumers should receive such information at the time they purchase health insurance'. [52]

4.55 Medibank Private submitted that confusion among consumers is on two levels understanding the health system and Medicare entitlements; and comparing private health insurance products. It argued that health funds generally provide detailed information in their product brochures. The complexity for consumers arises where there is variation between fund products due to a combination of product differentiation and/or funds restricting benefit entitlements to control fund utilisation and drawing rate. Medibank Private considered that to provide a comprehensive consumer comparison of products, without knowledge of the purchaser's requirements, such as assessment of personal risk, family medical history, treatment preferences etc, is an impossible task. It concluded that while such requirements cannot be included in a comprehensive comparison of fund products, a comparison of fund products needs to be widely distributed focussing on improved education about Australia's health delivery system, choices that are available under that system and differences between health insurance products. [53]

4.56 The dilemma with product choice lies in the balance between funds being able to offer a greater range of products to consumers, possibly through a level of deregulation, and the need to ensure that a larger diversity of available product does not simply create greater confusion for the consumer.

4.57 Providing product comparison creates difficulties which were referred to by PHIAC. PHIAC advised that it had given consideration to compiling consumer information based on a product by product breakdown and comparison, but submitted that it is:

both extremely difficult and potentially controversial in comparing products that are so diverse. As well, products are constantly changing in the details. Such consumer information, were it possible to compile, could not be published in hard copy format as it would be extremely expensive and lacking in timeliness by publication. One alternative way of publishing any such data would be on a medium such as the Internet.

Even if PHIAC is eventually able to provide such information, it should not provide advice on particular products or funds. Ultimately the consumer needs to ask the right questions to ensure that what they buy meets their needs. Insure? Not Sure? already addresses the consumer information role in terms of its general coverage of generic products. Consumers would need to determine specifics for themselves as health insurance products are an individual choice. [54]

4.58 The only detailed comparative work that has been undertaken on different insurance products was by the Australian Consumers' Association in an article published in Choice in July 1996. [55]

4.59 Medical practitioners are also regarded as being at fault with the provision of information. Insurance funds have been vocal about the difficulties in providing a product which can cover medical expenses with any degree of certainty and APHA has indicated that hospital staff are invariably blamed when patients receive additional bills from doctors who routinely charge well in excess of the MBS fee. [56]

4.60 The CHF considered that `medical practitioners have failed to meet their part of the deal by providing honest and informative medical and financial details prior to procedures which would enable the patient to make informed decisions'. It suggested `that strengthening informed financial consent provisions for medical services would be a simple and logical way to improve consumer satisfaction with privately insured services, to reduce the incidence of unexpected financial hardship, and to encourage more competition on price among medical practitioners'. [57]

4.61 Support for strengthened informed financial consent was also given by APHA which recognised:

the substantial practical difficulties in providing exact information on likely medical charges prior to treatment. However, it is clearly possible to inform consumers that these charges exist. It should also be possible to provide better information on the range and level of likely charges for most consumers. [58]

Conclusion

4.62 The Committee remains concerned at the problems still evident in the dissemination of information about private health insurance products. It believes that all parties in the industry should accept greater responsibility in the production of information for consumers, the format of this information and in the methods by which consumers attention is drawn to the available information. Practitioners, funds and hospitals should establish a method of wider distribution of factual and informative material regarding private health insurance and their products.

Recommendation 15:

Recommendation 16:

Recommendation 17:

Recommendation 18:

Recommendation 19:

Recommendation 20:

Data Collection issues

4.63 Amendments in the Reform Act require that hospitals and day hospital facilities transfer the information specified in the Hospital Casemix Protocol (HCP) to their contracted health funds. The information specified in the HCP is prescribed by regulation which describes the data items to be collected and the format of that collection. Items include clinical and demographic information about the patient and charges. The Reform Act also requires health funds to forward this data together with extra billing information to the Department and PHIAC.

4.64 DHFS advised that HCP data collection commenced on 1 October 1995. From this date casemix information on separations of privately insured patients has been collected by private hospitals and transferred to contracted health insurance funds as part of their contracts. According to DHFS, the collection is becoming reasonably well established with data from health funds having been transferred to DHFS since February 1996. [59]

4.65 PHIAC advised the Committee that at this stage it does not receive any data from the HCP and it is not certain yet that PHIAC would need most of the HCP data. However it is envisaged that the level of analysis undertaken by PHIAC would use aggregate data for example at a state level or by AN-DRG. Such data would not identify individual hospitals. [60]

4.66 APHA suggested that there were significant problems with PHIAC receiving any HCP information. APHA claimed that:

As the PHIAC Board comprises representatives of health insurance funds, it would be commercially inappropriate for these individuals to obtain access to details of the specific charges levied by hospitals for different episodes of care. It would also be inappropriate for the fund representatives to receive information about their competitors' benefit payments. [APHA argued that] if PHIAC is to receive any HCP data, hospitals should be given the right to limit the scope of any such data provision. For example, it may be appropriate for PHIAC to obtain aggregated data without hospital (or fund) identifiers, which monitors the level of out-of-pocket charges in line with PHIAC's consumer information responsibility. However, as such information is likely to be readily available from data published by the Department, there is no valid justification for PHIAC to obtain special access to HCP data. [61]

4.67 PHIAC indicated that it `has no use for data identifying individual hospitals and it could only receive de-identified data for individuals. In addition, any such data provided to PHIAC would be with the permission of the Minister and would be clearly protected under the requirements of the Act. Any identifying information on hospitals would be protected'. [62]

4.68 The importance of accurate and timely collection of data was emphasised by funds. AHIA wrote that for `many years the private health care sector has suffered from a lack of data which can assist both the public and private sectors in planning. The provision of more data, not less, assists all concerned with policy formulation, including legislators'. [63] HIRMAA and Medibank Private also referred to the benefits to be gained from data collection, such as enabling funds and hospitals to manage their respective business needs, being able to progress towards standardising elements used to define an episode of care and achieving future health financing models. [64]

4.69 Medibank Private indicated that it had worked with DHFS in establishing processes for the receipt of HCP data from hospitals via health funds and, in conjunction with APHA and the National Consultative Group, in guiding the collection of data to electronic means.

4.70 The provisions in the Reform Act for the collection and transfer of data created considerable concern during the passage of the legislation through Parliament. The Committee's March 1995 Report on the Bill noted that the issues of cost and of privacy were particular concerns for a number of organisations. [65]

4.71 The introduction of HCP and associated changes in data management systems has provided an added cost impost for hospitals, especially for the smaller hospitals, both financially and in human resource terms. A number of submissions referred to the considerable expense borne by hospitals to introduce or upgrade information technology infrastructure and systems, provide ongoing administrative support often through the employment of additional staff, train staff and educate professional and medical personnel about casemix funding and reporting. [66]

4.72 An area of cost constantly referred to was in the duplication of data collection. The Australasian Day Surgery Association (ADSA) commented that:

There is a need for significant effort to be made by Government to amalgamate existing State and Federal level data collections to eliminate duplication and increase efficiency in the management of private health sector data. Therefore, at the very least the State morbidity data collections, the Australian Bureau of Statistics private hospital data collection and the data collected by the Hospital Casemix Protocol should be managed as one collection. [67]

This view was echoed in a number of submissions. [68]

4.73 Medibank Private suggested that to gain efficiencies within the data collection processes, the National Health Information Management Group review areas of duplication in the collection of health care delivery data, encompassing Commonwealth and State collections. [69] ADSA made a similar recommendation. The Committee considers that this apparent duplication is unwarranted and wasteful, and supports this suggestion.

4.74 In relation to privacy considerations, the funds did not accept that existing data arrangements endanger patient privacy. [70] MBF argued that at this stage it had no concern in relation to protection of the privacy of members in data being provided to DHFS or PHIAC because:

once a claim has been processed the data cannot readily be traced to specific members by name.

MBF's greater concern is with the potential for the data to be used to impose restrictions on future negotiations between hospitals and funds which may reduce the attractiveness of hospital insurance. [71]

4.75 The Privacy Commissioner referred to the provisions of section 73G of the National Health Act, inserted by the Reform Act ostensibly to remove any impediment under law which would prevent the disclosure of information by hospitals relating to the provision of hospital treatment. The Privacy Commissioner believes that this section raises privacy concerns as it appears to widen the range of people and organisations who may have access to personal health information. The Committee has noted earlier the concerns expressed by the Privacy Commissioner and the ADF at the lack of reference to the operation of s.73G in the Private Patients' Hospital Charter.

4.76 The Committee was informed that in recent speeches the Privacy Commissioner has expressed concern about the increasing pressures for the disclosure of identifiable health information without consent and pressures to use personal health information for purposes other than which it was collected, that is, secondary uses. The Privacy Commissioner suggested that:

secondary uses of health information should be the subject of community wide debate on the implications and desirability of such practices and the safeguards which should attach to any such disclosure or secondary use of personal health information. Safeguards which may be considered include notification to the individual if their record is to be accessed, giving individuals an opportunity to prevent the secondary use, audit trails and reports of such activities to external authorities. [72]

4.77 ADSA was similarly concerned at `the lack of appropriate guidelines for dealing with the use and release of data by all agencies to whom such data will be provided' either by health insurers, DHFS or PHIAC. ADSA believed that `potentially data currently being collected can be disseminated in the absence of adequate guidelines to control and safeguard their use'. [73] It recommended that guidelines for the use of any data collected via HCP be developed as a matter of urgency.

4.78 A particular incident was drawn to the Committee's attention which appeared to be a breach of privacy, though it was argued by the medical profession as demonstrating the funds' agenda to introduce a form of managed care. [74] The AHIA informed the Committee that the particular incident arose from a health fund seeking information on psychiatric treatment relating to each day program for which the hospital was seeking rebates to enable the fund to assess the level of classification of a given program. A consultant was employed by the fund to visit hospitals to determine whether documented procedures and protocols were being followed by hospital staff. As part of the process the fund had requested access to copies of de-identified patient notes, in accordance with agreement between the fund and hospitals that such de-identified notes would not lead to any compromise of patient confidentiality. However, in one review, the consultant was apparently supplied accidentally by the hospital with some patient notes that had not been de-identified. Once the error was discovered the notes were immediately returned to the hospital.

4.79 The AHIA commented that the supply of identified notes was `unfortunate' but should not be considered anything but a `genuine error'. The AHIA noted that the provisions of the Reform Act for hospitals being required to give funds `all reasonable assistance' relate to the payment of specific claims. The discussions between the funds and hospitals relating to the psychiatric programs were part of the health fund offering to extend benefits to support changes occurring in psychiatric patient care. The portrayal of the incident as evidence of `US-style managed care' was simply incorrect. [75]

Conclusion

The Committee is concerned about any incidence of breach of privacy or security of data, however isolated. To ensure that data exchange is effective, it is essential that all parties have complete confidence that the information they provided in relation to the operation of the legislation is treated with absolute respect and security.

Private Hospital Data Bureau

4.80 Amendments to the Health Insurance Act provide for the establishment of a Private Hospital Data Bureau (the Data Bureau). The provisions of the Act require that when the Data Bureau is established it will receive HCP data from private hospitals on all episodes of care regardless of contract or insurance status. DHFS informed the Committee that consultations were held with the private health sector, particularly APHA, to establish an interim bureau to collect data for two years. It was envisaged that during this interim period, further consultation and experience would assist in the drafting of relevant legislation for a self-funding independent bureau. Despite the calling of tenders and a recommendation from a selection panel, the Data Bureau has not been established. [76]

4.81 APHA has strongly supported the establishment of the Data Bureau. It believes that `the bureau will assist hospitals to assess their performance against industry peers and partially redress the information imbalance in the negotiation process between hospitals and health insurance funds. [77]

4.82 In recognition of the delay in the Data Bureau's commencement, APHA argued that the Government should extend its funding to cover data collection until the end of 1998, to allow the bureau to develop its services so that it can become self-funding in the future. APHA's `intention is that private hospitals, governments and researchers purchase their data requirements from the data bureau, thereby reducing the need for private hospitals to prepare multiple datasets. This objective can only be achieved if the data bureau has had sufficient time to collect, compile and validate initial datasets'. [78]

4.83 The AHIA was concerned that the proposed Data Bureau could breach privacy concerns if it decided to become self-funding by `selling' the data provided to it to external users. The AHIA believes that if a bureau is desired by the private hospital industry it should be funded by that industry, not by taxpayers. It also believes that the provision of cost data, in addition to charge data, would improve the managerial efficiency of private hospitals as well as the negotiating process. AHIA suggested that the Bureau be enabled to collect cost data on a basis to be determined by DHFS, APHA and AHIA. [79]

Recommendation 21:

Recommendation 22:

Recommendation 23:

Recommendation 24:

Senator Sue Knowles

Chairman

September 1996

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FOOTNOTES

[1] For a description of the operation and administration of reinsurance, see Submission No.25, pp.40-7 (APHA) and PHIAC Annual Report 1994-95, pp.17-18.

[2] Submission No.25, p.45 (APHA).

[3] See for example Submission No.2, p.24 (AHIA); Submission No.25, p.34 (APHA); Submission No.20, p.4 (HIRMAA); Transcript of Evidence, p.233 (DHFS).

[4] Submission No.43, p.3 (Queensland Department of Health).

[5] Submission No.39, p.6 (HCoA).

[6] Submission No.25, p.34 (APHA).

[7] Submission No.27, p.4 (AMA); Submission No.11, Attached Paper Community rating - At the crossroads, p.2 (MBF).

[8] Submission No.27, p.4 (AMA).

[9] Submission No.23, p.2 (COPS).

[10] Submission No.39, p.6 (HCoA).

[11] Submission No.54, p.2 (RACS).

[12] eg. Submission No.8, p.6 (AAS); Submission No.20, p.11 (HIRMAA); Submission No.25, p.36 (APHA); Submission No.37, p.4 (ACA); Submission No.55, p.6 (Medibank Private).

[13] Submission No.25, pp.35-6 (APHA).

[14] s.132A, National Health Act 1953.

[15] Submission No.45, p.6 (DHFS).

[16] Supplementary information, AMA, 2 August 1996, p.1.

[17] Transcript of Evidence, p.5 (AMA).

[18] Transcript of Evidence, p.231 (DHFS).

[19] Transcript of Evidence, p.232 (DHFS).

[20] Submission No.45, p.6 (DHFS).

[21] Submission No.26, p.2 (CHF).

[22] Submission No.2, pp.34-5 (AHIA).

[23] Submission No.51, p.3 (Medibank Private).

[24] Submission No.39, p.2 (HCoA).

[25] Submission No.25, p.19 (APHA).

[26] Submission No.39, p.2 (HCoA).

[27] Supplementary information, AMA, 2 August 1996, Attached paper Aggregate Billing Industry Position, p.3.

[28] s. 82ZRC, National Health Act 1953.

[29] Supplementary information, PHICC, 13 August 1996, p.1.

[30] Supplementary information, PHICC, 13 August 1996, pp. 7-8, 10-11.

[31] Submission No.32, p.17 (PHICC).

[32] Submission No.25, p.14 (APHA).

[33] Submission No.32, pp. 14-18, (PHICC) and Supplementary information, PHICC, 13 August 1996, passim.

[34] Transcript of Evidence, p.231 (DHFS).

[35] Submission No.26, p.2 (CHF).

[36] Submission No.20, p.5 (HIRMAA).

[37] Submission No.51, p.23 (Medibank Private).

[38] Supplementary information, PHICC, 5 August 1996, provides a breakdown by subject of these complaints and inquiries.

[39] For discussion on complaints, see Submission No.32 pp.6-11 (PHICC) and Transcript of Evidence, pp.114-16 (PHICC).

[40] Submission No.45, p.4 (DHFS).

[41] Submission No.5, p.4 (PHIAC).

[42] Submission No.26, p.2 (CHF).

[43] Submission No.11, p.6 (MBF).

[44] Supplementary information, DHFS, 8 August 1996, Q.3.

[45] Transcript of Evidence, p.211 (PHIAC).

[46] Submission No.60, p.3 (Privacy Commissioner).

[47] Submission No.44, p.12 (ADF).

[48] Submission No.5, p.3 (PHIAC).

[49] Transcript of Evidence, pp.208-11 (PHIAC).

[50] Submission No.26, p.2 (CHF).

[51] Submission No.32, p.11 (PHICC).

[52] Submission No.25, p.17 (APHA).

[53] Submission No.51, p.23 (Medibank Private).

[54] Submission No.5, p.4 (PHIAC).

[55] `Do you need health insurance?' and `Choosing a health fund', Choice, July 1996, pp.14-30.

[56] Submission No.25, p.17 (APHA).

[57] Submission No.26, p.2 (CHF).

[58] Submission No.25, p.17 (APHA).

[59] Submission No.45, pp.1-2 (DHFS).

[60] Submission No.5, p.5 (PHIAC).

[61] Submission No.25, p.33 (APHA). HCoA provided a similar argument - see Submission No.39, p.5 (HCoA).

[62] Submission No.5, p.5 (PHIAC).

[63] Submission No.2, p.29 (AHIA).

[64] Submission No.20, p.8 (HIRMAA) and Submission No.51, p.26 (Medibank Private).

[65] Senate Community Affairs Legislation Committee, Report on the Health Legislation (Private Health Insurance Reform) Amendment Bill 1994, March 1995, pp.10-11.

[66] See Submission No.25, pp.30-31 (APHA), Submission No.29, p.5 (ACHCA) and Submission No.58, p.5 (ADSA).

[67] Submission No.58, p.5 (ADSA).

[68] Submission No.25, p.31 (APHA), Submission No.29, p.6 (ACHCA) and Submission No.39, p.4 (HCoA).

[69] Submission No.51, p.27 (Medibank Private).

[70] Submission No.2, p.29 (AHIA).

[71] Submission No.11, p.16 (MBF).

[72] Submission No.60, p.2 (Privacy Commissioner).

[73] Submission No.58, p.5 (ADSA).

[74] Submission No.12, pp.1-2 (Dr Shirley Prager). See also Transcript of Evidence, p.34 (COPS) and p.55 (ADF).

[75] Supplementary information, AHIA, 6 August 1996, pp.1-2.

[76] Submission No.45, p.7 (DHFS), Submission No.25, p.29 (APHA).

[77] Submission No.25, p.30 (APHA).

[78] Submission No.25, p.30 (APHA).

[79] Submission No.2, pp.29-30 (AHIA).

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