Does ‘Not-for-Profit’ mean more focus on health?

July 2014

Melanie Kiely

Health Insurance Summit

28th July 2014

Healthcare cost is rising…

2Source:

ABS Demographic Stats Jun-13

AIHW Data Table 2014

5

6

7

8

9

10

19

86

-87

19

87

-88

19

88

-89

19

89

-90

19

90

-91

19

91

-92

19

92

-93

19

93

-94

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

% Health expenditure to GDP ratio (per cent)

Health expenditure as a % of GDP is

climbing, with increasing rates of

hospital admissions and increases in

costs per case-mix.

Why Peter Dutton is anxious

3

Private health insurance market is big

4

NFP32%

FP68%

NFP vs FP Market ShareMar-14

Type of Fund Members

NFP 4.2M

FP 8.5M

Total 12.7M

% of Population 55%Source:

PHIAC data;

ABS Population data

Currently more than half of the

population are PHI members

Not-for-profit pays more back in total benefits …

5Source: PHIAC data

$2,286

$2,402 $2,523$2,674

$2,168$2,251

$2,365$2,497

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2009/10 2010/11 2011/12 2012/13

Total Benefits per Policy

Not-for-Profit For-Profit

• Benefits paid per policy

is higher for NFP

• Could it be that NFP are

less efficient in achieving

better health outcomes?

… but for-profit funds are paying more for prosthesis

6Source: PHIAC data

$61.5

$56.6

$54.0

$56.0

$58.0

$60.0

$62.0

Medical Benefits per Service

Medical Benefits per Service

Not-for-profit For-profit

$752.7

$771.6

$740.0

$750.0

$760.0

$770.0

$780.0

Prosthesis Benefits per Service

Prosthesis Benefits per Service

Not-for-profit For-profit

• NFP funds are paying more

benefits back to members in

medical benefit

• On the other hand, FP funds are

paying more back in prosthesis

Increasing coverage for Chronic Disease Management Program

7

0M

2M

4M

6M

8M

10M

12M

Jun

-07

No

v-07

Ap

r-08

Sep

-08

Feb

-09

Jul-

09

Dec

-09

May

-10

Oct

-10

Mar

-11

Au

g-11

Jan

-12

Jun

-12

No

v-12

Ap

r-13

Sep

-13

Feb

-14

Persons Covered for CDMP since 2007

Source: PHIAC data

• Introduced in 2007, not

mandatory

• Coverage increased

significantly

• Almost all members are

covered now

Not-for-profit funds are paying more benefits in CDMP

8

$1,178

$531

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Benefits per Program

CDMP Benefits per Program

Not-for-Profit For-Profit

Source: PHIAC data

• Are NFP funds providing more

than necessary?

• Or are FP funds not providing

enough to their members?

The COACH Program works!

Studies found COACH Program:

• Reduces coronary risk factorlevels.

• Reduces hospital admissionby 16%, bed-days by 20%within 4 years.

9Source:

The COACH Program

People are dying from chronic diseases

10Source: AIHW Data Table 2014

0

50

100

150

200

250

300

350

197

9

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

Dea

ths

per

100

,000

Po

pu

lati

on

Chronic Disease Deaths per 100,000 Population, 1979 - 2011

Coronary heart disease Cerebrovascular disease Diabetes Cancers COPD Other chronic diseases

Perhaps we should also put some focus on chronic diseases other than heart disease

Re-admission cost is on the rise

11Source: AIHW Health Expenditure Australia 2011-12

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

Total Recurrent Healthcare Expenditure

$5,711 $5,849 $5,916 $5,758 $6,258 $5,823

$8,512

$5,881

$0

$2,000

$4,000

$6,000

$8,000

$10,000

NSW VIC Qld WA SA Tas NT Aust

Average recurrent health expenditure per person ($)

• Recurrent expenditure is onthe rise

• Averaging $5.8K in recurrenthealth cost per person

Majority of claims were from a small portion of members

12

In 2013

76% of hospital benefits

5% of members

HBFMembers

HBFHospital Claims

For example:

• $283K on one cancer patient over 5 years

• $494K on one psych patient over 5 years

Integrated Care – The Holy Grail?

13Source:

Transforming Your Care – A review of health and social care in Northern Ireland

http://www.dhsspsni.gov.uk/index/tyc/tyc-timeline.htm

Currently is fragmented:

• Lack of coordination

• Lack of compliance

• Patient re-admissions

14

Early prevention and lifestyle management could be the key

15

16

• What is the shareholder’s ROIexpectations on returns andtimeframe?

• Will Medibank Private continueexisting programs, or cut them outand do nothing like nib?• Focus on better return from

programmes• Shareholder vs member focus

What are the implications of Medibank listing, and further profit drivers?

17

“The aim of medicine is to prevent disease andprolong life, the ideal of medicine is to eliminatethe need of a physician”

– William James Mayo

18