Private health system struggles despite increase in insured population

AMA has called for long-overdue reforms to be implemented to ensure Australians get value for money from their insurers and the system remains sustainable amidst deep-rooted problems in private health care.

An increase of more than 500,000 people taking out private health insurance over the past 18 months can’t mask deep-rooted problems in private health, including soaring private health insurance management costs and fewer young people joining.

AMA President Professor Steve Robson said despite more than 513,000 extra people taking out private health insurance since September 2020, 40 per cent were over 60 years old and only 6 per cent were aged between 20–39 (24 per cent were aged 40-59).

“Private health insurance is more than a straight numbers game. What we are seeing is the members joining are typically older with more complex health needs, while very few younger people are signing up,” Professor Robson said.

“We know a large contributor pushing people into insurance is serious concern and fear over the logjam in our public hospitals, rather than any major reforms to affordability or value improvement in private health insurance,” he said.

“This is not a long-term recipe for a sustainable private health system, which is why we are calling on the government to restore the private health insurance rebate for targeted groups to make private health insurance affordable.”

The AMA released its Repeat Prescription for Private Health Insurance, as part of its 2023 federal budget submission on private health, which calls for long-overdue reforms to be implemented to ensure Australians get value for money from their insurers and the system remains sustainable.

“The private health sector is an essential pillar in Australia’s health system, and we need to ensure it remains attractive to younger Australians and provides value for everyone,” Professor Robson said.

“We need to have more money flowing to improving patient health outcomes and less going into management expenses of insurers, which have increased by more than 16 per cent, while expenditure on medical services has gone backwards over the past three years. That’s why the AMA would like to see a minimum payout, with 90 per cent of every premium dollar paid returned to patients.

“There are immediate changes that can be made to ensure private health delivers value for consumers and meets the needs of our ageing population and increased levels of chronic disease, including changes to the Lifetime Health Cover loading and penalties, especially the starting age to make it an easy choice for Australians to stay in PHI for life.

“We would also like to see a review of the way penalties ramp up for late entrants so that those who do the right thing by joining early aren’t disadvantaged, and so premiums remain under control.”

The AMA is also calling for default benefits to be retained to ensure patients are protected even if their insurer has no contract with the hospital, and for funding and accreditation systems to allow providers to roll out more innovative and flexible health programs.

Professor Robson said the AMA was continuing its call for an independent Private Health System Authority to fill the current gap in regulation and oversee the private health system.

“Under current arrangements no one has looked at the bigger regulatory picture to gauge the impact of ad hoc changes or balance the interests and needs of day hospitals, private hospitals, private health insurers, medical device manufacturers, doctors, and most importantly patients. A Private Health System Authority would ensure a cohesive regulatory model and safeguard patient choice, which is central to its value proposition alongside speed to entry and doing so without adding more red tape.”

“If we truly want reform, if we are committed to introducing new models of care, and if we are going to make insurance affordable in an era of cost-of-living increases, we are going to need to come together as an industry — with government — to make that change. A Private Health System Authority can be the mechanism to make that happen.”

Ritchelle Drilon

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Ritchelle is a Content Producer for Healthcare Channel, Australia’s premier resource of information for healthcare.

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