One of the major policy changes on the agenda of the Federal Government is the introduction of private health insurance (PHI) into primary health care.  This has been flagged by Peter Dutton in a number of speeches and media interviews and was also recommended by the Competition Policy Review.  While the exact role the Government has mind for PHI in primary health care is not clear, both BUPA and Medibank have already started to expand their activities in this sector. 

This policy direction has generated a robust debate with supporters of the Competition Policy Review position arguing that many of the intractable problems within primary health care (such as how to improve chronic disease management) could benefit from greater competition and innovation and others expressing concern about the impact of private funders on equity and access to care.

Speculation at the Victorian Healthcare Association National Conference last week as about the difficulties the Government is having resolving the boundaries of the new Primary Care Networks (PCNs). Some delegates believed that agreement around the boundaries has been delayed in order to allow the private health insurance sector to provide input, with the expectation that some private health funds would tender for the contract to run one or more PCNs.  Others believed that the Catholic Health sector was the one to watch, as many providers already have experience running hospitals and aged care and would be better placed than health insurance funds to move into primary health care.  Regardless of when the boundaries for PCNs are finalised, it is clear that some major changes to primary health care are being contemplated.   How they eventuate will play a significant role in shaping our health system for the future. 

To this end, Croakey asked a range of experts their views on the possible introduction of private health insurance into primary care, including Professor Mark Harris, UNSW Scientia Professor and Executive Director Centre for Primary Health Care and Equity, Delia Scales, founder, WikiHospitals, Dr Tim Senior, GP,  Alison Verhoeven, CEO of AHHA,  Dr Andrew Pesce, Professor Stephen Leeder, Emeritus, University of Sydney, Editor in Chief, The Medical Journal of Australia,  Dr Peter Arnold, retired GP, Dr Christine Walker EO of Chronic Illness Alliance and Dr Peter Tait, GP.

The following is a compilation of their responses to a series of questions about this policy direction posed by Croakey.  They raise a number of interesting issues, such as how the involvement of private health funds may impact on chronic disease management, equity and efficiency in primary health care. 

Q.What are the potential benefits and risks of this move? How would you like to see it evaluated?

Mark Harris

Private health insurers have a legitimate obligation to be involved in measures to improve the health of their members.  This may include measures to improve the pathway for care and the quality of care – for example through education, guidelines, ec to support for GPs in making referral decisions and for patients to be involved in this decision making.

However they should not be involved in prioritising when and how patients are able to access general practice.  Priority access to general practice should be on the basis of need not ability to pay or membership of a health fund. Giving priority access on the basis of health fund membership risks undermining a core function of primary medical care in Australia – accessibility – without some of the safety nets available in other countries such federally funded Community Health Centres in the US.

Delia Scales


Australian patients need a dramatic improvement in the quality and coordination of their care. Currently 40% of people coming to ED are in the last year of their life. 47% of Australian hospital beds are filled by people over 65. According to Dr Hillmans “dying people end up on a “conveyor belt” in hospitals even when doctors have “nothing more to offer them”. The large numbers of patients coming to ED are not always seeking ‘free’ health care, neither should they be blamed for ‘taking up’ health resources. Some patients coming to ED have social issues like drug, alcohol, homelessness and mental illness. They often know that ED is the only place to get support, a warm bed and hot food.

Hospitals offer 24 hour doctors, nurses, pathology tests, food and shelter. By comparison, our community health care is poorly funded, poorly coordinated and poorly managed. Permanent accommodation for people with psych and/or drug problems are impossible to obtain.  Allowing private health funds to get better GP care may improve integrated community care services.

Good IT products currently used in the UK include: Safe Patient Systems, Optimal Medicine, and Buddyapp.


Offering ‘same day’ visits for GP’s is very unlikely to improve long term clinical outcomes for patients. The unglamorous reality of good quality long term care is patient education, monitoring treatment compliance, following up appointment attendance and integrating clinical information into an overall picture. There’s no point in seeing a GP the same day if you are homeless. Or if you do not have an end of life documentation in a nursing home. Or if you didn’t take your medications for the last month and your condition has deteriorated.

Patients that attract high fees such as Veteran Affairs already access acute clinical services for a range of minor conditions. Both public and private hospitals simply want the money they bring in. Over servicing is a huge financial and resource burden on the health system. Access to doctors should also be based on medical need only, not on fee paying patients’ ability to make demands.

Evaluation: There is currently no coordination of payments and quality between State, Federal, public, private, and community services. The funding of ‘fee for service’ encourages medical over servicing and lack of long term follow up care. 

Tim Senior

Private health insurance companies seem well aware of the fact that access to high quality primary health care will improve people’s health, and keep people out of expensive hospital care. It’s no surprise that they’d want this for their members. For those with private health insurance cover, it’s likely that they will have a marginal benefit. A large number of this group will already be able to advocate for themselves in a complex system, have access to primary care in ways that already suit them, and are likely to be healthier purely because they are better off. I expect an evaluation would show that people in the program benefited (because it could hardly show otherwise) though it will be difficult to show that they benefited more than they would have without the program.

The risk, of course, is for those who aren’t members of the health funds with these program, and they are likely to be pushed down the queue for an appointment, have reduced access to primary care and have worse health as a result. I’d encourage any evaluation to see what happened to those who weren’t members of the health fund.

Alison Verhoeven

While we are supportive of the development of innovative strategies to achieve better patient outcomes, government policies must take into account the needs of all Australians, not only those who can afford private health insurance. The Australian Healthcare and Hospitals Association is supportive of the trials currently underway in Victoria and Western Australia which are aimed at the delivery of timely, cost-effective care to both privately insured and non-insured patients. However, it does not support programs where those belonging to one private health insurance fund are given priority access rights to GP services over patients whose needs may be greater but who can’t afford private health cover, or have purchased insurance from another provider.

Andrew Pesce

The failure of private insurers to play significant role in primary care reinforces the fragmentation of our health care systems into the functional elements we see:

1.      Primary care, essentially MBS funded with increasing patient co-payments, with Allied health and Dental care almost completely privately funded

2.      Specialist Care, MBS and co-payment funded in community settings for those who can afford it , State funded and rationed in Public Hospitals for those who can’t

3.      Elective Surgery in Private hospitals, majority funded by Private Health Insurers but increasing patient copayments as well with some MBS funding for specialist procedural fees

4.      Acute Care in public hospitals, managed by States and Territories.

5.      Other health domains (aged care, mental health, indigenous health)

Having these functional components fundamentally separated by different funding and governance systems perpetuates the inability to co-ordinate care based on the patient’s needs. And fundamentally aligns patient care to the design and funding features of each component of the system. So the benefits of PHIs entering primary care that MAY follow

1.      Potentially can incentivise care for conditions in primary care and other community settings to avoid more deterioration to the point where hospitalisation is required. Possibly help co-ordinate care between primary care and private specialist acute care

2.      Increase the pool of  funding for primary care, and change the mix from Fee for Service (which PHIs can’t do in general practice) to block funding payments

3.      Potential for better collection of data on clinical outcomes in primary care

But the risks are:

1.      Conflict of Interest. When all is said and done, Health funds’ business cases are  focused  on their own members. How will a PHI support care for patients who are uninsured, or insured with other PHIs when presenting to a GP for primary care? Especially if they win a tender for one or several PHNs. It’s hard to see how PHIs will promote equity of access for uninsured patients: after all their raison d’être is to provide extra care for their customers above what can be provided via MBS and public hospitals.

2.      Increasing total health care expenditure if funding is duplicated rather than shifted from less efficient to more efficient care settings. Remember managed care in the US did not decease health expenditure there.

3.      PHIs Shifting financial risk from PHI funded domains (wherever the dust settles) to Commonwealth and State & Territory govt funded services

So my view is that PHI involvement would be potentially beneficial for the health system where it is structured to promote integration of care and not further fragment it. The role with PHNs is potentially valuable: especially if PHIs fund planning of co-ordination of care between primary care providers and other sectors in the relevant PHN. Whether they will see this as in their own interests we have to wait and see. They should not be allowed to make fee for service type payments in General practice, and funding provided in this sector should be on the basis of contracted block payments. Perhaps the PHIs can be more proactive to promote uptake by consumers and Doctors of PCEHR. If all PHI members had PHEHRs as an add on to their membership, we would begin a more significant uptake of use by doctors and hospitals.

Stephen Leeder

If PHI companies are genuinely interested in achieving better care for patients with chronic illnesses they are welcome to join the national debate about how to do this.  There are many examples from overseas where PHI have taken a leading role in developing integrated care for their enrolled – Kaiser Permanente is a leading example.  However the applicability to Australia with multiple payers for health care is limited.  But we don’t have the answers in Aus about how best to manage patients with multiple chronic problems so more experimentation and discussion is warranted.

Peter Arnold

This is sheer madness, which will add ridiculously to health costs overall.

What is the point of any price – for anything? It is a disincentive! Remove the price barrier and then you get ‘the moral jeopardy of insurance’. People buy excessively because the cost is nothing or close to nothing.

And don’t let anyone say that people don’t go to the GP unless they need to. For so many pensioners, it has always been a social outing. Private insurance will mean all the inefficiencies and disadvantages of universal bulk-billing.

Furthermore, it will raise the cost of private health insurance quite unnecessarily, perhaps, unless it is an optional extra, even making some people give up private health insurance.

Christine Walker

The main problem I foresee is that the further erosion of Medicare means the restoration of GP as small individualised businesses not acting in concert with population/public health issues. Not that there was much of that at all anyway.

It may lead to further concentration of GP in better off suburbs and fewer in rural and regional areas.

It will lead to higher prices and GPs behaving more like specialists. This is already happening with GPs advertising themselves as specialising in sports medicine, or ageing, diabetes care etc.

It may of course lead to the growth of more community health services to fill their places which would be great but needs another Whitlam.

Oh and another thing. I believe health insurers limit types of treatments they will pay for. I don’t know enough about this but it would be worthwhile finding out what impact this will have on consumers.

I also wonder if health insurers have done any modelling on the costs to them of paying for people with multimorbidities. I love to know.

Peter Tait

I can’t really see any health system or general benefits although those who will be able to more ably jump the queue will of course find life easier and less stressful.

The equity aspect is huge; this will further advance the cause for a two tier – even three tier (the really rich who can just buy whatever services they want, those with private health insurance who get preferential treatment at jumping queues for procedures, and those who will wait and be reminded strongly what the Latin derivation of the work patient means) health system. It will increase costs for every one eventually.

It will exacerbate further the split of general practice into those (usually corporate mega practices) who currently will cherry pick the easy, quick and straightforward people and leave the more complex people for small business GPs and the Aboriginal Health sector. In this model these mega practices may be happy to manage the slightly more complex who are happy to pay, but I wonder what will happen to the bulk billing arm of those practices. Some non-corporate practices might take up the offer as well and those that do will find they are pressured into have First and Second class patients and this will mean yet again that the less well off / disadvantaged will miss out on care (or it will be delayed).

Evaluation: will need it to be implemented. I guess Queensland deserves to be the guinea pig for this if they let it in, so the insurers should be required to pay a percentage of their take into a fund so the effects of practices and even communities can be independently evaluated. But really we should be able to work out from first principles that this is a corrosive idea and not run the trial.

Q. What are the equity implications for people who don’t have private health insurance?

Mark Harris

The risk is that those without such fund membership will have reduced or delayed access.  Given that many health problems are inversely related to socioeconomic status in Australia this could create “inverse care”.  Already in many low income areas, GPs have seen a drop off in demand for GP care with the introduction of the GP co-payment.  If health funds start paying for this gap then the only people with a cost disincentive to see the GP will be those on low incomes without health insurance (again inverse care).  If health funds are linked with corporate chains of general practice centres, this may undermine the perceived independence of primary care decision making about referral.

Delia Scales

Ironically, many public patients get better, more coordinated health care in large public hospitals. This is because the model of public health care is team based, with a large emphasis on nursing and allied health services. Public hospitals have large budgets can afford to invest in information technology and maintain large nursing staff. By comparison, many private patients receive sub-standard specialist medical care, with no nursing and allied health input. Some private patients then end up distressed and broke, in the public system.

However all patients should be able to see a community clinic, 24/7 and get integrated health care services. Blocking access to this will simply increase the burden on public hospitals.

Tim Senior 

It’s notable that the phrase “…for our members” keeps cropping up. The product a health insurance company is selling is faster access. Unless people with health insurance are prepared to say “but don’t put me in ahead of your non-members” those without will be shifted down the queue. We already see the effects of this on access to secondary care – for example the waiting lists for cataract surgery.

I don’t see how any moves like this will help improve the health of Aboriginal and Torres Strait Islander peoples. The rates of private health insurance in Aboriginal communities are very low, and as long as funds are saying “…for our members” then the gap will widen. This is particularly the case if government is viewing Medicare as a safety net, rather than as universal health care, where they will provide as little funding as possible under the guise of encouraging people to “take responsibility” by buying health insurance.

Similarly, I don’t see that the market in small regional towns and remote areas is big enough for health insurers to feel they can profit by operating there. Areas with high levels of poverty, similarly, will not be profitable for health insurance companies.   The result of this will be a two tier health service at an individual level, but also at a community and regional level.

Alison Verhoeven

Agreements between private health insurers and GP services which give exclusive or preferential access arrangements to members of particular funds give rise to a healthcare system with an even larger gap between the ‘haves’ and the ‘have-nots’ than already exists, and where those who do not have the means to afford private health insurance are increasingly likely to experience poorer health outcomes. It directly contradicts the notion of universal access to quality healthcare which underpins Australia’s health system.

Stephen Leeder

Unresolved.  I assume the PHIs are expecting Medicare to pay for public patients.  If what the PHIs are offering has (as yet unproven) benefit, then there is an equity problem.

Peter Arnold

They will have to queue up amongst the over-utilisers. Some (? many) GP will give preference to the insured, just as the specialists do now. I can even foresee different ‘sessions’, analogous with specialists’ public and private work.

Q. What might be some of the consequences for general practice?

Mark Harris

Private insurance rates are around 60-70% in high income areas and around 40% in low income areas.   GPs working in low income areas will have less access to support from private health insurance funds and thus have to have lower incomes and/or spend less time with patients (there is already evidence that this occurs).  GP reception staff will be making decision about triage priority and insurance status in scheduling appointments.

Delia Scales

There is no funding for GP clinics to employ clinic nurses, allied health staff or to set up info structure such as information technology. GP’s are small businesses being asked to care for an increasingly complex and aged population. Their only funding is via ‘fee for service’ that is orientated towards a large number of brief appointments. If they see a patient for longer, they do not receive an equal amount of pay. Running any business in Australia is fraught with red tape and excessive costs. GP’s are at risk of simply selling up to private companies who will buy entire practices. Companies can then increase prices charged to private insurers, and increase over servicing to make money, all of which has already happened in America.  See medical practice software for more information on this.

Tim Senior

The Medicare rebates that fund almost all practice costs have remained stagnant for several years now. (And note that the co-payment proposal cuts this small rebate by $5). It is difficult to provide high quality primary care on a bulk billing model. Feeling this pressure, many practices will reluctantly take up the money offered by private health insurers where it is available, I suspect, to be able to keep up with increasing practice costs, including paying receptionists, practice managers and practice nurses.

For those practices that do take this up, it is likely that over time there will be more insurers involved, meaning that dealing with the systems and particular requirements of each insurer will add to red tape (which can currently happen with Work Cover insurers). The alternative is to deal with only a few insurers, which could limit patient choice about seeing the doctor/practice of their choice.

For those practices that don’t participate – either because they choose not to, or because they work in an area where health insurance coverage is very low, they will continue billing as they do. As the Medicare rebate falls, more and more practices will consider moving to private billing.

The proposal sounds like it might be influence by managed care, which sounds reasonable (though my understanding is that the Kaiser Permanante model is mainly provided to those in work). There’s a tension to be negotiated here between slavishly applying guidelines to individual patients and being responsive to individual patient needs at that time. Care can look like it is below quality when it doesn’t fit the guidelines, but there are many patients out there who have had excellent care, because they were able to make the right decision for them at that time, based on their circumstances, that happened not to coincide with the suggestions of the guidelines. This can be especially important when there are multiple chronic medical conditions.

Stephen Leeder

They could be positive (possibly) if PHI involvement makes life more profitable or pleasant as they manage patients with chronic ailments or (in the Brisbane ‘trial) not.  Essentially Brisbane is about expansion of PHI despite the current law prohibiting additional fee for service or gap cover from PHI.  Alternatively GPs may find the relationship with tight guidelines and accountabilities constricting as many have the corporatised practices. 

Peter Arnold

Overloading of practices with unnecessary demand. GPs will make more money, work fewer hours than they do now because they will no longer be in the least ‘hungry’. For this same reason, after-hours service has already vanished, despite the unenforced requirements of ‘vocational registration’. GPs will compete with service even less than they do now.

Q. Any other comments you’d like to make.

Mark Harris

It is unclear what problem this proposal is seeking to solve (apart from the need to promote more private health insurance).

Delia Scales

Private hospitals are the laughing stock of the business world. There are no up front quotes on prices for potential customers. There is no public debate allowed about quality of services offered. No rating system of doctors, hospitals or nursing homes is allowed public view. Doctors with serious impediments and hospitals with low standards are allowed to continue to practice unimpeded. There is simply no other private industry that could get away with this kind of behaviour. As a consequence, many private hospital standards are low and their costs are unnecessarily high. A extensive report into this problem was commissioned by Private Healthcare Australia. Governments and private health insurance companies know this. They just don’t want to stand up to medical unions and private companies that profit so much from them.

Private health care is like the car industry, spoon fed, badly performing and run by ‘unions’ i.e. the AMA. Long term, it won’t survive. Kill it now, and allow another model of care to emerge.

There is a whole range of wonderful IT products and community health options coming on to the market, such as intensive care at home, and other health IT resources.

Tim Senior

The proposal vaguely set out about private health insurers taking on the role of Primary Health Networks, the organisations arising from Medicare Locals, is curious. I am not clear about what is being proposed here. It may be the (rather unimaginative) two tier system where those with private health insurance have their care managed and those without get access to a safety-net baseline level Medicare. This would be a disaster for health outcomes. But what if the proposal is for private health insurers to manage everyone in an area (or everyone with a chronic disease)? Could government essentially purchase their services on behalf of the population? And build in an equity component – that they actually have to manage everyone and not cherry pick the easy cases, pay them on outcomes, and allow very little exception reporting! I doubt that health insurers would like this model. It would mean they had little extra to offer paying customers, and they’d have to cover some very expensive care – perhaps including obstetrics for everyone. They would also find themselves becoming involved in welfare, housing and legal advocacy. We may even see them advocating on the social determinants of health in the future, as they recognise this would be the only way to reduce their health expenditure and generate a profit (if they weren’t allowed to cherry pick). I doubt very much that this is what the government has in mind, given their current understanding of the effects of inequality.

Alison Verhoeven

All providers in the Australian health system have a role to play in supporting integrated care for patients.  Medicare Locals and their successor Primary Health Networks will have an especially important role to play in ensuring primary care is well-integrated into the broader health system, and that care is focused on the needs of the chronically ill, and other people with complex care needs. The Australian Healthcare and Hospitals Association values the interest of private health insurers in getting this right for their policy holders, though the challenge rests with the Health Minister to get this right for all Australians, not just those with the means to pay. Better solutions are needed to help those with chronic illness access affordable and well-integrated care, and a narrow focus on solutions led by private health insurers will not assist the millions of Australians who don’t have private health insurance. A productive, healthy country needs health policy for all, not just the privileged

Peter Arnold

It is time that Australia got off the universal ‘fee-for-service’ band-wagon. It is ridiculously illogical and unaffordable for the country. Some socio-economic/geographic areas need a salaried GP service, others could do well with a capitation scheme, leaving others with a fee-for-service scheme where the fee is a disincentive, as it is for any other service or commodity.

Medicare has never been affordable for the country as a whole. Nor is Medicare-type insurance without co-payments affordable for any country!

Unfortunately, none of our politicians has the courage to pull the plug. They are simply leaving the problem for the next generation.



Disclaimer: Andrew Pesce has been a member of the BUPA Medical Advisory Panel since 2011







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