Private health insurers propose making “split billing” by medical providers a criminal offence and adopting laws to ensure patients don’t have to pay for medical costs that are not disclosed beforehand.

Private Healthcare Australia, the industry lobby group, says large, unexpected medical bills give the funds a bad name, damaging “the perception of private health insurance being value for money”.

The PHA sets out the policy in a new exposure draft titled “Combatting surprise billing in Australia”, seeking responses by August 15.

It says the proposed reform would affect only a tiny proportion of medical services.

“In the March 2021 quarter, more than 97% of medical services covered by private health insurance had no gap (89.9%) or a known gap (7.7%).  The Grattan Institute has pointed out that just 7% of medical services account for 89% of medical gaps,” it says.

This is a reference to a 2019 report in which the institute said “a handful of greedy specialists” were driving the growth in out-of-pocket costs by charging more than twice the official Medicare Benefit Schedule fee.

To stop surprise billing, the PHA says the options are to deregulate all pricing (including abolishing Medicare) or to introduce a proper regulatory framework for transparent pricing.

“For non-emergency admissions, doctors, hospitals and health funds should be able to disclose costs beforehand,” the document says.

The PHA recommends legislation to protect consumers, so they would not be liable for out-of-pocket costs that were not disclosed at least seven days before a non- emergency procedure, or two days after booking in cases where the procedure is booked within the seven-day period.

It notes that health funds are legally required to disclose all fees and excess amounts.

Under the proposal, hospitals would need to provide information about fees through the booking medical practitioner or directly to the consumer.

Should hospitals fail to do so, they would receive either the amount contracted by the health fund, or if there was no contract, the second-tier default benefit.

“All medical practitioners involved in the consumer’s care will need to disclose fees to the patient for the expected services. This may be coordinated through the admitting doctor, the hospital or individually,” the exposure draft says.

“Should a doctor fail to provide a written quote prior to service, they will receive any fee contracted under a no-gap arrangement with the health fund, or where no agreement exists, they will receive the MBS Schedule fee.”

It would be an offence to fail to detail the full cost of a service covered by Medicare or by private health insurance to payers.

“One mechanism would be to amend the Private Health Insurance Act 2007 to introduce an offence if any tax invoice for a service under a private health insurance arrangement (as defined in schedule one) does not include the full cost of the service, referring to the principles of the Australian Consumer Law 2010. An explicit clause may be required to prevent split billing or balance billing.”

The Grattan Institute’s director of health policy, Dr Stephen Duckett, said he was in favour of getting rid of split billing.

“That really annoys people,” he told the limbic.  “They have signed up for a $1000 excess (on their health insurance policy) and the bill is much more.  No one has told them about the anaesthetist, the pathology, the radiology.

“I think it is a sensible proposal,” he said, referring to the PHA draft.

The PHA says that its recommendations would not prohibit doctors from setting their own fees in a private contract with the patient but concedes the enforcement of such contracting would be made conditional on providing informed financial consent.

The policy is entirely consistent with the AMA’s position statement Setting Medical Fees and Billing Practices 2017  and Informed Financial Consent: a collaboration between doctors and patients 2020, it says.

The industry group says its proposal is of a “lesser standard” than the recommendation of a ministerial committee on out-of-pocket costs, which “was strongly of the view that patients need better fee information before [the] first consultation”.

The paper also cites calls for transparency in medical fees from the Consumers Health Forum and the Australian Private Hospitals Association.