Latest submission to Senate on private health insurance.
The following is an edited and condensed extract of the AMA’s submission to the ACCC report to the Senate on private health insurance.
In Australia, the public and private systems work together as a part of a health system that provides patients with universal access to affordable health care. The balance between the private and public system cannot be overlooked.
The private health sector is a large contributor to the system. In 2014-15, 42 per cent of all hospital separations were funded by private health insurance; where 50 per cent were public patients and the remainder were self-funded. Not only is it a large contribution, but it is a cost effective one. In 2014-15, there were 4.1 million privately insured hospital separations for approximately $12 billion in outlays, or around $3000 per separation, compared to 5.9 million separations in the public sector for a combined government outlay of $48.1 billion (or $8,100 per separation). While the service mix and complexity may differ between the sectors, the private sector very efficiently complements the public sector. If consumers withdraw from the private sector, these services will need to be provided by the public sector. Under current capacity, the public sector will either not meet the additional demand, or will only do so at a higher cost to governments.
We need to ensure that as private health insurers interact with patients and hospitals, the underpinning regulation promotes the efficient supply of health services. Private Health Insurance (PHI) has specific features that make the design of efficient regulation especially complex. This is further compounded by the specific historical development and place of PHI in the Australian context – as a form of supplementary insurance to Medicare, with the primary purpose of providing private hospital cover. Current regulation, as well as defining the scope of the cover PHI provides, includes restrictions on premiums through Community Rating and Lifetime Cover, means-tested subsidies for PHI take-up (the PHI rebate which is among the top 20 most expensive Federal Government programs), along with means tested tax penalties (the Medicare Levy Surcharge) for the failure to take out cover, and price controls over increases in PHI premiums.