While Australia has one of the best and more cost effective health systems in the Western world, it suffers from a major anomaly

The Federal Government pays (via the Medicare Levy and other taxes) all of the standard costs of Medical Procedures and General Practitioner Costs.

The State Governments pay for the costs of running and staffing Public Hospitals.

HENCE THERE IS A HUGE TRANSFER PRICING ARGUMENT BETWEEN THE TWO LEVELS OF GOVERNMENT.

Let me give you one simple example.  People who undergoing medical procedures at Public Hospitals should not be charged.  However, they are politely asked if they have Private Health Insurance.  If they do, then the public hospital often bills the Private Health Insurance Fund, resulting in:

• More Revenue for thePublic Hospitals, and
• Higher costs for the Private Health Funds. 

Hence more people are considering leaving Private Health Insurance, or lowering their level of cover.

Let’s look at a simple example that flows from their bizarre health arrangement in Australia:

• In 2014-15, there were 7.4 million attendances at Public Hospital Emergency Departments.
• The Triage Nurses do an excellent sole when you arrive.

The term triage may have originated during the Napoleonic Wars from the work of Dominique Jean Larrey. The term was used further during World War I by French doctors treating the battlefield wounded at the aid stations behind the front. Those responsible for the removal of the wounded from a battlefield or their care afterwards would divide the victims into three categories

1. Those who are likely to live, regardless of what care they receive;
2. Those who are unlikely to live, regardless of what care they receive;
3. Those for whom immediate care might make a positive difference in outcome.

Now let’s look at the Australian numbers in 2014-15 7.4 million emergency patients attended hospital. Of these, 2.2 million were admitted.  These would have been almost all category 2 or category 3. This leaves 5.2 million people in category 1.

What on earth are these patients doing clogging up public hospital emergency wards?  The answers are as follows:

• They don’t have or can’t afford private health insurance.
• Most General Practitioners will not work at night
• A large proportion of these visits are “out of hours”, often due to drunken brawls, and  Sporting Injuries, which are more likely at the weekend.

Let’s dig into the numbers of the 5.2 million people who are not admitted:

• 3.8 million are seen within 4 hours
• 1.4 million are seen after 4 hours.

Now look at the costs. The average cost of seeing a public patient in a public hospital emergency department is about $300.  And I will bet you “London to a Brick” that this does not include:

• Public Hospital Construction Costs
• Foregone Rates, and
•   Foregone Land Taxes.

Now the maths is pretty simple: 5.2 million patients at $300 equals $1.6 billion in 2014-15. I suspect $2 billion p.a. is closer to the mark now.

A better solution – Why don’t we encourage our hard working General Practitioners to work some evenings and weekends!

The median general practitioner sees about 100 patients a week.  85% of patients are bulk billed. The current Medicare schedule Fee is $36.30 for a basic consultation.

That equates to a gross weekly income of $3,630.  But practice costs are about 60% for staff, and rent etc.  That equates to a net pre-tax income of $1,452 per week, or $70,000 per annum for a 48 week year.  No holiday pay for self-employed general practitioners!

HOW DO WE UNCLOG THE PUBLIC HOSPITAL EMERGENCY DEPARTMENTS?

Get the General Practitioners to do the work!

• Pay them $1,500 for a 6 hours evening or weekend session, of which they keep 40% or $600
• Let’s suppose they see 15 patients a session.
• Hence the cost per patient is $100. 
• That is a saving of $200 per patient who move from the emergency outpatients departments to their GP
• Suppose half the 5.2 million patients move!

BINGO – JACKPOT - $1 BILLION IN ANNUAL HEALTH COST SAVINGS!

Wait till you see my next article about the medical specialist’s cartel, which is completely legal.

Peter A Worcester BA BSc FIAA MAICD

 

Peter is a fiercely independent actuary of 40 years’ experience, who is passionate about:

1.    Protecting Investors Rights

2.    Improving efficiency in society, thus enabling a higher standard of living for all, and

3.    Pro-bono work.  He brings his varied skills to 3 pro bono medical organisations, and is seeking to add more to his workload. 

27 February 2017