The future of health in Australia

It’s an understatement that those working in Australia’s healthcare system has had to cope with extreme pressures in the past couple of years. While advances in technology and systems have alleviated some of this pressure, breakdowns are still occurring. Coupled with an aging population, rising costs, and a lack of education around medicines, devices and procedures, Australia’s healthcare system needs attention.

To overcome these challenges, experts are looking at the knowledge, expertise, and experiences from many disciplines for support and solutions. Actuaries and healthcare experts need the space and time to come together to help to design and transform the system so it can remain viable and inexpensive into the future. At the same time, experts need to balance providing value with real and viable patient outcomes that doesn’t cut costs or lower the quality of care.

The FOHS, hosted virtually on Thursday 24 March, dived deep into these topics. Here, we provide a summary of the plenary sessions and keynote at the FOHS, which covered:

• Plenary 1: Healthcare and PHI in the wake of COVID-19

• Keynote: At what cost? The case for value-based care

• Plenary 2: Prostheses cost in Australia

• Plenary 3: Value from different perspectives.

Plenary 1: Healthcare and PHI in the wake of COVID-19

The session opened with a wide-ranging discussion on COVID-19 and its impact on the healthcare system and private health insurance sectors, the rise of virtual services, rebate pledges, mental health, and a likely return to pre-COVID conditions across industries and sectors.

Adrian Baskir, Commercial Actuary at Bupa UK, and member of the COVID Actuaries Response Group for the UK’s Institute and Faculty of Actuaries, kicked things off by giving a quick overview of the current UK health sector and COVID’s impacts. Adrian said during the height of the pandemic in 2020, the UK saw the private health sector effectively shut down for three months as the system attempted to cope with the demand.

Many private insurers saw increased profits, prompting companies to make rebate pledges and promising not to make huge profits off the back of pandemic. This included BUPA who gave £125 million back to its members. As the dust settled around the COVID outbreak, Adrian said insurance claims are bouncing back to pre-pandemic levels. This coincided with advanced technology coming into play as, like in Australia, a lot more health services and care has moved online.

Adrian said because of the pandemic, many consumer and industry behaviours have changed. This includes: 

• A behavioural change in many consumers who are now more likely to seek care than they had before the outbreak

• At the same time, healthcare providers can see more patients virtually and will likely be a mainstay in the healthcare industry

• Lastly, vaccines aren’t the silver bullet we wanted them to be. Instead, we will see advances in medication from the pharmaceutical side to one day treat COVID like the flu.

Siddharth Parameswaran, from JP Morgan in Sydney, then spoke on the Australian market perspective of the health sector over the past few years. Siddharth commented on the sentiment of markets during the first wave of COVID back in early 2020, which saw some pressure on margins in the private insurer space with no growth during that time. Today it’s a different story. Many insurers are now seeing growth with penetration being higher.

“Margins, from what we can see, are back to where they were pre-pandemic and are incredibly strong,” Siddharth said.

But he said there is still uncertainty. Many insurers made promises to customers to return money to policyholders. The sector has also gravitated to a place of uncertainty.

“With so much going on with COVID it makes it very hard to tell what the underlining themes are and where we end up.”

Daniel Pole, Research Director at IPSOS, provided insights into what consumers are thinking and feeling about their healthcare in recent times. Daniel gave a brief history of the state of private health insurance in Australia over the past 20 years. He mentions 2007 being a turning point for consumers as the country saw economic booms, more investment in public health, and higher private insurance premiums, which meant consumers were turning away from private health insurance. This was the situation the industry was facing before the pandemic hit.

Daniel said now the situation has changed: more people have private health today than they did at the start of the pandemic. He also said Australians were initially concerned about the economy more than anything else at the start of the pandemic.

“That (mindset) shifted in early parts of last year. Economic concerns started to fall away, and healthcare concerns were on the increase. People are now having more of a front of mind concern about how the virus impacts them and their loved ones.”

Daniel said how these issues impact private health insurance is uncertain in the future. “Where we go from here is an open question.” Daniel also touched on the impacts of mental health as many have lived through anxiety around lockdowns, closed borders, and being uncomfortable going out into the community.

One of the top reasons consumers are taking up private health insurance now is taking advantage of mental health services.

Keynote: At what cost? The case for value-based care

After a quick break, delegates were treated to the FOHS’s keynote address from Professor Rachelle Buchbinder AO from Monash University and Professor Ian Harris from UNSW. In their session, the two ran through their research that investigated over-diagnosing and over-treating our populations.

Rachelle started by describing her research, undertaken with Ian, outlining the potentially harmful practice of unnecessary diagnoses in Australia. Rachelle quoted a news report that estimated that $30 billion each year is wasted on ineffective and unwarranted care in the healthcare system.

“The current business model prioritises actual care over actual health,” she said. “It is based on treating people rather than on preventing illness.”

“On the whole, doctors and society at large overestimate the benefits of what doctors do and underestimate the potential for harm.”

Rachelle believes one of the problems at the heart of the issue is the lack of science literacy in both doctors and the general public. If doctors don’t understand the evidence, they have an unfounded belief and that can impact treatments to patients.

Rachelle ran through several examples of ‘over-diagnosis’ – where a diagnosis is technically correct, but it won’t benefit patients and might even harm them. One cause of over-diagnosis is a widening of disease definitions. One example Rachelle used was gestational diabetes, with a recent broadening of the definition meant an increase in women being diagnosed with the condition.

“This leads to more women being anxious, more assessments, possibly more caesarean sections, and it definitely increases the costs. But in fact, there were no improvements to mother or baby from this diagnosis. So, we’re harming people.”

Rachelle presented several solutions for over-diagnosis, including tougher policy decisions to reduce the influence of industry and media, better communication to the public, better health literacy in schools, and instilling a healthy scepticism in people around medical care.

Ian talked about the effectiveness of surgery in healthcare. Using research and case studies, Ian said much of surgery today is ineffective or low value, remains common and costly, surgeons continue to rely on observation and not high-quality evidence, and many procedures are incentivised. In a recent study, Ian and his team reviewed more than 10,000 workers’ compensation cases where surgery was needed on the spine and checked in with patients 24 months after their operation.

“If you have a spine procedure, you should be right 24 months after the procedure, hopefully sooner. We found 19%, nearly 1 in 5, had another spine operation in 24 months and only 1 in 5 returned to full capacity after two years.”

In another study, Ian found that nearly 90% of patients who had spine fusion operations were still using opioids or continued major physio after two years. Only 3% returned to full capacity.

“There is consistent overestimation of benefits and underestimation of the harms of physicians regarding the treatments they commonly do compared to reality,” he said.

Ian said there was at times a huge difference in opinions of doctors and patients on how successful the surgery went. He said physicians are not prepared to discard their decision making based on someone else’s numbers. They rather trust their eyes and tradition and are not prepared to discard therapies validated by both tradition and their own experiences.

Plenary 2: Prostheses cost in Australia

Did you know privately insured patients pay more for prostheses than public patients? That was the big topic during the second plenary session, where key experts discussed how we go about solving these challenges.

Rachel David, CEO of Private Healthcare Australia (PHA), kicked off the session by jumping into the issues surrounding the prostheses industry in Australia and the attempts to improve the quality of products and better services to consumers.

PHA has made significant inroads in highlighting wasteful and inappropriate practices in the system by monitoring prices on behalf of the industry. Rachel said with the help of internal experts, they have managed to pass on major savings to PHI holders in almost every treatment area and group on the prothesis list.

“We found significant fraud and inappropriate practice and even just by doing that without looking at the government reforms we’ve been able to make some significant savings for health fund members,” she said.

Rachel said that while prostheses are not the biggest cost in private health it is the fastest-growing, with people livinrg longer and needing interventions to stay on their feet.

“One of the problems with the prostheses list is obviously price,” she said. “These prices were set by the commonwealth some years ago without a clear mechanism to move in line with market prices and the effect of that over time has meant these prices are 30%-100% more than those in comparable markets around the world.”

Rachel also raised the issue of the medical industry for protheses is comprised of over 99% generic products made from cheap materials. She said this translated into “astonishingly high” margins for manufacturers. Rachel went on to say that government attempts to place pricing controls have not worked.

“Until proper controls are put on this system, we won’t save any money,” she said.

Rachel called on the government to create a ‘break glass’ provision to protect consumers and to ensure budget spend isn’t being wasted.

The discussion moved on to James Downie, CEO of the Independent Hospital Pricing Authority (IHPA). James explained the role of IHPA in establishing a public benchmark price that will be used to determine the gap of existing PL benefit insurers have to pay to hospitals and how the benefits will be reduced over the coming four years. James said they have developed a methodology and have provided a report to the Department of Health for review.

Group CEO, St Vincent’s Health Australia Toby Hall also spoke on the issue, stating actuaries have an acute understanding of the impacts of Australia’s growing ageing population.

He also said that pricing is an issue with no doubt that private consumers are paying more than those in the public sector.

“I welcome the need to reduce the cost to ensure patients aren’t paying more for private health cover,” he said.

Toby said that every day we wait for prices to be adjusted is another day people are paying too much than they should. One solution Toby put forward was bundling products to simplify the process and introduce average pricing in the future to ensure patients are using the best products and devices.

Plenary 3: Value from different perspectives

For the final plenary, the panel featured a mix of voices from government, healthcare, data-driven healthcare consultants, and private health insurance.

Dr Jean-Frédéric Levesque, CEO of the Agency for Clinical Innovation, part of NSW Health, spoke on the values of the key programs the Agency has developed and their early successes. Jean-Frédéric started by supporting a need for a value-based healthcare system to help combat rising health costs, to help meet expectations from consumers, and support patients taking a more active role in their healthcare choices.

He spoke on their program, Leading Better Value Care, implementing different ways to deliver healthcare with a focus on specific conditions including hip fracture, heart failure, osteoarthritis, and others. The program focuses on patient-reported outcomes and patient exported experience measures. They then evaluate these outcomes to build stronger investment, build better care for patients, and create better value for money.

“We need to focus on what matters in terms of what we measure. A defining part of value-based healthcare is to actually maximise outcomes from the perspective of patients,” Jean-Frédéric said.

He touched on the Agency’s Health Outcomes and Patient Experience (HOPE), a platform where patients and clinicians can review during consults to gather safe and secure data on interactions.

Jean-Frédéric believes these types of platforms and measures can limit ineffective care and help impose lean measures on inefficient care.

“Unwanted care really describes care that is fundamentally good, effective care, but maybe not the care that patients want – maybe not the care they need to solve their problems – and to meet their expectations and preferences. And when this happens, we really need to listen.”

Dr Kean-Seng, immediate past President of AMA NSW and GP continued the conversation by describing the AMA’s value-based care principles.

He said the AMA based policy positions and responses on these principles, which include:

• Patient outcome

• Patient experience

• Clinician experience

• Sustainable cost.

Overlaying these principles in a Venn diagram, Kean-Seng said at the heart of all these factors is where the focus should be. He believes we need to bring a holistic perception of value across the whole system.

“Oftentimes we measure value in terms of the little part of the system we see,” he said.

“If we derive all of our data in one part and we design our system to derive benefit for that one element, then we could potentially be causing disbenefits and increasing costs in other systems.”

Kean-Seng said the measure of value needs to be holistic. Currently many only see value from where they sit.

He also believes it needs to be sustainable and ensure funding is appropriate for providing better value for that system.

“We all know funding will drive behaviour. The question is: is the behaviour it drives the behaviour you want?”

Dr Sidney Chandrasiri, Deputy Chief Medical Officer and Group Director, Academic and Medical Services at Epworth Healthcare and final speaker for the day focused on the framework of value-based healthcare.

Sidney began by highlighting five specific principles that need to be implemented to move to a more value-based healthcare system. They include:

• Structure our healthcare systems to deliver care based on a disease/condition rather than around specialties or departments
• Avoid fragmentation and integrate coordination of care delivery systems

• Measure outcomes for patient outcomes and also the costs associated with that care

• Creating platforms that talk to each other and support data sharing

• Create outcome-based or performance-based funding systems that align incentives of each stakeholder in the healthcare system towards patient-centred care.

Currently, coordination of delivery is an issue as patients have difficulty negotiating their care through multiple carers and clinicians.

Sidney said the current system is a zero-sum competition structure: if one gains, another loses. And with a system based on fees for services can incentivise volume.

“Right now, the main challenge in Australia is that many value-based concepts are being delivered in isolation,” she said.

Sidney believes to be truly successful and bring about change, these concepts need to be implemented at the same time. Sidney said that barriers to this change include resistance from stakeholders. With no clear evidence, many won’t commit to changing.

A value-based system can also affect private hospitals with any significant change potentially hitting their bottom line, making them resistant to immediate change. Current digital and IT infrastructure was also a barrier as it’s currently not fit for purpose being unable to follow a patient through their healthcare journey. Many stakeholders are also unwilling to share data.

Sidney posed solutions to moving forward, including increasing collaboration and alignment between healthcare stakeholders.

“What is the driver for the service? At the end of the day, it should be about patient outcomes,” she said.

There also needs to be a national approach instead of a state-based fix. Sidney said while difficult to operationalise, it was seen during the COVID pandemic.

“Before COVID, telehealth had originally many red-tape barriers. During COVID those barriers disappeared.”

Sidney summarised the dangers of implementing value-based care in silos and isolation. She said it can be achieved by looking at the journey patient, the cost of providing that journey, and having a unified approach across government, industry, and other stakeholders.

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