Earlier this week I penned a piece questioning whether the private health system was delivering Australians value for money and whether spending taxpayer money in this way was superior to expanding funding to the public system?
This post arose after it was reported that almost 70% of Aussies with private health insurance have considered dumping or downgrading their cover over the past year due to escalating premiums and the perception that they are being ripped-off.
Yesterday, the debate over the cost of private health insurance amped-up with an international comparison of premiums confirming Australia is among the highest cost markets in the world for private health cover. From The Canberra Times:
Bupa, which originated in Britain, charges a British family with two adults and two children $170 a month for its top cover, according to its online quote.
In Australia, Bupa would charge the same family $588 a month…
Britain and Australia both spend roughly 9.0 per cent of GDP on health.
A family looking for top cover in New Zealand could expect to pay $300 less a month than in Australia and the same family in Ireland would be almost $175 better off.
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The OECD’s Health at a Glance Report 2015, released last November, also noted that Australians spend more on out-of-pocket health care costs than the OECD average:
Out-of-pocket costs account for 20% of expenditure on health care in Australia, slightly higher than the OECD average of 19%. By contrast, out-of-pocket costs account for only 10% of health spending in the United Kingdom, 13% in New Zealand and 14% in Canada, which have similar governmentfunded health systems. Out-of-pocket costs also comprise a low proportion of health spending in France (7%), whose health system is largely funded by social security. The share of health expenditure made up by out-of-pocket costs increased in Australia by 1% between 2008 and 2012.
Nevertheless, the OECD also shows that Australia performs well in terms of overall population health status. At 82.2 years, life expectancy is the sixth highest in the OECD. The below charts summarise the situation, with Australia presented in red against the OECD average (blue):
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Australia also achieves good outcomes efficiently. Overall health expenditure is 8.8% of GDP, which is just below the OECD average of 8.9%. Public health expenditure is lower again at just 5.9% of GDP versus the OECD average of 6.5% of GDP. Again, the below charts summarise the situation, with Australia shown in red and the OECD average in blue:
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So it’s not all bad news.
But given the 2015-16 Budget Papers showed that the cost of the private health insurance rebate will rise from $6,228 billion in 2013-14 to $7,061 billion by 2019-20, it does leave open the question of whether Australia’s private health system is delivering value for money versus spending these funds on the public system?
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
