Transcript The role of private health insurance in New Zealand Health

DR IAN MCPHERSON
Group Chief Executive
Southern Cross Healthcare
New Zealand
DR IAN MCPHERSON
• Degree in Medicine and Diploma in Obstetrics
• Worked predominantly as a GP in New Zealand
• Held a range of different positions:
– Red Cross, Department of Health, Aetna, Allianz
based in Singapore
• Started with Southern Cross Healthcare in 2002
KIA ORA
WHAT MAKES UP NEW ZEALAND
• Four million New Zealanders
• Rugby
• The country has a GDP of $NZ 138 billion
– $AUD 128.73 billion
• Primary industries are farming, forestry, tourism
• Political environment is MMP
– Recent election resulted in slim majority for Labour led
coalition
NEW ZEALAND HEALTH SYSTEM
• NZ has a mixed health system like the UK
• Public and private health care systems are
complimentary
• Primary primarily covers elective conditions
• Total health spend $NZ 10.69 billion
– 8.7% of GDP
• 78% of total health spend is publicly funded
• Expenditure is increasing rapidly
• Predicted to reach 63% of GDP by 2050
PRIVATE FUNDING IS GROWING
Total health funding (%) in 1979/80 and 2001/02
1979/80
2001/02
Publicly
funded
88.1
Privately
funded
77.9
11.9
Private
household
10.4
16.1
22.1
Health
Insurance
1.1
6.7
Not-for-profit
organisations
0.4
0.3
ROLE OF PRIVATE HEALTH SECTOR
Meets individual needs by:
– Providing quicker access
– Giving choice of specialist
– Comfortable hospital facilities
– Access to additional health services
HEALTH SYSTEMS ARE BALANCED
• Health systems are like a mobile in the
children's bedroom
• Alter one component – it impacts another
–
–
–
–
Private - Public
Funder - Provider
For Profit - Not For Profit
Primary - Secondary
ROLE OF PUBLIC HEALTH SECTOR
• Funding and provision are different matters
• Publicly funded & publicly delivered
– acute hospital treatment
• Publicly funded & privately delivered
– doctor visits, medicines, elective surgery overflow
• Privately funded and privately delivered
– Elective surgery, $2 billion mostly primary care
ROLE OF PRIVATE HEALTH SECTOR
• Funding:
– 1.3 million New Zealanders with health insurance
– 32% of the population
– Out-of-pocket expenditure of $NZ 2 billion
• Delivery:
– Primary care (GPs, pharmacies, etc)
– Allied health professionals (physios, dentists, etc)
– Radiology (x-ray, CT scans, MRI scans)
– Specialist treatment (primarily surgical)
– Elective surgical hospitals
SOUTHERN CROSS HEALTHCARE
• Not-for-profit organisation established in 1961
• The Group an extensive range of health care
products and services
• New Zealand’s largest private health care
organisation
• Employs 1,500 people
• Southern Cross Insurance has 60% market
share – 800,000 members
OVERVIEW OF INSURED POPULATION
• During the 1990s health insurance
membership declined
• Affordability has been the major issue
• In recent years the market has been declining
but now stable
• Traditional indemnity insurance will continue
to lose attractiveness
• A further decrease in health insurance will
increase pressure on the public system
PHARMACEUTICAL MANAGEMENT
• Government run, central funding agency for all
pharmaceuticals
• Determine which drugs will be funded and the
subsidy level that applies
• Health insurers fund the shortfall for PHARMAC
drugs only
• Patients pay the full cost for non-Pharmac
drugs
IMPACT OF PHARMAC STRATEGY
Health Insurance
1600
Prescriptions
1400
1200
CPI trends Sept 1999 to Dec 2003
All Groups
GPs
2000
Specialists
1800
Hospital Room
1000
Pharmacuet icals
800
600
400
200
0
Dec-03
Aug-03
Apr-03
Dec-02
Aug-02
Apr-02
Dec-01
Aug-01
Apr-01
Dec-00
Aug-00
Apr-00
Dec-99
Aug-99
Apr-99
Dec-98
Aug-98
Apr-98
Dec-97
Aug-97
Apr-97
Dec-96
Aug-96
Apr-96
Dec-95
Aug-95
Apr-95
Dec-94
Aug-94
Apr-94
Dec-93
PHARMAC IMPACT ON DRUG EXPENDITURE
PHARMAC METHODS
• Reference pricing
• Generics
• Bundling
• Negotiated deals with the Pharmaceutical
industry
• Tendering
WHAT’S REQUIRED
• Clear definition of what the New Zealand public
sector does or does not pay for
• Respect for the other components of the system
• Increased use of private hospitals for public funded
elective surgery
• Innovative new products
– e.g. Health Management Accounts
• Incentives for private health insurance
– Removal of FBT
– 30% tax rebate or ‘defined’ contribution
WHY SUPPORT THE REBATE
• Choice: health insurance provides insured people with
a choice about how they access health services
• Fairness: insured people pay twice – through tax and
insurance
• Coverage: a subsidy would boost coverage, making
the viability of the health insurance industry more
certain
• Cost: for every $1 the Government spent on the rebate
for insured people it would be spending $2.76 on
the same health services for an uninsured person
PRIVATE v PUBLIC
• If the health insurance market halved in the next
ten years, net cost to the Government would be
$230 million
• Three times the cost of the rebate
• Australian experience used to not justify it:
– Public workload still increasing
– Had to be increased again
– Money could have been better spent
• NZ should retain a pure tax system
AN ALTERNATIVE TO THE 30% SUBSIDY
• Defined contribution
– e.g. $200 tax rebate per person, annually
– Applied through a health insurance plan or health
management account
– Could target certain age groups such as families or
the elderly
– Limits Government exposure to premium increases
INNOVATIVE NEW PRODUCTS
• Health today is more than sickness – it’s about being
and keeping well
• We are spending:
– $700 million on health insurance (Industry data)
– $1.75 billion out-of-pocket on health goods and services (Ministry
of Health);
– More than $350 million on sports goods and fitness (industry data)
• Many people spend more on gym memberships and the
related sports gear and clothes than they do on health
insurance (Research conducted by TNS)
ACTIVA ACCOUNT
• Health Management Account – also known as a
Medical Savings Account
• A new way of paying and managing health and
wellbeing needs
ACTIVA
activa Account
activa Plan
•
Card and web accessed
•
•
Used to pay for day-to-day health
related expenses and low cost
diagnostic and surgical expenses
• Lump sum for serious health events
•
Operates in debit and credit
• Excess options $1,000 or $2,500
•
Healthy interest rates
activa Network
•
Partners
•
Merchants
•
Activa providers
Health insurance which helps pay for
high cost surgical and medical
treatment
ACTIVA PARTNERS
Household Spending
HEALTH INSURANCE
• Must add value
• Get you better health care than you can get
yourself
• Our competition is:
– Self insurance - Not the competition