Female doctor holding out an EFTPOS machine for payment

The problem with private payments in the health system

by Stephen Duckett

Published in Healthcare Management Forum, 1 June 2021

Of all the creatures in the health policy menagerie – including unicorns and elephants-in-the-room – the most dangerous are the zombies. And the most dangerous zombie of all is the co-payment zombie – that co-payments are somehow useful health policy instruments (Evans et al. 1993). Unfortunately, co-payments have a prominent place in Australia – about 17 per cent of all health expenditure is paid directly out of patients’ pockets, an issue I address in a paper published in the July edition of Healthcare Management Forum. See the link at the bottom of this blog entry.

In 2018 to 2019, co-payments accounted for 8 per cent of the revenue of family physician services and 17 per cent of specialist medical services. Co-payments lead to missed care: 3.7 per cent of Australians missed out on seeing a family physician – or delayed a visit – because of cost; 8 per cent missed a specialist visit because of cost.

Patient co-payments are inequitable – hitting more of the poor than the rich – and inefficient, leading to reductions in both necessary and unnecessary services. Despite this, the zombie that was thought to be dead eons ago, still somehow manages to rise and stalk through the system.

Australia also relies significantly on a second type of private payment – private health insurance. Because of the existence of a universal public insurance scheme, private health insurance is voluntary in Australia, covering just over 40 per cent of the population. Governments of different colours have different views about private health insurance – conservative governments (called the Liberal-National coalition in Australia) are strong supporters – ‘it’s in our DNA’ spruiked one conservative health minister  – whereas Labor governments tend more to simply tolerate it. Stakeholders who earn all or part of their income from the underwriting of private work that private health insurance provides – private doctors, hospitals, and the device manufacturers – all laud the benefits of private health insurance. In an Australian peculiarity, private health insurance is extensively subsidised by government.

The existence of private payments inevitably involves the creation of a two-tier health system, although the French-Canadian expression à deux vitesses may be a better phrase given what is often purchased is faster access. A two-tier or two-speed health system is antithetical to social justice. It also undermines commitment to solidarity and weakens support for the stewardship function of the health system. Preferential access for those who can afford it weakens support for a universal health system and undermines the legitimacy of public priority setting.

Private patients’ payments – be they private out-of-pocket payments or through private health insurance – are a core part of the business model of most private providers in Australia. The evidence about the problematic place of private payments is particularly strong but, despite this, it is hard to kill them off completely. Policy proposals to introduce or increase co-payments continue to arise in Australia and amble with arms outstretched hoping to ensnare a sceptical public with their siren call of co-payments being able to fix all the problems of the system.

It is a call that needs to be resisted.