Out of pocket and in trouble

Posted by Damien Jones on 5 September 2013

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The following article from The Age website is a very good example of why Trauma insurance is an essential part of any personal risk protection strategy.  It highlights the reality faced by many Trauma sufferers when going through the process of treatment and recovery.  The two main financial issues highlighted in this article are:

1) how does someone pay for expensive medical treatments; &
2) how do you secure the family home in the process (i.e. take care of debt)?

Talk to your adviser to find out more and please read on for the full story...

Many Australians are struggling to pay rising out-of-pocket costs in an increasingly two-tiered health system that favours the rich and disadvantages the poor.

Before she was diagnosed with cancer two years ago, Helen Williamson thought Australians had good access to affordable healthcare. If you were sick, she thought you would get the treatment you needed irrespective of how much you could pay. But after being told she had an aggressive tumour in her breast in 2011, Williamson quickly realised it was not as simple as that.

A visitor was saying to me yesterday that the Australian hospital system looks much more like the American system than we would ever be prepared to admit. 

The first problem she faced was a recommendation from her GP that she see a private surgeon for a mastectomy, even though she did not have private health insurance.

Williamson, 53, says her GP recommended the surgeon because he was a specialist in a long- standing skin condition she has had and he did not know of any other surgeons with that expertise working in the public system.

The GP said the private surgeon would also operate on her within a couple of weeks rather than a couple of months if she went to a public hospital. While this would end up costing her $20,000, she did not hesitate and borrowed the money from her family.

''I just thought, 'let's get on with it, let's get this cancer out'. I didn't want to take the risk of having to wait for surgery in a public hospital because the longer you wait, the more your cancer can grow.''

But the $20,000 loan from her parents was just the beginning of a financial crisis that resulted in Williamson and her husband having to sell their Melbourne home.

Despite deciding to continue her treatment in the public hospital system, which is meant to be free under Medicare, Williamson says the out-of-pocket costs she paid - after government subsidies were taken into account for various services, drugs and aids - snowballed.

There was $400 for a breast prosthesis, about $2500 in gap payments for chemotherapy and other drugs and more than $3000 for biopsies, X-rays, ultrasounds and other tests such as MRI, PET (a common cancer scan) and bone density scans, some of which receive no government funding.

Other smaller items added up, too. There was a wig for $400 to cover her balding head, special $90 bras to accommodate her prosthesis and over-the-counter skin and nail creams recommended to combat the uncomfortable effects of chemotherapy.

In a cruel twist, after her cancer treatment Williamson also developed two serious and painful skin conditions that resulted in three more hospital stays. This made returning to her job as an administrative assistant impossible, so she resigned and remains unemployed.

''Financially, it has just ruined us,'' she says. "We lost our house because we couldn't keep up the repayments."

Williamson says although she received excellent care in both private and public hospitals, she was dismayed by some of the unexpected costs she faced and still wonders how others with less money than her get by.

She is not alone. Consumer health groups and policy experts say many Australians are struggling to pay rising out-of-pocket costs in an increasingly two-tiered health system that favours the rich and disadvantages the poor.

Earlier this month, a coalition of health groups including the Consumers Health Forum, Catholic Health Australia and the Nursing and Midwifery Federation, said the Medicare system was out of date and needed to be fixed to cope with the ageing population and growing prevalence of chronic disease.

The ''Mend Medicare Coalition'' said there was increasing evidence that Australia's universal health scheme and its associated ''safety nets'' to help the worst off were breaking down, causing Australians to pay some of the highest out-of-pocket costs within comparable Organisation for Economic Co-operation and Development (OECD) countries.

The figures bear this out. According to the Australian Institute of Health and Welfare, the average annual out-of-pocket expenditure on healthcare has almost doubled from about $583 in 2000 to $1075 in 2010 - $94 above the weighted OECD average of $981.

In 2010-11, nearly 40 per cent of this was for medications, 19 per cent for dental services, 12 per cent for medical services such as GP visits and 10 per cent for health aids and appliances such as wheelchairs.

Another 7 per cent was spent on services by other health practitioners, such as physiotherapists or podiatrists, and public and private hospital fees accounted for 5 per cent each.

While 82 per cent of GP services are now bulk-billed across the country, Medicare data shows the average out-of-pocket cost for those who don't get bulk-billed has increased from $30 in 2007 to $46.50 in 2012.

Private health insurance does not save people much either. Nearly 50 per cent of Australians have insurance, but a mid-level family policy costs about $3000 a year and the average out-of-pocket cost for a private hospital stay is $1170.

So what does the government cover and why are people paying such steep out-of-pocket costs?

Under Medicare, all Australians are meant to receive free care in a public hospital and the Medicare Benefits Schedule (MBS) provides subsidies for consultations with GPs, specialists and some allied health professionals outside of hospitals, as well as some tests and procedures.

But as Williamson discovered, free public hospital care can have limitations and for some, it comes with an intolerable waiting list. Also, some diagnostic tests are not covered by the MBS , such as $555-$1600 MRI scans for women with breast cancer, even though their doctors order them.

If you choose to see a private specialist like Williamson did, the market economy dictates that the specialist can charge whatever they like above and beyond what Medicare and private health insurers pay them, leaving patients to pick up the gap or ''co-payment'' the specialists devise.

For people who are often sick or have more complex needs, there are ''safety nets'': if you spend up to a certain amount on health services in a year (around $610 for low income earners and $1221 for all others), the Extended Medicare Safety Net will reimburse you for 80 per cent of your costs thereafter. With medicines, the Pharmaceutical Benefits Scheme is designed to subsidise the most needed drugs; however, some are not covered and others that are covered may still require a co-payment.

For concession-card holders, the maximum co-payment per script is $5.90, but this rises to $36.10 for everyone else, which is why Williamson paid thousands of dollars for her chemotherapy and other drugs.

For PBS medicines, the safety net kicks in at $354 for concession-card holders and $1390 for everyone else. After that point, concession-card holders receive free scripts while everyone else pays a maximum of $5.90 per script.

While these costs may be tolerable for healthy people who use the system infrequently, they quickly add up for those who get sick, particularly those on low incomes who face multiple chronic diseases.

There is also data showing that those who live in wealthy areas are accessing more government subsidies than those in poorer areas when it comes to the Extended Medicare Safety Net, which is meant to help people with the largest bills.

For example, an analysis by the Mend Medicare Coalition found that people who lived in wealthy electorates, such as Wentworth in the eastern suburbs of Sydney, were paid $11 million under the Medicare Safety Net last year compared to only $460,000 in Braddon - a less well-off electorate in north-west Tasmania. The most likely reason? Poorer people are not spending enough on their healthcare to even reach the threshold for the safety net to kick in.

Research suggests this could be leading to bad outcomes, too. A 2011 survey of 134 New South Wales GPs found 64 per cent of the doctors believed the health of some of their patients had deteriorated because they could not afford their prescription medicines. Similarly, a survey of 214 women last year by Breast Cancer Network of Australia found one in 10 had forgone an MRI because it was ''too expensive''.

The Mend Medicare Coalition, which also includes the Mental Health Council and the Public Health Association of Australia, has called for a parliamentary inquiry into out-of-pocket costs to highlight what is driving them and what should be done to bring them down. So far, the Greens have agreed to this, but neither Labor nor the Coalition has said an investigation is warranted.

But health-policy experts say the issue will be a major problem for whoever wins government and the measures required to address it are going to be politically uncomfortable.

In short, independent experts say there is a lot of waste in the system that needs to be cut to free up money. To achieve anything, a new government will have to reform traditional funding structures and take on commercial interests.

Dr Anne-Marie Boxall, director of the Deeble Institute for Health Policy Research, says although co-payments are sometimes a ''necessary evil'' designed to try to limit unnecessary use of the system, the Medicare Benefits Schedule has not been kept up to date to provide reasonable subsidies for the right services.

While new treatments are often coming on to the MBS, she says there is increasing evidence the government is wasting money on services that are either ineffective or for which there are cheaper alternatives.

''We need to get the things that are not effective off the list because that will save an enormous amount of money that can be spent somewhere else, including on lowering co-payments,'' Boxall says.

James Gillespie, deputy director of the Menzies Centre for Health Policy and associate professor in health policy at the University of Sydney, agrees. But he says another factor fuelling out-of-pocket costs is the fee-for-service model in Australia.

Under this model, practitioners are paid a set fee per patient for short consultations regardless of whether they are treated effectively or not. This is inefficient, he says, because it simply encourages fast throughput rather than desirable outcomes that will fix people's problems.

''In Britain, the incentive is to treat the patient so they don't keep coming back because they won't get more money if the patients keep showing up. Whereas the incentive in our system is to find something to please the patient in a short time and it doesn't matter if they keep showing up or not,'' he says.

While Australia's fee-for-service model still works reasonably well for healthy people who need sporadic, short consultations, he says it is no longer suitable for the increasing numbers of patients with chronic diseases such as diabetes who need ongoing care over many consultations.

While grant-style payments that reward effective care could change this, they have been strongly resisted by powerful lobby groups like the Australian Medical Association because of fears it will financially disadvantage doctors.

Gillespie says the growth of private services in recent decades has also contributed to rising out-of-pocket costs because under Australia's constitution, specialist doctors can charge whatever they like. With little competition in the sector, this has meant few specialists bulk-bill and many charge large co-payments on top of whatever they get under the MBS.

In some cases, specialists have also exploited government funding through the Medicare Safety Net by pushing up their fees to hit the threshold so they can bank some of the increased subsidies that are meant to make services more affordable.

This has occurred amid growing corporatisation of medical services, which has led some to speculate that business models ''over-service'' through the ordering of unnecessary tests, for example, to boost profits.

''A visitor was saying to me yesterday that the Australian hospital system looks much more like the American system than we would ever be prepared to admit,'' he says. ''We have better access to it … but 65 per cent of services are now delivered by the private sector.''

Boxall says while increased competition among medical specialists would create pressure for them to charge less, any move by a government to do this would cause conflict with various lobby groups.

''It's hard to get to that point where you have large numbers of dentists or particular specialists because people won't do the training if they don't think they will make reasonable incomes out of it,'' she says. ''At the moment, the medical colleges control how many specialists there are and they keep a pretty tight lid on the supply coming through.''

With less than two weeks to go before the election, neither major political party has announced any new policies that stem the rise in out-of-pocket costs for healthcare. Boxall says if nothing is done during the next term of government, more Australians can expect to be hit with larger bills.

''If we do nothing, our health system will continue to become less equitable,'' she says. ''The easiest tool governments have to control health expenditure is to push costs on to individuals but that will always disadvantage people on low incomes.''

While Helen Williamson is hopeful her health woes are coming to an end, she says people need more help with the costs they face while suffering traumatic illnesses.

''It seems to be a problem across the board,'' she says. ''Something needs to be done. We're talking about people's lives.''

Read more: http://www.theage.com.au/federal-politics/federal-election-2013/out-of-pocket-and-in-trouble-20130825-2sjob.html#ixzz2dyubAjA5

* The information is for general purposes only and has been prepared without taking account of your objectives, financial situation or needs. AFRM recommends that you seek professional advice before acting on any information contained within this website.