Reform needed to keep health affordable

This year’s Budget was eerily quiet for the private health insurance sector given the amount of attention it has had from both sides of the political fence in recent months.

No doubt the upcoming federal election will cast a spotlight on health and the industry, with Labor already voicing it will cap premiums and launch a Productivity Commission Inquiry into private health insurance if elected.

The Turnbull government has also been busily formulating a raft of recommendations, which will see the introduction of Gold, Silver, Bronze and Basic product categories in April 2019. These changes centre around being more transparent and simpler for prospective members to understand. You can rest assured that St.LukesHealth has been representing its members interests at all stages of the process through representation on various committees at the federal level.

After considerable evidence of inflated product pricing was presented to the government by private health insurance funds, it also introduced minimum benefits payable for most medical devices on the Prosthesis List, which is expected to save insurers more than $1 billion between 2018 and 2021, with these savings to be used to minimise the level of premium increases going forward.

The need for reform is inevitable if private health insurance is to survive in the future and St.LukesHealth fully supports this process, but the aim of this reform needs to be squarely aimed at improving the affordability of the health system, including members of private health insurance.

With the health cost inflation continuing to grow at a rate of 6 to 7 per cent per annum, this puts enormous pressure on the private and public systems to fund such increases through premiums, taxes and the Medicare levy.

 This has been acknowledged by government with its recent decision to increase funding to public hospitals by 6 per cent per annum for the next three years. With respect to St.LukesHealth, members can be reassured that as a not-for-profit fund any surplus is directed back to its members keeping premiums as low as possible, whilst as a whole the private health industry delivered its lowest premium rate rise in 17 years at 3.95 per cent.

Last financial year, St.LukesHealth returned 92 per cent of premium revenue back to members in the form of benefits paid, compared with just 84 per cent by the big three for-profit funds and only 65 per cent by general insurers.

Achieving meaningful health cost reform should be the top of each political parties’ agenda, with more than 13.5 million Australians having some form of private health cover, and over 80 per cent of this cohort believing they receive value for money, as it provides peace of mind, a choice of hospital and clinicians and gives members a timeframe in which they can receive treatment.

Contrary to the belief that private health insurance is only for the wealthy, almost half of all people with private health insurance have an annual income of $50,000 or less.

In Tasmania, just under one in two people take out private health insurance, meaning that while wages are stagnant and cost of living pressures continue to rise, people are putting the value of health insurance above other luxuries in life.

Private health funds pay for two thirds of essential planned surgery, most mental health admissions to hospital and 40 million dental services.

In monetary terms, private health insurance contributes about $20 billion on behalf of insured members to the Australian healthcare system - a 4.5 per cent increase on the previous year.

As a not for profit health fund, the only reason premium costs rise is because the costs of medical devices, hospital accommodation, fees charged by medical specialists and providers continues to rise.

 Add to this an ageing population that is living longer because of medical advances, and little wonder why the health system is under pressure. This is even more of a challenge in Tasmania which has one of the oldest age profiles of any state and also one of the highest disease burdens which presents its own challenges to St.LukesHealth and the public system.

Labor has recently said it would cap private health insurance premiums at 2 per cent for two years if it was to get elected but those within the industry say this approach will more than likely lead to higher increases once the cap was lifted. Unfortunately, this type of reform does nothing to alleviate cost pressures on the health system and thus will have no meaningful impact on the problem we face.

I’m sure all Australians would agree that both sides of politics need to stop politicising the health debate as a way of winning votes and work on sustainable long-term solution to tackling the ever-increasing cost in the health supply chain.

We have great people in all parts of our health system, however we need meaningful, well thought-out reform and both the private and public sectors working together to provide an affordable health system that we all can access, afford and rely upon. With great leadership and a single focus, we can do it. 

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