Funds blame an ageing population and a failure to attract new members.
The likelihood of limiting next year’s private health insurance increases to an average three per cent has been labelled “extremely challenging” with “hefty” increases forecast.
That’s the view of Private Healthcare Australia chairman John Hill. He was reacting to news that Health Minister Greg Hunt, who had been aiming for a three per cent ceiling, had hit a significant hurdle due to the cost of such devices as knee and hip replacements soaring by 8.6 per cent.
Australians with private health insurance would face hefty premium increases next year that were likely to be twice the rate of inflation, Mr Hill said.
“Without putting downwards pressure on those costs (medical devices), you can’t put downward pressure on premiums,” Mr Hill told The Age. “It’s simple mathematics.”
Insurers would have “no other option” but to pass on their rising costs to consumers, he said.
In November, private health insurers will submit their proposed premium hikes, which must then be approved by the Health Department. Mr Hunt will announce the approved price increase in late December, with new premiums to apply from 1 April.
An increase of 3.2 per cent would be double the current rate of inflation.
Industry experts warn that the private health industry is in a “death spiral” with increasing numbers of younger Australians dropping their coverage due to cost and a perceived lack of value.
Data from the Australian Prudential Regulation Authority (APRA) shows 65,000 fewer Australians had health insurance in December 2018 compared with a year earlier.
“Inflated prices for established medical technologies must come down in line with the rest of the world,” Mr Hill said on Wednesday.
“The most commonly used implants – cardiac stents – are five times the price in Australia as in New Zealand.”
The Age reports that insurers agreed to this year’s average premium increase of 3.25 per cent – down from 3.95 per cent in 2018 and the lowest increase in 17 years – on the basis that a deal struck by Mr Hunt with the Medical Technology Association of Australia (MTAA) would slash device costs by $250 million this year, with a total of $1.1 billion to be saved by 2021.
This has not happened and costs have risen by 8.6 per cent this year.
MTAA chief executive Ian Burgess said that the volume growth was “as anticipated” due to new medical device technologies being added to the government’s prostheses list and an ageing population.
“That compares with a 10-year average of 7.8 per cent. It’s not a significant increase,” he said.
Medical devices, including joint replacements, insulin pumps and human tissue items such as corneas, bones and heart valves, make up eight per cent of insurers’ costs.
A spokesman for Mr Hunt said the government was implementing “the most significant improvements to private health insurance in over a decade” and that reforms had delivered record-low premium rises.
The Consumers Health Forum (CHF), meanwhile, says the possibility of further taxpayer help for private health funds requires a searching inquiry into the cost benefits for the whole health system.
Chief executive Leanne Wells said: “The lesson of history is that after 20 years of government subsidies and regulatory shelter, consumers have experienced years of above-inflation premium increases and shrinking coverage, while health funds profits have tended to remain buoyant.
“The pressure from health funds makes it timely for a thorough, independent inquiry by the Productivity Commission to examine the effects of private health insurance subsidies on the health system as a whole and how it serves the interests of healthcare for all Australians.”
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