Australia’s not so private health insurers bleed taxpayers

With the percentage of Australians between the ages of 20 to 39 with private health insurance falling from 40% to 34% over the past five years, and older Australians claiming more than ever, private health insurance providers have demanded government subsidies to keep the industry viable.

However, the health program director at the Grattan Institute, Stephen Duckett, has debunked the need for more public funding:

The private health insurance industry likes to warn Australians of a doomsday scenario. It claims that a decline in private health insurance will lead to a massive blow-out in public hospital waiting times.

Don’t believe it. The relationship between public and private activity in health care is complex. In fact, a greater proportion of private activity is actually associated with longer rather than shorter waiting times in public hospitals, as I have shown here and more recently here.

Yet, in its most recent pre-budget submission, Private Healthcare Australia asserted that if private health insurance coverage dropped below 40 per cent of the population, then waiting times for knee replacements would increase by one month.

Let’s think about that. About 44 per cent of the population currently has some level of private hospital insurance. For that figure to fall below 40 per cent, about one-in-10 of the currently insured population would need to drop out.

But under the new Gold-Silver-Bronze-Basic system of private health insurance, only people with Gold-level insurance are covered for joint replacements. So that means that most people with Silver, Bronze, or Basic insurance will not currently have insurance for knee replacements anyway. Only about 25 per cent of the population has Gold cover, so the 40 per cent doomsday threshold has already been well and truly passed.

And guess what? The sky has not fallen in.

We should be wary of self-interested assertions such as ‘an X per cent drop in private health insurance will lead to a Y month increase in public hospital waiting times’.

Crispin Hull also demolished the industry over the weekend:

If people want to provide health privately for a fee, fine. But if they cannot do it without a permanent government subsidy, like the car industry, they should go under.

It is fine for government to support start-up industries, like renewables, electric cars, or other new technologies, but if after a time they do not make it, it is no business of government to continue support because they have failed. Private health insurance has demonstrably failed in Australia. Without the tax concessions for premiums and without the Medicare penalty levy for people without insurance, they would go under.

The government subsidies of private education and private health also have a high incidental cost. They have has resulted in a swathe of articulate, engaged, middle-class, middle-income people leaving the public systems.

When that happens governments can get away with poor service. There are fewer articulate people to voice demands for better service at the cost of votes.

Further, when the articulate, middle-income people are engaged, they improve the public system…

Strip away the subsidies and only a very few would be able to afford genuine free-enterprise health.

It would mean a great proportion of articulate middle-income people would come back to the public sector and no government would get away with long waiting lists for elective surgery or starved public schools. They would be thrown out of office…

Further, the government support now given to private education and health is so high that per capita it is almost as much per capita as to public education and health anyway. So nothing lost. For every private student or patient who jumps ship, it will not cost government much more.

As shown recently by the Grattan Institute, private health premiums are rising much faster than inflation and wages growth, which is ultimately unsustainable:

Therefore, young people are dropping their cover, leaving older and sicker people in the system, which is driving premiums up further:

And this comes despite taxpayers subsidising private health insurance 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:

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

The last thing the federal government should do is to waste more taxpayers’ money on private health insurance subsidies. Cut the cord.

Leith van Onselen

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