Email Private health insurance leaves plenty of people unhappy, so how can it be fixed? By political reporter Stephanie Dalzell
Posted July 25, 2019 06:26:05
Photo: Among the Grattan Institute's central concerns were young people ditching private health cover. (Flickr: Thomas Hawk) Related Story: Young, healthy and not paying private insurance? You're not alone Related Story: 'System should be better than this': AMA president warns of shift towards US-style health care Related Story: The pros and cons of private health insurance as you age Map: Australia
With young and healthy people baulking at the cost of private health insurance, there are fears the sector could be headed towards disaster unless things turn around.
Australian Medical Association president Tony Bartone yesterday went as far as to say the system was on the "precipice of possible demise" and demanded the Federal Government act urgently.
That came after a Grattan Institute report warned of an "impending crisis" without urgent changes to the healthcare sector.
Among its central concerns were young people ditching private health cover, which was forcing up prices because those who continued with their coverage tended to be older and in need of more medical assistance.
One of the difficulties the Government faces is a sector split on the long-term changes needed to fix things.
The Government argues it is already overhauling the sector to prevent a healthcare crisis.
Beyond that, what are its options?
Doctors argue it's not perfect, but it's crucial
The Government spends about $6 billion a year to promote the use of private health insurance through an income-tested rebate.
That's almost 8 per cent of its entire health budget.
Is private health insurance worth it for older Australians?
Taking out health insurance is something people in their 20s and 30s grapple with, but what about older Australians who are deciding whether to keep it?
But it hasn't always been that way.
The private health insurance subsidy was one of the main policy incentives introduced by the Howard government in the late 1990s.
Initially, the Government spent about $6 billion on that rebate.
But by 2012 that cost had blown out as the scheme expanded significantly and health costs increased faster than inflation.
To counter that, the then-Labor government began means-testing the rebate and capped growth.
It did that by using a formula that works out the difference between inflation and the average increase in premiums.
It's complicated, but as an example, six years ago, someone aged 65 or younger earning less than $88,000 would have received a 30 per cent rebate.
Today, they'd receive about 25 per cent.
The Australian Medical Association has called on the Government to uncap the rebate.
Photo: Tony Bartone has warned the health sector is on "precipice of possible demise". (ABC News: Luke Stephenson)
Insurers insist the system can't survive without them
Health insurers, unsurprisingly, also believe the answer to reforming the system lies in further subsidising private health insurance.
The private health insurance industry's peak representative body, Private HealthCare Australia, also wants the Government to "unfreeze" the rebate cap by bumping the private health rebate back up.
Its chief executive, Rachel David, said that would help stop young people with lower incomes from abandoning private health insurance, and thus, mitigate the "death spiral".
"We need to look at some degree of government subsidy to even up the odds … and that means restoring the rebate to what it was," she said.
She argued the private sector was an integral part of the public health system, and that elective surgery wait times would blow out without proper investment in private care.
"Throwing money at public hospitals is not the answer, there is no guarantee it will translate into more patient care."
Reform enthusiasts want the rebate ditched
Giving private health insurers more money is a terrible idea, according to experts like Jennifer Doggett from the Australian Health Care Reform Alliance.
- The Coalition introduced changes to the private health system in April, which offer tiers for hospital products
- Insurers can now also offer consumers a choice — a larger excess in exchange for a lower premium
- The Government has made it clear that the patient rebate isn't going anywhere
She said the Government already spends too much money on subsidies and doesn't need to spend more.
"There's no question that's an incredibly bad use of funding," she said.
"The question we have to look at, from a consumer's perspective, is given we're investing these billions of dollars, would we get better value in terms of health outcomes, services provided, consumer needs met, if we took that money and put it into health care in a different way?
"We need to have a process and look systematically at where our health priorities are and where the money should be spent."
Tim Woodruff from the Doctors Reform Society agreed, saying private health insurance subsidies should be gradually decreased.
- In the lead-up to the election, Labor said private health insurance was turning into a con, attacking the big funds for lifting their premiums each year
- It wants a Productivity Commission inquiry into private health insurance
"Our industry covers about 45 per cent of Australians, but does it need to?" Dr Woodruff said.
"Private health insurance could be reduced to a smaller industry that caters for people who want that choice, who want that fancier facility."
Dr Woodruff said as the rebates were wound back, the Government should direct savings to the public system, particularly in the areas of preventative health and dental care.
Can we ditch the private sector?
Simply put — no.
Every country with a functioning universal health care model also has an adjoining private health sector.
But the way the sectors engage varies dramatically from country to country.
Some countries, like the Netherlands, require all of their citizens to purchase basic private health insurance.
Others, like Canada, use private insurance to supplement the public system, where many citizens buy private health insurance to cover things that the public plan won't.
Australia's system is different again.
It was designed to be complementary to the public health system, where residents purchase private health insurance to have more choice — choice of doctor, services used or timing of appointments.
But a key point of the Grattan Institute report was that the purpose of private health insurance in Australia now isn't clear.
Some argue it's shouldering the burden of a struggling public hospital system, while others say it's a complementary part of the public system.
People unsatisfied with their insurance
Dr Bartone says, ultimately, people are walking away from health insurance because they're not happy with the product.
"Australians are very clever, they realise when they're being sold a dud," he told the National Press Club.
"So if you bring value back to the system, if you bring transparency, if you bring certainty of experience, people will retain their health insurance."
Underlying the argument about whether private health insurance is value for money is the argument about whether subsidising the industry is value for taxpayers.
The AMA and private health insurers say it is, but other experts like Dr Woodruff and Ms Doggett say it's not.
Despite the doom and gloom that's been forecast, we have a little more time for discussion.
Collectively, Australia's private health insurers raked in nearly $24.4 billion in the year to March, while the net profit after tax was $1.37 billion.
Death may be coming, but it's not imminent.
Topics: health-insurance, government-and-politics, health, australia
Contact Stephanie Dalzell
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