PHIAC | Circulars and Publications

		Search

Publications

Topics in this section

PHIAC Charters

PHIAC Corporate Plan

Industry Risk Management

Private Patients' Hospital Charter

Insure? Not Sure? (pdf format)

PHIAC Annual Report

Operations Of The Private Health Insurers Annual Report

Financial and Statistical tables of past Operations Annual Reports

Industry Statistics

Presentations

Discussion Papers

Publications

Operations Of The Private Health Insurers Annual Report 2006-07

Part B

Operations Review

Detailed Benefits Review (Continued)

Medical benefits

Medical benefits are paid by insurers for medical services provided in hospital. Specifically, medical benefits cover the difference between the Medicare rebate (75% of the schedule fee), and the schedule fee, plus benefits paid above the schedule fee (gap cover) where the fund has an agreement with the provider or the fund’s rules permit.

In 2006–07, medical benefits for services where the charge was no more than the schedule fee increased 6.1%, reaching $69 million. The number of medical services where the charge was no more than the schedule fee increased 0.4% to 4 million. Medical benefits where the charge was greater than the schedule fee increased 9.6%, reaching $977 million, and the number of medical services where the charge was greater than the schedule fee increased 5.2% to 16 million. Medical benefits paid above the schedule fee have become an important component of total medical benefits and are shown in table 23.

Top of Page

From 1 July 1995, insurers were permitted to pay medical benefits above the schedule fee where purchaser-provider agreements existed. In August 2000, gap cover schemes (6) were introduced to cover the gap for medical services. It should be noted that PHIAC collects data on individual medical services, and cannot show data on services that make up an episode of care. It is possible that in an episode at least one or more of the individual medical services in that episode will incur out of pocket costs. The changes in the private health insurance legislation from 1 April 2007 allowed insurers greater flexibility in regard to paying benefits above the schedule fee. These initiatives were introduced to address the problem of unexpected out-of-pocket costs for the privately insured. While increased coverage of medical charges has made health insurance more attractive to purchasers, it has a direct financial impact on insurers and adds to pressure on contribution rates.

(6) Gap cover schemes, unlike purchaser-provider agreements, do not require a contract between a fund and a doctor, which makes them more attractive to many medical practitioners.

Figure 13. Medical benefits above schedule fee

In response to changes in legislation that require organisations to offer no- or known-gap products, PHIAC implemented a more detailed collection of medical benefits statistics from 2001. This allows better reporting of medical services with a no- or known-gap. Gap is defined as the out-of-pocket expenses of the patient after Medicare benefits and fund benefits have been paid.

Top of Page

The proportion of services with no-gap costs in 2006–07 was 82.7%, compared with 82.6% in 2005–06 and 81.1% in 2004–05. The proportion of services with a known-gap decreased from 5.4% in 2005–06 to 5.3% in 2006–07. This proportion had been steadily increasing from June 2001 but appears to have stabilised over the past three years.

The average payment made by patients across all services during the year (including services where there was no gap) increased $1.87 to $21.96. Average payment by patients where a gap was paid increased $11.85 to $127.12.

The increase in no-gap services, combined with known-gap services, has significantly reduced the unexpected out-of-pocket costs for the privately insured. The increase in the average payment by patients where a gap was paid may be due to the reluctance of medical practitioners to agree to no-gap schemes when they have high charges. Consequently there are fewer medical practitioners whose patients incur out-of-pocket costs, but these out-of-pocket costs tend to be high.

Top of Page

Listed prostheses benefits

Under hospital treatment cover listed prostheses benefits are paid for surgically implanted prostheses. The Minister for Health and Ageing determines which items are listed in the prostheses schedule. There has been substantial growth in benefits paid for listed prostheses since 2000–01. PHIAC began to collect data on groups of listed prostheses for which benefits were paid during 2005–06 but is unable to comment on any change in the benefit paid for specific listed prostheses as this level of detail is unavailable for previous years. PHIAC data shows that during 2006–07, the number of prosthetic items for which benefits were paid increased 6.0% and benefits paid for listed prostheses increased 10.8% from the previous year. Total benefits paid for prosthetics during 2006–07 was $928 million.

Figure 14. Listed prostheses benefits

Top of Page

General treatment (excluding hospital-substitute and chronic disease management programs)

The general treatment benefits that cover treatments such as dental and optical services, therapies and other non-accommodation services were called ancillary benefits in previous annual reports. This section discusses only those general treatment benefits.

Total general treatment benefits for 2006–07 were $2,393 million. The six major general treatment categories in terms of benefits paid were:

dental ($1,234 million)
optical ($390 million)
physiotherapy ($185 million)
chiropractic ($172 million)
pharmacy ($67 million)
podiatry ($65 million).

These are shown in figure 15 with remaining categories aggregated in ‘other’. A further breakdown of general treatment benefit statistics is shown in table 26 (page 68).

Total general treatment benefits grew 7.3% during the year. General treatment benefits per SEU increased 2.2% in 2006–07, whereas hospital treatment benefits per SEU increased 6.3%.