Focus on primary healthcare: Medibank chief George Savvides

By David Donaldson

March 20, 2015

Australia’s health system has too many bad incentives leading to higher costs and poorer health outcomes, Medibank Private managing director George Savvides said on Thursday.

One of the worst examples of poor coordination of services, he told a CEDA audience, is the number of patients with chronic illness presenting for acute care with preventable conditions, which is a significant driver of health costs. Avoidable costs will continue to mount as the population ages, and chronic conditions become more widespread, unless the government does more to improve primary care systems, Savvides stated.

The complexity of the funding and coordination of primary care meant many of the heaviest users of the healthcare system defaulted to using far more expensive hospital services, often in poorer health, than would have been the case if adequate primary care had been provided, he argued. Two-thirds of payments for potentially preventable hospitalisations made by Medibank in 2013 were driven by chronic disease.

Savvides added that 3% of Medibank’s customers were responsible for around one-third of all claims, highlighting the potential for savings to be found in better coordinating primary care for those with high needs.

Complex funding arrangements only make it more difficult to deliver services in the best way possible for the patient. Addressing the complex funding of the health system — shared between public and private, state and federal, hospital and primary health systems — Savvides said “there are so many holes in this bucket. And I can say that the leaks are larger, much larger, than the year-on-year compounding growth of the health budget.”

Improving patient understanding of the health system would have benefits, too. There is insufficient information available for patients and health practitioners on finding “best pathways” to treatment, he said, adding that evidence showed many were expensive but had poor health outcomes. Clearer signposting about best-practice pathways would not only lead to better health but save money.

International evidence demonstrates that well-coordinated primary care reduces hospital admissions, often by a significant number.

He singled out the New Zealand and Swedish primary health systems, which enrol patients on a longitudinal basis, for praise. About 80% of Swedes are covered by integrated care, he said, and the number of hospital beds in Sweden reduced by 45% through the 1990s, while other European countries only managed a reduction of 10-20% during that time. Members of the publicly-funded Medicare programs run by Humana in the United States are 50% less likely to be readmitted to hospital within 30 days than non-members.

Medibank is trialling the use of primary care coordination through its CarePoint and CareFirst projects due to their ability to save the insurer money and improve health outcomes for those who use its services most heavily.

Part of the push to better integrate primary care into the health system, argued Savvides, should be to allow private health insurers to cover general practice services, which is disallowed under current law.

“We need to improve the performance of the Australian health system or the private system will just be paying for acute care at the end of the production line, rather than avoiding some of that unnecessary, high-intensity intervention in the lives of individuals,” he said, suggesting private insurers would be well placed to focus on primary care on a longitudinal basis.

He stated that more effort should be put into ensuring funds went towards health interventions based on evidence — a 2012 Medical Journal of Australia study identified 156 potentially ineffective or unsafe medical services listed on the Medicare Benefits Schedule.

Savvides also raised concerns about the shrinking private health insurance rebate rate, which has come down from 30% to 27.5% after being linked to the consumer price index. He said some customers were opting to move to a lower-cover insurance product, meaning they take on more risk — and the public system will end up picking up the cost.

“That’s not smart,” he said.

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