AMA hits back at private health insurers

3 minute read

After a Four Corners report claiming that doctors were fraudulently billing Medicare, the AMA has produced a rorts exposé of its own.

Private health insurers have bumped up management expenses by 32% since 2019, a new analysis from the AMA found.

The association’s finding comes at a moment where tensions are escalating between doctor groups and health funds.

Earlier this week, an ABC Four Corners episode alleged that up to 80% of spinal surgery patients were billed for more complex services than provided, while around 10% were billed for longer services than provided and 7% were billed for spinal fusions without a chronic lower back pain diagnosis.

The data used to inform the piece came from the records of 23,000 spinal surgery patients and was provided to the ABC by six private health funds.

This data was then analysed by Synapse – a firm run by former TMR columnist and Medicare billing expert Dr Margaret Faux – and UK health fraud investigation company Kirontech.

As reported in TMR earlier this week, health funds may have been motivated to participate in the Four Corners program because findings of widespread fraud give weight to the argument that insurers should not automatically have to pay for any service Medicare has paid.

“In relation to the Synapse/Kirontech report, it would have been better for insurers to work with the Department of Health and Aged Care to look at the data, and have it properly assessed against MBS requirements — in consultation with clinicians who understand what is involved in a procedure,” AMA president Professor Steve Robson told TMR.

“It’s our understanding the ABC did not approach any of the relevant specialist colleges or societies for comment or input before publishing its story.”

According to the AMA, health insurer profits have risen by 50% over the four years to June 2023, during which time management expenses rose by 32% and the amount paid out in medical services and hospital treatment benefits increased by 3.6% and 8.1% respectively.

“When patients pay their insurance premiums, they expect that money is going mostly towards the costs of benefits for treatment and hospital stays, but what this [analysis] shows is that management expenses and insurance profits are key drivers of premium increases,” Professor Robson said.

Private Health Australia CEO Dr Rachel David told TMR that management expense ratios for health insurers typically make up about 10% of the cost to consumers, while management expenses make up around 20% of general insurance costs.

“Health fund management expenses are closely scrutinised during the premium setting round by APRA/DoHAC to ensure they are appropriate,” she said.

“Inflation is affecting all sectors, and this includes the operation of private health funds.

“There is no evidence management expenses have risen faster than [other costs].” 

Management expenses typically comprise wages for call centre staff to provide product information to customers, cybersecurity, IT service upgrades and preventive health services that can’t be counted as claims.

“Health funds have the highest rate of return to consumers of any form of insurance in Australia,” Dr David said.

“Health funds on average return 86 cents in every premium dollar back to members in benefits in 2023.

“In comparison, the general insurance sector on average returned 65 cents in every premium dollar back to members.”

The AMA is calling on the federal government to mandate that private health insurers return a minimum of 90 cents on the dollar to their customers.

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