Calls for private health insurance overhaul ahead of May Budget

MedTech & Diagnostics News: Australia’s private health system is in dire straits, with soaring management costs and fewer young people joining. Ahead of the May Budget, the AMA is calling for changes to the private health system in order to ensure it is delivering value to consumers, reducing the pressure on the public health system and meeting the needs of an aging population with increased levels of chronic disease.

AMA President Professor Steve Robson said despite more than 500,000 people taking out private health insurance since September 2020, 40% were over 60 years-old and only 6% were aged between 20–39 (24% were aged 40-59).

“Private health insurance is more than a straight numbers game. What we are seeing is the members joining are typically older with more complex health needs, while very few younger people are signing up,” Professor Robson said.

Private insurance premiums have risen three times more than the rate of wage growth between 2011 and 2019 – 30% increase in premiums compared to an 8% increase in wage, after adjusting for inflation. High premiums and unexpected expensive out-of-pocket costs have reduced the value of private health insurance for many Australians, especially for the young and the healthy.

“We know a large contributor pushing people into insurance is serious concern and fear over the logjam in our public hospitals, rather than any major reforms to affordability or value improvement in private health insurance,” he said.

“This is not a long-term recipe for a sustainable private health system, which is why we are calling on the government to restore the private health insurance rebate for targeted groups to make private health insurance affordable.”

In a survey conducted by the University of Melbourne and Melbourne Institute of Applied Economic and Social Research, 76% of people who identified as not having private health insurance but being able to afford it, gave “premiums too expensive/out of pocket costs too high” as the main reason for not having private health insurance.

The government continues to subsidise the private health insurance industry, costing Australian taxpayers nearly A$7 billion per year, with the hope that this may reduce the burden on the public system and reduce waiting times. But there is not much evidence to support this.

In fact, there are almost 100,000 patients on the NSW elective surgery waiting list, according to the recent Bureau of Health Information (BHI) report.

The AMA’s pre-budget submission calls for long-overdue reforms to be implemented to ensure Australians get value for money from their insurers and the system remains sustainable.

“The private health sector is an essential pillar in Australia’s health system, and we need to ensure it remains attractive to younger Australians and provides value for everyone,” Professor Robson said.

“We need to have more money flowing to improving patient health outcomes and less going into management expenses of insurers, which have increased by more than 16%, while expenditure on medical services has gone backwards over the past three years. That’s why the AMA would like to see a minimum pay-out, with 90% of every premium dollar paid returned to patients.

“There are immediate changes that can be made to ensure private health delivers value for consumers and meets the needs of our ageing population and increased levels of chronic disease, including changes to the Lifetime Health Cover loading and penalties, especially the starting age to make it an easy choice for Australians to stay in private health insurance for life.

“We would also like to see a review of the way penalties ramp up for late entrants so that those who do the right thing by joining early aren’t disadvantaged, and so premiums remain under control.”

The AMA is also calling for default benefits to be retained to ensure patients are protected even if their insurer has no contract with the hospital, and for funding and accreditation systems to allow providers to roll out more innovative and flexible health programs.

To ensure a cohesive and balanced regulatory model, the AMA is advocating for an independent Private Health System Authority that would safeguard patient choice and balance the interests and needs of day hospitals, private hospitals, doctors, medical device manufacturers and private health insurers.

Michael Roff, CEO of Australian Private Hospitals Association (APHA) told Health Industry Hub “We’re not ruling out AMA’s proposal, but the devil would be in the detail. There are a lot of bodies involved from the Health Department and that’s before you even get down into what’s happening on a state level. It would be quite a job to come up with something that satisfies everybody and addresses the real challenge of determining what the objective of this Authority would be.”

Professor Robson stated “If we truly want reform, if we are committed to introducing new models of care, and if we are going to make insurance affordable in an era of cost-of-living increases, we are going to need to come together as an industry – with government – to make that change. A Private Health System Authority can be the mechanism to make that happen.”

In reimagining healthcare, Health Industry Hub^TM is the ONLY one-stop-hub uniting the diversity of Pharma, MedTech, Diagnostics & Biotech sectors to inspire meaningful change. The exclusive leadership and influencer podcasts and vodcasts offer unparalleled insights and add immense value to our breaking news coverage.

The Health Industry Hub^TM content is copyright protected. Access is available under individual user licenses. Please click here to subscribe and visit T&Cs here.