Further to the previous post on the Department of Health and Ageing request for a tender “to build a new private health insurance economic model”, some more information has come to hand which may be of interest (and many thanks to the Croakey reader who has helped with this).
Our correspondent suggests that the new model is an upgrade of the one previously prepared by Access Economics. P 323 of DOHA’s 2005/06 annual report records that Access received $140,580 for “further development” of this model. By the look of the document below, this tender is going to be worth big bucks – mind you, it looks like a lot of work in a very short timeframe to get the proposal together.
Below are extracts from the tender document:
“The Commonwealth Government believes that a mixed model of balanced private and public health services is integral to the provision of universal access to high quality, affordable health care services for all Australians. People have a choice about whether to use the public or private systems according to their own circumstances. Consumers with private health insurance still retain the right to choose whether to be treated as a public patient or as a private patient in hospital. Government incentives such as the Rebates, Lifetime Health Cover and the Medicare levy surcharge support private health insurance.
There is a range of publicly available information which the Consultant may use for this project. This includes, but is not limited to, private health insurance industry data from the Private Health Insurance Administration Council (PHIAC) relating to membership, premium income, episodes and benefits paid for both hospital and ancillary services, through the Annual Report on the Operations of the Registered Health Benefits Organisations and the PHIAC A Reports.
Other information can be sourced from the Australian Bureau of Statistics’ National Health Survey and the IPSOS Health Care & Insurance Syndicated Survey (available by subscription) and the Australian Institute of Health and Welfare (AIHW) Hospital Statistics.
The model should accommodate all the factors that are significant in influencing the outputs noted below. These include, but are not limited to:
o Government policy settings (Private Health Insurance Rebates and Rebate Tiers; Lifetime Health Cover, the Medicare Levy Surcharge, No Gap/Known Gap policies; Prostheses payment arrangements etc);
o Health care cost drivers including demographic factors;
o Consumer costs and other demand influences; and
o Financial and prudential standards applying to private health insurance funds.
The key objective of this project is to build a new private health insurance economic model that will allow the Department to model policy options and will ensure the accuracy and integrity of future policy development and costing estimates for private health insurance.
The tenderer will be required to:
• develop an economic model1 capable of modelling, at a minimum, the scenarios outlined below (Economic Model);
• select the appropriate, publicly available data sets to use in the economicmodel (Data Selection);
• develop software capable of manipulating the model, presenting easy to read reports and capable of exporting the resulting data to a Coma Separated Value file (Software); and
• provide documentation on the development of both the economic model and the software (Documentation).
The tender must include a project plan, with proposed timeframes and methodology for the major aspects of the project.
The economic model will compare all scenarios to projections against all modelled factors if there are no changes to Government policy.
The model will be required to model, at a minimum, the following scenarios:
• Changing rebate levels for different levels of income;
• Changing rebate levels for different age groups;
• Changing rebate levels for different product types (for example: hospital, general treatment, combined);
• Changing gap cover arrangements;
• Changing the Medicare Levy Surcharge and thresholds for different levels of income;
• Changing the Medicare Levy Surcharge and thresholds for different age groups; and
• Changing the Lifetime Health Cover rates and starting age for different age groups.
It would be desirable for the economic model to model the following scenarios:
• Changing the scope of product coverage (for example: inclusion or exclusion of participating items such as specific general treatment options);
• Changing broader health cover arrangements;
• Changing the Lifetime Health Cover rates and starting age for different levels of income;
• Changing the FBT exemptions for employers who pay private health insurance on behalf of their employees;
• Changing the impact of tax status of insurers; and
• Other scenarios the tenderer can predict.
The desirable scenarios, if included, should be costed separately.
The model will be able to model scenarios over the short-term (ie, 1, 2, 3, 4 years), mid-term (ie, 5-10 years) and long-term (ie, greater than 10 years). The model would ideally be able to project up to the year 2049-50.
The model must be able to model the outcome of any combination of the above scenarios that could reasonably be combined. The tender will specify which scenarios will be capable of being modelled together and which will not.
The model will need to assess the impact of the above changes on participation/coverage, the rebates, premiums and the Medicare Levy Surcharge revenue.
The model should be flexible and extendable, including the ability to incorporate changes to existing policies and the introduction of new policies.
The reports must be able to clearly focus on the impact of the modelled scenarios on:
o the level of private health insurance coverage;
o average premiums; and
o cost to Government (premiums).
It would be desirable if the reports also included the impact of the modelled scenarios on:
o premiums for hospital treatment cover and for general treatment cover;
o private hospitals; and
o public hospitals.
The desirable reporting features, if included, should be costed separately.
These outputs should relate to the private health insurance sector as a whole, not the impacts on individual insurers (note that individual insurers may react to policy changes in different ways).
Where different models, or different scenarios will produce different reports, the tender should clearly specify what each report would be able contain.
The model must allow policy options to be tested both individually and jointly and for impacts to be modelled over time.
The timeframe for this project will be from commencement until 30 November 2013. The consultancy is expected to run over five consecutive financial years, with the main body of work on the model with the successful tenderer to begin by April 2010.
A draft model and draft progress report will be due by November 20 and progress report will be due by February 2011.”
Croakey is struck by the lack of attention to equity issues. Are economic models not capable of addressing such fundamental concerns?