Where Is The Money For Gap Cover Coming From? – 13 October 1999

Private health funds should tell the public where the money to pay for doctors’ medical gaps is going to come from, Dr Bruce Shepherd, Chairman of the Australian Doctors’ Fund, said in Sydney today.

“Health fund operators are acting like Father Christmas making a Spring visit, by promising to fund patients’ out of pocket medical expenses without pushing up premiums,” said Dr Shepherd.

“Well if the ‘gap’ money is not coming from premium rises then its got to come from your health care – shorter lengths of stay, restrictions on treatments and drugs.”

By offering doctors a higher fee the funds have finally put paid to the myth that doctors charge patients a gap simply to line their own pockets. Doctors fees are higher than the Medicare rebate – the amount that is reimbursed by the Government – because the Medicare rebate has failed to keep step with medical inflation and in some cases has not increased at all for years.

Medibank Private has already estimated their GapCover scheme will cost $35 million.

“Many funds are barely breaking even – where are they going to find that sort of money from?”asked Dr Shepherd.

Three years ago a major inquiry into private health insurance was launched because health funds were going broke and raising premiums by 25 per cent or more. The reason? Health funds costs were going through the roof and one of the drivers was more people taking advantage of no gap policies for hospital accommodation costs. Now funds are increasing their costs and inevitably encouraging more patients to make claims because they are taking away the price signal.

Hospitals themselves, sick of being squeezed by the health funds on price to the extent where they themselves are on the verge of collapse, are thinking of pulling out of contracts and charging patients a hospital gap.

“One fee health cover makes great headlines,” said Dr Shepherd. “But you, the patient, will pay one way or another.”

“Either your premiums will go up eventually, or you will offer to pay an excess, another word for a gap, or the quality of the product, will be downgraded – lower lengths of stays, fewer drugs, draconian eligibility rules. This makes much less pleasant reading.”

“Stories of women being forced home the day after giving birth or old ladies being pushed back to the public hospital system to continue cancer treatment or psychiatric patients being denied cost effective hospital care, commonplace in the American managed care system, don’t go down very well with the breakfast tea and toast,” said Dr Shepherd.