Insurer: Health bills out of control

BY ROB STOCK
Last updated 05:00 01/11/2009
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RISING HEALTHCARE costs have reached crisis point, pushing families to give up their health insurance and fall back onto the straining state system, says Ian McPherson, chief executive of Southern Cross Medical Care Society.

The not-for-profit insurer saw claims rise by $61 million in the year to June and McPherson said factors behind the claims blowout included the amount private surgeons earned and costly new medical technologies with little or no proven clinical benefit.

Health insurance premiums would have to rise again this year, McPherson said, though Southern Cross was trying to stem that by steering GPs to lower-cost surgeons and refusing to pay the full costs charged by some surgeons.

"How much will people be able to continue to pay and not object?" McPherson asked.

"We have seen a significant downgrading from policies that are far more general to policies covering the extreme emergencies. It is difficult for people to downgrade any more. There is a significant number sitting on the bottom rung and about to jump off into the public system again."

McPherson's complaints about high-cost surgeons are echoed by Act MP John Boscawen, who says a lack of competition is inflating surgery costs.

Boscawen is on a mission to cut the price of a cataract operation in half by allowing more foreign doctors in and removing what he sees as blocks to freer competition.

"It [competition] is not there because the Royal Australasian College of Ophthalmologists [RACO] regulates who will be admitted to their membership," Boscawen said.

The result, he said, was too few eye doctors, long state waiting lists of three to six months, and a climate in which sufferers were willing to pay high fees for private operations. He'd like to see eye surgeons from overseas come here to increase the competition.

Mike O'Rourke from RACO said Boscawen's claim was "outrageous".

"We have the cheapest cataract surgery among the OECD countries."

He said it was the Medical Council, not RACO, that registered specialist doctors, albeit after receiving recommendations from the organisations such as the college, and he warned that the high standards required of foreign doctors coming here were in place for a reason.

It's not the first time ophthalmologists have been criticised. In 2004, the Commerce Commission won a legal battle against the New Zealand Society of Ophthalmologists who were found by the high court to have used their power to exclude competition by blocking the registration of an Australian eye doctor hired to perform operations in Southland.

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Commission chairwoman Paula Rebstock called the society's actions "an abuse of trust and privilege" and it was "particularly repugnant that the defendants used the language of patient safety as a convenient excuse to disguise their own self-interest".

Rising costs for Southern Cross could also feed the already rapid rise in the state's healthcare bill. Consultant Paul Winton, author of a report in August – Health, New Zealand's untreated addiction – said current trends suggested healthcare costs could grow from 20% of core government spending to 40% in 15 years.

McPherson said Southern Cross had begun engaging with GPs on the premium-affordability crisis, and the subtext is clear – the insurer wants to see GPs direct patients away from the more expensive private surgeons.

"We are not going to tell GPs who to refer their patients to," McPherson said, but "we would like GPs to be mindful about the cost rather than referring out of habit. Giving them an incentive to help manage our budgets is something we are exploring with them now."

Southern Cross has been developing a network of affiliated providers, but McPherson said as yet it would be a step too far to require their use in the same way a car insurer would require a claimant to go to an approved panelbeater.

"Our market research says that the buyers of health insurance aren't quite ready for Southern Cross to direct volumes, and if we were going to, my preference would be that GPs would help us with that," McPherson said.

Big savings are available. The cost of a hip replacement can vary from $12,000 to $18,000.

McPherson said there were instances where it appeared that profit motive and not clinical outcomes were driving that price upwards.

He cited the example of robot-assisted prostatectomy surgery which costs $30,000 compared to the $15,000-$20,000 of conventional surgery, without evidence of faster recovery or better clinical outcomes.

Why were surgeons using it? "Because it is fun. Because it is interesting. Because you can get a margin on your investment."

Southern Cross's reaction in this case was to pay only a "contribution" to the cost of the robot-assisted surgery.

Terry Moore, president of the Private Surgical Hospitals Association, said: "We are conscious of the increases in costs which ultimately, if left unchecked will mean fewer people will be able to afford to go private themselves."

Moore said uncontestable clinical proof of new technologies could take years to emerge, but acknowledged they were stoking cost escalation along with wages and surgeons' fees.

McPherson also hit out at fees in his annual report to members last month. "We hear the argument that [surgeons] are part of a globalised workforce; we point out that if their prices increase to reflect overseas rates, fewer New Zealanders will be able to afford private surgical services."

Boscawen is of similar mind, arguing that the globalised workforce is more of a westernised workforce, because the wages earned by quality doctors from India, for example, where cataract surgery is cheap, are having no effect on the fees charged by private surgeons here.

Moore countered: "Surgeons are generally independent practitioners and contractors so they pretty much set their own fees in a competitive market, but I don't think the fees have gone up much more than the medical inflation rate. They have become more efficient so they are probably earning more, but probably working harder for it and doing more procedures."

He said rising premium costs for health insurers were also driven by the sheer number of procedures being done, not just the cost of each one.

Moore said private hospitals would benefit from more competition on surgeon fees but cost savings had to be balanced by ensuring that immigrant doctors were high-quality.

Already nearly 40% of New Zealand-registered doctors were trained overseas, Medical Council statistics show.

- © Fairfax NZ News

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