Curing a Disease in Health Care


Herald Sun

6th September 2006



Opposition health spokeswoman Julia Gillard recently suggested that the next Health Care agreements between federal and state governments from 2009-10 must do more to integrate private hospital services into the provision of publicly funded health care. She indicated Labor would contemplate that as a more general feature of the system. The next agreement is due in 2009-10.


This is a welcome recognition of the important, growing role of private hospitals, which are now fully competitive with their public counterparts. In 2004-05, almost 40 per cent of all patients were treated in private hospitals, up from 33 per cent in 1997-98, with Queensland private hospitals treating the highest proportion (almost half) and Victorian private hospitals more than 36 per cent.


While beds in public hospitals fell, those in private hospitals increased by 12 per cent.


This is remarkable, given that private hospital patients have to pay their own treatment costs as well as contributing, through their taxes, to those of public hospital patients. Individuals are responding to the higher quality treatment and reduced waiting time offered by private hospitals. 


The Australian Council on Healthcare Standards reported in 2005 that private hospitals generally performed better than public hospitals in all mandatory criteria.


Private hospitals now perform almost all surgical procedures and treatments and have compliance and risk assessment units that apply comprehensive performance monitoring measures and standards designed to minimize the risk of the "Dr Death" type situation that emerged in Queensland public hospitals.


Moreover, average public cost weight data compiled by the Australian Institute for Health and Welfare show costs about 10 per cent lower in private hospitals.


All this has significant potential implications for the future role of public hospitals and, hence, the need for public health funding. The opportunity exists for private hospitals to absorb most, if not all, of the expected future growth in hospital separations.


The adjustment of government policies to this end would increase the significant savings to government budgets - and hence to the taxpayer that already exist from the treatment of patients in private hospitals.


These probably now amount to over $9 billion a year.


The quality of treatment would also be improved and public hospital waiting lists reduced.


What changes in government policies might be considered?


While the increased 30 per cent rebate on private health insurance premiums cost taxpayers over $2.5 billion in 2004-05, this has raised the insurance participation rate and contributed to higher usage of private hospitals. Another extension of the rebate would undoubtedly further lift usage rates and effect savings in public hospital costs.


An indication by federal and state governments that they expect private hospitals to continue to play an increasing role would be consistent with the Council of Australian Governments agreement to press ahead with health reforms.


A preparedness to make low interest loans available to assist the capital funding of the prospective further expansion in demand for private hospital services.


To reduce separations in public hospitals and waiting lists of those on low incomes, access to public hospitals of private patients could be reduced. Insured patients could be put on a "special" waiting list that would normally involve a 12-month wait for treatment, except in circumstances where it would not be practicable to obtain private hospital treatment.


The establishment of a policy sympathetic and encouraging to the role of private health groups would be a major step forward in public health policy.