Chapter 2 Methodology for the review

Methodology for the review

3. 1   This chapter details the hypotheses to be tested, the approach, the data utilised in the review and the stakeholders consulted. It also presents the conceptual link between the Surcharge and hospital use, operating through the media of choices about hospital insurance and private or public treatment in hospitals. This conceptual link underpinned the development of the review methodology.

Hypotheses to be tested

3. 2   The data utilised in this and the final report will be used to address one or both of the following hypotheses:

3. 3   Underlying these hypotheses is the assumption that any impact on public hospital demand, arising due to the Surcharge changes, will act through the influence of the Surcharge on choices regarding private hospital insurance and consequent choices regarding public or private hospital treatment. In particular, as a policy mechanism, the Surcharge is meant to influence the level of private hospital insurance coverage in the Australian population.

Commonwealth Elective Surgery Waiting List Reduction Plan

3. 4   In addition to hypothetical impacts of the Surcharge on public hospital activity and particularly on volume and waiting times for elective surgical activity from waiting lists, other policies may also affect this activity. A key influence in this respect is the Commonwealth Elective Surgery Waiting List Reduction Plan, the timing of which has coincided with the introduction and operation of the Surcharge changes.

3. 5   Through the ESWL Reduction Plan, the Commonwealth has committed $600 million to reduce the backlog of patients waiting longer than the clinically recommended time for elective surgery in all states and territories and to implement strategies to provide long-term improvements in elective surgery and waiting times.

• Under Stage 1, the Commonwealth allocated $150 million for an immediate national blitz to improve access to elective surgery in 2008.
• Under Stage 2, the Commonwealth provided $150 million between 2008 and July 2009 to make systematic improvements in the hospital system to improve elective surgery throughput in the longer term, including construction of additional day surgery units.
• Stage 3 is currently being developed and provides $300 million in dividend payments to states and territories that dramatically increase the number of elective surgeries completed within the clinically recommended time by the end of the four-year plan.
• As a component of the plan, each state and territory is required to report elective surgery and waiting time performance. Reports on the Australian Government’s ESWL Reduction Plan were utilised for this report.

Factors influencing private health insurance coverage and public hospital utilisation

3. 6   There are a range of factors that influence the rate of private health insurance membership and mix of public and private hospital utilisation. Each of these factors may interact with changes to the Surcharge to moderate or exacerbate any impacts of the changes on both rates of insurance coverage and consequent patterns of public hospital use. These factors include:

• The potential that any decision to opt in or out of private health insurance will be delayed until after a tax return is lodged. This and the fact that the impact on the health system will not be felt until the person requires hospital care could stagger the effect over a number of years.
• Strategies by public hospitals to maximise the rates at which privately insured patients elect to be treated as private patients may lead to an increase in the number of private patients treated in public hospitals. A number of jurisdictions are implementing ‘no gap’ arrangements for private patients treated in public hospitals. This may lead to some patients choosing private treatment in a public hospital instead of treatment in a private hospital.
• Commonwealth health reform initiatives are increasing the focus on casemix based funding, better service coordination and options to improve efficiency across jurisdictions, making public hospitals a more attractive option to private hospitals.
• Changes in waiting list policies and practices in states and territories and provision of additional funding to reduce elective surgery waiting lists will affect rates of treatment in public hospitals for elective surgery.
• Gap payments or out of pocket expenses for treatment in private hospitals for individuals with private health insurance may also influence the decision to be treated in a public hospital or the decision to take out private hospital insurance.
• Declining rates of Department of Veterans’ Affairs (DVA) coverage in the ageing population will reduce the proportion of compensable patients in the older age groups and increase apparent rates of public patient treatment in those age groups.
• The impact of Lifetime Health Cover on people from the age of 31, which is a powerful and robust driver of private health insurance membership in the 30 to 40 years age group.
• The wavering of community confidence in the public hospital system due to regular adverse publicity affecting public perceptions of the adequacy of the public hospital system to meet future health needs (Australian Government National Health and Hospital Reform Commission 2009).
• Health insurance fund premium increases and the overall perception of health insurance product value for money by consumers.
• The impact of further changes to private health insurance policy generally and to the Surcharge specifically, announced in the 2009 Federal Budget.

Overview of approach

3. 7   Overall, the review has three key stages:

(i ) scoping and data collection
(ii ) analysis and testing of results
(iii ) reporting.

Data utilised in the review

3. 8   The review utilises data from the following primary data sources to test hypothesis (i) (Section 3.2):

• Australian Hospital Statistics (AHS) reporting of hospital episode data
• AHS-ESWL data reporting of elective surgery activity
• RP-ESWL reporting of key elective surgery indicators.

3. 9   Secondary data sources were also available to further test the impact of the Surcharge on public hospital activity, operating costs and elective surgery waiting lists. Supplementary analysis utilising these sources was not to be undertaken unless a discernible impact was identified in the primary data sources. This included Australian Tax Office (ATO) data reporting income and health insurance status, Private Health Insurance Administrative Council (PHIAC) private health insurance membership and benefit data, Australian Bureau of Statistics (ABS) population estimates and ABS National Health Survey (NHS) data.

3. 10   The timing of data availability and associated limitations are reported with respect to each data collection.

AHS data

3. 11   The Department obtains episode level public hospital data within the National Minimum Data Set (NMDS) from states and territories on an annual basis. The data is provided for each financial year (July to June). This data provides the main source of information about the profiles and patterns in use by hospitals (public and private) by insured and not insured patients, before and after the changes to the Surcharge.

3.12   The data utilised in this report is the aggregated NMDS prepared and released by the Australian Institute of Health and Welfare (AIHW) in published AHS reports. The timetable for release of data is 12 months after the end of the relevant financial year. Data to 2008-09 was available for this report. Data to 2009-10 will be available for the Review Report 3. Appendix 2 details the variables provided within the AHS extract used for this report.

3. 13   AHS data was obtained with a view to determining:

• Trends in public hospital utilisation (separations, length of stay, undiscounted cost weighted separations) in combination with same day and overnight status, acute flag (acute, mental health, sub acute and non-acute), episode type (medical/surgical and procedural), admission status and payment status.
• Trends in private hospital utilisation (separations, length of stay, undiscounted cost weighted separations) in combination with same day and overnight status, acute flag (acute, mental health, sub acute and non-acute), episode type (medical/surgical and procedural).
• Depending upon the results of analyses of impacts on public hospital activity, correlations and relationships between the above and rates of private health insurance (membership and new members), with a focus on changes post October 2008.

AHS-ESWL data

3. 14   The AHS also reports the number of admissions from the elective surgery list per 1,000 people and average waiting time in days for the 50th percentile (median), 90th percentile of patients and per cent of patients who waited more than 365 days between the date of addition to and removal from the waiting list. The reported admission rate is a crude rate based on the Australian estimated resident population. The 50th percentile represents the number of days within which 50 per cent of patients were admitted for the awaited procedure. The 90th percentile represents the number of days within which 90 per cent of patients were admitted. Unlike the ESWL Reduction Plan reports, the AIHW data does not report overdue patients based on clinical urgency and recommended waiting time.

3. 15   Through accessing current and historical AHS reports, the AIHW data provides a trend in the rate of admission from the waiting list and average waiting times over a period of years. For this report, data from 1 July 2000 to 30 June 2009 is used. Data for 2000-01 to 2004-05 was extracted from the AHS 2004-05 and data for 2005-06 to 2009-10 was extracted from the AHS 2009-10.

RP-ESWL data

3. 16   The report utilises reports on the Australian Government’s ESWL Reduction Plan.

3. 17   The Australian Government has funded the ESWL Reduction Plan for the period 2008-2011. Each State and Territory receives funding intended to improve access to, and waiting times for, elective surgery. Under this plan, states and territories are required to report quarterly data on trends in throughput for public hospital elective surgical waiting lists. Cleared quarterly, reports to the Australian Health Ministers’ Conference (AHMC) are available on the Department website. The most recent report (March 2010) was used to compare trends in key indicators since the baseline quarter of September 2007.

3. 18   It should be noted that the ESWL Reduction Plan, while generating data useful to this review, also presents a confounding influence in the event of this review showing hypothesis (i) to be incorrect and need to test hypothesis (ii) (Section 3.2). Anecdotally, more rapid access to elective surgical services in the private sector has been an incentive for people to take or hold private health insurance and also to use that insurance when choosing private or public hospital treatment. If the plan is successful in significantly improving access to elective surgery in the public sector then this may lead to a reduction in the incentive for insured people to choose private treatment and hold private insurance. Under this scenario, a reduction in private surgical activity would be expected.

3. 19   In contrast, the changes to the Surcharge, should they have any impact on public hospital waiting lists, would be expected to increase pressure on those lists and so increase waiting times and potentially the length of the lists.

3. 20   Waiting list initiatives implemented by states and territories further confound assessment of the impact of changes to the Surcharge on waiting lists. Periodically, state and territory governments provide additional funding, or other resources, on either an ongoing or one off basis to achieve a general reduction in the waiting list, reduce the number or percentage of patients waiting beyond benchmark waiting times, or provide an increase in the volume of particular types of surgery (Queensland Government 2008; Victorian Government 2009; NSW Government 2009).

3. 21   As a result, the extent to which changes in waiting list indicators will be able to be firstly detected, and secondly attributed, to changes to the Surcharge is limited. Nonetheless, significant deterioration in waiting times or in rates of throughput over the period of the review, in light of these other initiatives, would be unexpected. This would be an indicator that further investigation might be warranted. As such, the analyses of the waiting list data have focused on waiting times and throughputs from the lists.

Stakeholder consultations

3. 22   The key stakeholders for this review comprise states and territories, private health insurers and private hospitals (Appendix 1). Key stakeholders were consulted in both the Year 1 and Year 2 Reviews. The consultations informed the analysis in this report.