Australian Health Programs: Evaluating their effectiveness in Health Insurance

Date29th November 2023

In response to increasing pressure on hospital capacity – which hit a peak during the pandemic – Private Health Insurers (PHIs) are delivering more out-of-hospital care than ever before. Health programs also provide insurers with opportunities to deliver better value and outcomes for their customers. However, insurers must rely on data-driven decision-making and evidence-based practices to inform this growth. In recent years, we’ve observed a large increase in the use of and marketing of health programs, which offer potential benefit savings at several multiples of their cost.

This blog is the first of a three-part series that will focus on

  1. The current landscape of health programs and their benefits

  2. A guide to quantifying their value

  3. Implications for insurers and claims managers, and future trends and opportunities

Types of health programs and their value to members and insurers

Healthcare programs fall into three main areas; chronic disease management programs, hospital substitute care and preventive and wellness initiatives.

Chronic disease management programs

Chronic disease management programs (CMDPs) target complications linked to chronic conditions and pre-emptively address or delay onset for high-risk members. Conditions such as cardiovascular disease and type 2 diabetes are influenced by factors such as cholesterol, blood pressure and lifestyle choices. CDMPs offer comprehensive assistance, including educating participants on managing risks, coaching them to achieve health goals and assisting patients with their post-hospital recovery to prevent readmissions. These programs are provided via telephone or in-person consultations with a qualified health professional such as a dietician or diabetes educator. A large part of the CDMP offering is the planning and coordination of health services rather than the provision of healthcare.

Hospital substitute care

Care-at-home programs provide a cost-effective and convenient solution to traditional hospital-based care, particularly for patients who require ongoing support but do not need intensive medical intervention. These programs encompass various models, including in-home care, community-based clinics, and telehealth services.

 Over the last ten years, there has been a steady increase in reported care-at-home activity [1], both in the public system, where care-at-home is much more commonplace, as well as in the private system. Factors contributing to the increase include: pressure on hospital capacity (more-so during the COVID-19 pandemic), technology advancements facilitating remote care (monitors, delivery devices etc.), patient preference and increased availability of services.

Preventive care and wellness initiatives

Preventive care programs adopt proactive measures to identify and address health issues before they escalate. They prioritise regular health check-ups, screenings, and immunisations to facilitate early detection and intervention. By preventing the onset or progression of diseases, these programs effectively reduce the burden on the healthcare system. Insurers often offer discounted or fully covered screenings for conditions such as diabetes, hypertension and cancer, ensuring individuals have access to necessary preventive measures.

Wellness programs focus on promoting healthier lifestyles and preventing the onset of diseases. These initiatives may include fitness classes, nutrition counselling, stress management workshops, smoking cessation support or 24/7 online care providers. By encouraging and incentivising healthy behaviours, insurers contribute to the overall wellbeing of their insured population. Wellness programs have the potential to reduce the risk of chronic conditions, enhance mental health and improve overall quality of life.

Health program benefits

The tables below present an indicative assessment of the relative level of benefits for members and program funders (insurers) observed in program evaluations. Darker shaded boxes (‘High’) indicate more significant benefits are likely to be observed; lighter shades (‘None’, ‘Low’ or ‘Medium’) indicate fewer benefits are likely. Clinical efficacy is also an important consideration for program funding, but is not discussed below.

https://a.storyblok.com/f/132489/651x315/56d8230f4a/phi-graph-table-2.png

A spectrum of member outcomes post-program presents challenges in interpreting results, particularly with limited data volumes. Yet, understanding the characteristics of members for whom programs generate successful outcomes is arguably more important than the program value estimation itself – as this can inform utilisation of programs, changes to referral processes or changes in the program delivery.

Private Health Insurance spend on health programs

The chart below shows the reported benefits paid by health insurers [2] by program type. Other programs that do not meet regulatory definitions may be funded as expense items and are not included.

https://a.storyblok.com/f/132489/651x315/81cdcc01a8/phi-graph-table-1.png

Roughly 0.7% of PHI benefits paid relate to CMDP, hospital substitution and health management programs.

Hospital substitution benefits have increased substantially, from $27m in 2012 to $86m in 2022 – evidence of insurers increasing out-of-hospital care. CDMP benefits reported by fund has varied significantly over the period, making inferences of program use difficult, though reporting has been steadier in recent years at around $40m. As mentioned above, CDMP reported expenditure is predominantly planning and coordination, rather than allied health service provision. Health management programs benefits have been steady at roughly $30m per year and is the smaller contributor of the three.

The recipients of hospital substitute treatment tend to be older members, with 70% of benefits attributed to members aged 60 and above. This percentage has steadily increased from 50% in 2012, aligning more closely to the age profile of total hospital benefits. Moreover, over 80% of CDMP benefits are paid to older members (60+).

Hospital substitution benefits appear to be a recent focus; Medibank at Home customers more than tripled between FY19 and FY22 [3], and although nib hasn’t published numbers it was a focus in the FY22 investor presentation [4] to provide alternative care settings for members as part of the hospital substitution program. We observed the largest increases in benefits paid by smaller insurers, with the top five insurers contributing 92% of hospital substitute benefits in 2012 and reducing to 85% in 2022.

Opportunities for the future

While hospital substitute treatment offerings are seeing accelerated growth, CDMP spending has reduced and prevention spending remains flat – which strongly differs from the public messaging of insurers. Health programs account for only a fraction of total PHI outlays, however their benefit savings could be several multiples of their cost. These programs represent a vital care offering to deliver better value and outcomes to customers, making it prudent for Australian PHIs to review their offering in this space and the benefits they derive.

As we continue this series, we will delve further into program valuation approaches, implications for insurers and claims managers, and the exciting future trends and opportunities in this space.

Learn more

To learn more about our practices, reach out to the Finity team.

References

[1] AIHW Hospital Admission Data

[2] APRA Membership and Benefits Data

[3] https://www.medibank.com.au/content/dam/retail/about-assets/pdfs/investor-centre/annual-reports/Medibank_AR2022_website.pdf

[4] https://www.nib.com.au/docs/fy2022-full-year-results-investor-presentation