Wed Nov 6

Private health insurers are now offering GP telehealth services. Is this a risk to Medicare?

Written by: Yuting Zhang, Professor of Health Economics, The University of Melbourne

Australia’s second-largest private health insurer, Bupa, has recently started offering ^[1] its members three free GP telehealth consultations a year. This follows other insurers such as nib ^[2] offering its members digital GP consults, for things like prescriptions and medical certificates, for a fee.

But if you search the government’s Compare Policies website ^[3] that helps people choose among different private health plans, you will find no plans that officially cover GP visits.

This is because it is currently illegal ^[4] for insurers to cover the costs of out-of-hospital services that are also funded by Medicare, which includes GP and specialist visits.

Insurers may get around this by running their digital health platforms as a separate business, rather than as part of the private health plans that are heavily regulated by the government. Another strategy is to pay the overheads of clinics ^[5] which then offer “free” consultations to members.

So why might private health insurers be moving into primary care? Why hasn’t it been allowed? And is it a risk to Medicare?

Keeping people out of hospital saves money

Better access to GP (primary) care can improve people’s health and reduce their chance of needing to be hospitalised, particularly for those with chronic conditions such as heart disease, diabetes and asthma ^[6].

Sometimes people use emergency room services for minor problems that can be solved by a GP ^[7].

So offering members free or low cost primary care that’s easy to access could result in lower downstream hospital costs and save insurers money in the long run.

There are also other reasons why private insurers want to cover primary care.

The first is the potential for “cherry-picking”. In Australia, private health insurance operates under a community rating ^[8] system, where premiums are not based on a person’s health status or age.

This means insurers cannot exclude or charge higher rates for people at higher risk of needing surgery or other hospital-based treatment (excluding the Lifetime Health Cover loading ^[9], which applies if you first take out private health insurance after you turn 31).

However, insurance companies often have strategies to attract healthier members. They may offer free running shoes, for example, to appeal to keen runners, or age-based discounts ^[10] for new members aged under 30.

The target audience for free or easily accessible GP telehealth services is likely to be working professionals who lack time, or younger people. These groups are generally healthier and less likely to be hospitalised each year.

Insurers want to attract healthy, young members who are less likely to need expensive health care. Geber86/Shutterstock ^[11]

Another reason insurers might want to cover primary care is to help retain members, who would feel they are receiving tangible benefits and a sense of value from their insurance plans.

When Medibank trialled offering free GP visits in 2014, members who benefited from this service reported being more likely to stick with the insurer ^[12].

Across the health system, the Australian government is expanding telehealth and multidisciplinary teams ^[13] (for example, GPs, nurses, nutritionists, physiotherapists and specialists) to manage chronic diseases.

In response to these changes, insurance companies are preparing for the future of health-care delivery ^[14] by expanding in digital health and creating large clinics where multidisciplinary teams co-locate. Offering free telehealth GP service is a small step toward this large strategic change.

Why haven’t insurers offered primary care in the past?

When Medicare was introduced in 1984, medical professionals objected to allowing private health funds to offer cover for the “gap” between the Medicare benefit (what the government pays the clinician) and the fee (what the clinician charges).

After lobbying from the Australian Medical Association, the Minister for Health at the time, Neal Blewett, concluded ^[15] allowing insurers to cover the gap would simply increase the cost of the service, especially for those without insurance – with no benefit to patients.

Consequently, a prohibition on insurance for primary care was legislated ^[16].

It’s currently illegal for insurers to cover the costs of out-of-hospital services that are also funded by Medicare. Robyn Mackenzie /Shutterstock ^[17]

Over time, whenever the question of allowing private insurers to cover primary care has come up, the main argument against it has been that it could create a two-tiered system ^[18]. Under such a system, those without private insurance would have lower access to primary care.

About 45%^[19] of the population has private insurance. And with insurers footing the bill, it’s likely that GP consultation prices would rise ^[20].

Additionally, private funds would likely pay more than Medicare to incentivise GPs to participate. This would leave those without private health insurance at a disadvantage.

This situation is currently unfolding in the hospital sector. Surgeons earn significantly more for surgeries in private hospitals compared to public hospitals ^[21]. This leads to them prioritising working in private hospitals.

As a result, patients with private health insurance can access elective procedures without delay. Meanwhile, those without private insurance face longer wait times.

Should the government allow private insurers to cover primary care?

Current evidence does not provide much support for the government supporting the private health insurance industry ^[22] via subsidising individuals’ insurance premiums.

Our research found ^[23] that despite the government spending billions of dollars subsidising private health insurance every year, the sector barely took any pressure off the public hospital system.

Currently, the ability for private insurers to offer primary care is constrained by legislation, and this should continue to be the case.

Allowing private health insurers to expand further into primary care would undermine the universality of Medicare. It risks creating a two-tiered primary health-care system, replicating the disparity we have already seen in hospital care.

Insurer-funded primary care would also involve large administrative costs, as seen in the health-care system of the United States ^[24], which largely relies on private funding and delivery.

However, the government should do other things ^[25] to make primary care more affordable to save downstream hospital and emergency department costs. This includes:

increasing Medicare rebates to make primary care free to the poor and children regardless where they live
making primary care free to rural and remote areas
making primary care cheaper to others.

The Australian government has the financial capability to make primary care more affordable and should prioritise implementing this. Even private insurance companies recognise its benefits. But the way to do this is not through private health insurance, which would make primary care both more unequal and more expensive.