Health insurance doom loop accelerates

Via the ABC:

The percentage of Australians with basic hospital cover has dropped to its lowest level in more than a decade, as almost 30,000 people dumped their policies in just three months.

The latest Australian Prudential Regulation Authority (APRA) data shows health premiums are still rising faster than wages, and out-of-pocket costs are continuing to bite, just one month after a report stated Australia’s health care system had become increasingly unfair, costly and confusing.

The proportion of the population with basic hospital cover dropped to 44.2 per cent — its lowest level since 2007.

That is an entire percentage point cent lower than the same time last year, and the equivalent of 28,000 people dumping their cover since March.

The figures also revealed health insurance premiums rose almost 2.8 per cent over the June quarter, once again outpacing inflation and wage growth.

The President of the Australian Medical Association Dr Tony Bartone said it was highly concerning.

“This is a continuation of the same trend, the same spiralling down trend we’ve been referring to for many months now,” he said.

“We need to address the issues underpinning this decline to ensure equity and access to the public health system.

“Our public health system is predicated on a specific amount of work being done on the private system — that is relieving a lot of pressure on public systems.

“If that was to fall over tomorrow, that would [create] an enormous burden, an enormous burden the public system could not cope with.”

The chief executive of the private health insurance industry’s peak representative body, Private HealthCare Australia, also said the figures were worrying.

“Of course it’s concerning, we know people are finding it hard to cover the cost of the premiums, and private health is perceived as expensive,” Dr Rachel David said.

But she pointed to the fact the percentage of benefits paid had risen by three per cent in the past quarter.

Out-of-pocket costs vary depending on where you live

The figures also revealed Australians are paying an average of $315 in out-of-pocket expenses every time they go to hospital, an increase of almost two per cent in 12 months.

Gap fees for specialists were an average of $151 — but varied greatly depending on location.

Australians from Canberra were charged much more for specialists, and paying an average gap fee of $271.40.

They were closely followed by those from New South Wales, who paid an average of $209.40 in out-of-pocket expenses, while those from South Australia paid the least — less than $70.

A horizontal bar graph broken down into each state and territory, with long dark green bars above smaller lighter green bars.

The Grattan Institute’s Health program director, Stephen Duckett, said there were a number of problems with the current system.

“People paying health insurance for years and years, suddenly need to use their health insurance, they go to hospital, and they end up with these surprise bills,” he said.

“Then they get really, really annoyed, and this doesn’t help the health insurance industry.

“People find they’re not covered and they drop out.”

Mr Duckett said while the Federal Government’s planned specialist fees website would go some way to helping patients avoid bill shock — it was not a silver bullet.

The website will list the costs of individual specialists in a bid to crackdown on doctors charging excessive fees.

“Transparency without a doubt is a good thing, it is really important consumers know what they’re going to pay,” Mr Duckett said.

“Unfortunately, transparency in health care is really hard to do.

In a statement, a spokesman for the Health Minister Greg Hunt said the Government was continually working to improve the sector.

“The Morrison Government is delivering the most significant reforms to private health insurance in over a decade, which is making insurance simpler and more affordable for Australians,” he said.

“Work has already commenced with the healthcare sector to identify and implement the next wave of improvements for private healthcare.”

As usual, fake reform. The percentage of Australians aged between 20 and 28 with private health insurance cover for hospitals fell by 6.9% (33,975 people) in 2018, according to data from the Australian Prudential Regulation Authority. The overall percentage of Australians with hospital cover at the end of 2018 was 44.6%, the lowest level since December 2006, whereas the percentage of over-90s with health cover rocketed. From The AFR:

It’s the fourth year in a row that APRA has reported a fall in rates of hospital cover, from its 2014 peak of 47.3 per cent. The rate is now at its lowest level since December 2006.

With the exception of 35 to 39 year olds, the percentage of every cohort up to age 64 with hospital cover fell, with 30 to 34 year olds seeing the second biggest drop, of 3.56 per cent.

The percentage for every cohort over age 65 increased, meanwhile, with cover for the high-risk 90 to 94 year old age band rocketing 8.8 per cent.

The latest data from APRA follows last week’s report from the Grattan Institute, which claimed that the private health insurance sector is in a “death spiral” because of the continued decline of people with cover:

Australia’s private health insurance industry fears it is in a death spiral, and politicians need to rethink whether or to what extent taxpayers should continue to subsidise the industry.

Australians are increasingly dissatisfied with private health insurance, and policy reform is urgent.

Premiums are rising much faster than wages or inflation.

People are dropping their cover, especially the young and the healthy. Those who are left are more likely to get sick and go to hospital, driving insurance costs up further.
Meanwhile, taxpayers subside the industry to the tune of about $9 billion every year: $6 billion for the private health insurance rebate, and $3 billion on private medical services for inpatients.

It’s inevitable that government will have to make tough decisions about whether more subsidies are the answer to the impending crisis.

The overarching question of whether the private health system is worth supporting needs to be thoroughly examined.

Every year, the Australian Competition and Consumer Commission (ACCC) releases its report to the Australian Senate on competition and consumer issues in the private health insurance industry. And every year, the ACCC finds that Australia’s private health insurance industry is characterised by market failures due to asymmetric and imperfect information, as well as significant complexity.

Premiums continue to rise every year, which comes at a direct cost to the federal budget of some $9 billion. Whereas the list of policy exclusions has also surged:

Accordingly, consumers are viewing private health insurance as poor value for money.

Still, successive governments – both Coalition and Labor – fail to articulate why Australians need a duplicate health care system, or why the federal government subsidies to private health insurance should be so substantial.

There is no evidence that private health insurance buys patients extra quality and safety. The Productivity Commission (PC) found that the larger, most comparable public and private hospitals had similar adjusted premature death ratios. Further, the PC found that the team-based care in large public hospitals also leads itself to better coordination of care.

International evidence also does not support the contention that private health insurance keeps medical costs down:

ScreenHunter_1766 Mar. 20 14.45

In fact, in Australia’s case, private health insurance might even raise overall health costs. This is because the high financial overhead of private insurance means that only 84 cents in every dollar collected by private insurers is returned as benefits, with the rest going to administrative costs and corporate profits. By contrast Medicare returns 94 cents in the dollar, even after the cost of tax collection is taken into account.

A single national insurer, like Medicare, also has the monopsony buying power to control prices demanded by powerful service providers.

So, where is the evidence to show that spending taxpayer money to subsidise private health insurance is superior to expanding funding to the public system?

Australia needs a national debate about the efficacy of the private health insurance system and whether we should shift towards a single national insurer.

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