Restore rebate in budget and curb public patient poaching – APHA

The Australian government can reduce the cost of private healthcare and improve public-sector performance by making key reforms in the 2020-21 Federal Budget, says Australian Private Hospitals Association (APHA) CEO Michael Roff.

APHA has recommended restoring the private health insurance rebate for the lowest earners and curbing public hospitals’ practice of chasing privately-insured patients, as part of eight major measures in its Federal Budget Submission 2019-20.

“We believe these reforms could make a real difference and make private health insurance more accessible,” Mr Roff said.

Restoring the insurance rebate to 30 percent for low-income households – which make up 75 percent of all policy holders – would not only stop the ‘double whammy’ of rising premiums and decreasing tax allowance but also help address the trend of falling subscriptions, the APHA report said.

The base rebate has dropped every year since, down to 25.1 percent, meaning that these consumers face higher costs despite the industry’s average increase dropping from a high of 6.20 percent in 2014-15 to a projected 2.92 percent in 2020-21.

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“This tier has the greatest influence on private health insurance participation, shaping the trends that determine the sustainability of private health insurance,” the submission stated. “Yet current policy settings mean these households are the most affected by upwards pressure on health insurance premiums, even though they are the least able to absorb them.”

Restoring the rebate for households in the lowest income tier to 2013-14 levels – 30 percent for people under 65; 35 percent for 65 to 69-year-olds and 40 percent for 70-year-olds – would cut their premiums by between 2.02 percent and 3.67 percent, according to APHA.

Stopping public hospitals from ‘harvesting’ private patient revenue could save health insurers $1.5 billion each year and reduce premiums by six percent.

It would also free up significant resources – nearly 15 percent of public hospital beds were taken by private patients in 2017-18, while more than 100,000 elective and emergency surgeries on private patients took place in public facilities, Australian Institute of Health and Welfare data showed.

APHA calculated that making the following reforms in the next national hospital funding agreement would save $380 million each year in reduced rebate payments:

• Remove the rebate on ‘public hospital only’ (basic tier) policies, as these products only provide access to public hospitals.
• Remove the obligation for private health insurers to pay for private patients treated in public hospitals.
• Strengthen patient election provisions.
• Remove financial incentives for public hospitals to admit insured patients ahead of public waiting-list patients.

Reform is also needed for the Lifetime Health Cover (LHC) loading, which was an effective incentive for those aged under 31 to take out private insurance when it was introduced in 2000 – but is now proving to be a deterrent.

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“Reform of this policy is a complex task because of the need to recognise that many people are liable for this loading or have been liable for it in the past,” the APHA submission said. “Failure to do so, however, may result in a blowout in the number of uninsured people in higher age groups and an unsustainable burden on the public health sector.”

To address this, APHA recommended adjusting the LHC entry age, reducing the penalty level, and providing a 12-month amnesty so people over 31 can take out private health insurance without being penalised.

Other major reforms in the submission included reducing avoidable hospital admissions by increasing remuneration for hospital-based pharmacies, whose sustainability has been impacted by price-disclosure rules and recent legislation. These cuts have reduced the ability of hospital-based pharmacists to support patients at risk of medication-related complications.  

APHA said at least half the $1.4 billion annual cost of these 650,000 hospital and emergency department medicine-related admissions could be avoided.

It also urged the government to address workforce regulations – which have made it more costly for employers to bring in skilled migrants to fill specialised positions that the local job market cannot cover – and to provide funding for the required clinical placements that current trainees do not have access to.

Other issues addressed in the submission include:

• Doubling the Medicare Levy Surcharge to properly incentivise high-income Australians to take up private health insurance and relieve pressure on the public system
• Upgrading IT software to relieve the administrative burden of private health insurance reforms
• Increasing clinical placement funding for medical, nursing and allied health professional graduates.

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