The participation of younger people in private health insurance (PHI) needs to be better incentivised to stabilise premiums for everyone, says Dr Rachel David, CEO of Private Healthcare Australia which represents private health insurance funds in the country.
She said this in a submission to the government ahead of the 2020-21 Budget address scheduled to be delivered on 6 October 2020. The annual Budget speech has been postponed to this date to provide more time for the economic and fiscal impacts of COVID-10 to be better understood. Since 1994, the Treasurer has presented the Budget on the second Tuesday in May, with exceptions made in some years.
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Dr David said that working middle-income families with young children are bearing a disproportionate share of the cost of private health as they cross-subsidise a large, baby-boomer cohort, who at the average age of 72 are claiming record numbers of procedures.
She said that providing subsidies to private health insurance is the most cost-effective way for the Australian government to support the growth in hospital and health services over the coming decades.
Subsidies for private health insurance-funded services cost the Commonwealth Budget around 30 cents in the dollar. The alternative, providing more services in public hospitals, costs the Commonwealth Budget 45 cents in the dollar.
In addition, the government should look at a possible fringe benefits tax exemption for private health insurance premiums for people aged under 40.
Out-of-hospital costs
The submission also says that there is a need to address one of the key frustrations consumers have with private health insurance and permit health funds to pay for health care out-of-hospital on a broad scale.
The rules confining health funds to hospital care were conceived in the 1970s, when health technology and even diseases were different.
Today, many forms of treatment of chronic diseases can be safely managed by health professionals in the community or in patients’ homes.
Escalating premiums
The submission highlights as well the need to protect Australians from escalating premium costs caused by fraudulent and wasteful claims.
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In particular, steps must be taken immediately to remove the Soviet-era fixed price regulation of prostheses (medical implants) by the Commonwealth and improve the quality and safety regulation of medical implants in line with the Pharmaceutical Benefits Scheme (PBS).
There is also a need to address regulatory incentives for in-hospital care, and the second-tier default benefits that increase the cost of care and penalise both patients and high-quality hospitals.
Dr David said, “There are challenges, they are fixable, and it’s time for action.”
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