Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

I rise to speak today about private health insurance and an insidious practice that could be costing nearly nine million Australians up to $800 million every year. I refer to fraud and specifically to fraudulent misuse of the private health insurance industry. Fraud in any industry is reprehensible. It is a burden to business, it is a burden to taxpayers and it almost always costs innocent consumers, who end up paying for the greed of others. Nonetheless I would argue that there are few instances where the societal costs of fraud are as high as when it is perpetrated on our health system. Fraud in health industry speak is often called ‘unintended benefit leakage’—a bland description for a rotten practice.

Unintended benefit leakage, or fraud, occurs when claims are made for medical services not rendered. Generally this is done by medical practitioners but it also occurs when patients, members of the public or medical practice staff create false medical receipts to obtain the benefits. Regardless of how these frauds are implemented, fraudulent practices are inappropriate and unethical. They cost our health system and they cost consumers. They are quite simply a blight on our society.

Exactly how much fraud is costing the private health insurance industry is a matter of some contention but industry experts have identified the direct cost as potentially up to $800 million dollars every year. This is a hidden cost to health insurance premiums, which are already rising by around twice the rate of inflation each year. Over the past five years alone, private health insurance premiums have risen by more than 30 per cent. The Health Insurance Association say that the price increases are as a result of massive jumps in the cost of medical technology, an ageing population and increasing salaries. Individual claims certainly have escalated over the past decade. Ten years ago the most expensive claims were around the $5,000 mark. Today they can be $50,000 or more. The highest individual claim I could identify was for $276,000. But what if some of these current high-level payouts are actually ‘unintended benefit leakages’?

This raises the question: what percentage of the increases in premium costs can be attributed to fraudulent payouts? As you can imagine, the health insurance companies remain very tight-lipped about the direct cost of fraud upon their members. However, one large health fund identified $27 million of fraudulent activity last year alone, and this was identified without using the best fraud identification technology available.

If health insurance fraud industry experts are correct, we are looking at up to $800 million of fraudulent payments in the private health insurance industry every year. Imagine how many additional hospital beds could be provided with that $800 million—$800 million equates to around $250 in additional health insurance premiums per policy, per family, per year. How many families would welcome a $250 reduction in their private health insurance? How many more families would be able to afford private health insurance if it was reduced by $250?

I would like to make it very clear that the vast majority of members and health providers do the right thing. However, there is evidence that a small number clearly exploit the system to the tune of hundreds of millions of dollars per year. One recent audit of a major capital city hospital identified nearly $1.5 million worth of fraudulent claims. There are over 1,000 hospitals in Australia and, while this is just one example, one could be forgiven for asking: is this just the tip of the iceberg?

The public does not hear much about dentists who bill health insurance companies for the more expensive porcelain fillings rather than the amalgam ones they have just implanted in their patient. And there was no publicity recently afforded the dentist who claimed two identical high-cost dental treatments for two family members on the same day. When this was further investigated, the dentist’s clinical records could not be aligned with the claims. When forced to admit that he had not performed the services, he was asked to refund more than $6,000. The health insurance industry is also vulnerable to the practice of ‘cascading’. Cascading works like this: when the benefit limit for one family member has been reached and a further benefit is then denied, some medical practitioners will submit a claim in another family member’s name instead.

Cascading therefore results in the payment of a benefit that is often not legitimate. Suspicions of cascading prompted a review of one optical dispenser with a pattern of questionable claims and billing practices. This review resulted in a number of patients and health fund members being interviewed. Some of the patients billed by this optical dispenser did not even wear glasses and many were unaware of additional claims against their family members and their fund. The optical group provided refunds for all unsubstantiated claims and, through cooperating with the health fund, they avoided referral to their professional registration board and possible legal action.

This is simply not good enough. It should not be a matter of saying: ‘Fair cop, Gov; you got me. I’ll pay the money back but let me stay in business.’ Our medical providers need to be more accountable for their actions. And do not be fooled: these rotten procedures are not confined to small operators. I have already mentioned that fraud is occurring within our private hospital system. Let me give you an example of how it works.

In Australia’s private hospitals, you will receive some of the finest care that you will get anywhere in the world. This care comes at a cost. A bed in a private hospital typically costs around $500 per night. In the intensive care unit the cost can run upwards of $2,000 per night. Now imagine for a moment that the ICU of a private hospital has a couple of vacant beds in it. Is it beyond belief to consider that patients will be wheeled out of the general ward and relocated to the ICU ward whether or not it is necessary? It happens in the middle of the night, simply so that the hospital can claim an additional $1,500 or so for patient care. Stunts like these are what have resulted in an audit of one private hospital identifying nearly $1.5 million in leakage. It is not leakage; it is out-and-out fraud. And this is just one of the 291 private hospitals in this country that the private health insurance industry supports.

Across the medical industry, there is considerable evidence of cases where doctors are claiming for procedures that have never been performed, and there is growing evidence of unnecessary procedures being performed on unsuspecting patients. One medical provider was required to pay back $136,000, another was required to pay back $45,000. And the list goes on: $40,000; $35,500; $12,000. I could keep going. These individuals had all been billing for services they had not delivered. And just what happens to these fraudulent thieves? Quite frankly, not enough. In any other industry, if you steal from your employer or your patient, you are likely to lose your job, you are likely to lose your professional accreditation and you are likely to face criminal prosecution. However, in the case of the medical practitioner who was forced to repay $136,000 which they billed for services that they never delivered, there was no criminal penalty, there was no action taken by their professional body and the entire penalty amounted to their no longer being recognised as a provider by the health insurance fund concerned.

This is simply not good enough. We should expect more. The integrity of our health system demands more. The public expects a higher level of accountability from those we trust with our health and the health of our loved ones. In fact, this lack of accountability often leads to even greater consumer pain. Where a provider is derecognised by a health fund, there is no obligation or commitment to communicate that information either to other industry health funds or to the patients of that particular provider. Unbelievably, this can lead to the outrageous situation where the health fund member is out of pocket.

Imagine visiting your dentist to have expensive root canal treatment, knowing—or thinking—that your medical benefit fund will pick up a substantial amount of the cost. However, after the procedure, when it comes to swiping your card, your medical provider says that there must be something wrong with your cover—your claim has been rejected. In reality, there is nothing wrong with your cover but there is something wrong with your medical service provider. Your health fund no longer recognises your medical provider because they have been involved in unethical and unscrupulous practice. How many Australians have unknowingly paid a bill because they have found themselves in a situation just like this? How many are out of pocket because they have had to pay for treatment that should have been covered? Australian consumers deserve better, and honest medical practitioners deserve better.

So, what can we do about this practice? Firstly, the private health insurance industry needs to take a leaf out of this government’s book in combating fraudulent claims. This government has been rigorous in ensuring medical fraud is minimised in the public sector, and the health insurance industry now needs to do the same. When this government came to power, it was estimated that somewhere between seven and 10 per cent of all Medicare Australia claims were fraudulent. Through industry intelligence and data analysis, as well as tip-offs received from the public, that figure is now down to around one per cent, saving Australian taxpayers more than $1 billion every year.

I think we all agree that fraudsters in any industry need to be stamped out. It is time for the medical professional associations to apply the highest possible penalties when one of their members has been identified as being involved in medical fraud. A financial planner who defrauds a client or an accountant who fiddles the books can be banned for life from their industry by their professional associations.

Private health insurance fraud is a practice that should not go unaddressed any longer. Medical professionals involved in this activity should face removal of their provider number. They should be publicly named. They should face deregistration as a medical practitioner or as a health service provider, and wherever possible they should be pursued through the courts. This is the standard expected in other industries. The health insurance industry now needs to adopt the same approach. They need to be allowed to share information on discredited practitioners with other health funds. They need to report every practitioner identified as being involved in benefit leakage to their relevant professional association.

These professional bodies need to throw the book at these individuals that discredit their entire profession. If they do not feel comfortable in being able to judge one of their own, there is a need to establish a multipractice disciplinary body to ensure transparent accountability. The good men and women involved in medical practice in Australia deserve this protection from the rogues in their industry. And the good men and women of Australia deserve to have the most affordable private health insurance possible. This is a matter of public importance.