Private health insurance spirals towards collapse

New data from the Australian Prudential Regulatory Authority (APRA) reveals that the number of Aussies taking out private health insurance has crashed to its lowest level since 2006.

According to APRA, private health hospital coverage of adults fell from 44.7% in 2018 to 44% last year, with losses experienced across all jurisdictions:

More worryingly, coverage has collapsed amongst healthy young cohorts while rising among the elderly:

The above charts add weight to the claim that Australia’s private health insurance industry is facing a ‘death spiral’. Young and healthy people (the so-called “invincibles”) continue to leave system, thus leaving a larger proportion of unhealthier, older, expensive users.

If this process continues, it will force premium up further, leading to a further exodus of the invicibles, and so on.

Australia’s private health insurance sector can only remain solvent if enough young and healthy people agree to sign-up, since they are the ones who are likely to pay more into the system than they take out.

In the absence of risk-based pricing, the only incentive for these young people to sign up is to avoid penalty – i.e. the Medicare Levy and the lifetime health cover surcharges.

Clearly, these young, healthy cohort perceive that it is cheaper to simply pay the penalties than hold private health insurance, thus helping to explain the clear exodus from the system.

Perhaps policy makers should take this opportunity to investigate whether the private health insurance industry should continue to be supported by taxpayers.

Australians are 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:

The rebate alone is projected to grow to $7.1 billion by 2022-23, according to the budget papers.

This $9 billion (and growing) of private health subsidies may very well produce more benefits to taxpayers if it was diverted into the public system.

After all, 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.

Instead of hosing more taxpayer funds to prop-up the private system, maybe it is time to abandon private health insurance subsidies altogether, with the savings instead redirected into the public system?

The system is headed for collapse anyway.

Leith van Onselen
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  1. BANG. if ever there was a time to do this, it’s now.

    I don’t the PHI cabal will mount much sympathy if that money was going into equivalent public services, and improved telehealth including specialist access.

    What was that Justin Timberlake song? Something about a river?

      • Yes. A mix of public and private doesn’t work. I think it can work for marginal stuff, things like elective surgery, A&E; ie things that can’t be gamed by the public or by the healthcare companies actuaries. Everything else, better to have a fully socialised system with the Minister accountable.

  2. Its a dog of a system which relies heavily on young people once again subsidizing the health and safety of older people. With greater levels of casualisation and the young being shafted every which way they will continue to abandon private health cover because that is the most logical thing to do. AMA also has a lot to answer with specialists gouging many times above the equivalent cost of the public system for the same health outcome. Just because its private, does not mean its good.

    Like private schools, let it stand on its own 2 feet and invest more in universal health and education outcomes. Also, strip non citizens of medicare rights, its a luxury we cannot afford with massive deficits.

    • “Like private schools” …
      Oh no can’t have that. You need privatization because it ensures efficient outcomes. Just don’t mention that it doesn’t work without government support.

    • If states didn’t provide free education to the children of temporary visa holders, they could put more money into public health.

    • RobotSenseiMEMBER

      Specialists’ rates are not set by the AMA. Why shouldn’t they be allowed to charge what is commensurate with their level of training? I’ve paid more for a plumber in-hours than a cardiology appointment.

    • DominicMEMBER

      Everything in this country sits atop the younger generations – it’s what a ponzi does.

      And because the gubmint knows that the local young can’t support it, they import people from other countries in the hope that they can help support it.

      Healthcare and housing.

  3. Well you can barely afford a house so healthcare isn’t exactly top of the priority list

  4. Do you have more recent numbers?
    I mean, in the middle of a global pandemic, you’re saying the number of takers on health insurance is at record lows?? What is even the point of flogging this dead horse any longer? I think the govt at this point is hoping more people don’t take up health insurance and just give it to medicare because that’s where wuflu patients end up.
    This is failing the same reason Victorian lockdown is.. the numbers are so stacked against the younger cohort that they have nothing to gain from it. So they’re talking with their feet. Decades to taking and taking from the next generation, this is what is left.. just a bunch of old people paying for each other’s medical expenses at ever increasing prices… in the middle of a pandemic and a recession. Excellent.

    • darklydrawlMEMBER

      Actually, yes. Part of the issue is driven by the halt on elective surgery and other secondary services (Physio et al). Many people have ceased paying their extras cover as they cannot claim much (anything) as all those ancillary services are restricted. If you are really sick the public system will pick you up, so I can see why some folks would be dropping private health.

      • AH yes. Insurance is used up on days that you are not allowed to claim on it.. so not really worth paying.
        Been thinking the same for car insurance. And the second car. There is virtually no situation for last 6 months where both of us were out.

  5. Good, let private health burn. Coming as I do from over a decade in the US, where I experienced first hand the horrors of fully privatised health, I can only applaud the demise of this evil system here.

    It should NEVER have been introduced here. John Howard has a lot to answer for, the little pr↑ck

    • Jumping jack flash

      The doctors wanted it in exchange for hiding all the long term unemployed using the DSP.

      Add a bit of magic stats, and unemployment halved overnight.

      Howard was one of the greats. They dont make pollies like they used to.

    • DominicMEMBER

      Private healthcare is the least of anyone’s worries — of more concern is the Govt-protected health sector that makes doctors, surgeons and other medical staff ludicrously expensive and keeps drug prices orders of magnitude higher than they should be.

      I’m going to see a specialist in a few days time — $300 for what will be a 15 minute consultation. I wouldn’t mind if the person concerned were a world-renowned expert in the field but it’s just some rando …

  6. I wonder if the poor health profiles of temporary visa holders required to have insurance is becoming a big burden on the insurers?

    • DominicMEMBER

      Who knows, but if it were the case they’d presumably put the premiums for that group specifically. Well, that’s how it SHOULD work ..

  7. Jumping jack flash

    Howard knew that PHI was completely unnecessary in Australia when he decided to use it to pay off the doctors for his economic miracle, so he invented the “stick” of the MLS to get people to take it up. Carrots dont work for something as completely unnecessary as PHI.

    If people arent taking it up then the only solution is a bigger stick. Double the MLS, people will flock to it in droves.

    • Mark HeydonMEMBER

      The rate PHI prices go up, the MLS will need to rise in the near future so PHI remains “competitive”.

  8. Display NameMEMBER

    Interesting to see the private nursing homes in Vic are killing people at a cracking clip compared to the public managed ones. And that is despite an additional corona payment I believe. The profit motive and health care dont work.

    • Selective. Wait until the Vic Covid19 has ridden it’s untimely wave & then we can do the real stats. Might not be a lot in it at the end I suspect?

  9. Is it any wonder younger cohorts are leaving private healthcare in droves?

    Nothing here that a half decent public economist wouldn’t have warned about.

  10. Old Aussies own all the wealth and assets in this country…. yet PHI is set up to con young folk into subsidising the health care of older Australians… yeah that’s a GREAT business model if ever I heard of one !!! LOL #BROKEN #YouthUnemployment #EatYourYoung #BoomersWorld