24th Aug 2018
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Will baby boomers break the system?
Author: Olga Galacho
Will baby boomers break the system?

Every 1 April, those of us with private health insurance hear one piece of news that we wish really was an April Fool’s Day joke – the announcement of a big increase in premiums.

This year, the hike was on average 3.9 per cent which, when grouped with medical services, was the biggest contributor to the June quarter inflation.

Australian Bureau of Statistics figures show that the Consumer Price Index (CPI) rose 0.4 per cent in the quarter. The category that increased inflation the most was health (1.9 per cent).

Retired Australians are among the biggest group with private health insurance. In YourLifeChoices’ Retirement Income and Financial Literacy Survey 2018, 71 per cent of respondents said they had private health cover. While they said the rising cost of insurance was a major burden on their budgets, they were still anxious to retain their cover.

Older Australians are heavy users of the health system. Those aged 65 and older comprise just 14 per cent of the population, according to the 2016 Census, but account for 28 per cent of the 123 million claims for GP visits in 2014–15.

In addition, of the 12.5 million specialist visits claimed through Medicare in 2014–15, 43 per cent were lodged by those aged 65 and over.

The Australian Council of Social Service (ACOSS) believes that affordable health and aged care are just as important in retirement as a decent income.

ACOSS senior adviser Peter Davidson says: “It’s vital that we avoid a two-tier healthcare system – one for the top half of the population and another for the bottom half, of the kind that has long existed in the United States and still exists in dental care in Australia.”

He says the challenge for governments is how to pay for the inevitable increases in the cost of existing healthcare programs given increasing longevity, while closing the worst gaps in services, such as dental and mental health services and the National Disability Insurance Scheme (NDIS).

“The Parliamentary Budget Office estimates that to maintain existing commitments in health, aged care and the NDIS, governments will need to spend an extra $21 billion a year by 2027,” he says.

The Australia Institute senior economist Matt Grudnoff says that low-income households traditionally spend a larger proportion of their income on essential goods, but that this principle breaks down when it comes to healthcare.

Healthcare can easily be regarded as a necessity, he says, but lower-income households view it as a non-essential category that they can cut back on because their budgets won’t stretch that far. As a result, a greater burden is placed on those who can afford to pay.

Mr Grudnoff says that in the past 30 years, the CPI has doubled whereas healthcare costs are 3.7 times higher.

He also warns of the dangers of a two-tiered system and questions the Government’s strategy.

“In recent decades, Australia has reduced its emphasis on direct government spending on specialised healthcare and has increased indirect funding of that area by subsidising private health insurance. Effectively, the Government has substituted spending on Medicare for subsidies for private health insurance.

“It might be time for the Government to consider if it is getting a big enough benefit from this strategy or if the $6.4 billion it will spend on subsidies to private health insurers next year might be better put directly into the healthcare system.

Aged Care Steps director Louise Biti recommends that senior Australians consult a financial adviser to help them plan for the potential high cost of healthcare later in life.

“Having adequate savings opens up your choices and your ability to control the level and type of care you receive,” she says.

“While we don’t know what our future holds, with some planning, we can help make our retirement a comfortable one. For example, we could ensure we have a safe and secure income in place for life. This might be pension income, lifetime income streams or drawdown strategies from other investments.”

Financial planner and founder of MyLongevity.com.au, David Williams, says that while we can’t predict how long we will live or what health issues may crop up later in life, it is possible to make informed calculations.

He has developed a free tool called SHAPE, which analyses your personal factors, current health and daily habits to give an indication of your life expectancy.

“There is no plan without a timeframe and the best timeframe is the one that you develop for yourself,” he says. “You can then have a constructive conversation with your financial adviser – just as you will have had with your medical adviser.

“Understanding more about the chapters in your longevity is a step towards taking more control of your life and achieving a more fulfilling future.”

Have you planned to retain your private insurance cover for life? Do you have an emergency fund for a health scare? Is the system a bit broken?

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    COMMENTS

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    VicCherikoff
    24th Aug 2018
    10:49am
    My option is to avoid modern foods and supplement my diet with wild and near wild foods which are so much richer in antioxidants, anti-inflammatories, anti-allergens, adaptogens, anticarcinogens, live enzymes, bioavailable minerals, good sugars, organic acids and more.

    If you consume rubbish foods (processed foods and even our fresh produce these days) then you are sure to end up relying more on the medical and pharmaceutical industries as you age (and age faster).
    jackie
    24th Aug 2018
    11:27am
    I agree with you and avoid drugs unless they are really necessary. Younger generations don't cook and eat out all the time. Their health will pay later. Prevention is better than cure.
    Ted Wards
    24th Aug 2018
    12:47pm
    That's a very a sweeping generalisation Jackie. I know many who actually never go out and eat very healthy food because they can't afford to go out a lot and whom would never touch things like macdonalds and KFC.
    Sundays
    24th Aug 2018
    11:14am
    Doctors over prescribe and send too many people for tests which come back negative. A review in this area would save a lot of money. My father was on a raft of tablets and he forgot what they were all for. With the help of the pharmacist he cut them all back to a couple of essentials. Lived to 89, passed peacefully
    MICK
    24th Aug 2018
    11:46am
    Many Australians are their own worst enemy where health is concerned.
    Bad and/or damaging lifestyle, seeing the doctor when 2 days in bed would achieve the same result, over prescription and hypochondria all account for a health bill the country does not need to have.
    Reeper
    24th Aug 2018
    12:01pm
    If the Public Healthy System can't handle an aging population then it needs a massive injection of money and resources. Government after Government (from all sides of politics) have played with Medicare, very badly. No Australian should need Private Cover for essential care if they have paid taxes.
    Rae
    24th Aug 2018
    1:28pm
    Yes Reeper and clinics and hospitals staffed as public facilities with public servant salaries would help. Including specialists.

    There is no reason for the excessive fees and charges other than greed and nothing stopping the Doctor's Union.
    Rae
    24th Aug 2018
    1:25pm
    The system was broken when it was semi privatised to support insurance companies instead of health.
    Letting the doctor's union ramp up costs and control supply hasn't helped either.
    Also a lot of older people go looking for a magic pill with every twinge and sniffle especially the ones who get it all for free from the taxpayers.

    Yes they'll break the system as the fail to afford the insurance and keep looking for a lost youth through the magic pill option.
    patti
    24th Aug 2018
    3:17pm
    There is already a 2 tier health system i Australia. If you have enough money, you pay high premiums to health funds, and get into hospital quickly, but you have generally to pay a prohibitive gap fee.
    If you don't have spare money, you get treated in the public health system, where you can languish on a waiting list forever, and possibly die waiting. This is fact
    MD
    24th Aug 2018
    8:46pm
    Of course it's a 2 tier health system, you either pay up or put up with the queue on the public list. Part of the problem may be some people's expectations which stem from the fact welfare isn't designed to meet the plethora of each individuals' ailments - a good many of which might well be the result of earlier poor choice... or simply stupidity. Pointless envying the wealthy their ability to sashay to the head of the queue - they pay full fare - so as a matter of-course the quack's favour them.

    Yes, the health system is doomed to bog down under the sheer weight of admissions due to old farts fully expecting to live forever and - needless to say, their idea of - "Entitlement".
    Knows-a-lot
    24th Aug 2018
    5:40pm
    The health system is broken already; and private health insurance is just a scam.
    George
    24th Aug 2018
    11:04pm
    In a nutshell, yes!
    George
    24th Aug 2018
    8:44pm
    Same old topic being repeated under a new heading trying to make baby boomers feel guilty!
    Hence, same answer as before.

    Matt's comment “It might be time for the Government to consider whether the $6.4 billion it will spend on subsidies to private insurers next year might be better put directly into the healthcare system” is his own.

    The two-tier system is a valid approach to give CHOICE, otherwise it would be a Communist system (something ACOSS / Peter Davidson would like) with no choice and some people may end up suffering pain / dying waiting in queues!

    However, BOTH Medicare and the Private Health Insurance (so-called, but only paying limited amounts back, thus not bearing the Risks) are BROKEN.
    Medicare must pay reasonable fees to Medical Specialists, but then also insist on Capped fees with say max 25% extra allowed based on experienced / experts being able to charge.
    Private Health Insurance MUST pay for ALL Gaps, not some or partially, even Pharmaceuticals gaps - then we can call it an Insurance system.

    We also need competition, hence import as many more Medical Specialists as needed to get this competition going.

    May a RC is needed urgently into the whole Medical system MESS, as politicians don't seem to have a spine for real reform actions!
    MD
    24th Aug 2018
    9:12pm
    What, another Royal Commission, get over it George, you and your ilk have got a bee in your bonnet about anything/everything needing the heat of an RC blowtorch turned up and applied to it. If I didn't know otherwise I'd swear macca's had a special on 'Get an RC with fries' on offer, it seems to be the universal panacea first and foremost on everyone's mind these days. Rc's cost squillions and bye and large the winners happen to be the close knit legal fraternity, the public meanwhile scavenge over the crumbs brushed from the tables of their fee for all banquet.

    Competition's a good thing, you may have something there, good luck getting gubbermint to call another RC to convince the Quacks of the need for same.
    George
    24th Aug 2018
    11:03pm
    There is nothing to get over, as I suggested RC "maybe" - I am not a RC fan as such, but given the complete lack of spine among our politicians (also too complex for them to figure out what to do with all their ideologies), the strangle-hold of Medical Unions over price-setting & Supply of services, the broken Medicare system which leaves large gaps, and the greedy out-of-control Private Health Insurance (so-called, not really insurance) providers - I can't see any way out for the people and maybe (just like in the Banking case) a RC will spell the problems out for some politicians to finally listen.


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