Calls to allow insurers to charge higher premiums for the sick

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The rising cost of private health insurance and skyrocketing out-of-pocket costs will keep the system in a death spiral until the public and private sectors are better integrated and funds can charge higher premiums to those with chronic health conditions, according to new research.

A paper written by a team of international actuaries urges Australia to look offshore for ways to improve the healthcare network and advocates for rebates to support those in need rather than the current income-based rebates on private health insurance premiums.

It calls on the Government to relax the rules that prevent insurers from charging higher premiums to those with chronic health conditions – with the Government funding the difference. The result, it says, would be cheaper premiums for the young and healthy and a greater uptake of private insurance. And it could be budget-neutral if the Government diverted some of the $6 billion worth of health insurance premium subsidies it gives Australians based on their incomes, The Age reports.

The paper, Private Health and Health Care Financing – Learning from the World, says our healthcare system compares favourably to other developed countries but identifies areas for improvement.

“Australia’s high out-of-pocket expenses and health cost growth suggests a need to review the health system to ensure sustainability for future generations,” the paper says.

The Government spent $185.4 billion on health services and products in 2017-18 or $7485 per person, according to the Australian Institute of Health and Welfare (AIHW). And patients spent $3.9 billion on out-of-pocket hospital expenses in 2017-18, up $560 million or 17 per cent over the previous financial year and quadruple the amount spent a decade earlier.

Specialist out-of-pocket costs increased by almost $200 million in 12 months, and GP out-of-pocket costs rose by $38 million.

The healthcare paper was written by Medibank chief actuary and Monash University Associate Professor Andrew Matthews; Medibank deputy chief actuary Adam Stolz; former Chile Ministry of Health adviser Josefa Henriquez, and University of Newcastle professor of health economics Francesco Paolucci.

It examined health systems in 12 comparable countries and ranked Australia second in overall performance, after the UK and ahead of the Netherlands. It rated our out-of-pocket costs as high, at about 17 per cent of total national healthcare costs.

The paper says Australia’s total share of healthcare costs as a percentage of gross domestic product is not expensive at 10.3 per cent, compared with the US at 17.2 per cent, and Switzerland, Germany and Japan at 12.4 per cent, 11.3 per cent and 10.9 per cent respectively.

But around 16 per cent of Australians reported that they had skipped a medical consultation because of costs, compared with an OECD average closer to 10 per cent (ranging from only 2.6 per cent of Germans to 22.3 per cent of Americans).

Mr Matthews gave the example of a patient who needs mental health treatment but struggles to access services.

“If a good way of dealing with it is to have the private system provide that service, then we have to fund that, whether through private health insurance or some other way, but not from the individual – because it’s too costly,” he told The Age.

“Let’s stop thinking of it as subsidising a private system and think about it as how much are we willing to subsidise a person to get the treatment they need.”

Grattan Institute health economist Stephen Duckett said the proposal was worth considering, but that any changes should not amount to “a disguised further subsidy for private health insurers”.

Are you hanging in with private health insurance? Or have you been forced to dump it?

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Written by Janelle Ward


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