tag:theconversation.com,2011:/ca/topics/private-health-insurance-2311/articlesPrivate health insurance – The Conversation2023-10-06T00:43:44Ztag:theconversation.com,2011:article/2127872023-10-06T00:43:44Z2023-10-06T00:43:44ZPeople with private health insurance save the government $550 a year, on average<figure><img src="https://images.theconversation.com/files/551923/original/file-20231003-21-e4wvn4.jpg?ixlib=rb-1.1.0&rect=505%2C18%2C3608%2C2732&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.pexels.com/photo/photo-of-woman-lying-in-hospital-bed-3769151/">Pexels/Andrea Piacquadio</a></span></figcaption></figure><p>The federal government has, for a long time, <a href="https://www.aph.gov.au/parliamentary_business/committees/senate/community_affairs/completed_inquiries/1999-02/pubhosp/report/c05">encouraged Australians</a> to get private health insurance, in an attempt to reduce the financial burden on the public health system.</p>
<p>To make private health insurance more attractive, the government has a strategy of carrots and sticks. Low-income and older people receive subsidies through “<a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/insurance_rebate.htm">premium rebates</a>”. High-income earners without the right policy face the Medicare Levy Surcharge, ranging from <a href="https://privatehealth.gov.au/health_insurance/surcharges_incentives/medicare_levy.htm">1 to 1.5%</a> of their taxable income.</p>
<p>The effectiveness of these subsidies is regularly debated, with questions about whether the <a href="https://www.health.gov.au/sites/default/files/documents/2022/03/budget-2022-23-portfolio-budget-statements.pdf">A$6.7 billion</a> of taxpayer money that subsidises private health insurance premiums could be better spent on Medicare or directly financing hospitals. </p>
<p>We set out to answer this question: do the savings from increased participation in private health insurance outweigh the costs the government incurs by subsidising private health insurance rebates?</p>
<p>Our <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies/supporting_documents/MLS%20and%20PHI%20Rebate%20Study%20%20Offset%20Analysis.pdf">analysis</a>, which was commissioned and funded by the Department of Health and Aged Care, found large benefits to the government, especially when older people sign up for private insurance. On average, the government saves about $554 for each person it helps with these subsidies a year. </p>
<p>But rebates can be better targeted for Australians who are more likely to need and use health services. </p>
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<h2>How did we work this out?</h2>
<p>To assess if the money spent on subsidising private health insurance pays off, we examined both the costs (from the premium rebate subsidies and the forgone tax from the Medicare Levy Surcharge) and the savings. </p>
<p>To calculate the savings we looked at how much money the government would spend if these people didn’t have private health insurance and used the public health system instead of the private system. We call this the “offset”.</p>
<p>This is a key metric for the success of the carrot and sticks, as it will be able to tell us the health-care costs saved by the government when someone has private insurance.</p>
<p>Using private health insurance spending data from 2019, we made assumptions that one day in a private hospital costs equal to one day in a public hospital, based on findings from the <a href="https://www.pc.gov.au/inquiries/completed/hospitals/report">Productivity Commission</a>.</p>
<p>We also factored in the government’s <a href="http://www.msac.gov.au/internet/msac/publishing.nsf/Content/Factsheet-03">75% Medicare Benefits Schedule fee contribution</a>, and <a href="https://theconversation.com/we-can-cut-private-health-insurance-costs-by-fixing-how-we-pay-for-hip-replacements-and-other-implants-121172">higher prices</a> for prostheses (for hip replacements and other implants) in the private system.</p>
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Read more:
<a href="https://theconversation.com/we-can-cut-private-health-insurance-costs-by-fixing-how-we-pay-for-hip-replacements-and-other-implants-121172">We can cut private health insurance costs by fixing how we pay for hip replacements and other implants</a>
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<p>On average, we found that private health insurance offsets public health-care costs by about $1,400 per person, with greater savings for older people than younger people, reaching $4,000 for those aged 75 and above.</p>
<p>To answer if the savings from private insurance take-up outweighs the costs incurred, we needed to take into account what the government spends to subsidise insurance. </p>
<p>We used the standard <a href="https://privatehealth.gov.au/health_insurance/surcharges_incentives/insurance_rebate.htm">premium rebate percentages</a> where a person aged 70 or above earning up to $90,000 attracts a 32.812% rebate, while a person aged under 65 making $105,001–$140,000 would receive a 8.202% rebate.</p>
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<img alt="Surgeon operates" src="https://images.theconversation.com/files/551938/original/file-20231004-17-8tgkzg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/551938/original/file-20231004-17-8tgkzg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/551938/original/file-20231004-17-8tgkzg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/551938/original/file-20231004-17-8tgkzg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/551938/original/file-20231004-17-8tgkzg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/551938/original/file-20231004-17-8tgkzg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/551938/original/file-20231004-17-8tgkzg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The savings were greater for older people, who were more likely to use health services.</span>
<span class="attribution"><a class="source" href="https://www.pexels.com/photo/woman-in-white-medical-scrub-4421551/">Anna Schvets/Pexels</a></span>
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<p>With an average annual private health insurance premium of $2,300, this would mean the government incurs costs ranging from $755 to $189.</p>
<p>As people who enrol in private insurance don’t have to pay the Medicare Levy Surcharge, which helps fund the public health system, we found that the forgone tax amounts range between $970 and $2,400 for single individuals subject to the penalty.</p>
<p>Combining the costs (from the premium rebate subsidies and the forgone tax from the Medicare Levy Surcharge), and subtracting the savings (the offsets), is how we find that the subsidies are a good financial deal for the government. The subsidies are less than the cost offset by about $554 per person who has private health insurance.</p>
<h2>Is there room for improvement?</h2>
<p>This raises a question: what if we could change these subsidies based on who costs more to provide health care for and who saves the government more money? As our findings reveal that some groups save the government more money than their subsidies cost, what should we do with the subsidies? If we increase their subsidies, it costs taxpayers more – unless more of them switch to private health insurance. </p>
<p>For instance, an individual aged 75+ earning $105,001 to $140,000 receives $1,877 in subsidies and offsets $5,268 in public health spending, saving the government $3,391. Given the roughly 6,000 people in this age group currently in private health insurance, only two additional enrolments would make it budget-neutral. </p>
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Read more:
<a href="https://theconversation.com/private-health-insurance-is-set-for-a-shake-up-but-asking-people-to-pay-more-for-policies-they-dont-want-isnt-the-answer-210981">Private health insurance is set for a shake-up. But asking people to pay more for policies they don't want isn't the answer</a>
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<h2>How can the savings be used?</h2>
<p>A better way to subsidise private health insurance is to give extra subsidies to people who are sicker and need more medical care. These are known as “risk-adjusted subsidies”. </p>
<p>A risk-adjusted subsidy would be based on a person’s characteristics such as their age, gender, income, where they live and their health history (such as prior hospitalisations, or use of services). These are people who need private health insurance the most, and also would save the government the most money by having private insurance.</p>
<p>This subsidy could be computed by a formula that uses individual-level spending to figure out how much health care the person is likely to need and how much it’s expected to cost. </p>
<p>Existing <a href="https://www.nber.org/papers/w31052">work</a> in Australia has shown how this can be developed, while <a href="https://www.sciencedirect.com/book/9780128113257/risk-adjustment-risk-sharing-and-premium-regulation-in-health-insurance-markets">countries</a> such as the Netherlands, Germany, the United States and Switzerland show such a system is feasible. </p>
<p>The Australian health system, and private health insurance regulation in particular, is set for a shake-up, with the <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies/">Department of Health and Aged Care</a> seeking input on its options. Our research can help inform a path forward. </p>
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Read more:
<a href="https://theconversation.com/who-really-benefits-from-private-health-insurance-rebates-not-people-who-need-cover-the-most-212611">Who really benefits from private health insurance rebates? Not people who need cover the most</a>
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<img src="https://counter.theconversation.com/content/212787/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Francesco Paolucci has received funding from Horizon 2020, the National Health and Medical Research Council, the Medical Research Future Fund, the Australian Research Council, and The Department of Health and Aged Care.</span></em></p><p class="fine-print"><em><span>Josefa Henriquez has received funding from the Department of Health and Aged Care. </span></em></p>Yes, savings from increased participation in private insurance outweigh the costs the government incurs by subsidising private health insurance rebates. But rebates can be better targeted.Francesco Paolucci, Professor of Health Economics, University of Bologna, University of NewcastleJosefa Henriquez, Phd Candidate (Economics), University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2126112023-09-17T20:00:35Z2023-09-17T20:00:35ZWho really benefits from private health insurance rebates? Not people who need cover the most<figure><img src="https://images.theconversation.com/files/547124/original/file-20230908-19-g6utdm.jpg?ixlib=rb-1.1.0&rect=0%2C2%2C1000%2C663&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/busy-nurses-station-modern-hospital-352316315">Shutterstock</a></span></figcaption></figure><p>The Australian government spends <a href="https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/delivering-australias-lowest-private-health-insurance-premium-change-in-21-years">A$6.7 billion a year</a> on private health insurance rebates. These <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Private-health-insurance-rebate/">rebates</a> are the government’s contribution towards the costs of individuals’ premiums. </p>
<p>But our <a href="https://doi.org/10.1002/hec.4751">analysis</a> shows higher rebates for people aged 65 and older are not doing much to encourage them to sign up for private hospital cover, the very group who may benefit the most from it.</p>
<p>This and <a href="https://doi.org/10.1080/13504851.2017.1299094">other research</a> point to these rebates largely going to people on higher incomes, ones who’d be more likely to buy private health insurance anyway.</p>
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Read more:
<a href="https://theconversation.com/the-private-health-insurance-rebate-has-cost-taxpayers-100-billion-and-only-benefits-some-should-we-scrap-it-181264">The private health insurance rebate has cost taxpayers $100 billion and only benefits some. Should we scrap it?</a>
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<h2>Remind me, what are these rebates?</h2>
<p>In <a href="https://www.abs.gov.au/ausstats/abs@.nsf/2f762f95845417aeca25706c00834efa/0aaf3311ebcd3646ca2570ec000c46e4!OpenDocument#:%7E:text=The%20Federal%20Government%2030%25%20Rebate,the%20means%2Dtested%20PHIIS%20rebate.">1999</a>, the Australian government introduced the private health insurance rebate. Initially, the rebate meant the government paid 30% of the cost of private health insurance for everyone, regardless of income or age. Then in 2005, the Howard government increased the rebate rate to 35% for those aged 65-69 and to 40% for those aged 70 and older, regardless of how much they earned.</p>
<p>Over time, the rebate rates have decreased slightly and now depend on both income and age. However, the higher discount for older people has always remained.</p>
<p>We wanted to understand whether the higher rebates for older people actually encourage them to buy private health insurance. </p>
<p>So we looked at data from more than 300,000 people who filed tax returns over more than a decade (2001-2012). We then compared the trends in insurance coverage of people younger than 65 and older than 65, before and after the 2005 rebate policy change.</p>
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Read more:
<a href="https://theconversation.com/private-health-insurance-is-set-for-a-shake-up-but-asking-people-to-pay-more-for-policies-they-dont-want-isnt-the-answer-210981">Private health insurance is set for a shake-up. But asking people to pay more for policies they don't want isn't the answer</a>
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<h2>What we found</h2>
<p>We found higher rebates led to a modest and short-term increase in private health insurance take-up. We estimated that lowering premium prices by 10% through higher rebates would only result in 1-2% more people aged 65 and older buying private health insurance in the next two years.</p>
<p>This means higher rebates for older people are a very expensive way to get them to insure. </p>
<p>People aged 65-74 with income in the bottom 25% of earners were the most likely to buy insurance in response to higher rebates that reduced premium prices. That’s an income under $21,848 in today’s money (income increased to 2023 dollar amount, in line with the <a href="https://www.ato.gov.au/rates/consumer-price-index">consumer price index</a>).</p>
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<h2>What do we propose?</h2>
<p>Our findings suggest a more targeted subsidy program would be a more effective way to increase private health insurance. To achieve this, we recommend lowering income thresholds for rebates to target people of all ages on genuinely low incomes.</p>
<p>Currently, people earning as much as $144,000 (singles) or $288,000 (families) can receive rebates.</p>
<p>Other evidence to back our proposal comes from <a href="https://melbourneinstitute.unimelb.edu.au/publications/working-papers/search/result?paper=4682822">research</a> released earlier this year. This suggests higher income earners are likely to buy private insurance regardless of rebates.</p>
<p>A recent <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies">consultation report</a> commissioned by the federal health department reviewed a range of health insurance incentives. </p>
<p>The <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies/supporting_documents/Finity%20Consulting%20MLS%20and%20PHI%20Rebate%20Final%20Report.pdf">report</a> recommends removing rebates for those with income higher than $108,000 for singles and $216,000 for families (we recommend removing them at $93,000 for singles and $186,000 for families). The report also recommends increasing rebates for those older than 65 (we believe income, rather than age, is a better marker of someone’s means).</p>
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<span class="caption">People on low incomes should be targeted instead.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/elderly-man-holding-old-coin-purse-727162720">Shutterstock</a></span>
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<h2>Are rebates good value for money?</h2>
<p>We also need to look at whether rebates provide value for money more broadly, and across all ages. </p>
<p><a href="https://grattan.edu.au/wp-content/uploads/2019/12/926-Saving-Health-2.pdf">Existing evidence</a> shows a 10% decrease in premiums due to rebates only leads to a 3.5-5% increase in private health insurance take-up among all Australians. We show this is only <a href="https://doi.org/10.1002/hec.4751">1-2%</a> for people over 65.</p>
<p>So rebates are likely to <a href="https://doi.org/10.1016/j.jhealeco.2013.11.007">cost taxpayers more</a> than they generate in savings, and are largely windfalls to those who would privately insure anyway, often those who are financially better off.</p>
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Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
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<h2>What happens if we scrapped the rebates?</h2>
<p>It is uncertain how many people would drop private cover if the rebate was removed. </p>
<p>But based on research from when the rebate was introduced, the rebate might account for a maximum <a href="https://escholarship.org/content/qt6j47s8kq/qt6j47s8kq_noSplash_be059196ed2d70b94486039f64452494.pdf">10-15 percentage points</a> of the overall take-up rate. Other research suggests it might be much less than this, closer to <a href="https://www.sciencedirect.com/science/article/pii/S016762961300163X?casa_token=C-SdG98Jc2UAAAAA:KJLHBZ2BJhq9wRQQKUbEWPiqoeza1DEi3mZ9Y6O2GereVX1L1x0cJumVgrqBeMGa1ygDjFrPG7T5">2 percentage points</a>.</p>
<p>In other words, the rebate only appears to influence a small percentage of people to buy private health insurance. So scrapping it would likely have a similarly small effect.</p>
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<p>Then there’s the impact of scrapping the rebate, people dropping their cover and putting more pressure on the public system. Earlier this year, we found private health insurance had <a href="https://theconversation.com/does-private-health-insurance-cut-public-hospital-waiting-lists-we-found-it-barely-makes-a-dent-211680">minimal impact</a> on reducing waiting times for surgery in Victorian public hospitals. So scrapping the rebate might have minimal impact on waiting lists.</p>
<p>Taken together, the billions of dollars a year the government spends to subsidise private health insurance via rebates might be better directed to public hospitals and other high-value care, including primary care and preventive care.</p><img src="https://counter.theconversation.com/content/212611/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yuting Zhang has received funding from the Australian Research Council (future fellowship project ID FT200100630), Department of Veterans' Affairs, the Victorian Department of Health, and National Health and Medical Research Council. In the past, Professor Zhang has received funding from several US institutes including the US National Institutes of Health, Commonwealth fund, Agency for Healthcare Research and Quality, and Robert Wood Johnson Foundation. She has not received funding from for-profit industry including the private health insurance industry.</span></em></p><p class="fine-print"><em><span>Judith Liu received funding from Richard Ivan Downing Fellowship Fund (University of Melbourne) during the conduct of the study.</span></em></p><p class="fine-print"><em><span>Nathan Kettlewell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We found rebates don’t do much to encourage older people to sign up for private health insurance.Yuting Zhang, Professor of Health Economics, The University of MelbourneJudith Liu, Assistant Professor of Economics, University of OklahomaNathan Kettlewell, Chancellor's Research Fellow, Economics Discipline Group, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2116802023-08-27T20:04:42Z2023-08-27T20:04:42ZDoes private health insurance cut public hospital waiting lists? We found it barely makes a dent<figure><img src="https://images.theconversation.com/files/544122/original/file-20230823-29-hhssuv.jpg?ixlib=rb-1.1.0&rect=0%2C1%2C1000%2C664&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/blur-image-patients-hospital-waiting-see-1142067620">Shutterstock</a></span></figcaption></figure><p>The more people take up private health insurance, the <a href="https://www.aph.gov.au/parliamentary_business/committees/senate/community_affairs/completed_inquiries/1999-02/pubhosp/report/c05">less pressure</a> on the public hospital system, including <a href="https://www.privatehealthcareaustralia.org.au/australians-sign-up-to-private-health-insurance-in-record-numbers-to-avoid-hospital-waiting-lists/#:%7E:text=%22Private%20health%20insurance%20is%20the,and%20keep%20pressure%20off%20premiums.">shorter waiting lists</a> for surgery. That’s one of the key messages we’ve been hearing from government and the private health insurance industry in recent years.</p>
<p>Governments <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/index.htm">encourage us</a> to buy private hospital cover. They tempt us with carrots – for instance, with subsidised <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Private-health-insurance-rebate/">premiums</a>. With higher-income earners, the government uses sticks – buy private cover or pay the <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Medicare-levy-surcharge/">Medicare Levy Surcharge</a>. These are just some of the <a href="https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/delivering-australias-lowest-private-health-insurance-premium-change-in-21-years#:%7E:text=Home-,Delivering%20Australia's%20lowest%20private%20health%20insurance%20premium%20change%20in%2021,be%202.70%20percent%20in%202022">billion-dollar strategies</a> aimed to shift more of us who can afford it into the private system.</p>
<p>But what if private health insurance doesn’t have any meaningful impact on public hospital waiting lists after all?</p>
<p>That’s what we found in our <a href="https://melbourneinstitute.unimelb.edu.au/publications/working-papers/search/result?paper=4721936">recent research</a>. Our analysis suggests if an extra 65,000 people buy private health insurance, public hospital waiting lists barely shift from the average 69 days. Waiting lists are an average just eight hours shorter.</p>
<p>In other words, we’ve used hospital admission and waiting-list data to show private health insurance doesn’t make much difference.</p>
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Read more:
<a href="https://theconversation.com/private-health-insurance-is-set-for-a-shake-up-but-asking-people-to-pay-more-for-policies-they-dont-want-isnt-the-answer-210981">Private health insurance is set for a shake-up. But asking people to pay more for policies they don't want isn't the answer</a>
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<h2>What we did</h2>
<p>Our <a href="https://melbourneinstitute.unimelb.edu.au/publications/working-papers/search/result?paper=4721936">work</a> looked at data from 2014-2018 on hospital admissions and waiting lists for elective surgery in Victoria.</p>
<p>The data covered all Victorians who were admitted as an inpatient in all hospitals in the state (both public and private) and those registered on the waiting list for elective surgeries in the state’s public hospitals.</p>
<p>That included waiting times for surgeries where people are admitted to public hospitals (as an inpatient). We didn’t include people waiting to see specialist doctors as an outpatient.</p>
<p>The data was linked at the patient level, meaning we could track what happened to individuals on the waiting list.</p>
<p>We then examined the impact of more people buying private health insurance on waiting times for surgeries in the state’s public hospitals.</p>
<p>We did this by looking at the uptake of private health insurance in different areas of Victoria, according to socioeconomic status. After adjusting for patient characteristics that may affect waiting times, these differences in insurance uptake allowed us to identify how this changed waiting times.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Man lying in hospital bed with oxygen mask, holding hands of female friend or relative" src="https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/544142/original/file-20230823-23-lz4g5p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">We looked at all people waiting for elective surgery.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-shot-wife-hands-family-praying-2344798261">Shutterstock</a></span>
</figcaption>
</figure>
<h2>What we found</h2>
<p>In our sample, on average <a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0005/4721936/wp2023n09.pdf">44% of people</a> in Victoria had private health insurance. This is close to the national average of <a href="https://www.apra.gov.au/private-health-insurance-annual-coverage-survey">45%</a>. </p>
<p>We found that increasing the average private health insurance take-up from 44% to 45% in Victoria would reduce waiting times in public hospitals by an average 0.34 days (or about eight hours).</p>
<p>This increase of one percentage point is equivalent to 65,000 more people in Victoria (based on <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/3101.0Main+Features1Jun%202018?OpenDocument">2018 population data</a>) taking up (and using) private health insurance.</p>
<p>The effects vary slightly by surgical specialty. For instance, private health insurance made a bigger reduction to waiting times for knee replacements, than for cancer surgery, compared to the average. But again, the difference only came down to a few hours.</p>
<p>Someone’s age also made a slight difference, but again by only a few hours compared to the average wait.</p>
<p>Given the common situation facing public and private hospitals across all states and territories, and similar private health insurance take-up in many states, our findings are likely to apply outside Victoria. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/getting-an-initial-specialists-appointment-is-the-hidden-waitlist-99507">Getting an initial specialists' appointment is the hidden waitlist</a>
</strong>
</em>
</p>
<hr>
<h2>Why doesn’t it reduce waiting lists?</h2>
<p>While our research did not address this directly, there may be several reasons why private health insurance does not free up resources in the public system to reduce waiting lists:</p>
<ul>
<li><p>people might buy health insurance and not use it, preferring to have free treatment in the public system rather than risk out-of-pocket costs in the private system</p></li>
<li><p>specialists may not be willing to spend more time in the public system, instead <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/1753-6405.12488">favouring working</a> in private hospitals </p></li>
<li><p>there’s a growing need for public hospital services that may not be available in the private system, such as complex neurosurgery and some forms of cancer treatment.</p></li>
</ul>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/with-surgery-waitlists-in-crisis-and-a-workforce-close-to-collapse-why-havent-we-had-more-campaign-promises-about-health-182327">With surgery waitlists in crisis and a workforce close to collapse, why haven’t we had more campaign promises about health?</a>
</strong>
</em>
</p>
<hr>
<h2>Why is this important?</h2>
<p>Government <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/index.htm">policies</a> designed to get more of us to buy private health insurance involve a significant sum of public spending.</p>
<p>Each year, the Australian government spends about <a href="https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/delivering-australias-lowest-private-health-insurance-premium-change-in-21-years#:%7E:text=Home-,Delivering%20Australia's%20lowest%20private%20health%20insurance%20premium%20change%20in%2021,be%202.70%20percent%20in%202022">$A6.7 billion</a> in private health insurance rebates to reduce premiums.</p>
<p>In the 2020-21 financial year, Medicare combined with state and territory government expenditure provided almost <a href="https://www.aihw.gov.au/reports/hospitals/australias-hospitals-at-a-glance/contents/spending-on-hospitals">$6.1 billion</a> to fund services provided in private hospitals.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1691072564003520512"}"></div></p>
<p>There might be an argument for this public spending if the end result was to substantially take pressure off public hospitals and thereby reduce waiting times for treatment in public hospitals.</p>
<p>But the considerable effort it takes to encourage more people to sign up for private health insurance, coupled with the small effect on waiting lists we’ve shown, means this strategy is neither practical nor effective.</p>
<p>Given the substantial costs of subsidising private health insurance and private hospitals, public money might be better directed to public hospitals and primary care. </p>
<p>In addition, people buying private health insurance can skip the waiting times for elective surgery to receive speedier care. These people are often <a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0005/4682822/wp2023n08.pdf">financially well off</a>, implying unequal access to health care.</p>
<h2>What’s next?</h2>
<p>The Australian government is currently <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies/">reviewing</a> private health insurance.</p>
<p>So now is a good time for reforms to optimise the overall efficiency of the health-care system (both public and private) and improve population health while saving taxpayer money. We also need policies to ensure equitable access to care as a priority. </p>
<p>When it comes to reducing hospital waiting lists, we’ve shown we cannot rely on increased rates of private health insurance coverage to do the heavy lifting.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/211680/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yuting Zhang receives funding from the Australian Research Council, Department of Veterans' Affairs, the Victorian Department of Health, and National Health and Medical Research Council. In the past, Professor Zhang has received funding from several US institutes including the US National Institutes of Health, Commonwealth fund, Agency for Healthcare Research and Quality, and Robert Wood Johnson Foundation. She has not received funding from for-profit industry including the private health insurance industry.</span></em></p><p class="fine-print"><em><span>Jongsay Yong and Ou Yang do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Governments spend billions of dollars every year to encourage us to take up private cover. But our research shows this does little to reduce pressure on the public system.Yuting Zhang, Professor of Health Economics, The University of MelbourneJongsay Yong, Associate Professor of Economics, The University of MelbourneOu Yang, Senior Research Fellow, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2109812023-08-13T20:04:05Z2023-08-13T20:04:05ZPrivate health insurance is set for a shake-up. But asking people to pay more for policies they don’t want isn’t the answer<figure><img src="https://images.theconversation.com/files/541841/original/file-20230809-17-cw90xj.jpg?ixlib=rb-1.1.0&rect=2%2C4%2C995%2C661&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/businesswoman-work-laptop-phone-connect-internet-497999221">Shutterstock</a></span></figcaption></figure><p>Private health insurance is <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies/">under review</a>, with proposals to overhaul everything from rebates to tax penalty rules.</p>
<p>One <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies/supporting_documents/Finity%20Consulting%20MLS%20and%20PHI%20Rebate%20Final%20Report.pdf">proposal</a> is for higher-income earners who don’t have private health insurance to pay a larger <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Medicare-levy-surcharge/">Medicare Levy Surcharge</a> – an increase from 1.25% or 1.5%, to 2%. And if they want to avoid that surcharge, they’d need to take out higher-level hospital cover than currently required.</p>
<p>Encouraging more people to take up private health insurance like this might seem a good way to take pressure off the public hospital system. </p>
<p>But <a href="https://melbourneinstitute.unimelb.edu.au/publications/working-papers/search/result?paper=4682822">our research</a> shows these proposals may not achieve this. These may also be especially punitive for people with little to gain from buying private health insurance, such as younger people and those living in regional areas who do not have access to private hospitals.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
</strong>
</em>
</p>
<hr>
<h2>What is the Medicare Levy Surcharge?</h2>
<p>The Medicare Levy Surcharge was <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2013/May/A_short_history_of_increases_to_the_Medicare_levy#:%7E:text=From%20July%201997%2C%20a%20surcharge,ancillary%20insurance%20cover%20was%20introduced">introduced in 1997</a> to encourage high-income earners to buy health insurance. People earning above the relevant thresholds need to buy “complying” health insurance, or pay the levy.</p>
<p>This surcharge is in addition to the <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Medicare-levy/">Medicare levy</a>, which applies to most taxpayers.</p>
<p>The surcharge varies depending on your income bracket, and the rate is <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Medicare-levy-surcharge/Medicare-levy-surcharge-income,-thresholds-and-rates/">different</a> for families.</p>
<p>For instance, to avoid paying the surcharge currently, a single person living in Victoria earning A$108,001 can buy basic hospital cover. The lowest annual premium for someone under 65 is <a href="https://www.privatehealth.gov.au/dynamic/Search/">about $1,100</a>, after rebates. That varies slightly between states and territories.</p>
<p>Not buying private health insurance and paying the Medicare Levy Surcharge instead would cost even more, at $1,350 (1.25% of $108,001).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/if-youve-got-private-health-insurance-the-choice-to-use-it-in-a-public-hospital-is-your-own-113367">If you've got private health insurance, the choice to use it in a public hospital is your own</a>
</strong>
</em>
</p>
<hr>
<h2>What is being proposed?</h2>
<p>The <a href="https://consultations.health.gov.au/medical-benefits-division/consultation-on-phi-studies/">report</a>, by Finity Consulting and commissioned by the federal health department, reviews a range of health insurance incentives. </p>
<p>It recommends increasing the Medicare Levy Surcharge to 2% for those with an income above $108,001 for singles, and $216,001 for families.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Tax forms from Australian Taxation Office" src="https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=381&fit=crop&dpr=1 600w, https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=381&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=381&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=479&fit=crop&dpr=1 754w, https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=479&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/541892/original/file-20230809-27-9rg8wm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=479&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">People on higher incomes without private health insurance need to pay the Medicare Levy Surcharge via the taxation system.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/australian-individual-tax-return-form-176951723">Shutterstock</a></span>
</figcaption>
</figure>
<p>The definition of a “complying” private health insurance policy would also change. </p>
<p>Rather than having basic hospital cover as is required now, someone would need to buy <a href="https://www.health.gov.au/resources/publications/private-health-insurance-reforms-gold-silver-bronze-basic-product-tiers-campaign-fact-sheet?language=en">silver or gold</a> cover to avoid the surcharge.</p>
<p>Under the proposed changes, people who pay the 2% surcharge would also no longer receive any rebate, which currently reduces premiums by <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Private-health-insurance-rebate/Income-thresholds-and-rates-for-the-private-health-insurance-rebate/#Rebaterates1">about 8%</a> for people earning $108,001-$144,000. </p>
<p>So, for a single person under 65, earning $108,001 and living in Victoria, the <a href="https://www.privatehealth.gov.au/dynamic/Search/">annual cost of buying</a> complying hospital cover would be at least $1,904 (without the rebate). Again, that varies slightly between states and territories.</p>
<p>But the cost of not insuring and paying the Medicare Levy Surcharge instead would go up to $2,160 (2% of $108,001).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-to-switch-health-insurers-if-youre-worried-about-cybersecurity-costs-or-claims-194248">How to switch health insurers if you're worried about cybersecurity, costs or claims</a>
</strong>
</em>
</p>
<hr>
<h2>Is this a good idea?</h2>
<p>However, <a href="https://melbourneinstitute.unimelb.edu.au/publications/working-papers/search/result?paper=4682822">our research</a>, out earlier this year, suggests increasing the Medicare Levy Surcharge will not meaningfully increase take-up of private health insurance. We’ve shown that people do not respond as strongly to the surcharge as theory would predict. </p>
<p>For example, when the surcharge kicks in, we found the probability of insuring only increases modestly from about 70% to 73% for singles, and about 90% to 91% for families.</p>
<p>It is generally cheaper to buy private health insurance than to pay the surcharge. However, we found about 15% of single people with an income of $108,001 or above don’t insure despite it being cheaper than paying the Medicare Levy Surcharge. </p>
<p>We don’t know precisely why. Maybe people are not sure of the financial benefit due to changes in their income, or if they are, cannot be bothered, or do not have time, to explore their options.</p>
<figure class="align-center ">
<img alt="Medicare card" src="https://images.theconversation.com/files/541891/original/file-20230809-13146-b42ojv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/541891/original/file-20230809-13146-b42ojv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/541891/original/file-20230809-13146-b42ojv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/541891/original/file-20230809-13146-b42ojv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/541891/original/file-20230809-13146-b42ojv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/541891/original/file-20230809-13146-b42ojv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/541891/original/file-20230809-13146-b42ojv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some people may choose to pay more tax for public services including Medicare.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/australian-medicare-card-over-textured-background-500169142">Shutterstock</a></span>
</figcaption>
</figure>
<p>Maybe, as <a href="https://www.reddit.com/r/AusFinance/comments/x2909w/does_anyone_else_willingly_pay_the_medicare/">anecdotal reports suggest</a>, rather than buying private health insurance, some people would rather support the public system by paying the Medicare Levy Surcharge. </p>
<p>The point is, people who are not buying private health insurance appear to be highly resistant to financial incentives. So stronger penalties might have little effect.</p>
<p>Instead, we propose the Medicare Levy Surcharge be better targeted to true high-income earners. We can do that by increasing income thresholds for the surcharge to kick in, which are then indexed annually to reflect changes in earnings.</p>
<h2>How about needing more expensive cover?</h2>
<p>Requiring people to choose silver level cover or above would address criticisms about people buying “<a href="https://theconversation.com/getting-rid-of-junk-health-insurance-policies-is-just-tinkering-at-the-margins-of-a-much-bigger-issue-82749">junk</a>” private health insurance they never intend to use. </p>
<p>However, people may be buying this type of product because private health insurance has little value to them. Requiring them to spend even more on a product they don’t want is a roundabout way of taking pressure off the public system. </p>
<p>So we propose keeping the current level of hospital cover required to avoid the surcharge, rather than increasing it.</p>
<h2>Who loses?</h2>
<p>Taken together, the cost of these proposed changes would disproportionately fall on people with little to gain from private health insurance. These include younger people, those living in regional areas who do not have access to private hospitals, or those who prefer to support the public system directly.</p>
<p>These groups are the least likely to use private insurance so have the least to gain from upgrading their cover.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/getting-rid-of-junk-health-insurance-policies-is-just-tinkering-at-the-margins-of-a-much-bigger-issue-82749">Getting rid of junk health insurance policies is just tinkering at the margins of a much bigger issue</a>
</strong>
</em>
</p>
<hr>
<h2>Where to next?</h2>
<p>The report also recommends keeping <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Private-health-insurance-rebate/">health insurance rebates</a> (a government contribution to your premiums), the <a href="https://www.ato.gov.au/Individuals/Medicare-and-private-health-insurance/Private-health-insurance-rebate/Lifetime-health-cover/">Lifetime Health Cover</a> loading (to encourage people to take out hospital cover while younger), as well as the Medicare Levy Surcharge.</p>
<p>We also support keeping these three in the short to medium term.</p>
<p>But we recommend gradually reducing public support for private health insurance.</p>
<p>We believe the ultimate goal of reforming private health insurance is to optimise the overall efficiency of the health-care system (both public and private systems) and improve population health while saving taxpayers’ money. </p>
<p>The goal should not be merely increasing the take-up of private health insurance, which is the focus of the current report.</p>
<p>So, as well as our recommendation to better target the Medicare Levy Surcharge, we need to:</p>
<ul>
<li><p>lower income thresholds for <a href="https://theconversation.com/the-private-health-insurance-rebate-has-cost-taxpayers-100-billion-and-only-benefits-some-should-we-scrap-it-181264">insurance rebates</a>, especially targeting those on genuinely low incomes. This means lower premiums only for the people who can least afford private health care</p></li>
<li><p>remove rebates <a href="https://theconversation.com/private-health-insurance-premiums-should-be-based-on-age-and-health-status-122545">based on age</a> as higher rebates for older people <a href="https://www.tandfonline.com/doi/abs/10.1080/13504851.2017.1299094?journalCode=rael20">do not</a> encourage more to insure. Rebates should be tied to just income, which is a better indicator of financial means.</p></li>
</ul>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/private-health-insurance-premiums-should-be-based-on-age-and-health-status-122545">Private health insurance premiums should be based on age and health status</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/210981/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yuting Zhang receives funding from the Australian Research Council, Department of Veterans' Affairs, the Victorian Department of Health, and National Health and Medical Research Council. In the past, Professor Zhang has received funding from several US institutes including the US National Institutes of Health, Commonwealth fund, Agency for Healthcare Research and Quality, and Robert Wood Johnson Foundation. She has not received funding from for-profit industry including the private health insurance industry.</span></em></p><p class="fine-print"><em><span>Nathan Kettlewell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>People on higher incomes without private health insurance don’t seem to be swayed by financial incentives, our research shows.Yuting Zhang, Professor of Health Economics, The University of MelbourneNathan Kettlewell, Chancellor's Postdoctoral Research Fellow, Economics Discipline Group, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2030372023-04-07T13:48:03Z2023-04-07T13:48:03ZMillions of Americans at risk of losing free preventive care after Texas ruling on ACA<figure><img src="https://images.theconversation.com/files/519403/original/file-20230404-473-pq24if.jpg?ixlib=rb-1.1.0&rect=19%2C0%2C2121%2C1406&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Raising the cost barriers for health care will harm the most vulnerable patients.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/mother-talking-with-daughter-while-male-doctor-royalty-free-image/1321467310">Maskot via Getty Images</a></span></figcaption></figure><p>Many Americans breathed a sigh of relief when the Supreme Court left the Affordable Care Act in place following the law’s <a href="https://www.supremecourt.gov/opinions/20pdf/19-840_6jfm.pdf">third major legal challenge</a> in June 2021. This decision left <a href="https://source.wustl.edu/2017/02/americans-divided-on-obamacare-repeal-poll-finds/">widely supported policies</a> in place, like ensuring coverage <a href="https://www.healthcare.gov/coverage/pre-existing-conditions/">regardless of preexisting conditions</a>, granting coverage for <a href="https://www.healthcare.gov/young-adults/children-under-26/">dependents up to age 26</a> on their parents’ plan and removing <a href="https://www.healthcare.gov/health-care-law-protections/lifetime-and-yearly-limits/">annual and lifetime benefit limits</a>.</p>
<p>But now, millions of people in the U.S. are holding their breath again <a href="https://storage.courtlistener.com/recap/gov.uscourts.txnd.330381/gov.uscourts.txnd.330381.114.0_1.pdf">following a March 30, 2023 ruling</a> in Braidwood v. Becerra that would <a href="https://www.healthaffairs.org/content/forefront/texas-judge-just-invalidated-preventive-services-mandate-happens-next">eliminate free coverage</a> for many basic preventive care services and medications.</p>
<h2>Litigating preventive care</h2>
<p><a href="https://www.law.cornell.edu/cfr/text/29/2590.715-2713">Section 2713</a> of the ACA requires insurers to offer <a href="https://www.healthcare.gov/coverage/preventive-care-benefits/">full coverage of preventive services</a> endorsed by one of three federal groups: the U.S. Preventive Services Task Force, the Advisory Committee on Immunization Practices or the Health Resources and Services Administration. If one of those groups recommends a preventive care service as essential to good health outcomes, then you shouldn’t have to pay anything out of pocket. For example, <a href="https://www.congress.gov/bill/116th-congress/house-bill/748/">the CARES Act</a>, which allocated emergency funding in response to the COVID-19 pandemic, used this provision to ensure COVID-19 vaccines would be free for many Americans.</p>
<p>Immunizations, including COVID-19 vaccines, require a recommendation from the <a href="https://www.cdc.gov/vaccines/acip/index.html">Advisory Committee on Immunization Practices</a> of the Centers for Disease Control and Prevention, while women’s health services require approval from the <a href="https://www.hrsa.gov/womens-guidelines/index.html">Health Resources and Services Administration</a>. Most other preventive services require an A or B rating from the <a href="https://uspreventiveservicestaskforce.org/uspstf/home">U.S. Preventive Services Task Force</a>, an independent body of experts trained in research methods, statistics and medicine, and supported by the <a href="https://www.ahrq.gov/cpi/about/otherwebsites/uspstf/index.html">Agency for Healthcare Research and Quality</a>.</p>
<p>The lead plaintiff in the ACA case, <a href="https://khn.org/news/article/braidwood-becerra-aca-preventive-services-court-decision-reed-oconnor/">Braidwood Management</a>, is a Christian for-profit corporation owned by Steven Hotze, a physician and conservative activist who has <a href="https://www.texastribune.org/2013/05/15/republican-donor-releases-songs-opposing-obamacare/">previously filed</a> multiple lawsuits against the Affordable Care Act. Braidwood and its co-plaintiffs, a group of conservative Christian employers, objected to being forced to provide their 70 employees free access to pre-exposure prophylaxis, or PrEP, a medicine that is <a href="https://www.cdc.gov/hiv/basics/prep/prep-effectiveness.html">nearly 100% effective</a> in preventing HIV infection. Hotze claimed that PrEP “facilitates and encourages homosexual behavior, intravenous drug use and sexual activity outside of marriage between one man and one woman,” despite a lack of evidence to support this. He also claimed that his religious beliefs prevent him from providing insurance that covers PrEP.</p>
<p>PrEP received an <a href="https://www.uspreventiveservicestaskforce.org/uspstf/recommendation/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis">A rating</a> from the U.S. Preventive Services Task Force in June 2019, paving the way for it to be covered at no cost for millions of people. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Red ribbon hanging from the North Portico of the White House" src="https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434528/original/file-20211129-19-1jm1jvh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">PrEP is a key tool to helping the U.S. reach its goal of substantially reducing new HIV infections by 2030.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ObamaWorldAidsDay/c146dee7e944420482f3e5786d4d2e50">AP Photo/Pablo Martinez Monsivais</a></span>
</figcaption>
</figure>
<p>Though Section 2713 of the ACA <a href="https://doi.org/10.1016/j.ypmed.2021.106690">doesn’t work perfectly</a>, sometimes leaving patients frustrated by <a href="https://www.washingtonpost.com/national/health-science/getting-charged-for-free-preventive-care/2014/01/17/98fbd1fa-7ec2-11e3-95c6-0a7aa80874bc_story.html">unexpected bills</a>, it has made a huge difference in reducing costs for services like <a href="https://doi.org/10.1001/jamanetworkopen.2021.1248">well-child visits</a> and <a href="https://doi.org/10.1097/MLR.0000000000000610">mammograms</a>, just to name a few.</p>
<p><a href="https://aspe.hhs.gov/sites/default/files/documents/786fa55a84e7e3833961933124d70dd2/preventive-services-ib-2022.pdf">Over 150 million Americans</a> are enrolled in private health insurance, allowing them to benefit from free preventive care, with <a href="https://www.healthsystemtracker.org/brief/preventive-services-use-among-people-with-private-insurance-coverage/">about 60%</a> using at least one free preventive service each year. Raising the cost barrier again for PrEP, for example, would <a href="https://doi.org/10.1001/jamanetworkopen.2021.22692">disproportionately harm</a> younger patients, people of color and those with lower incomes.</p>
<p>As public health researchers at <a href="https://www.bu.edu/sph/profile/paul-shafer/">Boston University</a> and <a href="https://sph.tulane.edu/sbps/kristefer-stojanovski-phd-mph">Tulane University</a> who study <a href="https://scholar.google.com/citations?user=bDT820kAAAAJ&hl=en">health insurance</a> and <a href="https://www.researchgate.net/profile/Kristefer-Stojanovski-2">sexual health</a>, we believe that prevention and health equity in the U.S. stand to take a big step backward with this policy in jeopardy.</p>
<h2>What preventive services are affected?</h2>
<p>The ruling in Braidwood rests in large part on the <a href="https://www.law.cornell.edu/constitution/articleii">appointments clause</a> of the U.S. Constitution, which specifies that certain governmental positions require presidential appointment and Senate confirmation, while other positions have a lower bar. </p>
<p>Texas federal <a href="https://www.healthaffairs.org/content/forefront/texas-judge-just-invalidated-preventive-services-mandate-happens-next">District Judge Reed O'Connor ruled</a> that because the U.S. Preventive Services Task Force is an independent volunteer panel and not made up of officers of the U.S. government, they do not have the appropriate authority to make decisions about which preventive care should be free, unlike the Advisory Committee on Immunization Practices or Health Resources and Services Administration. O'Connor also ruled that being forced to cover PrEP violated the religious freedom of the plaintiffs.</p>
<p>Following his initial ruling in September, both sides submitted briefs that tried to inform the “remedy,” or solution, the judge would ultimately recommend. He could have chosen, as the <a href="https://storage.courtlistener.com/recap/gov.uscourts.txnd.330381/gov.uscourts.txnd.330381.112.0_3.pdf">federal government advocated</a>, to grant only the plaintiffs an exemption from covering PrEP under the Religious Freedom Restoration Act. But O'Connor instead chose to make his “remedy” apply nationally and cover more services.</p>
<p>He invalidated all of the task force’s recommendations since the Affordable Care Act was passed in March 2010, returning the power to insurers and employers to decide which, if any, preventive care would remain free to patients in their plans. A few of the <a href="https://www.bloomberg.com/opinion/articles/2023-04-01/braidwood-ruling-further-weakens-aca-on-prep-drugs-preventive-care">recommendations covered by his ruling</a> include PrEP; blood pressure, diabetes, lung and skin cancer screenings; and medications to lower cholesterol and reduce breast cancer risk. As of 2022, <a href="https://www.commonwealthfund.org/blog/2022/aca-preventive-services-benefit-jeopardy-what-can-states-do">15 states</a> have laws with ACA-like requirements for plans in the insurance marketplace, but not for large employer plans generally <a href="https://blog.petrieflom.law.harvard.edu/2023/04/03/three-reactions-to-braidwood-v-becerra/">exempt from state oversight</a>.</p>
<p>Insurance contracts are typically defined by calendar year, so most people will <a href="https://www.kff.org/policy-watch/qa-implications-of-the-ruling-on-the-acas-preventive-services-requirement/">see these changes</a> starting only in 2024. Importantly, these services will likely still need to be covered by health insurance plans as <a href="https://www.law.cornell.edu/uscode/text/42/18022">essential health benefits</a> through a separate provision of the ACA – they just won’t be free anymore. </p>
<p>Other U.S. Preventive Services Task Force recommendations and those made by the Advisory Committee on Immunization Practices or Health Resources and Services Administration – namely, immunizations and contraception, respectively – will remain free to patients <a href="https://www.kff.org/womens-health-policy/issue-brief/explaining-litigation-challenging-the-acas-preventive-services-requirements-braidwood-management-inc-v-becerra/">for now</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Demonstrator holds a sign saying 'Save the ACA' in front of the U.S. Supreme Court." src="https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/419002/original/file-20210902-19-azgfs0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Affordable Care Act has faced many legal challenges over the years.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/SupremeCourtHealthCare/af7a18ea1fc84b39af301fa84aec0672">AP Photo/Alex Brandon</a></span>
</figcaption>
</figure>
<h2>What’s next?</h2>
<p>The <a href="https://storage.courtlistener.com/recap/gov.uscourts.txnd.330381/gov.uscourts.txnd.330381.115.0.pdf">federal government appealed</a> the ruling to the 5th U.S. Circuit Court of Appeals on March 31, 2023, buoyed by a <a href="https://newsroom.heart.org/news/23-national-health-organizations-respond-to-braidwood-v-becerra-ruling-that-threatens-no-cost-preventive-care">coordinated response</a> from 23 patient advocacy groups. They have asked for a stay while the case continues, which pauses the effects of the ruling. If either O'Connor or a higher court grants their request, it will leave the status quo of free preventive care in place. </p>
<p>But there are also concerns that either the 5th Circuit orthe Supreme Court could take the ruling even further, endangering the free coverage of contraception and other preventive care that remains in place. </p>
<p>The ending to this case may still be several years off, with <a href="https://news.yahoo.com/americans-surprise-medical-bills-health-care-loopholes-131630868.html">even more frustration</a> ahead as the courts undermine national goals in <a href="https://www.whitehouse.gov/cancermoonshot/">fighting cancer</a>, <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/10/31/a-proclamation-on-national-diabetes-month-2022/">diabetes</a> and <a href="https://www.cdc.gov/endhiv/index.html">ending the HIV epidemic</a>.</p>
<p><em>Portions of this article originally appeared in previous articles published on <a href="https://theconversation.com/the-next-attack-on-the-affordable-care-act-may-cost-you-free-preventive-health-care-166087">Sept. 7, 2021</a>, <a href="https://theconversation.com/hiv-prevention-pill-prep-is-now-free-under-most-insurance-plans-but-the-latest-challenge-to-the-affordable-care-act-puts-this-benefit-at-risk-171086">Dec. 1, 2021</a>, and <a href="https://theconversation.com/free-preventive-care-under-the-aca-is-under-threat-again-a-ruling-exempting-prep-from-insurance-coverage-may-extend-nationwide-and-to-other-health-services-190317">Sept. 13, 2022</a>.</em></p><img src="https://counter.theconversation.com/content/203037/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Shafer has received funding in the past three years from the Commonwealth Fund, Arnold Ventures, Robert Wood Johnson Foundation, Kate B. Reynolds Charitable Trust, Starbucks Coffee Company, and Renova Health.</span></em></p><p class="fine-print"><em><span>Kristefer Stojanovski does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>On the basis of government appointment technicalities and religious freedom, Americans may lose free coverage for cancer and blood pressure screenings, HIV prevention medication and other essential services.Paul Shafer, Assistant Professor of Health Law, Policy and Management, Boston UniversityKristefer Stojanovski, Research Assistant Professor of Social, Behavioral and Population Sciences, Tulane UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1942482022-11-11T03:58:13Z2022-11-11T03:58:13ZHow to switch health insurers if you’re worried about cybersecurity, costs or claims<figure><img src="https://images.theconversation.com/files/494377/original/file-20221109-15-k2scpe.jpg?ixlib=rb-1.1.0&rect=10%2C0%2C6699%2C4476&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.pexels.com/photo/women-with-laptops-sitting-on-the-floor-4132400/">Ketut Subiyanto/Pexels</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p><a href="https://www.apra.gov.au/sites/default/files/2022-08/Quarterly%20Private%20Health%20Insurance%20Statistics%20June%202022.pdf">More than half</a> of Australians hold private health insurance. About one quarter, or almost four million people, are members of Medibank, Australia’s <a href="https://www.finder.com.au/health-insurance-statistics">largest health insurer</a> and the company at the centre of the <a href="https://theconversation.com/medibank-hackers-are-now-releasing-stolen-data-on-the-dark-web-if-youre-affected-heres-what-you-need-to-know-194340">current cybersecurity breach</a>.</p>
<p>Medibank has promised <a href="https://www.medibank.com.au/livebetter/newsroom/post/medibank-cybercrime-update11Nov">to support</a> affected customers. However, such breaches may trigger some customers to think about switching companies. People might also want to switch companies for other reasons, including wanting to get a better deal.</p>
<p>Here are some tips to get started.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/medibank-hackers-are-now-releasing-stolen-data-on-the-dark-web-if-youre-affected-heres-what-you-need-to-know-194340">Medibank hackers are now releasing stolen data on the dark web. If you're affected, here's what you need to know</a>
</strong>
</em>
</p>
<hr>
<h2>Why switch?</h2>
<p>Ahead of this latest cybersecurity breach, the <a href="https://www.accc.gov.au/system/files/981_Private%20Health%20Report_2013-14_web%20FA.pdf">most common reason</a> for wanting to switch private health insurers was to find cheaper cover.</p>
<p>This was most likely driven by annual premium increases, which until recently, have been running above inflation.</p>
<p>Other reasons for switching include dissatisfaction with claim amounts, looking for additional policy benefits or trying to avoid exclusions (services not covered). Existing cover may also no longer suit someone’s <a href="https://www.iselect.com.au/health-insurance/switch-health-insurance/">health needs and lifestyle</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">Explainer: why do Australians have private health insurance?</a>
</strong>
</em>
</p>
<hr>
<p>The Commonwealth Ombudsman <a href="https://www.ombudsman.gov.au/__data/assets/pdf_file/0020/29423/The-right-to-change_DL_Brochure_2019_digital-A1776084.pdf">offers a guide</a> with common types of situations encountered when switching health insurers, and what to expect.</p>
<p>Switching can lead to better matches between what a consumer needs from their health insurance and policy inclusions. People may also get better value for money.</p>
<p>There’s the added bonus of <a href="https://www.accc.gov.au/system/files/Private%20Health%20Report%202012-13.pdf">promoting competition</a> between companies, prompting insurers to design better-value insurance products.</p>
<h2>How do I compare?</h2>
<p>Switching health insurers may feel daunting. However, several websites such as <a href="https://www.iselect.com.au/health-insurance/?utm_sitelink=comparehealthinsurancesitelink&utm_source=google&utm_medium=cpc&utm_campaign=gl_bau-generic-brand-exact_dr&utm_term=iselect&gclid=EAIaIQobChMIivCnpICj-wIVgzUrCh3zcAUdEAAYASABEgJPAvD_BwE&gclsrc=aw.ds">iSelect</a>, <a href="https://www.comparethemarket.com.au/health-insurance/">comparethemarket</a> and <a href="https://www.finder.com.au/health-insurance">finder</a> provide product and cost comparisons. </p>
<p>These sites compare less than one-third of all insurers, restricting your chance for getting a better deal.</p>
<p>A less-known option is using the government website <a href="https://www.privatehealth.gov.au/dynamic/search/start">privatehealth.gov.au</a>. This contains details on every policy available in Australia.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Male nurse wearing mask taking blood pressure of female patient wearing mask" src="https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494788/original/file-20221111-21-abak3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">If you’re a nurse or belong to certain other professions, you may be eligible to join certain insurers.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/male-nurse-measures-blood-pressure-senior-1817431535">Shutterstock</a></span>
</figcaption>
</figure>
<p>You and your family may be eligible to join a <a href="https://www.privatehealth.gov.au/dynamic/insurer/restricted">restricted insurer</a> based on your industry or profession. These may offer <a href="https://www.finder.com.au/restricted-funds">lower premiums</a> and policies with greater benefits, as profits are returned to members. Terms and conditions, including waiting periods, may be more flexible with restricted funds.</p>
<p><a href="https://www.health.gov.au/sites/default/files/private-health-insurance-reforms-gold-silver-bronze-basic-product-tiers-campaign-fact-sheet_1.pdf">Government reforms</a> have introduced four product tiers (gold, silver, bronze or basic). These are based on standard clinical categories specifying what is and is not covered. All insurers are now required to classify their products into these tiers, which makes comparing across insurers easier.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/private-health-insurance-and-the-illusion-of-choice-10985">Private health insurance and the illusion of choice</a>
</strong>
</em>
</p>
<hr>
<h2>What else do I need to know?</h2>
<p><strong>Waiting periods, discounts and fees</strong></p>
<p>When you switch insurers, your old health fund issues a clearance certificate to your new fund, with the amounts you’ve already claimed in the year carrying across to your new policy. </p>
<p>If switching to a similar level of cover, any <a href="https://www.ombudsman.gov.au/__data/assets/pdf_file/0020/29423/The-right-to-change_DL_Brochure_2019_digital-A1776084.pdf">waiting periods</a> you’ve already served also carry over, provided payments with your old insurer are up to date. </p>
<p>However, you may have to serve waiting periods for any new benefits and inclusions applying under your new policy, a point to clarify with your new insurer.</p>
<p>There are no exit fees for switching and some funds offer discounts to new members, subject to a <a href="https://www.legislation.gov.au/Details/F2021C00248">12% per annum cap</a>.</p>
<p>Changing insurers should not affect your <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/lifetime_health_cover.htm">Lifetime Health Cover</a> status – the government incentive to encourage people to buy and keep hospital cover to avoid an age-based loading on their premiums after the age of 30. This is provided you continuously <a href="https://www.ombudsman.gov.au/__data/assets/pdf_file/0020/29423/The-right-to-change_DL_Brochure_2019_digital-A1776084.pdf">maintain a hospital policy</a>. </p>
<p>Insurers cannot refuse your cover or charge you more based on pre-existing health conditions. They charge customers the same price for the same policy, regardless of whether they are switchers. Although, people aged 18-29 could receive a discount of up to 10% of their premiums.</p>
<p><strong>Excesses and exclusions</strong></p>
<p>Insurers are allowed to <a href="https://www.health.gov.au/sites/default/files/private-health-insurance-reforms-increasing-voluntary-maximum-excess-levels.pdf">increase voluntary excess levels</a> (the sum you pay out of your own pocket before health insurance coverage kicks in) in return for cheaper premiums.</p>
<p>People can also choose to exclude certain medical conditions from their health cover to save money.</p>
<p>However, you should assess whether these options suit you before switching to such policies.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/greedy-doctors-make-private-health-insurance-more-painful-heres-a-way-to-end-bill-shock-127227">Greedy doctors make private health insurance more painful – here's a way to end bill shock</a>
</strong>
</em>
</p>
<hr>
<h2>You’re not the only one finding this hard</h2>
<p>Despite the potential benefits of switching insurers, only <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">around 1.5%</a> of all insured people switch insurers each quarter. </p>
<p>An earlier Australian Competition and Consumer Commission <a href="https://www.accc.gov.au/system/files/981_Private%20Health%20Report_2013-14_web%20FA.pdf">report</a> found that while 48% of consumers surveyed thought about changing insurers, only 14% actually switched.</p>
<p>This likely reflects the complexity of health insurance policies, and the perceived difficulty of making a switch, leading to a tendency for people to “set and forget”.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Woman in business suit at laptop reading sheet of paper" src="https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494790/original/file-20221111-12-8uq8m1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">It’s easy to be confused or think the process of switching is too hard.</span>
<span class="attribution"><a class="source" href="https://www.pexels.com/photo/woman-in-blue-blazer-holding-white-paper-3727468/">Anna Shvets/Pexels</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/inducing-choice-paralysis-how-retailers-bury-customers-in-an-avalanche-of-options-116078">Inducing choice paralysis: how retailers bury customers in an avalanche of options</a>
</strong>
</em>
</p>
<hr>
<h2>How could switching be easier?</h2>
<p>Scheduled annual price increases each April may make some people reassess their insurance needs.</p>
<p>The government could create more “triggers” for switching, encouraging consumers to re-assess their situation. Private health insurance advertising often increases around this time.</p>
<p>The government could also provide information to help people compare how much they are paying relative to their peers. If people discover they’re paying more than others with similar cover, that might be a good incentive to switch. People may also think about switching if they discover their chosen level of cover doesn’t align with their peers. </p>
<p>However, some consumers may never be “<a href="https://theconversation.com/confusopoly-why-companies-are-motivated-to-deliberately-confuse-39563">nudged</a>” enough to switch. A <a href="https://insightplus.mja.com.au/2021/20/why-do-australians-buy-private-hospital-insurance/">large proportion of people</a> who purchase hospital cover buy private health insurance to avoid paying the <a href="https://www.ato.gov.au/individuals/medicare-and-private-health-insurance/medicare-levy-surcharge/">Medicare levy surcharge</a>. These types of consumers may be less likely to evaluate their health cover as their health-care needs change.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/confusopoly-why-companies-are-motivated-to-deliberately-confuse-39563">Confusopoly: Why companies are motivated to deliberately confuse</a>
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</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/194248/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Henry Cutler receives funding from the Australian Healthcare and Hospitals Association.</span></em></p><p class="fine-print"><em><span>Anam Bilgrami does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Caught up in the latest Medibank cybersecurity breach? Not happy with your premiums? Here’s what you need to know about switching health insurer.Anam Bilgrami, Research Fellow, Macquarie University Centre for the Health Economy, Macquarie UniversityHenry Cutler, Professor and Director, Macquarie University Centre for the Health Economy, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1815952022-04-28T20:02:15Z2022-04-28T20:02:15ZRising out-of-pocket health costs are a worry. But the major parties have barely mentioned it<figure><img src="https://images.theconversation.com/files/459931/original/file-20220427-18-i0jg5g.jpg?ixlib=rb-1.1.0&rect=2%2C1%2C995%2C664&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sad-black-woman-near-window-reading-1314448082">Shutterstock</a></span></figcaption></figure><p>Rising out-of-pocket costs for health care is an important issue the major parties have not yet substantially addressed during the election campaign.</p>
<p>We heard just this week how health-care costs are rising <a href="https://theconversation.com/inflation-hits-an-extraordinary-5-1-how-long-until-mortgage-rates-climb-181832">faster than</a> other costs of living pressures.
<a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release#key-statistics">Health-care costs</a> are also rising faster than <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/dec-2021">wages</a>. The rising cost of specialists’ fees, in particular, are a concern. So, many Australian families are finding it increasingly difficult to keep up. </p>
<p>Earlier this year, a major consumer survey <a href="https://healthsystemsustainability.com.au/the-voice-of-australian-health-consumers/">found</a> 30% of people with chronic conditions were not confident they could afford needed health care if they became seriously ill; 14% could not pay for health care or medicine because of a shortage of money.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/inflation-hits-5-1-how-long-until-mortgage-rates-climb-181832">Inflation hits 5.1%. How long until mortgage rates climb?</a>
</strong>
</em>
</p>
<hr>
<h2>Out-of-pocket costs are rising</h2>
<p>Out-of-pocket health-care costs cover a range of expenses not covered by Medicare or private health insurance, such as doctors’ fees for consultations and surgery.</p>
<p>Only 35.1% of specialist consultations were <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/Medicare%20Statistics-1">bulk billed in 2020-21</a> compared with 88.8% of GP services.</p>
<p>For private (multi-day) hospital care in 2019-20, <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/health-casemix-data-collections-publications-HCPAnnualReports">43.7% of separations</a> (hospital admissions that include procedures and operations) had no hospital or medical out-of-pocket cost.</p>
<p>Out-of-pocket costs are rising, <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/Medicare%20Statistics-1">Medicare statistics show</a>.</p>
<iframe src="https://flo.uri.sh/visualisation/9617550/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:300px;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation" width="100%" height="400"></iframe>
<div style="width:100%!;margin-top:4px!important;text-align:right!important;"><a class="flourish-credit" href="https://public.flourish.studio/visualisation/9617550/?utm_source=embed&utm_campaign=visualisation/9617550" target="_top"><img alt="Made with Flourish" src="https://public.flourish.studio/resources/made_with_flourish.svg"> </a></div>
<p>There is ample <a href="https://link.springer.com/article/10.1007/s10198-013-0526-8">evidence</a> out-of-pocket costs reduce access to, and use of, health care. This more strongly affects people who need health care the most.</p>
<p>For instance, access to timely specialist care in Australia depends on your income and ability to pay.</p>
<p>Although richer people <a href="https://www.sciencedirect.com/science/article/pii/S0277953618302041">use more specialist care</a>, on average, it is less-affluent people who have higher need for <a href="https://www.sciencedirect.com/science/article/pii/S0168851020302244?casa_token=UO9uqqBMiDgAAAAA:esi0pxqJkXVpBeI2qB2HwxiCBgTcL7VRMlcMDyp_Y0TaQo81MNugRrPRkGpbtsSR5ubUA5Kx_TA">health care</a>. Yet it is less-affluent people who have to wait to see a specialist in a public hospital. </p>
<p>High doctors’ fees have other consequences. They may provide skewed incentives to doctors, leading to <a href="https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(16)30947-3/fulltext">overdiagnosis and overtreatment</a>. Doctors may also flock to high-earning specialties while we have a shortage of GPs (who are paid <a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0011/3809963/ANZ-Health-Sector-Report-2021.pdf">half as much</a> as specialists).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/specialists-are-free-to-set-their-fees-but-there-are-ways-to-ensure-patients-dont-get-ripped-off-97372">Specialists are free to set their fees, but there are ways to ensure patients don't get ripped off</a>
</strong>
</em>
</p>
<hr>
<h2>What do the major parties promise?</h2>
<p>Health policies <a href="https://www.abc.net.au/news/2022-04-20/federal-election-liberal-labor-nationals-greens-policy-positions/100482298">announced</a> by the major parties ahead of the federal election do not necessarily translate into lower out-of-pocket health costs, or focus on the most pressing issue.</p>
<p>The Coalition has promised to <a href="https://theconversation.com/what-is-the-pbs-safety-net-and-is-it-really-the-best-way-to-cut-the-cost-of-medicines-180315">lower the safety net threshold</a> for the Pharmaceutical Benefits Scheme. This announcement, made in this year’s federal budget, would make medicines cheaper or free for people who need multiple scripts a year.</p>
<p>But this is an area where out-of-pocket costs have been falling for <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/mar-2022/640105.xlsx">some time</a> compared with other areas of spending. So any announcement may have been better targeted at areas where out-of-pocket costs are growing more quickly.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Person using EFTPOS machine in pharmacy or clinic" src="https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/459940/original/file-20220427-18-rzq6w3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Election policies announced so far don’t always address the biggest out-of-pocket costs.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/paying-pharmacy-407956288">Shutterstock</a></span>
</figcaption>
</figure>
<p>In any election there is always a focus on access to GPs and bulk billing. This includes Labor’s proposal for new <a href="https://theconversation.com/labors-urgent-care-centres-are-a-step-in-the-right-direction-but-not-a-panacea-181237">urgent care centres</a>, which would provide bulk billed services to take the pressure off emergency departments.</p>
<p>However, neither of the major parties are doing anything about the continuing and much larger increases in specialists’ out-of-pocket costs. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/labors-urgent-care-centres-are-a-step-in-the-right-direction-but-not-a-panacea-181237">Labor’s urgent care centres are a step in the right direction – but not a panacea</a>
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<hr>
<h2>Can informed patients make a difference?</h2>
<p>The Coalition introduced a price transparency <a href="https://www.health.gov.au/resources/apps-and-tools/medical-costs-finder">website</a> <a href="https://www.abc.net.au/news/2019-12-30/government-health-website-out-of-pocket-hospital-costs/11832410">in 2019</a> that provides estimates of out-of-pocket costs for private hospital care, with plans for doctors to voluntarily upload their fees. Some <a href="https://www.medibank.com.au/health-support/hospital-assist/costs/">private health insurers</a> also have such websites.</p>
<p>However, these websites rely entirely on consumers doing the “leg work” by shopping around to reduce their out-of-pocket costs. The assumption is that by providing consumers with more information, they will make better choices. But this is too simplistic because information can difficult to get and understand, and these websites don’t include data on the quality of care.</p>
<p><a href="https://minerva-access.unimelb.edu.au/items/a0d05155-4781-59fa-bebd-5a5565c3012d">Our review</a> on price transparency websites in health care shows <a href="https://theconversation.com/we-need-more-than-a-website-to-stop-australians-paying-exorbitant-out-of-pocket-health-costs-108740">they may not work</a> for consumers. Not all consumers <a href="https://doi.org/10.1016/j.ijindorg.2021.102716">can or want</a> to use them. There’s also the risk doctors could use these websites to see what other doctors are charging and increase their fees.</p>
<p>It could be better if these websites were used by GPs when referring patients to specialists. Patients can also be encouraged to ask about the out-of-pocket cost when booking an appointment or during the visit. </p>
<p>But this does not help patients who are usually in a vulnerable position, who want care quickly, do not have the information or time to shop around, and might think the care they receive will be affected if they ask about cost. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/doctors-fees-shouldnt-just-be-transparent-they-should-be-fair-and-reasonable-100948">Doctors’ fees shouldn't just be transparent, they should be fair and reasonable</a>
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<hr>
<h2>Can doctors make a difference?</h2>
<p>Doctors set their own fees and many use the Australian Medical Association fee schedule as guidance. They decide what fee to charge, whether to bulk bill, or whether to use gap cover provided by private health insurers for private hospital care. </p>
<p>At the moment it would require a brave politician to directly control doctors’ fees given the constitutional protections they have and the way Medicare and private health insurance were designed to provide subsidies to patients, not to directly pay doctors.</p>
<p>However, something the major parties can address is “bill shock”. Patients don’t always know the doctor’s fee before they visit, and in some circumstances don’t know in advance how much a procedure will cost.</p>
<p>If care involves many tests, visits and procedures over time by different doctors, then there will be a bill for each. This shifts all the financial risk to patients, something private health insurance was designed to handle. </p>
<p>At a minimum, doctors’s fees and out-of-pocket costs need to be bundled together and published as an upfront quote or range for the expected course of care. This is something that could be addressed by one of the major parties. </p>
<h2>What next?</h2>
<p>Addressing rising out-of-pocket health costs is a complex area linked closely to broader reform of the health-care system, which neither major party has promised to do anything about.</p>
<p>Without such reforms we’ll see Australians prioritising spending on food, housing and petrol over health care, in the current climate.</p>
<p>But Australia cannot afford to allow this to happen. As we have witnessed during the pandemic, an unhealthy population is not only bad for individuals, it’s bad for us all.</p><img src="https://counter.theconversation.com/content/181595/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anthony Scott receives funding from a research grant awarded by the Medibank Better Health Foundation on out of pocket costs and price transparency.</span></em></p>Health-care costs are continuing to rise faster than wages, so many Australian families are finding it increasingly difficult to keep up.Anthony Scott, Professor of health economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1812642022-04-19T20:16:09Z2022-04-19T20:16:09ZThe private health insurance rebate has cost taxpayers $100 billion and only benefits some. Should we scrap it?<p>The private health insurance rebate costs Australian taxpayers nearly <a href="https://www.mq.edu.au/__data/assets/pdf_file/0011/1210061/The-MUCHE-Health-Report_220331_Final_02.pdf">A$7 billion per year</a>, and has cost over $100 billion since its introduction.</p>
<p>Yet the rebate’s return on investment has never been estimated.</p>
<p>In the middle of an election campaign and with a record budget deficit, it’s worth reflecting on why the rebate was introduced and whether it represents value for money.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">INFOGRAPHIC: A snapshot of private health insurance in Australia</a>
</strong>
</em>
</p>
<hr>
<h2>What is the private health insurance rebate, who gets it, and why was it brought in?</h2>
<p>The private health insurance rebate is money paid by the Australian government to people who buy private patient hospital cover.</p>
<p>Eligibility depends on policy type (single or family) and annual income. Singles or families within incomes classified as Tier 3 do not receive any rebate.</p>
<hr>
<iframe title="Rebate levels applicable up to 30 June 2023" aria-label="Table" id="datawrapper-chart-XxQ3D" src="https://datawrapper.dwcdn.net/XxQ3D/2/" scrolling="no" frameborder="0" style="border: none;" width="100%" height="303"></iframe>
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<p>The rebate rate is based on age and income. It is calculated as a percentage of the premium paid, so the more spent, the more money the government will provide, either through lower premiums or through your tax return.</p>
<p>The Australian government introduced a means-tested rebate to singles and families in 1997 to encourage people to buy private health insurance.</p>
<p>It thought an increase in private hospital cover would take pressure off public hospitals.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-debate-were-yet-to-have-about-private-health-insurance-39249">The debate we're yet to have about private health insurance</a>
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</em>
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<hr>
<p>Cover had significantly declined due to premium increases of 75% between 1989 and 1996.</p>
<p>Around the same time, the government introduced the Medicare Levy Surcharge. This penalises higher income people for not owning private hospital cover.</p>
<p>It also introduced lifetime health cover loading, which makes people aged over 30 pay higher premiums if they decide to purchase private hospital cover for the first time, or drop their cover for three years or more (with exemptions for people going overseas).</p>
<p>Means testing on the rebate was removed in 1999, and a flat 30% rebate was applied to all policies. This formed part of the <a href="https://treasury.gov.au/sites/default/files/2019-03/Whitepaper.pdf">government’s support</a> for cost of living pressures given the goods and services tax was being introduced.</p>
<p>At the time, there were several supporters of the rebate, such as the peak bodies for the private health insurance sector and private hospitals.</p>
<p>There were also strong opponents.</p>
<p>The Industry Commission (now the Productivity Commission) concluded the rebate would not help the public hospital system. A <a href="https://www.aph.gov.au/parliamentary_business/committees/senate/community_affairs/completed_inquiries/1999-02/phealth_first/report/c03">Senate Standing Committee concluded</a> the rebate runs “counter to the Medicare principles of universality, equity and access”.</p>
<h2>Changes to rebate policy settings over time</h2>
<p>The then Coalition government increased the rebate in 2005 from 30% to 35% for people aged 65-69 years and 40% for people aged 70 years and over. <a href="https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd0405/05bd070#Purpose">This was to</a> “reward older Australians for contributing to private health insurance costs for most of their adult lives”. It had little effect on membership and has been interpreted by some researchers and academics as a <a href="https://www.tandfonline.com/doi/full/10.1080/13504851.2017.1299094">wealth transfer to older Australians</a>.</p>
<p>The then Labor government reduced the rebate and increased the Medicare levy surcharge for high income earners in 2012, to limit government expenditure growth, after concerns the rebate provided “<a href="https://pubmed.ncbi.nlm.nih.gov/18548303/">windfall gains</a>” to high income earners. This policy <a href="https://onlinelibrary.wiley.com/doi/10.1111/1475-4932.12603">increased private hospital cover</a>.</p>
<p>The government has gradually reduced the rebate since 2014. </p>
<h2>Does the rebate achieve its intended purpose?</h2>
<p>The federal government now spends the same on the rebate each year as the South Australian government spends on its <a href="https://www.statebudget.sa.gov.au/budget-papers/2021-22-Budget-Statement.pdf">whole health system</a>. </p>
<p>The purpose of the rebate was to increase private health insurance membership to reduce public hospital pressure. On these measures, it seems to have failed.</p>
<p>While private hospital cover increased dramatically from 31% to 45% just after the 30% rebate was introduced, <a href="https://pubmed.ncbi.nlm.nih.gov/12536860/">most studies</a> attribute the increase to the lifetime health cover policy.</p>
<p>There is also no strong evidence increasing private hospital cover takes pressure off the public hospital system, with <a href="https://www.publish.csiro.au/ah/pdf/ah030006">data</a> suggesting little, if any, impact. Public hospital elective surgery waiting times for three popular surgeries increased despite the dramatic increase in private hospital cover at the start of the millennium.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=648&fit=crop&dpr=1 600w, https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=648&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=648&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=815&fit=crop&dpr=1 754w, https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=815&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/458508/original/file-20220419-24-8c9jju.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=815&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Source: Australian Prudential Regulatory Authority</span></span>
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</figure>
<hr>
<p><a href="https://www.publish.csiro.au/AH/AH050087">Some studies</a> suggest increased private hospital cover could increase public hospital waiting lists. Shifting patients into private hospitals decreases demand for public hospital elective surgery, but the supply of surgeons also shifts to private hospitals, which means fewer resources for public hospitals.</p>
<p>Many people have also downgraded their cover because of systemic premium increases. This means members may still use the public system to avoid large out-of-pocket costs.</p>
<h2>So what should the major parties do this election?</h2>
<p>Both major parties should commit to reviewing the rebate’s return on investment and ditch the rebate if taxpayers are not getting value for money.</p>
<p>Removing the rebate would be politically challenging.</p>
<p>Some members would experience a premium increase of between 8 and 33%, adding to their cost of living. Older Australians with low incomes would experience the greatest premium increases. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">Private health insurance 'carrot and stick' reforms have failed – here's why</a>
</strong>
</em>
</p>
<hr>
<p>That doesn’t mean there would be a collapse in membership but there would be some decline, potentially below 40% of the population. </p>
<p>Removing the rebate should be popular among Australians without private health insurance, which is more than half. They don’t receive any benefit from the rebate yet their tax is used to cover its cost.</p>
<p>A drop in membership means some people would get their elective surgery in public hospitals instead. But the money saved from the rebate would be <a href="https://www.sciencedirect.com/science/article/pii/S016762961300163X?via%3Dihub">more than enough</a> to cover those extra costs in the public system, with funds left over.</p>
<p>Savings could be reinvested into the public system, where every Australian can benefit.</p><img src="https://counter.theconversation.com/content/181264/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government has spent $100 billion on the private health insurance rebate. Why? And does it represent value for money?Henry Cutler, Director, Centre for the Health Economy, Macquarie UniversityAnam Bilgrami, Research Fellow, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1611712021-05-19T11:11:11Z2021-05-19T11:11:11Z4 ways to fix private health insurance so it can sustain a growing, ageing population<figure><img src="https://images.theconversation.com/files/401510/original/file-20210519-13-41h98t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/NGxd0beBLps">Caley Vanular</a></span></figcaption></figure><p>Since 2015, the share of younger people (aged 20 to 39) with private health insurance has dropped from <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">24% to 22%</a>. </p>
<p>People in this age group contribute more in insurance premiums than they claim in pay-outs. So this decline ends up pushing prices up for the <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">44% of Australians with private insurance</a>. </p>
<p>And new <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">private health insurance coverage data</a> shows this trend continuing.</p>
<p>Our latest <a href="https://grattan.edu.au/report/stopping-the-death-spiral/">Grattan report</a> outlines a four-step plan to stop this trajectory and fix the private health insurance system. The first step is preventing insurers increasing premiums if they cannot demonstrate the policy offers value for money. </p>
<h2>What’s the private health insurance ‘death spiral’?</h2>
<p>An ageing population, increased use of health services, and rising health-care costs are driving up the benefits insurers have to pay out each year. </p>
<p>As pay-outs increase, insurers raise premiums, to recoup these costs. </p>
<p>Rising premiums make health insurance less affordable and less attractive — particularly to younger and healthier people. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-do-you-stop-the-youth-exodus-from-private-health-insurance-cut-premiums-for-under-55s-128101">How do you stop the youth exodus from private health insurance? Cut premiums for under-55s</a>
</strong>
</em>
</p>
<hr>
<p>As younger, healthier people drop their insurance, the insurance “risk pool” gets worse; people who hold insurance are older and more likely to use their benefits and use them to a greater value. </p>
<p>This increases the cost of premiums, younger people drop out, and the death spiral starts again.</p>
<h2>What does the data say?</h2>
<p>The chart shows the overall trends in private health insurance over the past six years.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=427&fit=crop&dpr=1 600w, https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=427&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=427&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=537&fit=crop&dpr=1 754w, https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=537&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/401500/original/file-20210519-13-bejg14.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=537&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>Over this time period, the number of people with private health insurance over 65 — who are likely to draw on their health insurance, receiving more in benefit pay-outs than they pay in premiums — has increased dramatically. </p>
<p>At the same time, the numbers in all other age groups is declining, albeit with a <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">slight uptick in the September quarter of 2020</a>, possibly associated with people being allowed to defer premium payments during the COVID crisis. </p>
<p>The picture is particularly stark for 20 to 39-year-olds. People in this group make the pool of people insured less risky overall.</p>
<h2>So far, policy tweaks have failed</h2>
<p>In <a href="https://www.greghunt.com.au/major-reforms-to-make-private-health-insurance-simpler-and-more-affordable/">2017 the federal government announced</a> several rearrangements of private health insurance deckchairs to make the product more affordable or to encourage young people into insurance. </p>
<p>This included:</p>
<ul>
<li>simplified <a href="https://www.health.gov.au/resources/publications/private-health-insurance-reforms-gold-silver-bronze-basic-product-tiers-fact-sheet">gold/silver/bronze/basic</a> labelling of products</li>
<li>increasing excesses from A$500 to $750 for singles, and double that for families. Premiums are lower for people who accept higher excesses to reduce premiums</li>
<li>premium <a href="https://theconversation.com/youth-discounts-fail-to-keep-young-people-in-private-health-insurance-121803">discounts from 2% for 29-year-olds</a> to 10% for 18 to 25-year-olds.</li>
</ul>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/premiums-up-rebates-down-and-a-new-tiered-system-what-the-private-health-insurance-changes-mean-114086">Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean</a>
</strong>
</em>
</p>
<hr>
<p>But these initiatives have failed to entice young people into private health insurance.</p>
<h2>What are the solutions?</h2>
<p><a href="https://grattan.edu.au/report/stopping-the-death-spiral/">Our report</a> proposes four key changes to:</p>
<p><strong>1. Address premium increases, which are currently too great and too frequent.</strong> </p>
<p>Over the past 20 years, private health insurance premiums have grown
faster than inflation, faster than health-specific inflation, and faster than wages. If people want to keep their same level of insurance, they have to fork out more and more.</p>
<p>Insurers that won’t or can’t offer their customers value for money should not be allowed to raise their premiums. </p>
<figure class="align-center ">
<img alt="Serious man and woman sitting at kitchen table in front of open laptop computer, looking at screen" src="https://images.theconversation.com/files/401573/original/file-20210519-17-w5p8jh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/401573/original/file-20210519-17-w5p8jh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/401573/original/file-20210519-17-w5p8jh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/401573/original/file-20210519-17-w5p8jh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/401573/original/file-20210519-17-w5p8jh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/401573/original/file-20210519-17-w5p8jh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/401573/original/file-20210519-17-w5p8jh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Private health insurance premiums have been rising faster than inflation.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/serious-man-woman-sitting-kitchen-table-588038042">Shutterstock</a></span>
</figcaption>
</figure>
<p>A new private health industry plan could reinforce the incentives for insurers to improve their claims ratios. This is the proportion of premium revenue returned to members in the form of benefits. </p>
<p>The health minister could also require funds to provide additional justification for a proposed increase if the proportion of their premiums returned to members is worse than the average claims ratio.</p>
<p><strong>2. Reduce private hospital costs.</strong></p>
<p>Unnecessarily long stays and examples of <a href="https://theconversation.com/hospitals-have-stopped-unnecessary-elective-surgeries-and-shouldnt-restart-them-after-the-pandemic-136259">low- or no-value care</a> are more common in private hospitals than in public ones. This drives up the cost of private hospital care.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/hospitals-have-stopped-unnecessary-elective-surgeries-and-shouldnt-restart-them-after-the-pandemic-136259">Hospitals have stopped unnecessary elective surgeries – and shouldn't restart them after the pandemic</a>
</strong>
</em>
</p>
<hr>
<p>A new private health industry plan should create incentives for private hospitals to become more efficient. One way to do this would be for insurers to pay private hospitals in a similar way to how government funds public hospitals. This would mean insurers pay private hospitals for the patients they treat, not for how long patients stay in hospital or the other services hospitals provide.</p>
<p>Improving private hospital efficiency and reducing low- or no-value care could reduce premiums by 5%.</p>
<p><strong>3. Reduce out-of-pocket costs.</strong></p>
<p>Out-of-pocket costs on medical bills are often in the hundreds of dollars, and sometimes in the thousands. In 2019-20, the <a href="https://grattan.edu.au/wp-content/uploads/2021/05/Stopping-the-Death-Spiral-Grattan-Report.pdf">average medical out-of-pocket cost</a> was $544, and the average hospital out-of-pocket cost was $411. </p>
<p>Out-of-pocket costs are a major source of people’s dissatisfaction with private health insurance, and astonishingly high billing by a minority of doctors is a major cause of these costs.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/greedy-doctors-make-private-health-insurance-more-painful-heres-a-way-to-end-bill-shock-127227">Greedy doctors make private health insurance more painful – here's a way to end bill shock</a>
</strong>
</em>
</p>
<hr>
<p>Comprehensive, public information on fees and costs would help. But even that is unlikely to significantly reduce the size and prevalence of out-of-pocket costs, because patients face an inherent power imbalance when dealing with doctors.</p>
<p>A new private health industry plan should include the structural reform required to reduce surprise out-of-pocket payments. This may come about through downward pressure on medical bills, or with more deals between doctors and insurers to bridge the gap.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/401581/original/file-20210519-23-1ey3xyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/401581/original/file-20210519-23-1ey3xyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/401581/original/file-20210519-23-1ey3xyo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/401581/original/file-20210519-23-1ey3xyo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/401581/original/file-20210519-23-1ey3xyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/401581/original/file-20210519-23-1ey3xyo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/401581/original/file-20210519-23-1ey3xyo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Patients face a power imbalance when dealing with doctors.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-female-doctor-hands-typing-computer-1918929770">Shutterstock</a></span>
</figcaption>
</figure>
<p><strong>4. Reduce the price private insurers pay for medical devices.</strong></p>
<p>Surgically implanted medical devices include hip and knee replacement devices, cardiac stents and pacemakers. Currently, medical device manufacturers and importers, and private hospitals charge more than twice as much for these as public hospitals, a nice gravy train which they lobbied health minister Greg Hunt to retain. </p>
<p>This year’s budget revealed <a href="https://johnmenadue.com/prosthesis-pricing-is-a-dead-parrot/">the minister backed down</a> on a plan to reduce the cost of health insurance premiums by <a href="https://consultations.health.gov.au/technology-assessment-access-division/prostheses-list-reform-options/">stopping medical device rorts</a>. The budget announced yet another process of investigation and analysis, rather than making the tough decisions to end the excess charging, which would allow cuts in private health insurance premiums. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/we-can-cut-private-health-insurance-costs-by-fixing-how-we-pay-for-hip-replacements-and-other-implants-121172">We can cut private health insurance costs by fixing how we pay for hip replacements and other implants</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/161171/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website. Medibank is an affiliate partner of Grattan.</span></em></p><p class="fine-print"><em><span>Anika Stobart does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A sustainable private health insurance system requires enough young, healthy people paying premiums and not making claims. But government policies haven’t achieved this. Here’s what to try instead.Stephen Duckett, Director, Health Program, Grattan InstituteAnika Stobart, Associate, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1475502020-12-06T13:17:48Z2020-12-06T13:17:48ZWithout pharmacare, Canadians with disabilities rationing drugs due to high prescription costs<figure><img src="https://images.theconversation.com/files/372049/original/file-20201130-19-fy5oys.jpg?ixlib=rb-1.1.0&rect=790%2C49%2C7452%2C5438&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">For people with disabilities, prescription drug costs are often layered on top of other health-related costs.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Up to a third of Canadians with disabilities may skip doses of medication or neglect to get their prescriptions filled because of the cost of prescription drugs. One of the aims of pharmacare is to remove financial barriers to prescription drugs, and overcome inequities among Canadians for this important aspect of health care. </p>
<p>While the federal government reiterated its commitment to implementing pharmacare in the <a href="https://www.canada.ca/en/privy-council/campaigns/speech-throne/2020/speech-from-the-throne.html">speech from the throne</a> in September, a <a href="https://www.canada.ca/en/health-canada/corporate/about-health-canada/public-engagement/external-advisory-bodies/implementation-national-pharmacare/final-report.html">key task</a> for implementation will be to ascertain who needs it most, ensuring that tax dollars are spent where they can do the most good. </p>
<h2>Myths about medication costs</h2>
<p>Recent <a href="https://qspace.library.queensu.ca/handle/1974/27908">research</a> from investigators at Queen’s University exposes two myths that could interfere with making sure the right people get the help they need from a pharmacare or public drug benefit program.</p>
<p><strong>Myth No. 1</strong>: People with disabilities are either seniors or welfare recipients, and therefore already receive their drugs free of charge. </p>
<figure class="align-right ">
<img alt="A young black woman using a wheelchair" src="https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372080/original/file-20201130-23-jw7o3j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sixty per cent of Canadians with disabilities are under age 65.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>The <a href="https://www150.statcan.gc.ca/n1/pub/89-654-x/89-654-x2018002-eng.htm">Canadian Survey on Disability (2017)</a> shows that 60 per cent of disabled adults are under the age of 65, and therefore are not eligible for seniors’ benefits. Furthermore, between 30 and 60 per cent of working-age disabled adults are employed (depending on the severity of their disability), and thus may be ineligible for government drug programs. In our research, 27 per cent of our sample received coverage for prescription drugs from government sources exclusively. Many were covered only by private health insurance (47 per cent) or by a mixture of private and public health insurance (17 per cent).</p>
<p><strong>Myth No. 2</strong>: Drug insurance alleviates the financial burden of prescription medications.</p>
<p><a href="https://doi.org/10.1038/s41393-019-0406-x">The study</a> also showed that although 92 per cent of our sample had some type of drug insurance, they still experienced extraordinary out-of-pocket costs for prescription medications — more than five times the national average.</p>
<h2>Multiple medications</h2>
<p>Like many people with disabilities and chronic illnesses, members of our sample took a number of prescription medications. The average in our sample was five, which is <a href="https://www150.statcan.gc.ca/n1/pub/82-003-x/2014006/article/14032/tbl/tbl2-eng.htm">significantly more than most Canadians take</a>, particularly those under age 65. For each of these prescriptions, there may be co-payments, dispensing fees or other point-of-purchase costs. These costs added up to an average of $197 per month in our sample, with some people bearing costs near $3,000 per month for their medications. </p>
<p>There were also often deductibles and/or premiums that had to be paid on a monthly or annual basis to maintain coverage. Deductibles are typically calculated as a percentage of net income, and range from $100-$400 annually. Catastrophic coverage of high-risk patients is intended to prevent financial hardship for people with high drug costs. However, deductibles for these patients can be as high as 20 per cent of annual income plus a co-insurance of up to 35 per cent — a percentage of prescription costs that patients pay directly while making a purchase.</p>
<p>Prescription drug costs were often layered on top of other health-related costs, such as over-the-counter medications, expendable health supplies such as catheters, gloves and skincare supplies, dietary supplements and adaptive devices such as wheelchairs and special cushions. These additional costs added up on average to $600 per month in our sample.</p>
<figure class="align-center ">
<img alt="Pharmacist discussing a product with a man using a wheelchair" src="https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372081/original/file-20201130-13-1yix81z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Thirty-seven per cent of people with disabilities ration medications because of prescription drug costs.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>The excess costs of prescription drugs for disabled people are particularly problematic when we take into account that disabled people are typically significantly less well off than non-disabled Canadians. <a href="https://www150.statcan.gc.ca/n1/pub/89-654-x/89-654-x2018002-eng.htm">National data</a> show the average income for someone with a disability is $20,000 lower than for those without a disability ($19,000 versus $39,000 per year). Twenty-eight per cent of people with a severe disability live below the poverty line, compared to 10 per cent of the non-disabled. Even among those who are employed, many work part-time, work for small employers or are self-employed.</p>
<h2>Rationing medication</h2>
<p>When we <a href="https://doi.org/10.3390/ijerph16173066">surveyed 160 people with disabilities for a study</a>, we found that the high cost of medications led 37 per cent of individuals to ration their medications by taking a smaller dose, taking medications less often or simply not filling prescriptions. Many resorted to cutting back on essentials such as food, shelter or other disability-related expenses in order to be able to pay for their drugs. These measures caused their symptoms to get worse, which ultimately affected their quality of life and caused them to use more health-care services.</p>
<p>Given this rising burden of prescription drug costs on patients, a national pharmacare program for Canada needs to respond to the breadth (who is covered, or population-coverage), depth (what services are covered, or cost-coverage) and scope (how much of the cost is covered, or service-coverage) of drug insurance. In particular, the extraordinary needs of people with disabilities need to be taken into account. </p>
<p>Our study demonstrated that paying for medications is a significant issue for many Canadians, but especially for those who live on a precarious margin of health. If we are to find a workable solution for pharmacare for Canadians, it needs to prioritize the needs of people who need it most.</p><img src="https://counter.theconversation.com/content/147550/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shikha Gupta receives funding from Mark S Lodge Foundation. </span></em></p><p class="fine-print"><em><span>Mary Ann McColl receives funding from Mark S Lodge Foundation; Social Sciences & Humanities Research Council</span></em></p>Any pharmacare plan that aims to remove financial barriers to treatment and eliminate inequities should prioritize those who face the highest out-of-pocket drug costs, such as people with disabilities.Shikha Gupta, Research Coordinator, Centre for Health Services and Policy Research and School of Rehabilitation Therapy, Queen's University, OntarioMary Ann McColl, Professor, School of Rehabilitation Therapy, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1481912020-10-21T19:00:16Z2020-10-21T19:00:16ZThinking of ditching private health insurance in the pandemic? Here’s how to calculate if it’s worth it for you<figure><img src="https://images.theconversation.com/files/364635/original/file-20201021-13-51vuek.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C7360%2C4912&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><a href="https://thenewdaily.com.au/finance/your-budget/2020/09/28/private-health-premium-rise/">Almost all</a> private health insurers increased their premiums in October, and have scheduled another price rise for April 2021. As many people <a href="https://melbourneinstitute.unimelb.edu.au/data/covid-19-tracker">struggle financially amid the pandemic</a>, you may be wondering whether you should drop your private health insurance altogether. </p>
<p>Before you do, bear in mind some government policies affect the cost of your insurance, and sometimes dropping it may even cost you more.</p>
<h2>Here’s the bottom line</h2>
<p>For singles with an income above A$105,000, and for families with an income above $180,000, it’s worth buying private hospital cover even if you don’t think you’ll use it. I’ll explain why in a moment.</p>
<p>People with incomes below these levels need to compare value and costs. The decision varies a lot depending on your age.</p>
<p>Three key polices affect your premium costs: the <a href="https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-surcharge/">Medicare levy surcharge</a>, government <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/insurance_rebate.htm">rebates</a>, and discounts for <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/discount_age.htm#:%7E:text=Age%2Dbased%20Discount-,Age%2Dbased%20Discount,will%20be%20gradually%20phased%20out.">younger people</a>.</p>
<p>Throughout this article, we’re talking about hospital cover, not “extras” like dental, optical or physio, which aren’t affected by these policies. You can buy extras cover separately without hospital cover. Extras cover is much cheaper than hospital cover, and an easier decision overall — you can readily compare how much you stand to gain from extras cover (based on how often you’re expecting to visit a physiotherapist, for instance) and then weigh that against how much it will cost you.</p>
<p>Here are the main things you should factor in when deciding on hospital cover.</p>
<h2>There’s the Medicare levy, and then there’s the surcharge</h2>
<p><a href="https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-exemption/category-1--medical-exemption-from-medicare-levy/">Almost all</a> Australians pay 2% of their taxable income as the <a href="https://www.ato.gov.au/Individuals/Medicare-levy/">Medicare levy</a>. This money goes towards funding parts of the public health-care system. It pays for Australians to get free (or much cheaper) GP visits and care in public hospitals.</p>
<p>If you earn above a certain income and don’t have private hospital cover (extras cover does not apply), you have to pay an extra 1-1.5% of your taxable income, called the <a href="https://privatehealth.gov.au/health_insurance/surcharges_incentives/medicare_levy.htm">Medicare levy surcharge</a>.</p>
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<p>For example, if John Citizen has a total taxable income of $150,000, he must pay $2,250 in additional tax (the Medicare levy surcharge), on top of the $3,000 he already pays as the Medicare levy. If he buys an appropriate level of private hospital cover, he can waive this extra tax and just pay the $3,000.</p>
<h2>Keep an eye on government rebates</h2>
<p>Singles with an income below $140,000, and families with an income below $280,000, can get government rebates on their private health insurance — that is, a partial refund. The level of this rebate <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/insurance_rebate.htm">varies by income and age</a>.</p>
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<h2>Discounts for the young</h2>
<p>Since April 2019, people aged 18–29 have been able to get discounts of up to 10% of their <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/discount_age.htm">private hospital premiums</a>. The allowable discounts are 2% for people aged 29, 4% for 28, 6% for 27, 8% for 26, and 10% for 18-25. People will retain that discount until they turn 41, then the discount gradually decreases by 2% per year.</p>
<p><a href="http://www.yutingzhang.com/phi.html">Factoring the above policies in</a>, for singles with an income above $105,000 and families with an income above $180,000, it makes sense to buy private hospital insurance even if you won’t use it. That’s because you can find hospital cover cheaper than the Medicare levy surcharge.</p>
<p>For those with an income below these levels, you need to compare <a href="http://www.yutingzhang.com/phi.html">whether the value is more than the cost</a>. Value consists of two components: protection from unexpected catastrophic risk, and your expected use of private hospital care.</p>
<p>First, value from risk protection is highly subjective, depending on your level of tolerance for potentially catastrophic uncertainties. Some people might naturally be more anxious about risks, but others less so. For example, people buy home and contents insurance to cover unexpected natural or accidental catastrophes, or burglary. But arguably, this component of value is small in the health insurance market because all Australians are insured by Medicare to cover their health needs in public hospitals, and are therefore protected from the financial risk of catastrophic health problems. </p>
<p>Second, there is value in buying private health insurance if you anticipate using private care, which can reduce your waiting time for certain elective surgeries, or give you a choice of doctors. This goes to the second part of value: expected use. </p>
<p>Take a look at the table below for the national averages for your age regarding your expected use of private hospital care. Basically, the older you are, the more you’re likely to use it, and the greater the expected benefit.</p>
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<p>Here’s an example. If you are single, 24 years old, are comfortable taking risks, have an income below $90,000, and your expected use of private hospital care is in line with the national average, your value from buying private hospital insurance is about $550 a year. As per the above graph, for people 20-24 years old, $550 was the national average of benefits actually paid by private insurance companies between July 2019 and June 2020.</p>
<p>Meanwhile, your median premium cost is $1,457 <a href="http://www.yutingzhang.com/phi.html">after rebates and discounts</a>, and you are exempt from the Medicare levy surcharge. So it may not be worth buying private hospital insurance in this set of circumstances.</p>
<p>When <a href="http://www.yutingzhang.com/phi.html">comparing value and costs</a>, you are most likely better off buying private hospital insurance given the current government policies for the following scenarios: </p>
<ul>
<li><p>family cover: family income above $180,000; family income below $180,000 if older than 44 or with special needs for private hospital care (such as childbirth in private hospitals). </p></li>
<li><p>single cover: income above $105,001; income below $90,000 and older than 54; income between $90,000 and $105,001 and older than 24.</p></li>
</ul>
<h2>And don’t forget</h2>
<p>There are a few final things you should keep in mind. When you use your insurance for a stay in hospital, there will be out-of-pocket, or “gap”, costs. So you’ll still have to pay extra even with private hospital insurance.</p>
<p>Then there is the Lifetime Health Cover loading, which adds 2% to your insurance premiums <a href="https://www.ato.gov.au/individuals/medicare-levy/private-health-insurance-rebate/lifetime-health-cover/">for every year you are over 30</a> if you don’t have hospital cover by 1 July following your 31st birthday.</p>
<p>For example, if you wait until you’re 40 to buy private hospital insurance for the first time, you could pay an extra 20% on hospital premiums. The loading is removed once you’ve held appropriate private hospital cover for ten consecutive years.</p>
<p>More generous coverage requires higher premiums. What’s more, even for the same coverage, premiums may vary substantially across insurers. So, shop around and use free resources to <a href="https://www.privatehealth.gov.au/dynamic/search/start">compare health insurance policies</a>.</p>
<p>Finally, it’s a good idea to re-evaluate your options every year or every other year as your situation or government policy changes.</p><img src="https://counter.theconversation.com/content/148191/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Professor Yuting Zhang receives funding from Australian Research Council Future Fellowship and National Health and Medical Research Council's Medical Research Future Fund. </span></em></p>It can be hard to work out what calculations to make when deciding on private health. So we asked a health economist to break it down.Yuting Zhang, Professor of Health Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1464802020-09-27T19:59:30Z2020-09-27T19:59:30ZPrivate health insurance premiums are going up this week. But the reasons why just don’t stack up<figure><img src="https://images.theconversation.com/files/359918/original/file-20200924-18-1pa6mok.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C998%2C666&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/female-dentist-checking-patient-teeth-braces-722601862">Shutterstock</a></span></figcaption></figure><p>Private health insurance premiums are <a href="https://www.news.com.au/finance/economy/australian-economy/what-you-need-to-know-before-private-health-insurance-premiums-rise-on-oct-1/news-story/efedc17fca905c8389e6f56813542d72">set to rise</a> on October 1, an increase companies have <a href="https://www.choice.com.au/money/insurance/health/articles/health-premium-hikes-on-the-horizon-131115">delayed</a> for six months due to the COVID-19 pandemic.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1308909666383036422"}"></div></p>
<p>But 2020 has been a year like no other. And some of the reasons insurance companies are using to justify this price rise don’t stack up.</p>
<p><a href="https://www.medibank.com.au/premium-review/">These</a> <a href="https://www.hif.com.au/health-insurance/rate-change-faqs">include</a> <a href="https://www.bupa.com.au/health-insurance/understanding-your-health-cover/why-do-my-premiums-go-up-each-year">increasing</a> costs of hospital and health care, more claims, an increase in chronic health conditions, and an ageing population.</p>
<p>At a time when many policy-holders are facing financial stress and many elective surgeries or treatments suspended or delayed, this week’s price rise isn’t justified. With a further price rise already set for April 2021, it would be fairer to delay any fee hike until then.</p>
<h2>1. Increasing costs of hospital and health care — false</h2>
<p>Costs of hospital and health care paid by private insurers have reduced substantially in 2020, not increased, according to the latest figures from the Australian Prudential Regulation Authority. That’s because many elective surgeries and routine extra care (such as dental check-ups) were suspended.</p>
<p>Private insurers paid reduced hospital treatment benefits in two consecutive quarters. They dropped <a href="https://web.archive.org.au/awa/20200605035409mp_/https://www.apra.gov.au/sites/default/files/2020-05/Quarterly%20private%20health%20insurance%20statistics%20March%202020.pdf">7.9%</a> in dollar terms in the March 2020 quarter, compared with the December 2019 quarter. They fell another
<a href="https://www.apra.gov.au/sites/default/files/2020-08/Quarterly%20Private%20health%20insurance%20statistics%20June%202020.pdf">12.9%</a> in the June 2020 quarter, compared with the March 2020 quarter.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Man lying down in hospital bed signing papers" src="https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/359917/original/file-20200924-24-19r58el.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Insurance companies paid less for hospital treatments earlier this year, not more.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/serious-graybearded-patient-lying-hospital-bed-1685211010">Shutterstock</a></span>
</figcaption>
</figure>
<p>Private insurers’ payments for general treatment (also known as ancillary or extras) benefits dropped even more. They fell <a href="https://www.apra.gov.au/sites/default/files/2020-08/Quarterly%20Private%20health%20insurance%20statistics%20June%202020.pdf">32.9%</a> in the June 2020 quarter, compared with the March 2020 quarter.</p>
<p>Some may argue the reduction in benefits paid is because substantially fewer people had private insurance in 2020. But this is not true. </p>
<p>While there was a small drop in the number of people with private health insurance in the first half of 2020, this was by less than a percentage point: the number of hospital memberships fell by <a href="https://web.archive.org.au/awa/20200605035409mp_/https://www.apra.gov.au/sites/default/files/2020-05/Quarterly%20private%20health%20insurance%20statistics%20March%202020.pdf">only</a> <a href="https://www.apra.gov.au/sites/default/files/2020-08/Quarterly%20Private%20health%20insurance%20statistics%20June%202020.pdf">0.4 percentage points</a>. There was a similar drop in the number of people with extras cover.</p>
<h2>2. Increase in claim frequency — false</h2>
<p>Another reason for the price rise is there have been more claims over a given time, or an increase in claim frequency. This, again, is not true this year.</p>
<p>Private insurers paid for <a href="https://www.apra.gov.au/sites/default/files/2020-08/Quarterly%20Private%20health%20insurance%20statistics%20June%202020.pdf">16.7%</a> fewer hospital treatments in the June 2020 quarter compared with the March 2020 quarter. That’s a <a href="https://www.apra.gov.au/sites/default/files/2020-08/Quarterly%20Private%20health%20insurance%20statistics%20June%202020.pdf">4.1%</a> reduction in the 12 months to June 2020.</p>
<p>Private insurers paid out <a href="https://www.apra.gov.au/sites/default/files/2020-08/Quarterly%20Private%20health%20insurance%20statistics%20June%202020.pdf">28.4% fewer</a> extras claims in the June 2020 quarter, compared to the March 2020 quarter. This was a <a href="https://www.apra.gov.au/sites/default/files/2020-08/Quarterly%20Private%20health%20insurance%20statistics%20June%202020.pdf">9.8%</a> fall over the 12 months to June 2020.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-to-clear-victorias-backlog-of-elective-surgeries-after-a-6-month-slowdown-we-need-to-rethink-the-system-146298">How to clear Victoria's backlog of elective surgeries after a 6-month slowdown? We need to rethink the system</a>
</strong>
</em>
</p>
<hr>
<p>In Victoria, services are only gradually returning to full capacity from <a href="https://www.premier.vic.gov.au/safely-reopening-elective-surgery-victorians">November</a>. So it will be a long while before claims return to pre-pandemic levels.</p>
<p>People have also been <a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0019/3401821/ri2020n13.pdf">avoiding seeking needed health care</a> because they are afraid of contracting the coronavirus, or cannot afford out-of-pocket costs due to increased financial stress. This would be another reason for the numbers of claims decreasing, not increasing.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/should-i-drop-my-private-health-insurance-during-the-pandemic-137156">Should I drop my private health insurance during the pandemic?</a>
</strong>
</em>
</p>
<hr>
<h2>3. More chronic disease, an ageing population — no data supporting this for the next 6 months</h2>
<p>In the long run, these claims <a href="https://www.aihw.gov.au/reports/older-people/older-australia-at-a-glance/contents/demographics-of-older-australians/australia-s-changing-age-and-gender-profile">are correct</a> and premiums should increase gradually over the coming years because of the ageing population and growing incidence of chronic conditions.</p>
<p>However, they’re not likely to change enough in the next six months to justify a premium increase now.</p>
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Read more:
<a href="https://theconversation.com/factcheck-do-one-in-two-australians-suffer-from-a-chronic-disease-49654">FactCheck: do one in two Australians suffer from a chronic disease?</a>
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<h2>Here’s what should happen</h2>
<p><a href="https://www.medibank.com.au/health-insurance/info/coronavirus-update/financial-hardship-policy/">Some</a> <a href="https://insurance.qantas.com/health-insurance/articles/qantas-health-insurance-policyholder-coronavirus-support-package">insurers</a> are already providing discounts for families in financial hardship, such as people receiving JobSeeker or JobKeeper. Others <a href="https://www.hif.com.au/health-insurance/rate-change-faqs">offer discounts or waive price rises</a> to people who pre-pay their policies for up to 12 months. More insurers should do this. </p>
<p>Providing financial relief and delaying the October premium increase will not only help customers but also help private insurers in the long run. </p>
<p>Increasing premiums twice in six months (October 2020 and April 2021) during an unprecedentedly difficult time can backfire, especially if the reasons to support the increase do not stack up.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/young-people-dropping-private-health-hurts-insurers-most-not-public-hospitals-132004">Young people dropping private health hurts insurers most, not public hospitals</a>
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<p>When premiums increase, young people are more likely to <a href="https://theconversation.com/young-people-dropping-private-health-hurts-insurers-most-not-public-hospitals-132004">drop private health insurance</a>. This will drive up premiums further for everyone. This in turn will lead to more young and healthy people dropping their cover. </p>
<p>Consequently, it may cause a “<a href="https://www.smh.com.au/business/consumer-affairs/private-health-system-in-a-death-spiral-says-expert-but-what-can-be-done-to-save-it-20191128-p53f58.html">death spiral</a>”, driving private health insurance out of business.</p><img src="https://counter.theconversation.com/content/146480/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Professor Yuting Zhang receives funding from Australian Research Council Future Fellowship and National Health and Medical Research Council's Medical Research Future Fund.
</span></em></p>During the pandemic, there have been fewer claims on private health insurance. So why are premiums going up?Yuting Zhang, Professor of Health Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1371562020-04-29T06:35:56Z2020-04-29T06:35:56ZShould I drop my private health insurance during the pandemic?<figure><img src="https://images.theconversation.com/files/331229/original/file-20200429-110734-1gx318o.jpg?ixlib=rb-1.1.0&rect=4%2C0%2C994%2C666&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/busy-nurses-station-modern-hospital-361328798">Shutterstock</a></span></figcaption></figure><p>Many Australians, especially those experiencing financial hardship due to COVID-19, are asking whether they can afford to keep their private health insurance.</p>
<p>Others don’t know if they should drop or downgrade their cover, especially if they cannot or don’t want to access services they’ve paid for.</p>
<p>Now consumer group Choice <a href="https://us4.campaign-archive.com/?u=270103a13e38b9f6643b82a8e&id=d9e5af4fa1">is recommending</a> <a href="https://www.abc.net.au/news/2020-04-24/calls-for-private-insurance-rebates-amid-coronavirus-pandemic/12178828">people think about</a> dropping extras cover, dropping or downgrading hospital cover and asking their insurance company for hardship considerations, which include waiving premiums or suspending their policy.</p>
<p>What options do you have? And what are the implications of dropping or downgrading your cover?</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
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<h2>What services can I use?</h2>
<p>Our <a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">research</a> shows people take out private health insurance because of shorter waiting times for elective surgery, choice of doctor or hospital, access to a private hospital room, and extras like dental and physiotherapy services.</p>
<p>Although some elective surgeries are due to <a href="https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/elective-surgery-restrictions-eased">resume this week</a>, it’s unclear how long it will take hospitals to clear the backlog, which surgeries will be performed and where. This raises questions about whether consumers will be able to access the benefits they value in having private health insurance. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/what-elective-surgery-will-be-allowed-now-the-coronavirus-situation-has-improved-its-up-to-your-surgeon-or-hospital-137077">What elective surgery will be allowed now the coronavirus situation has improved? It's up to your surgeon or hospital</a>
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<p>While a key reason for taking out private health insurance is to avoid waiting times, people may now have to <a href="https://theconversation.com/what-elective-surgery-will-be-allowed-now-the-coronavirus-situation-has-improved-its-up-to-your-surgeon-or-hospital-137077">wait</a> while hospitals and health care providers resume a staged approach to resuming elective surgery and general treatments impacted by the pandemic.</p>
<p>People may also be worried about whether they will receive the care they need if they have COVID-19. However, they should be assured that emergency treatment will be provided through the public system. Many private health insurance companies will also now <a href="https://www.moneymag.com.au/coronavirus-private-health-insurance">cover COVID-19 related treatments</a>. </p>
<h2>How are private insurers responding?</h2>
<p>Modelling by the <a href="https://www.tai.org.au/sites/default/files/P910%20Private%20eyes%E2%80%A6%2C%20hips%2C%20etc%20%5BWEB%5D.pdf">Australia Institute</a> shows private health insurers could make considerable savings due to a reduction in claims paid to, or on behalf of, consumers during the pandemic. </p>
<p>This is because services, such as elective surgery, and general treatments, such as dental services, are not available or are limited. And it recommends some of these savings should be passed on to policy holders.</p>
<p>Private health insurance companies have <a href="https://www.privatehealthcareaustralia.org.au/health-funds-postpone-1-april-premium-increase/">assured</a> consumers that any increase in premiums will be delayed by at least six months.</p>
<p>They have also said that some funds resulting from the cancellation of elective surgery or allied health services will be <a href="https://www.privatehealthcareaustralia.org.au/health-funds-committed-to-providing-financial-relief-for-members-impacted-by-covid-19/">returned to customers</a>. It isn’t clear, though, how this will be done and over what period. </p>
<h2>What options do I have?</h2>
<p>It’s not surprising if you’re confused about whether to keep, drop or downgrade your private health insurance.</p>
<p>Our research consistently shows consumers find changing private health cover <a href="https://theconversation.com/confused-about-your-private-health-insurance-coverage-youre-not-alone-49493">confusing</a>. Increasing costs of premiums, value for money and difficulties understanding policies are <a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">common concerns</a>. People aren’t certain what they need cover for, what is a reasonable price to pay, and how much difference there is between the public and private systems.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/confused-about-your-private-health-insurance-coverage-youre-not-alone-49493">Confused about your private health insurance coverage? You're not alone</a>
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<p>If you are thinking about downgrading your hospital cover or stopping extras cover, think about what services you may need in the future. </p>
<p>Remember that if you downgrade your hospital cover to a lower level of cover some services may be excluded (for instance, pregnancy). If you decide to increase your level of hospital cover in the future you may also need to re-serve waiting periods for those services excluded at the lower level of cover. </p>
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<a href="https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/331236/original/file-20200429-110757-1pgn73j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Lower levels of cover may exclude some services, such as pregnancy care, which may be relevant in the future.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/pregnant-woman-sitting-on-bench-background-150533705">Shutterstock</a></span>
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<p>If you drop your hospital cover and take it up again in the future, you may pay more due to the <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/lifetime_health_cover.htm">Lifetime health cover</a> loading (if you do not take private health insurance up again <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/lifetime_health_cover.htm">within 1,094 days</a> of dropping your cover).</p>
<p>Choice is also recommending people <a href="https://us4.campaign-archive.com/?u=270103a13e38b9f6643b82a8e&id=d9e5af4fa1">drop</a> their extras cover. But your decision about this will depend on the types of services you typically use. </p>
<p>If you decide to drop your extras cover, you may also be required to <a href="https://www.ombudsman.gov.au/__data/assets/pdf_file/0017/35612/Waiting-periods-DL-Fyler-Web.pdf">re-serve waiting periods</a> if you take up extras again in the future. </p>
<p>This means you may need to wait two months for general dental services or physiotherapy, but 12 months for major dental procedures. However these waiting periods vary according to procedure and insurer. So to find out what waiting periods apply, ask your health fund. </p>
<p>If you are experiencing financial hardship you may be able to ask your fund to temporarily waive your premiums or suspend your policy. However, you won’t be covered while your health insurance is suspended.</p>
<h2>What happens after the coronavirus?</h2>
<p>The pandemic highlights issues with Australia’s health-care system, and how private health insurance operates and is funded. </p>
<p>There has been much critique of government policy encouraging Australians to take out private health insurance, and in particular the <a href="https://theconversation.com/private-health-insurance-rebates-dont-serve-their-purpose-lets-talk-about-scrapping-them-91061">subsidising of premiums</a> through the private health insurance rebate.</p>
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<strong>
Read more:
<a href="https://theconversation.com/elective-surgerys-due-to-restart-next-week-so-nows-the-time-to-fix-waiting-lists-once-and-for-all-136835">Elective surgery's due to restart next week so now's the time to fix waiting lists once and for all</a>
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<p>At a time when more consumers are experiencing financial hardship they will question the value of their private health insurance even more than before. </p>
<p>There may be <a href="https://theconversation.com/elective-surgerys-due-to-restart-next-week-so-nows-the-time-to-fix-waiting-lists-once-and-for-all-136835">other ways</a> of providing health-care, including fixing waiting lists, that meet the needs of all Australians, while retaining the best aspects of both public and private care.</p>
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<p><em>As decisions about whether to change your private health insurance depend on your personal circumstances, please discuss your options and their implications with your health fund or read the fine print on policy documents.</em></p>
<p><em>For independent advice and consumer resources, see the government’s private health insurance <a href="https://www.privatehealth.gov.au/">website</a>, health department <a href="https://www.health.gov.au/resources/collections/private-health-insurance-reforms-consumer-resources">website</a> or consumer organisation websites such as <a href="https://chf.org.au/blog/gold-silver-bronze-making-health-insurance-easier-navigate">Consumers Health Forum of Australia</a> or <a href="https://www.choice.com.au/money/insurance/health">Choice</a>.</em></p><img src="https://counter.theconversation.com/content/137156/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sophie Lewis receives funding from the Australian Research Council and the National Health and Medical Research Council. </span></em></p><p class="fine-print"><em><span>Karen Willis receives funding from The Australian Research Council (ARC).</span></em></p>Drop, suspend, downgrade or keep? Many people are feeling the pinch and wondering if private heath insurance is worth keeping during the coronavirus pandemic. Here’s what to consider.Sophie Lewis, Senior Research Fellow, Centre for Social Research in Health, UNSW SydneyKaren Willis, Professor, Allied Health Research, Melbourne Health, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1320042020-02-18T19:02:04Z2020-02-18T19:02:04ZYoung people dropping private health hurts insurers most, not public hospitals<figure><img src="https://images.theconversation.com/files/315858/original/file-20200218-10995-63wavc.jpg?ixlib=rb-1.1.0&rect=49%2C16%2C5453%2C3646&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/family-budget-finances-young-woman-doing-546537382">Shutterstock</a></span></figcaption></figure><p>Young Australians are abandoning private health insurance in droves. And the overall decline in the percentage of the population with private coverage is continuing.</p>
<p><a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">New data</a> for the three months to the end of 2019, released yesterday by the private health insurance regulator, show that compared with the same time a year ago, 44,000 fewer young people (aged 25 to 34) have private health insurance. </p>
<p>The percentage of the population with some form of private hospital insurance is down 0.7 percentage points compared to the December quarter in 2018 and now stands at 44.0%.</p>
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<p>The private health insurance industry is in a dire predicament, and people who remain in private health insurance also stand to lose out.</p>
<p>But the industry’s argument a youth exodus will put massive amounts of additional pressure on public hospitals doesn’t stack up. The industry’s self-serving claims are simply designed to bolster its case for yet more government handouts.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/youth-discounts-fail-to-keep-young-people-in-private-health-insurance-121803">Youth discounts fail to keep young people in private health insurance</a>
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<h2>Why is the industry worried?</h2>
<p>The proportion of the population with any form of private hospital insurance is <a href="https://www.apra.gov.au/sites/default/files/2020-02/Quarterly%20private%20health%20insurance%20statistics%20December%202019.pdf">now around 44%</a>. </p>
<p>While the number of young people has fallen, there are 60,000 more people 70 and older than a year ago. The average age of a person with private health insurance continues to creep upwards.</p>
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<p>Changes in the composition of the insured population affects different stakeholders – such as the insured, the insurers and the public hospital system – differently.</p>
<p>The more young people drop out, the more the “risk pool” of the insured population worsens, because young people use health care less than older people. </p>
<p>This causes the price of insurance to go up for everyone, which leads to still more young people dropping out. This creates a death spiral for the industry. </p>
<p>Insurers lose out because fewer people are paying insurance premiums. </p>
<p>And those who remain in private insurance lose out because they have to pay higher premiums.</p>
<h2>Little impact on the public hospital system</h2>
<p>A critical issue is what happens to demand on the public system as the proportion of people who are privately insured declines. </p>
<p>The people who are most likely to drop out are younger people and people who don’t expect to use hospitals much. So logically, this is not likely to have much impact on demand for public care.</p>
<p>Private health insurance is now differentiated into Gold, Silver, Bronze, and Basic products, with “+” designations on the last three of these. Typically debates about private health insurance only focus on the number of people insured not the level of cover they have. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/premiums-up-rebates-down-and-a-new-tiered-system-what-the-private-health-insurance-changes-mean-114086">Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean</a>
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<p><a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">About 41% of those insured</a> have coverage with “no exclusions”, the equivalent of Gold.</p>
<p>This means less than 20% of the total population has insurance coverage for all conditions. So many people with private health insurance already rely on the public system for those procedures not covered in their insurance package.</p>
<p>Maternity care, for example, is usually only covered at the <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/89DCC17F86C24B4ACA2581BA007A2DC7/$File/20181010%20-%20GSBB%20fact%20sheet%20w%20tiers%20table.pdf">Gold tier</a>. Presumably, people with Silver, Bronze, or Basic products were always going to have their baby in a public hospital. So a reduction in the number of people with those products will have no impact on demand for maternity care in public hospitals. </p>
<p>Joint replacements, such as hips and knees, are also normally covered only in Gold products, so the same arguments apply.</p>
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<img alt="" src="https://images.theconversation.com/files/315860/original/file-20200218-10985-zm2zlh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/315860/original/file-20200218-10985-zm2zlh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=340&fit=crop&dpr=1 600w, https://images.theconversation.com/files/315860/original/file-20200218-10985-zm2zlh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=340&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/315860/original/file-20200218-10985-zm2zlh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=340&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/315860/original/file-20200218-10985-zm2zlh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=428&fit=crop&dpr=1 754w, https://images.theconversation.com/files/315860/original/file-20200218-10985-zm2zlh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=428&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/315860/original/file-20200218-10985-zm2zlh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=428&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">People with lower levels of private health insurance already use the public system.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/empty-hospital-hallway-611606933">Shutterstock</a></span>
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<p>There has been extensive research trying to predict the impact of a decline in private insurance on public hospitals. Researchers have found consumers are relatively slow to respond to changes in the price of insurance. Private health insurance is therefore said to be “sticky”. </p>
<p>Once insured, people, especially older people, tend to stay insured, and respond to premium increases by downgrading their cover, either in terms of what they are covered for (dropping from Gold to Silver, for example), or taking on a higher excess they have to pay if they go to hospital. But a higher excess is unlikely to make them choose a public hospital.</p>
<p>The big changes in terms of dropping out are happening in the group which is new to private health insurance – the young – who have not established a history with insurance. </p>
<p>But young people use health care infrequently, meaning only a small number of hospital admissions would be expected to move from the private to the public system.</p>
<h2>A slow death</h2>
<p><a href="https://grattan.edu.au/report/saving-private-health-2/">Our own modelling</a> at the Grattan Institute suggests the death spiral is real, but is slow. People over 70 will probably still be insured at much the same rate they are now over the next ten years, but people under 70 will drop out, with people under 55 dropping out more rapidly.</p>
<p>Young people receive a bad deal from private health insurance. The premium they pay – which is essentially the same as the premium everyone else pays under Australia’s system of “community rating” – is much greater than the costs of their expected use of health care. </p>
<p>The gap between what they pay and expected benefit is getting worse. That’s why they are leaving in droves. </p>
<p>But this decline is a bigger problem for the private insurers than it will be for the public health system.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-do-you-stop-the-youth-exodus-from-private-health-insurance-cut-premiums-for-under-55s-128101">How do you stop the youth exodus from private health insurance? Cut premiums for under-55s</a>
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<img src="https://counter.theconversation.com/content/132004/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website. Medibank Private is an Affiliate partner of Grattan Institute. Stephen Duckett has private health insurance.</span></em></p>New private health insurance data show young people are continuing to drop their cover. But the industry’s argument a youth exodus will put pressure on public hospitals isn’t necessarily right.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1225452019-12-12T18:54:17Z2019-12-12T18:54:17ZPrivate health insurance premiums should be based on age and health status<figure><img src="https://images.theconversation.com/files/305106/original/file-20191204-70105-yi0yk1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Policy changes have failed to stop young people dropping their private health insurance.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-woman-runner-running-on-city-359568020">Shutterstock</a></span></figcaption></figure><p>Private health insurance has come under <a href="https://www.theage.com.au/politics/federal/regulator-warns-health-insurers-over-death-spiral-hints-at-new-capital-rules-20191202-p53g5i.html">intense scrutiny in recent months</a>, as it becomes clear health insurers are failing to stop the exodus of young people dropping their cover. </p>
<p>Legislated age-based discounts began in April 2019 but haven’t achieved their aim of keeping young people in private health insurance. In July to September, the <a href="https://www.apra.gov.au/sites/default/files/Quarterly%20Private%20Health%20Insurance%20Statistics%20September%202019.pdf">largest decreases</a> in coverage were for people aged between 25 and 34, and in particular 25- to 29 year-olds, with more than 7,000 people in that age group dropping their private health insurance cover in that period. </p>
<p>This trend should come as no surprise. We’ve <a href="https://econpapers.repec.org/article/oupqjecon/v_3a90_3ay_3a1976_3ai_3a4_3ap_3a629-649..htm">known since the 1970s</a> that young people drop out of private health in voluntary insurance markets, especially those with an underlying universal public system such as Medicare. If too many young people exit the system, premiums go up for everyone. </p>
<p>This was also confirmed by last week’s <a href="https://theconversation.com/how-do-you-stop-the-youth-exodus-from-private-health-insurance-cut-premiums-for-under-55s-128101">Grattan report</a>, which argued private health insurance premiums should be made cheaper for Australians aged under 55.</p>
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<a href="https://theconversation.com/how-do-you-stop-the-youth-exodus-from-private-health-insurance-cut-premiums-for-under-55s-128101">How do you stop the youth exodus from private health insurance? Cut premiums for under-55s</a>
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<p>It’s time to change the way insurers are allowed to charge premiums. These should be <a href="https://www.jstor.org/stable/43199653?seq=1">based on the person’s likelihood of using their private health insurance</a> – determined not just by their age, but also their health status or risks – rather than charging everyone the same. </p>
<p>This could lead to unaffordable premiums for the elderly or the sick. But this potential problem can be addressed through other measures. </p>
<h2>Community versus risk rating</h2>
<p>In Australia, private health insurance operates under a legislated “community rating” system. Insurers are forced to charge everyone the same premium for the same cover, irrespective of their age, gender or health status.</p>
<p>This means the young and healthy subsidise older, sicker Australians. Young people end up paying high premiums, relative to their underlying health risk and, as we’ve seen, this encourages the young and healthy to drop their cover.</p>
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<a href="https://theconversation.com/youth-discounts-fail-to-keep-young-people-in-private-health-insurance-121803">Youth discounts fail to keep young people in private health insurance</a>
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<p>The alternative is to establish a “risk rating” system, where premiums are based on the person’s underlying risks.</p>
<p>Risk-based insurance schemes <a href="https://www.elsevier.com/books/risk-adjustment-risk-sharing-and-premium-regulation-in-health-insurance-markets/mcguire/978-0-12-811325-7">operate successfully in many countries</a> including the United States, New Zealand, Germany, China and Switzerland.</p>
<p>This would mean those who are at low risk (based on their age and other risk factors) pay lower premiums, and those who are at high risk (older people who are more likely to have health problems) pay higher premiums than they currently do.</p>
<h2>How do you make it fair?</h2>
<p>Risk ratings for private health insurance would challenge the principle of solidarity and affordable access to coverage. These are the reasons community ratings were established in the first place. </p>
<p>Responding to last week’s Grattan Institute proposal to move towards age-based premiums, Private Healthcare Australia chief executive Rachel David told <a href="https://www.smh.com.au/politics/federal/thousands-fast-track-private-mental-health-treatment-after-insurance-reforms-20191202-p53fxe.html">Nine newspapers</a> the community rating rule was “critical to keeping health care affordable for our ageing population”. </p>
<p>To solve the problem of older and higher-risk members being priced out of private health insurance, private health insurance rebates would need to be redirected. </p>
<p>Rebates are currently a <a href="https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/insurance_rebate.htm">means-tested percentage</a> off the price of your insurance premiums. These discounts are based on income/age and are irrespective of your health needs. </p>
<p>Under a risk-rating scheme, the rebates would need to become <a href="https://actuaries.asn.au/Library/Opinion/2019/TheDialogue9HealthWEBLres.pdf">risk-based rebates</a>. The rebates would be provided based on a person’s health status, such as their age and health conditions, to discount their insurance premiums.</p>
<p>Risk-based rebates would help tackle equity, as those who face higher premiums would get greater rebates. </p>
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<img alt="" src="https://images.theconversation.com/files/305105/original/file-20191204-70126-18qnqif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/305105/original/file-20191204-70126-18qnqif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/305105/original/file-20191204-70126-18qnqif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/305105/original/file-20191204-70126-18qnqif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/305105/original/file-20191204-70126-18qnqif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/305105/original/file-20191204-70126-18qnqif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/305105/original/file-20191204-70126-18qnqif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Older and sicker people would attract higher rebates.</span>
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<p>An additional rebate would apply to people whose expenses are above a certain threshold, to provide additional financial support for those who face the higher premiums. This would help ensure higher premiums don’t become prohibitive. </p>
<p>Such a move would require redistributing the <a href="https://grattan.edu.au/report/the-history-of-private-health-insurance/">A$9 billion in taxpayer subsidies</a> that currently flow to the private health insurance system.</p>
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Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
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<h2>Wouldn’t it be too difficult?</h2>
<p>Risk-based payments are often criticised because of the extensive data requirements consumers would need to disclose, including more personal details, information about the person’s past claims and the illness for which they’ve been diagnosed. </p>
<p>Risk-based systems are also criticised because of the sophistication of the techniques needed to calculate (and subsidise) individuals’ risk correctly. </p>
<p>These challenges can be addressed with <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5134202/pdf/HESR-51-2358.pdf">modern computer-based techniques</a>, meaning this is no longer an unsurmountable task. </p>
<p>It is possible to make Australia’s private insurance system <a href="https://search.informit.com.au/documentSummary;dn=663925327296069;res=IELHSS">more sustainable</a> and stop young people leaving the system by relaxing the community rating restrictions and adjusting the rebate system.</p><img src="https://counter.theconversation.com/content/122545/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Francesco Paolucci's universities (University of Newcastle and University of Bologna), where he is an investigator, receive funding from the NHMR, ARC, the European Commission, Medibank and NIB. </span></em></p><p class="fine-print"><em><span>Adrian Melia receives funding from the Accounting and Finance Association of Australia and New Zealand and NIB.</span></em></p><p class="fine-print"><em><span>Josefa Henriquez does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Young people should pay less for private health insurance. So should people who are healthy, as they’re less likely to access private health care.Francesco Paolucci, Associate Professor; Head of Health Policy Program, Sir Walter Murdoch School of Public Policy and International Affairs, University of NewcastleAdrian Melia, Lecturer in Accounting and Finance, University of NewcastleJosefa Henriquez, Research fellow, Department of Sociology and Business Law, Università di BolognaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1283112019-12-10T19:05:12Z2019-12-10T19:05:12ZPrivate health premium increases might be the lowest in years, but that doesn’t mean they’re justified<figure><img src="https://images.theconversation.com/files/306011/original/file-20191210-95120-1rbv0mj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Those facing large price increases might drop or downgrade their cover.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-stressed-caucasian-couple-facing-financials-556308208?src=-1-5&studio=1">Wayhome studio/Shutterstock</a></span></figcaption></figure><p>Every year private health insurers raise premiums and every year we rue the hit to our hip pocket. This cycle is heavily regulated: insurers apply to the health minister who must approve premium hikes unless deemed contrary to the public interest. Premiums then change on April 1. </p>
<p>This time the federal health minister, Greg Hunt, has managed to keep <a href="https://www.greghunt.com.au/the-lowest-private-health-insurance-premium-change-in-19-years/">average premium growth to 2.92%</a> – the lowest in 19 years. This news comes two weeks after he <a href="https://www.canberratimes.com.au/story/6507690/hunt-rejects-health-premium-rise-paper/?cs=14231">rejected an industry proposal</a> to increase premiums by 3.5%. </p>
<p>While the government celebrates this apparently modest price rise, consumers are right to point out that premium growth continues to outstrip inflation and wage growth. How do insurers justify this?</p>
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<a href="https://theconversation.com/premiums-up-rebates-down-and-a-new-tiered-system-what-the-private-health-insurance-changes-mean-114086">Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean</a>
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<h2>The case for higher premiums</h2>
<p>Australians have come to expect that come April 1 each year, their private health insurance costs will go up – often by a lot. </p>
<p>These increases have been substantially more than wage growth or inflation. Between 2011 and 2019, the <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/privatehealth-average-premium-round">cumulative growth</a> in nominal premiums (before rebates) was 49%. Over the same period <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/6345.0">wages grew</a> by 21% and <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0">CPI</a> by 16%. </p>
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<p>Insurers have justified the growth in premiums by pointing out that benefits – the money private health insurers pay out when we go to hospital or have treatment – have also grown substantially. </p>
<p><a href="https://www.apra.gov.au/operations-of-private-health-insurers-annual-report">Benefits grew</a> on average 5.3% per year between 2014-2019. However, while earlier this decade <a href="https://theconversation.com/can-private-health-insurers-justify-a-6-2-premium-increase-38390">benefit growth consistently outpaced premiums</a>, this is no longer the case. </p>
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<p>Growth in benefits is due to both higher medical costs and more claims. In fact, <a href="https://www.apra.gov.au/operations-of-private-health-insurers-annual-report">benefits per service</a> have hardly changed since 2014 and have actually fallen for prostheses (such as hip and knee replacements), which highlights the importance of growth in number of claims.</p>
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<p>Insurers are also facing growing cost pressure due to the exodus of young people from insurance and an ageing insurance pool. </p>
<p>Traditionally young people have cross-subsidised the higher expenses of older people, but increasingly they are deciding that private insurance is a bad deal. In the past 12 months, the number of people aged 20-34 with private hospital cover <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">has declined</a> by almost 50,000. </p>
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Read more:
<a href="https://theconversation.com/how-do-you-stop-the-youth-exodus-from-private-health-insurance-cut-premiums-for-under-55s-128101">How do you stop the youth exodus from private health insurance? Cut premiums for under-55s</a>
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<h2>Are insurers’ profits too high?</h2>
<p>Insurers can point out that their profit margins are not unusually high compared to other forms of insurance. Figures from the <a href="https://www.apra.gov.au/quarterly-general-insurance-statistics">Australian Prudential Regulation Authority show</a> that in 2019 after-tax profits were 9.5% of premium revenue for general insurers. Meanwhile, after-tax profits for private health insurers were 5.6% (6.4% for for-profit funds).</p>
<p>Insurers can also point out that their net margins and benefits-to-premiums revenue ratios have been relatively stable over the past decade. Against this, growth in premiums has mostly acted to sustain profit margins rather than extend them.</p>
<p>But does this really matter for assessing price hikes? While shareholders would like to maintain the margins they’re accustomed to, there’s nothing intrinsically meaningful about historical figures. </p>
<p>The profits in one sector also don’t entitle insurers to the same profit in a different sector. </p>
<p>Ultimately, it’s hard to know what the “right” level of profit is. For now, private health insurance remains a relatively profitable industry.</p>
<h2>What will the price increase mean for you?</h2>
<p>Forty-four percent of Australians <a href="https://www.apra.gov.au/sites/default/files/Quarterly%20Private%20Health%20Insurance%20Statistics%20September%202019.pdf">have private hospital cover</a> and 53% have general treatment cover for things like dental and optical. For these Australians, the <a href="https://www.greghunt.com.au/the-lowest-private-health-insurance-premium-change-in-19-years/">health minister estimates</a> singles will pay an average of A$35 more per year (A$0.68 per week) and families A$103 more per year (A$1.99 per week).</p>
<p>It’s important to recognise that the 2.92% figure is a <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/0B815BFEB8EDECA7CA257BF000195929/$File/Premium-Round-Individual-Insurer-Average-Premium-Increases%E2%80%931997-to-2020.pdf">weighted industry average</a>. Some policies will increase by more (and less) than 2.92%. You will find out by how much your plan is increasing early next year. </p>
<p>Those facing large price increases might downgrade their cover and some may drop it altogether. If healthier people drop out of insurance, that will put upward pressure on premiums in the future.</p>
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<span class="caption">Australia’s private health insurance system relies on young people who don’t use their insurance to subsidise older Australians who do.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/fit-people-jogging-on-treadmills-gym-329554319">wavebreakmedia/Shutterstock</a></span>
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<h2>So, is the 2020 premium increase justified?</h2>
<p>With the information at hand, 2.92% seems reasonable by historical standards. Growth in benefits has been declining since 2017 and this should flow to premiums.</p>
<p>Going forward, the government will need to do more than crack down on premium-setting if it wants to arrest growing costs. The biggest pressures are from rising hospital and medical fees and an ageing insurance pool. </p>
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Read more:
<a href="https://theconversation.com/greedy-doctors-make-private-health-insurance-more-painful-heres-a-way-to-end-bill-shock-127227">Greedy doctors make private health insurance more painful – here's a way to end bill shock</a>
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<p>Recent attempts to reduce costs by negotiating a better deal with medical device manufacturers was a good move, although <a href="https://www.privatehealthcareaustralia.org.au/medical-devices-companies-continue-to-drive-up-premiums-for-consumers/">insurers claim it failed to meaningfully lower their costs</a> because manufacturers increased the volume of devices sold. </p>
<p>Higher premium rebates for young people are more dubious since rebates are only <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-8462.2004.00327.x">cost-effective</a> if they cause lots of people to take up insurance who wouldn’t otherwise.</p>
<p>It’s been 21 years since the <a href="https://www.pc.gov.au/inquiries/completed/private-health-insurance">last Productivity Commission inquiry into the private health insurance industry</a>. Perhaps it’s time for another one.</p><img src="https://counter.theconversation.com/content/128311/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nathan Kettlewell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In April, private health insurance premiums will increase by an average of 2.92%. It’s the lowest rise in 19 years but still much higher than wages growth. And insurers still make a healthy profit.Nathan Kettlewell, Chancellor's Postdoctoral Research Fellow, Economics Discipline Group, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1281012019-12-03T18:36:45Z2019-12-03T18:36:45ZHow do you stop the youth exodus from private health insurance? Cut premiums for under-55s<figure><img src="https://images.theconversation.com/files/304850/original/file-20191203-67011-pcl5uo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As more young people drop their private health cover, premiums go up for everyone.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/outdoor-portrait-modern-young-man-mobile-228417220?src=30a5ea6b-7dd1-40a9-94a0-5f21263529eb-1-7">Josep Suria/Shutterstock</a></span></figcaption></figure><p>Young people don’t see private health insurance as good value for money. And they’re right: the cost of their expected use of private health care is significantly below what they pay in insurance premiums. </p>
<p>Unsurprisingly, <a href="https://theconversation.com/youth-discounts-fail-to-keep-young-people-in-private-health-insurance-121803">more and more young people are turning their backs on private health insurance</a>: dropping it, or opting not to take out a policy in the first place. </p>
<p>This youth exodus has put the private health insurance system into a “death spiral”. As younger, healthier people drop their insurance, the insurance risk pool gets worse, premiums go up, more young people drop out, and the cycle continues.</p>
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<a href="https://theconversation.com/youth-discounts-fail-to-keep-young-people-in-private-health-insurance-121803">Youth discounts fail to keep young people in private health insurance</a>
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<p>If Australia’s private health care system is to remain viable, the youth exodus has to be stopped. A <a href="https://grattan.edu.au/">new Grattan Institute report</a>, released today, proposes a fundamental change to the way health insurance premiums are set that aims to make private insurance fairer and better value for younger Australians.</p>
<h2>The risk rating spectrum</h2>
<p>Private health insurance premiums in Australia are mostly set on the average experience of the whole insured community – by a system of so-called “community rating”. Under this arrangement younger and healthier people subsidise the costs of older and sicker people. </p>
<p>But this is the <a href="https://link.springer.com/article/10.1007/s40258-015-0207-0">fatal flaw of community rating</a>: the cross subsidy only works if younger and healthier people still think the product is valuable. </p>
<p>Young people’s views on this are changing. Many are dropping their cover which means there are fewer and fewer young people to cross subsidise the costs of older people.</p>
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<img alt="" src="https://images.theconversation.com/files/304852/original/file-20191203-66990-b8uxdo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/304852/original/file-20191203-66990-b8uxdo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/304852/original/file-20191203-66990-b8uxdo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/304852/original/file-20191203-66990-b8uxdo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/304852/original/file-20191203-66990-b8uxdo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/304852/original/file-20191203-66990-b8uxdo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/304852/original/file-20191203-66990-b8uxdo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Young people don’t want to subsidise the costs of older people’s care.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/608739416?src=24d56ceb-42c8-4317-96f3-ecbb9d04855e-1-10&size=huge_jpg">lzf/Shutterstock</a></span>
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<p>Community rating contrasts with a “risk rating” approach, whereby the premium is set based on the specific risk of the insured person. Most insurance products, including home and car insurance, work this way.</p>
<p>Systems for setting insurance premiums lie on a spectrum, with a pure community rating at one end, and risk rating at the other. Australia’s private health insurance system lies close to the community-rated end. </p>
<p>However, <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/private-health-insurance-reforms-fact-sheet-discounts-for-18-to-29-year-olds">youth discounts introduced in April</a> – and differential products where young people are more likely to choose “Basic” products and older people more likely to choose “Gold” – mean that policies are already partially risk-rated.</p>
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<strong>
Read more:
<a href="https://theconversation.com/premiums-up-rebates-down-and-a-new-tiered-system-what-the-private-health-insurance-changes-mean-114086">Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean</a>
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<p>The Grattan Institute proposes a further shift towards age-based risk rating in our private health insurance system. This change would allow private health insurers to reduce the premiums of people under 55 while leading to only small increases in premiums for people aged 55 and over.</p>
<h2>Age-based risk rating for people under 55</h2>
<p>If health insurance premiums for people under 55 were deregulated and insurers allowed to charge an age-based premium, the cost of premiums for this age group would fall significantly. </p>
<p>We propose that the government subsidy for private health insurance, the private health insurance rebate, be withdrawn from this age group. Even without a subsidy, premiums for this group would fall.</p>
<p>With a lower price that is more closely aligned to their expected benefits, young people would see private health insurance as a better deal, and would be more likely to retain their insurance or, indeed, take it out again if they’d previously dropped it.</p>
<h2>Community rating for people 55 and over</h2>
<p>The private health insurance subsidy costs taxpayers around <a href="https://www.abc.net.au/news/2018-01-30/private-health-insurance-too-expensive-and-excludes-too-much/9374920">A$6 billion every year</a>. </p>
<p>Although this subsidy is probably not good value from a taxpayer’s point of view, there is some uncertainty about whether abolishing it would represent an overall saving once the cost of increased demand for public hospital care is taken into account. </p>
<p>Erring on the side of caution, the Grattan Institute proposes redirecting most of the rebate to premium subsidies for people over 55.</p>
<p>The increased subsidy for older people would mean premiums for that group would increase marginally, but potentially less than the increases which will occur if the youth exodus continues. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/304851/original/file-20191203-67023-1d28xka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/304851/original/file-20191203-67023-1d28xka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/304851/original/file-20191203-67023-1d28xka.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/304851/original/file-20191203-67023-1d28xka.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/304851/original/file-20191203-67023-1d28xka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/304851/original/file-20191203-67023-1d28xka.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/304851/original/file-20191203-67023-1d28xka.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The rebate subsidies would be redirected to those over 55.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/172679258?src=4d33cd08-ac19-49ec-9f20-c094dd47cdd6-1-36&size=huge_jpg">Lolostock/Shutterstock</a></span>
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<p>Community rating would be retained for people 55 and over, since premiums for the very old would become prohibitively expensive without it. </p>
<p>The premium subsidy for people 55 and over would continue to increase in line with inflation, and the means-tested component currently in place for premium subsidies would remain.</p>
<p>The private health insurance death spiral is real, albeit slow. Without policy change, the youth exodus will continue. Insurance premiums will continue to go up and private health coverage will decrease overall. A fundamental industry shakeup is required to address the inherent adverse dynamics.</p>
<p>The industry should also rely more on providing good value products to customers rather than depending on people to take out a policy simply because they’ve been forced to do so. As in any other industry, private insurance companies should be encouraged – and allowed – to compete, based on the value they can provide to customers.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/greedy-doctors-make-private-health-insurance-more-painful-heres-a-way-to-end-bill-shock-127227">Greedy doctors make private health insurance more painful – here's a way to end bill shock</a>
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</p>
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<img src="https://counter.theconversation.com/content/128101/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website. Medibank Private is an Affiliate partner of Grattan Institute. Stephen Duckett has private health insurance.</span></em></p>Young people don’t see the value in private health insurance and are dropping their cover in droves. Allowing under 55s to pay lower premiums, based on their lower risk, could keep them in the system.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1272272019-11-25T19:13:21Z2019-11-25T19:13:21ZGreedy doctors make private health insurance more painful – here’s a way to end bill shock<figure><img src="https://images.theconversation.com/files/303374/original/file-20191125-74572-hsguwg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">After an operation, patients might receive half a dozen bills from different health providers involved in their care.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/doctors-working-on-laptop-computer-writing-785808469?src=232d6ce3-a624-4842-942f-6faf15333e09-2-63&studio=1">Smolaw/Shutterstock</a></span></figcaption></figure><p>Large bills are one of <a href="https://chf.org.au/sites/default/files/20180404_oop_report.pdf">the main reasons people are dissatisfied</a> with their private health insurance – especially when these bills come as a surprise. </p>
<p>Doctors charge what they like, and patients rarely have any information about what they are getting for their money. Even <a href="https://chf.org.au/publications/out-pocket-pain">patients with top-level cover are left paying large and unexpected out-of-pocket costs</a> when they use their insurance.</p>
<p>Patients have little power to bargain with their doctors about fees and have almost no information about whether their doctor has higher or lower complication rates than other doctors.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/its-perfectly-legal-for-doctors-to-charge-huge-amounts-for-surgery-but-should-it-be-allowed-118179">It's perfectly legal for doctors to charge huge amounts for surgery, but should it be allowed?</a>
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<p>A Grattan Institute <a href="https://grattan.edu.au/home/health/">report released today</a> proposes that patients’ fees should be negotiated between doctors and private hospitals, rather than between the doctor and the patient. </p>
<p>We propose that hospitals issue one “bundled” bill after a patient is treated, rather than the confusing and seemingly ad hoc array of bills patients get at present.</p>
<p>Under the plan, patients would still choose their specialist, and still be treated in the hospital where their specialist practices. </p>
<p>The difference would be that private hospitals would issue a single bill to the patient’s insurer, and the private hospital would pay the specialist, the anaesthetist, the assistant, and any other medical practitioners on the patient’s behalf. </p>
<p>An insured patient would get one bill – from their insurer – which would include their excess and any additional cost the hospital has advised them about in advance. </p>
<p>An uninsured patient would also get a single bundled bill, but from the hospital.</p>
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<img alt="" src="https://images.theconversation.com/files/303377/original/file-20191125-74557-1vaycpb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/303377/original/file-20191125-74557-1vaycpb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/303377/original/file-20191125-74557-1vaycpb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/303377/original/file-20191125-74557-1vaycpb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/303377/original/file-20191125-74557-1vaycpb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/303377/original/file-20191125-74557-1vaycpb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/303377/original/file-20191125-74557-1vaycpb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Bill shock is one of the biggest problems Australians have with private health insurance.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-on-girl-female-woman-hands-1526711993">Miljan Zivkovic</a></span>
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<h2>Why it’s needed</h2>
<p>Medical fees are currently partly reimbursed by Medicare (75% of the schedule fee), partly reimbursed by the insurer (25% of the schedule fee), and doctors often charge more on top of this. </p>
<p>The extra is paid by the patient as an out-of-pocket charge. This results in an incoherent shambles of payments. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/specialists-are-free-to-set-their-fees-but-there-are-ways-to-ensure-patients-dont-get-ripped-off-97372">Specialists are free to set their fees, but there are ways to ensure patients don't get ripped off</a>
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<p>Patients are in the worst position to negotiate fees with their specialist. <a href="https://ama.com.au/sites/default/files/documents/Informed-financial-consent-Oct19-ONLINE.pdf">Quaint pamphlets</a> which encourage patients to ask their surgeons about fees shift responsibility from those who can effect change – doctors, private hospitals, insurers, and government – to those who can’t: powerless patients.</p>
<h2>A handful of doctors is causing the problem</h2>
<p>Only about one-quarter of hospital specialists’ services are <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">charged at the Medicare schedule fee or below</a>. </p>
<p>Many doctors feel this government-determined fee is not fair, possibly because it has not been consistently indexed with inflation. </p>
<p>More than two-thirds of services are charged up to 50% above the schedule fee.</p>
<p>But a very small proportion of services (7%) are charged at more than twice the Medicare schedule – and for these services, the average amount charged is more than three times the Medicare fee. </p>
<p>This small number of expensive services account for almost 90% of all medical gaps. The small minority of specialists who charge more than twice the schedule fee should be called out and labelled as greedy.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/doctors-fees-shouldnt-just-be-transparent-they-should-be-fair-and-reasonable-100948">Doctors’ fees shouldn't just be transparent, they should be fair and reasonable</a>
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<p>To some extent it’s fair that specialists with demonstrably better skills than their colleagues in the same specialty should charge more. </p>
<p>But since neither the public nor specialists have information about relative skill, such as complication rates after taking account of the complexity of the patient, it is hard to justify charging higher fees. </p>
<p>What’s more, higher fees are <a href="https://onlinelibrary.wiley.com/doi/abs/10.5694/mja16.00653">more prevalent in some locations than others</a>, suggesting the higher fees have nothing to do with either skill or the adequacy of the Medicare Benefits Schedule, but rather are more about what these doctors think the market can bear.</p>
<h2>A single bill would help</h2>
<p>Bundling medical fees into a single bill would require doctors to negotiate with private hospitals about what the doctor charges. </p>
<p>Hospitals are in a better position than patients to negotiate with doctors about fees. Private hospitals already negotiate about whether to appoint a specialist to the hospital; those negotiations should include consideration of what the doctor will charge patients.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/303376/original/file-20191125-74593-gw58sz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/303376/original/file-20191125-74593-gw58sz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/303376/original/file-20191125-74593-gw58sz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/303376/original/file-20191125-74593-gw58sz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/303376/original/file-20191125-74593-gw58sz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/303376/original/file-20191125-74593-gw58sz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/303376/original/file-20191125-74593-gw58sz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">If doctors have to negotiate with private hospitals about the fees they charge, they’re likely to be lower.</span>
<span class="attribution"><span class="source">ESB Professional/Shutterstock</span></span>
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</figure>
<p>Patients would benefit directly. They would still have choice of doctor but would face fewer and lower out-of-pocket costs for these choices. </p>
<p>Importantly, the doctor-patient relationship would continue; the change would be to the doctor-payment relationship.</p>
<p>Of course, some doctors – especially the greedy billers – would oppose this reform, because it would bring accountability into the medical market. Their squeals should be ignored.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/we-need-more-than-a-website-to-stop-australians-paying-exorbitant-out-of-pocket-health-costs-108740">We need more than a website to stop Australians paying exorbitant out-of-pocket health costs</a>
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</em>
</p>
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<img src="https://counter.theconversation.com/content/127227/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website..</span></em></p>Specialists can charge patients what they want, and some doctors charge exorbitant amounts. A handful of services account for almost 90% of all medical gaps.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1263452019-11-07T05:30:31Z2019-11-07T05:30:31ZPrivate health insurers should start paying for hospital-type care at home<figure><img src="https://images.theconversation.com/files/300540/original/file-20191107-12474-r0q6zf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Having treatment at home is more convenient for patients.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/671185213?src=9a8830d7-2b96-41a2-9c10-cad4d2592fb0-1-38&size=huge_jpg">Photographee.eu/Shutterstock</a></span></figcaption></figure><p>In the past, when you needed chemotherapy or intravenous (in-the-vein) treatments such as antibiotics or hydration, you needed to be admitted to hospital. </p>
<p>These days, it’s possible to have such treatments in the comfort of your home, with nursing or other clinical supports. </p>
<p>Public hospital-in-the-home and other hospital-substitute programs are burgeoning in the public sector, including in <a href="https://www.mja.com.au/system/files/issues/193_10_151110/mon10237_fm.pdf">Victoria</a>, <a href="https://www.silverchain.org.au/wa/">Western Australia</a> and <a href="https://www.health.nsw.gov.au/Performance/Pages/HITH.aspx">New South Wales</a>. These programs now provide the equivalent of hundreds of hospital beds. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/from-triage-to-discharge-a-users-guide-to-navigating-hospitals-54658">From triage to discharge: a user's guide to navigating hospitals</a>
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<p>Having treatment at home is more convenient for patients, reduces the demand on hospitals, and <a href="https://www.cochranelibrary.com/cdsr/doi/10.1002/14651858.CD007491.pub2/abstract">cuts costs for the health system</a>.</p>
<p>But if you have private health insurance and want to access these services via a private hospital, it’s often not possible. This needs to change.</p>
<h2>What’s the problem?</h2>
<p>Private health insurers are tightly regulated. If you have a top “gold” package, for example, the insurer must pay for all hospital services that attract a government Medicare Benefits Schedule (MBS) payment, other than cosmetic surgery. </p>
<p>But insurers are currently <a href="https://www.health.gov.au/health-topics/private-health-insurance/about-private-health-insurance/how-does-private-health-insurance-work">not allowed to cover</a> care provided outside of hospitals, except in very limited circumstances.</p>
<p>Insurers <em>are</em> allowed to cover eligible home-based programs developed by private hospitals. But they get to decide on a case-by-case basis whether to cover these programs. And each insurer makes a separate decision for each program.</p>
<p>This means private hospitals must negotiate with each private health insurer for each separate program, for each contract period. This makes it almost impossible for private hospitals to develop sustainable business cases for their programs. </p>
<p>The upshot is patients often miss out on the convenience of having hospital-type services in their home, and instead may face prolonged hospital stays. </p>
<p>The red tape needs to be untangled to make it easier for private hospitals and doctors to run these programs and for insurers to pay for them. </p>
<h2>What kind of care can you get at home?</h2>
<p>Few hospital-type services are delivered at home under the current system for privately insured patients: they account for about <a href="https://www.apra.gov.au/quarterly-private-health-insurance-statistics">4% of hospital treatments paid in 2018-19</a>.</p>
<p><a href="https://www.cabrini.com.au/patients-and-families/services/directory/hospital-in-the-home">Common hospital-type treatments</a> in the home include IV therapy and wound care. </p>
<p>A number of insurers are conducting pilot programs for out-of-hospital rehabilitation after strokes, <a href="https://www.medibank.com.au/livebetter/my-medibank/using-your-cover/rehab-in-the-home/">joint replacements</a> or an accident; chemotherapy; kidney dialysis; and <a href="https://media.bupa.com.au/palliative-care-pilot-recognised/">palliative care</a>, so people can die more comfortably in their own homes.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300580/original/file-20191107-12464-h9zryd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300580/original/file-20191107-12464-h9zryd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300580/original/file-20191107-12464-h9zryd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300580/original/file-20191107-12464-h9zryd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300580/original/file-20191107-12464-h9zryd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300580/original/file-20191107-12464-h9zryd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300580/original/file-20191107-12464-h9zryd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Pilot programs are underway to allow more people to die in their own homes.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/637042651?src=a2a0948d-d998-442f-b83f-9cc19c94ede1-1-63&size=huge_jpg">Photographee.eu/Shutterstock</a></span>
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<p>Untangling red tape would also allow private hospitals to offer more “<a href="https://www.bmj.com/content/358/bmj.j3702">prehabilitation</a>” programs to prepare people for elective surgery, and to offer <a href="https://www.mja.com.au/journal/2018/209/5/predictors-inpatient-rehabilitation-after-total-knee-replacement-analysis">rehabilitation programs in people’s homes</a> after surgery.</p>
<p>Theoretically, hospital-substitute programs at home could expand to other treatment areas such as obstetrics to have your baby at home. Or for <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/05EB674588C31EB7CA257E28001F1BBD/$File/Guidelines%20for%20Determining%20Benefits%202015%20Edition-Checked.pdf">mental health</a> treatment, which may be more efficiently provided outside hospital. </p>
<p>But legislative restrictions (designed to stop insurers covering general practice) have limited the expansion of these programs. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/waiting-for-better-care-why-australias-hospitals-and-health-care-are-failing-104862">Waiting for better care: why Australia’s hospitals and health care are failing</a>
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<h2>How should the system work?</h2>
<p>Regulation should support people’s access to the most efficient form of care. And private hospitals should have more certainty about how they’ll be reimbursed when they invest in alternatives to hospital inpatient care. </p>
<p>Rather than each insurer deciding whether they should fund good programs, the independent body which assesses and approves the public-sector equivalent of home-based care – the <a href="https://www.ihpa.gov.au/">Independent Hospital Pricing Authority</a> – should do the same for the private sector. </p>
<p>If a program has been approved by the authority, then private health insurers should be required to pay for it.</p>
<p>Specialist doctors, such as oncologists, should also be able to establish hospital substitute programs and have them approved for funding by private health insurers.</p>
<p>All of this is about improving quality and access to care, while at the same time reducing costs. It should be easier for private health insurers to pay for better alternatives to hospital care, where they can deliver the same treatment with the same or better outcomes, <a href="https://www.cochranelibrary.com/cdsr/doi/10.1002/14651858.CD007491.pub2/abstract">but at a lower cost</a>. </p>
<p>It is also about providing good alternatives to private hospital care, increasing competition in the health system, and reducing the number of unnecessary hospital admissions. </p>
<p>There are big opportunities for system-wide efficiencies in the private sector by shifting care from inpatient to outpatient settings – particularly for rehabilitation, psychiatric care, <a href="https://www.asrs.org/patients/retinal-diseases/33/intravitreal-injections">eye injections</a> for retinal conditions, and outpatient <a href="https://www.veinhealth.com.au/ambulatory-phlebectomy/">vein surgery</a>. </p>
<p>The public sector has already expanded its alternatives to hospital inpatient care. It’s time for the private system to do the same. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
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<img src="https://counter.theconversation.com/content/126345/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website.. </span></em></p>Patients often want the option to be treated at home rather than being admitted to hospital. But it’s much less likely to happen if you’re a private patient.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1218032019-08-20T05:17:45Z2019-08-20T05:17:45ZYouth discounts fail to keep young people in private health insurance<figure><img src="https://images.theconversation.com/files/288652/original/file-20190820-123749-1sn8r0a.jpg?ixlib=rb-1.1.0&rect=66%2C11%2C7271%2C4891&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Many young people see private health insurance as an unnecessary expense.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/792108373?src=JXjo4EIt_ph4IylSUXQv_g-1-7&size=huge_jpg">Yuricazac/Shutterstock</a></span></figcaption></figure><p>It was a key plank of what was dubbed the <a href="https://parlinfo.aph.gov.au/parlInfo/genpdf/chamber/hansardr/1804b2ba-3f8e-4c54-abff-2dea8c0ce814/0035/hansard_frag.pdf;fileType=application%2Fpdf">most significant package of private health insurance reforms in more than a decade</a>. From April 1 this year, private health insurers have been permitted to offer a youth discount – lower premiums for people under 30.</p>
<p>But the early signs are not good. New data <a href="https://www.apra.gov.au/publications/private-health-insurance-statistics">released today by the private health insurance regulator</a> show 7,000 fewer young people (25 to 29 year olds) were insured on June 30, 2019 than three months earlier when the new discount regime started.</p>
<p>In the three years to June 30, 2018, an average of about 2,100 young people dropped private health insurance every month. For the first six months of this year, the decline was 1,700 a month.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/premiums-up-rebates-down-and-a-new-tiered-system-what-the-private-health-insurance-changes-mean-114086">Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean</a>
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<p>So the new policy may have stemmed the bleeding, but young people are still leaving private health insurance. This does not augur well for the future of private health insurance. </p>
<p>It’s time to consider a bold option to encourage young people to stay in private health insurance, which reduces their premium costs based on their likelihood of getting sick. </p>
<h2>Lower health risks but the same costs</h2>
<p>As we pointed out in a recent <a href="https://grattan.edu.au/report/the-history-of-private-health-insurance/">Grattan Institute working paper</a>, the industry fears a death spiral where young and healthy people drop out of insurance, forcing up premiums for everyone left, then more young and healthy people drop out, premiums go up again, and the cycle continues.</p>
<p>Australian private health insurance is based on <a href="https://www.jstor.org/stable/43199730?seq=1#page_scan_tab_contents">community rating</a>. This means insurers must charge all consumers the same premium for the same product: they are not permitted to discriminate based on health risk (such as age, gender, health status, or claims history); and they cannot refuse to insure an individual.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/288655/original/file-20190820-123716-lnf43n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/288655/original/file-20190820-123716-lnf43n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/288655/original/file-20190820-123716-lnf43n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/288655/original/file-20190820-123716-lnf43n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/288655/original/file-20190820-123716-lnf43n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/288655/original/file-20190820-123716-lnf43n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/288655/original/file-20190820-123716-lnf43n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Older people are much more likely to use private health insurance yet everyone pays the same premiums.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/751342633?src=nQlns4AG1tl-3qRdpw5G2g-1-17&size=huge_jpg">Rawpixel.com/Shutterstock</a></span>
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<p>Community rating is designed to enable higher-risk people to take out private health insurance, by forcing lower-risk people to cross-subsidise them. It means lower-risk people have to contribute more than what their expected use would require. </p>
<p>But faced with a higher-than-fair premium, low-risk people – typically the young and the healthy – make an economically rational decision to drop their private insurance. Hence the death spiral.</p>
<h2>Discounts don’t cut it</h2>
<p>Australia already has a so-called <a href="https://link.springer.com/article/10.1007/s10754-005-6602-6">lifetime community ranking</a>, under which people who take out private health insurance after their 31st birthday pay higher premiums – an additional 2% per year for each year they defer taking out insurance.</p>
<p>The April 1 changes introduced a reverse scheme, under which people can get a discount of 2% for each year they join before they turn 30, up to a maximum discount of 10%. </p>
<p>But even with the full 10% discount, a 25 year old will still be paying significantly more than they would with a risk-rated premium.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/going-to-the-naturopath-or-a-yoga-class-your-private-health-wont-cover-it-110699">Going to the naturopath or a yoga class? Your private health won't cover it</a>
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<p>So the relentless downward trend continues. In the year to June 2019, the number of 25 to 29 year olds with private health insurance dropped 28,000, about 6%. The previous year it was also 6%. The year before that it was 5%. </p>
<p>In fact, for every quarter for the last four years there has been fewer 25 to 29 year olds insured at the end of each quarter than at the beginning of the quarter.</p>
<p>Although it may be too early to declare the new youth discount policy a complete failure, the government and industry need to consider bolder policies.</p>
<h2>A better way to attract young people</h2>
<p>Community rating may have had its day, given that under Medicare, everyone who needs health insurance automatically has it through the public system. </p>
<p>It’s time to consider shifting to risk rating, starting with people under 30. A risk rating based on age could halve young people’s private health insurance premiums and encourage more Australians to stay in private health insurance.</p>
<p>People aged 25 to 29 use health care much less than the rest of the insured population. In 2018-19, the average benefit payments for that group were A$708 per member compared to A$1,363 per member for the whole population. </p>
<p>If there were no cross-subsidies from 25 to 29 year olds, their premiums would be 52% of the average, community-rated premium.</p>
<p>This would dramatically reduce premiums for young people and increase the attractiveness of private health insurance. </p>
<p>As 25 to 29 year olds only comprise 4% of the insured population, adjusting premiums for this group is unlikely to have a measurable impact on premiums for other people with insurance in the short run, and may have a long run benefit if it attracts people aged 30 to 39 into insurance.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/288656/original/file-20190820-123720-10r01n3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/288656/original/file-20190820-123720-10r01n3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/288656/original/file-20190820-123720-10r01n3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/288656/original/file-20190820-123720-10r01n3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/288656/original/file-20190820-123720-10r01n3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/288656/original/file-20190820-123720-10r01n3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/288656/original/file-20190820-123720-10r01n3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Moving from a community rating to a risk rating could halve private health insurance premiums for young people.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/427841167?src=1cwyQAe64TuokMzm-k5a5Q-1-38&size=huge_jpg">GaudiLab/Shutterstock</a></span>
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<p>Under this reform, funds would have to manage the transition from a risk-rated premium for a 29 year old to a community-rated premium for a 30 year old. </p>
<p>This might involve full risk rating for 25 year olds and a blended approach – partial risk rating – for people over 25, so that the rate for 29 year olds does not involve too big a jump to a community rated premium at age 30. </p>
<p>But if developing a phasing-in plan is beyond insurers’ skill set, then private health insurance is in even more dire straits than the trend data reveals.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
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<img src="https://counter.theconversation.com/content/121803/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website.</span></em></p>Young people continue to cancel their private health insurance despite discounts to entice them to stay. Instead, we should reduce their premiums based on their likelihood of needing health care.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1106992019-04-02T18:47:21Z2019-04-02T18:47:21ZGoing to the naturopath or a yoga class? Your private health won’t cover it<figure><img src="https://images.theconversation.com/files/266724/original/file-20190401-177181-nte7ww.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Although there's evidence yoga may be helpful for some medical conditions, it can no longer be claimed under private health insurance.</span> <span class="attribution"><span class="source">From shutterstock.com</span></span></figcaption></figure><p>Starting this week, private health insurers are prohibited from providing benefits for a number of natural therapies. This <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/9BF149856FD5AF22CA2581BB007C0CEB/$File/Natural%20Therapies%20-%2019%20Oct%20with%20SR%20updates.pdf">includes</a> aromatherapy, Western herbalism, homeopathy, naturopathy, pilates, reflexology, Rolfing (soft tissue manipulation), Shiatsu, tai chi, yoga, and half a dozen others. </p>
<p>The goal of these changes is to stop taxpayers subsidising these therapies. But the way the changes have been legislated will have a lot of unintended consequences.</p>
<h2>Why were some therapies removed?</h2>
<p>The therapies were removed after a 2013 <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/phi-natural-therapies">government review</a> couldn’t find significant evidence for the clinical effectiveness for these therapies. </p>
<p>Based on the review, a <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/phmac">ministerial committee</a> concluded these therapies should no longer attract taxpayer subsidies as part of private health insurance.</p>
<p>Taxpayers subsidise natural therapies via the private health insurance rebate, which covers <a href="https://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/insurancerebate.htm">around 25%</a> of the cost of premiums. </p>
<p>This rebate itself is controversial. It costs the government around $6bn a year and <a href="https://www.phaa.net.au/documents/item/1155">many experts</a> have questioned whether it’s an effective use of taxpayer funds.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/private-health-insurance-rebates-dont-serve-their-purpose-lets-talk-about-scrapping-them-91061">Private health insurance rebates don't serve their purpose. Let's talk about scrapping them</a>
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</p>
<hr>
<p>However, current government policy <em>is</em> to subsidise premiums. So ensuring taxpayer funds are focused on therapies that work is a worthy goal. </p>
<h2>How does the legislation prohibit therapies?</h2>
<p>Government subsidies for private health insurance premiums are governed by <a href="https://www.legislation.gov.au/Details/C2019C00067">legislation</a>, with practical considerations fleshed out in <a href="https://www.legislation.gov.au/Details/F2014C00746">regulations</a>. Exclusions from government subsidies would usually be incorporated into these mechanisms. </p>
<p>Instead, the change is contained within a <a href="https://www.legislation.gov.au/Details/F2019C00047">separate set of rules</a> which govern what insurers can offer. Three rules were <a href="https://www.legislation.gov.au/Details/F2019C00017">amended</a>:</p>
<p><strong>Rule 3:</strong> The 16 natural therapies are defined in a list as “excluded natural therapy treatment”</p>
<p><strong>Rule 8:</strong> “Excluded natural therapy treatment” is prohibited from coverage as hospital treatment</p>
<p><strong>Rule 11:</strong> “Excluded natural therapy treatment” is prohibited from coverage as “general treatment” for a specific health condition. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/266725/original/file-20190401-177167-19e8c0d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/266725/original/file-20190401-177167-19e8c0d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266725/original/file-20190401-177167-19e8c0d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266725/original/file-20190401-177167-19e8c0d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266725/original/file-20190401-177167-19e8c0d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266725/original/file-20190401-177167-19e8c0d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266725/original/file-20190401-177167-19e8c0d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Natural health practitioners draw on a variety of remedies not used by medical doctors.</span>
<span class="attribution"><span class="source">From shutterstock.com</span></span>
</figcaption>
</figure>
<h2>So, what’s the problem?</h2>
<p>The term “natural therapies” groups diverse treatments that have very little in common. </p>
<p>Therapies such as iridology (diagnosing health problems by looking at the iris of the eye) are not evidence-based, yet therapies such as yoga and <a href="https://www.ncbi.nlm.nih.gov/pubmed/28234634">tai chi</a> have a reasonable (and <a href="https://www.ncbi.nlm.nih.gov/pubmed/28234634">growing</a>) body of evidence. All three are on the list of prohibited therapies. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/yoga-in-the-workplace-can-reduce-back-pain-and-sickness-absence-87375">Yoga in the workplace can reduce back pain and sickness absence</a>
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<p>Chinese medicine, chiropractic and massage therapy are not on the list, and can still attract private health insurance benefits. </p>
<p>The 2013 review noted evidence for some of the natural therapies on the list, but excluded them because it was limited to specific conditions or situations. Evidence for the breathing technique Buteyko, for instance, <a href="https://www.ncbi.nlm.nih.gov/pubmed/23101047">was limited to asthma</a>. </p>
<p>This limitation may warrant restriction of direct benefits. However, the legislation requires any bundled package of care or management program for asthma that attracts benefits to specifically exclude Buteyko, even if the insurer is not paying for Buteyko directly.</p>
<p>Organisations can still <em>technically</em> offer these services if they are completely separated clinically and administratively from reimbursable items. But the reality is this creates an almost impossible barrier. Natural therapies on this list can no longer interact, interface or integrate with reimbursable services.</p>
<p>The Department of Health’s <a href="https://www.aph.gov.au/%7E/media/Estimates/ca/supp1718/addinfo/Hansard/Official/2017_10_26_5686_Official.pdf?la=en">private health insurance advisor</a> admitted as much, noting it would be almost impossible for insurers – or organisations accepting insurance – to overcome barriers and offer any natural therapy services.</p>
<p>Had the legislation been focused on removal of subsidies there would have been few issues. But the “prohibitive list” in the legislation is highly unusual. </p>
<h2>If therapies work, won’t they be allowed back?</h2>
<p>The changes have a number of structural problems. </p>
<p>There is no formal process for updating the list as evidence evolves. This means therapies remain prohibited until legislated otherwise and other therapies cannot be added easily.</p>
<p>By virtue of not being included in the list, reiki and crystal healing are eligible for benefits. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/266727/original/file-20190401-177193-mvxezi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/266727/original/file-20190401-177193-mvxezi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266727/original/file-20190401-177193-mvxezi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266727/original/file-20190401-177193-mvxezi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266727/original/file-20190401-177193-mvxezi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266727/original/file-20190401-177193-mvxezi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266727/original/file-20190401-177193-mvxezi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shiatsu, a form of massage, is one of the treatments to have been cut from private health insurance.</span>
<span class="attribution"><span class="source">From shutterstock.com</span></span>
</figcaption>
</figure>
<p>Meanwhile, the review is already out of date. It examined systematic reviews published between 2008 and 2013, and did not review original research at all. Search criteria for the review were narrow and may not have reflected practice. The review excluded evidence for individual herbal medicines, for example, as it did not believe this evidence was relevant to the practice of herbalism.</p>
<p>Meta-analyses now show yoga to be effective in conditions such as <a href="https://www.ncbi.nlm.nih.gov/pubmed/29685823">diabetes</a> and <a href="https://www.ncbi.nlm.nih.gov/pubmed/23246998">back pain</a>. Yoga is now recommended as a first-line treatment for low back pain <a href="https://www.nice.org.uk/news/article/nice-publishes-updated-advice-on-treating-low-back-pain">in the United Kingdom</a>. And <a href="https://www.sto.nato.int/publications/STO%20Technical%20Reports/Forms/Technical%20Report%20Document%20Set/docsethomepage.aspx?ID=3269&FolderCTID=0x0120D5200078F9E87043356C409A0D30823AFA16F6010066D541ED10A62C40B2AB0FEBE9841A61&List=92d5819c-e6ec-4241-aa4e-57bf918681b1&RootFolder=%2Fpublications%2FSTO%20Technical%20Reports%2FSTO-TR-HFM-195">NATO recommends</a> military health services use yoga for post-traumatic stress disorder and back pain. </p>
<p>This legislation makes similar programs almost impossible to replicate in Australia. </p>
<p>At the very least, the Department of Health should update the review to ensure the <a href="https://www.saxinstitute.org.au/our-work/knowledge-exchange/evidence-check/">evidence on which they have based this decision</a> is current. </p>
<p>We need an evidence-based approach to natural therapies. But these changes hamper access to therapies known to work, encourage therapies known not to work, and reduce researchers’ ability to investigate what does and doesn’t work.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/premiums-up-rebates-down-and-a-new-tiered-system-what-the-private-health-insurance-changes-mean-114086">Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean</a>
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</p>
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<p><em>* The author’s disclosure statement has been updated since this article was first published.</em></p><img src="https://counter.theconversation.com/content/110699/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jon Wardle receives funding from National Health and Medical Research Council and the Defence Health Foundation relating to projects on natural therapies. Jon is a member of the Australian Research Centre in Complementary and Integrative Medicine, which researches natural therapies and has been directly impacted by these changes. Some ARCCIM funding has been from sources with interests in natural therapies (e.g. the Jacka Foundation). In addition to qualifications in nursing, health law and public health, Jon has clinical training as a naturopath and is co-author of the book Clinical Naturopathy.</span></em></p>From this week, private health insurers are unable to provide rebates for 16 natural therapies. But these changes may have unintended consequences.Jon Wardle, Associate Professor of Public Health, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1140862019-03-28T18:10:36Z2019-03-28T18:10:36ZPremiums up, rebates down, and a new tiered system – what the private health insurance changes mean<figure><img src="https://images.theconversation.com/files/266060/original/file-20190327-139377-12fjpz7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">This year's premium increase is small in comparison to previous years – but it still outweighs wage inflation.</span> <span class="attribution"><span class="source">From shutterstock.com</span></span></figcaption></figure><p>If you have private health insurance, or are considering getting it, a series of changes coming into effect on April 1 are worth knowing about.</p>
<p>These include the annual premium increase, a small decrease in rebates, the introduction of a new tiered system designed to simplify things for consumers, and some premium discounts for young people.</p>
<p>This year’s premium increase is quite small compared to recent years, and the reforms are generally sensible. But cost pressures and confusion in private health insurance cannot be fixed overnight.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/is-it-time-to-ditch-the-private-health-insurance-rebate-its-a-question-labor-cant-ignore-111171">Is it time to ditch the private health insurance rebate? It's a question Labor can't ignore</a>
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</em>
</p>
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<h2>A modest increase in premiums</h2>
<p>Private health insurance premiums will increase by <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/privatehealth-average-premium-round">an average of 3.25%</a> in 2019. These increases are relatively modest, as premiums have been rising at between 4% and 6% per annum for more than 10 years.</p>
<p><iframe id="sgTg1" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/sgTg1/7/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>However, compared to consumer price index <a href="https://www.rba.gov.au/inflation/measures-cpi.html">inflation of 1.8%</a> and <a href="https://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/6345.0Media%20Release1Dec%202018">wage inflation of 2.3%</a>, premiums are still rising substantially in real terms for Australians.</p>
<p>But in the current environment, above-inflation premium rises are not unexpected.</p>
<p>For comparison, consider the public health system, where spending increased at <a href="https://www.aihw.gov.au/getmedia/e8d37b7d-2b52-4662-a85f-01eb176f6844/aihw-hwe-74.pdf.aspx?inline=true">nearly 7% per year</a> in the decade to 2017.</p>
<p>Out-of-pocket spending by patients also had an above-inflation trend of <a href="https://www.aihw.gov.au/getmedia/e8d37b7d-2b52-4662-a85f-01eb176f6844/aihw-hwe-74.pdf.aspx?inline=true">5.1% per year</a> over the past decade.</p>
<p>So both public and private expenditure on health are increasing substantially. Driving this is the increased usage and price of health care. Hospital visits are growing at <a href="https://www.aihw.gov.au/getmedia/acee86da-d98e-4286-85a4-52840836706f/aihw-hse-201.pdf.aspx?inline=true">4% a year</a>, and health price inflation is a further <a href="https://www.aihw.gov.au/getmedia/acee86da-d98e-4286-85a4-52840836706f/aihw-hse-201.pdf.aspx?inline=true">2% per year</a>.</p>
<p>Many hospital procedures such as cardiothoracic surgery, colonoscopies, hip and knee replacements, are increasing in volume by <a href="https://theconversation.com/heres-whats-actually-driving-up-health-insurance-premiums-hint-its-not-young-people-dropping-off-85683">over 5% a year</a>. So as patients use their health insurance more, it’s reasonable for the price to rise.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/heres-whats-actually-driving-up-health-insurance-premiums-hint-its-not-young-people-dropping-off-85683">Here's what's actually driving up health insurance premiums (hint: it's not young people dropping off)</a>
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</p>
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<h2>Rebates continue to decrease slowly</h2>
<p>Most Australians with private health insurance receive a rebate from the Australian government to help cover the cost of premiums.</p>
<p>Means testing of rebates along income tiers was introduced in 2012. This sees individuals and households with higher incomes receive lower subsidies. </p>
<p>From 2014, the government began indexing rebates every year, using a formula that is calculated as a difference between the consumer price index, and the industry weighted average increase in premiums. </p>
<p>As a result of indexation, rebate entitlements have been <a href="https://www.ato.gov.au/individuals/medicare-levy/private-health-insurance-rebate/income-thresholds-and-rates-for-the-private-health-insurance-rebate/">gradually falling</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/266270/original/file-20190328-139356-vw7wkr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/266270/original/file-20190328-139356-vw7wkr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=335&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266270/original/file-20190328-139356-vw7wkr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=335&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266270/original/file-20190328-139356-vw7wkr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=335&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266270/original/file-20190328-139356-vw7wkr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=421&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266270/original/file-20190328-139356-vw7wkr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=421&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266270/original/file-20190328-139356-vw7wkr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=421&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Government rebates for private health insurance go down a small amount each year.</span>
<span class="attribution"><span class="source">From shutterstock.com</span></span>
</figcaption>
</figure>
<p>For example, this means in 2013/14, a person aged 65 or below earning less than $88,000 (base tier) would have received a 30% rebate. Today, a person of the same age in the base tier would receive a rebate of just over 25%.</p>
<p>From April 1, rebates will decrease between 0.1% to 0.5% from their levels in 2018/19, <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/health-phicircular2019-08">depending on the income tiers</a> that people fall into.</p>
<p>For a typical family policy that covers both hospital and extras (with premiums approximately A$140 a fortnight), the decrease in the rebate translates to a very small rise in premiums of A$1 a fortnight.</p>
<h2>Basic, bronze, silver or gold?</h2>
<p>One key initiative starting on April 1 is the introduction of <a href="https://beta.health.gov.au/resources/publications/private-health-insurance-reforms-gold-silver-bronze-basic-product-tiers-fact-sheet">four tiers</a> of private health insurance coverage: basic, bronze, silver, and gold. This is distinct to the income tiers we talked about above.</p>
<p>In this case, each tier mandates the minimum set of treatments (defined by clinical categories) that insurers must cover.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/if-youve-got-private-health-insurance-the-choice-to-use-it-in-a-public-hospital-is-your-own-113367">If you've got private health insurance, the choice to use it in a public hospital is your own</a>
</strong>
</em>
</p>
<hr>
<p>For instance, policies in the “basic” tier are required to cover rehabilitation services, hospital psychiatric services, and palliative care. </p>
<p>Insurers can include other types of treatments which are not mandatory under the basic tier, if they choose to do so. Each additional tier covers a wider range of treatments, in addition to services mandated in lower tiers.</p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/266265/original/file-20190328-139341-1ig2dxy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/266265/original/file-20190328-139341-1ig2dxy.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=561&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266265/original/file-20190328-139341-1ig2dxy.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=561&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266265/original/file-20190328-139341-1ig2dxy.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=561&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266265/original/file-20190328-139341-1ig2dxy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=705&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266265/original/file-20190328-139341-1ig2dxy.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=705&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266265/original/file-20190328-139341-1ig2dxy.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=705&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">The Conversation/Australian Government</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<hr>
<p>This simplified categorisation of policies is designed to help consumers understand how comprehensive their cover is, and enable them to more easily compare products offered by different health funds.</p>
<p>While this initiative provides consumers with greater clarity on the types of services covered by each type of health insurance product, it still does not standardise care completely.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/private-health-insurance-premium-increases-explained-in-14-charts-92825">Private health insurance premium increases explained in 14 charts</a>
</strong>
</em>
</p>
<hr>
<p>Health funds can offer to cover, in lower tier products, treatments that are mandated only in higher tiered policies (such as providing coverage for pregnancy in a basic policy). </p>
<p>This may confuse patients if they assume their policy covering pregnancy will also cover other costly private procedures such as joint reconstructions (bronze), or back, neck and spinal surgery (silver).</p>
<h2>Young people</h2>
<p>From April 1, health funds will be able to offer <a href="https://beta.health.gov.au/resources/publications/private-health-insurance-reforms-discount-for-18-to-29-year-olds">discounts on premiums</a> of 2% for each year a person is under the age of 30 when he or she takes up private health insurance. Premium discounts are capped at a maximum of 10%. The discount is retained until the person reaches the age of 41, after which it will be gradually phased out. </p>
<p><iframe id="2DqBM" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/2DqBM/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>This initiative is being introduced to encourage young Australians to purchase private health cover and to stem the decline in private health insurance ownership among younger people. From September to December 2018, the largest net decrease in insured persons was recorded in <a href="http://www.apra.gov.au/sites/default/files/private_health_insurance_quarterly_statistics_december_2018.pdf">people aged 25 to 29</a>.</p>
<p>These discounts on premiums for young people complement the <a href="https://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/lifetimehealthcover.htm">Lifetime Health Cover policy</a> introduced in 2000, which was designed to encourage Australians to take up private hospital insurance earlier, and also to maintain cover. </p>
<p>Under the Lifetime Health Cover policy, which is still in force, people above the age of 30 without private cover are required to pay a 2% loading on premiums for each year they are over 30, if they choose to take up private cover later on.</p>
<h2>Other changes</h2>
<p>Another key change is that health funds are permitted to offer private hospital policies with a <a href="https://beta.health.gov.au/resources/publications/private-health-insurance-reforms-increasing-voluntary-maximum-excess-levels">higher excess</a>, in return for lower premiums. The maximum permitted excess is increasing from A$500 to A$750 for singles, and A$1,000 to A$1,500 for families.</p>
<p><a href="https://beta.health.gov.au/resources/publications/private-health-insurance-reforms-travel-and-accommodation-benefits-for-regional-and-rural-consumers">Travel and accommodation benefits</a> will be allowed to be included in hospital insurance plans for customers living in regional and rural parts of Australia. This will assist patients and their carers to meet the additional costs of having to travel to urban centres or capital cities to receive specialised treatment.</p>
<p>Natural therapies such as yoga, naturopathy, pilates and reflexology will no longer be covered under a general treatment policy. A total of <a href="https://beta.health.gov.au/resources/publications/private-health-insurance-reforms-changing-coverage-for-some-natural-therapies">16 natural therapies</a> are excluded. A review undertaken by the National Health and Medical Research Council concluded there is no clear evidence of the efficacy of these therapies. </p>
<p>Finally, to strengthen consumer protection, the role of the <a href="http://www.ombudsman.gov.au/How-we-can-help/private-health-insurance">private health insurance ombudsman</a> will be expanded, giving the agency new powers and greater capabilities to address issues and complaints.</p><img src="https://counter.theconversation.com/content/114086/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Sivey receives funding from the Australian Research Council. </span></em></p><p class="fine-print"><em><span>Terence Cheng does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A raft of changes to private health insurance in Australia will come into effect on April 1. Here’s what you need to know.Peter Sivey, Associate Professor, School of Economics, Finance and Marketing, RMIT UniversityTerence Cheng, Senior Lecturer, School of Economics, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1133672019-03-15T05:40:11Z2019-03-15T05:40:11ZIf you’ve got private health insurance, the choice to use it in a public hospital is your own<figure><img src="https://images.theconversation.com/files/264043/original/file-20190315-28492-1yvnpa0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">When you're admitted to a public hospital, they'll want to know if you have private health insurance.</span> <span class="attribution"><span class="source">From shutterstock.com</span></span></figcaption></figure><p>You arrive at your local public hospital for treatment. The hospital staff ask for your name, date of birth and address. They ask if you have Medicare and private health insurance. Then they ask if you would like to be admitted as a public or private patient. You’re unsure. You’re left wondering whether this decision will affect the care you receive.</p>
<p>Almost all patients <a href="https://www2.health.vic.gov.au/about/news-and-events/hospitalcirculars/circ2504#info">will be asked</a>, either verbally or via a standard admission form, whether they have private health insurance and wish to use it.</p>
<p>In our <a href="https://www.tandfonline.com/doi/abs/10.1080/14461242.2016.1170624?journalCode=rhsr20">research projects</a> we’ve spoken to Australians with private health insurance who have received treatment in public hospitals. Many people say they find it difficult to decide whether to be a private or public patient. They are unsure of the benefits and costs, and where to find this information.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/are-private-patients-in-public-hospitals-a-problem-79910">Are private patients in public hospitals a problem?</a>
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</p>
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<p>Public hospitals have <a href="https://www.smh.com.au/business/consumer-affairs/vulnerable-and-shocked-patients-targeted-by-hospital-revenue-push-20190311-p513ad.html">recently been criticised</a> for allegedly pressuring vulnerable patients to use their private health insurance. </p>
<p>It’s important to note that opting to go private in a public hospital is solely your decision, and will not affect the quality of care you receive. Public and private patients have the <a href="http://www.federalfinancialrelations.gov.au/content/npa/health/_archive/national-agreement.pdf">same access</a> to public hospital services.</p>
<p>Under the <a href="http://www.federalfinancialrelations.gov.au/content/npa/health/_archive/national-agreement.pdf">National Health Reform Agreement</a>, all Medicare cardholders have the right to be treated in public hospitals for free as public patients. The cost of accommodation, meals, health care and other treatment-related fees is covered by Medicare. </p>
<h2>Why do public hospitals ask the question?</h2>
<p>Public hospitals are treating a <a href="https://www.aihw.gov.au/reports/hospitals/emergency-dept-care-2017-18/contents/summary">growing number</a> of patients every year, with increasingly complex needs and health conditions. In this environment, hospitals are expected to do more with less.</p>
<p>People who use their private health insurance benefit the public hospital because some of the funding needed for care comes from private health insurers, rather than hospitals relying solely on the allocation provided by the government via Medicare.</p>
<p>Hospitals say funding received from privately insured patients goes towards infrastructure, research, specialised equipment and other <a href="https://rph.health.wa.gov.au/For-patients-and-visitors/Private-patients">service improvements</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/264072/original/file-20190315-28471-uovlp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/264072/original/file-20190315-28471-uovlp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/264072/original/file-20190315-28471-uovlp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/264072/original/file-20190315-28471-uovlp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/264072/original/file-20190315-28471-uovlp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/264072/original/file-20190315-28471-uovlp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/264072/original/file-20190315-28471-uovlp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Public and private patients have the same access to public hospital services.</span>
<span class="attribution"><span class="source">From shutterstock.com</span></span>
</figcaption>
</figure>
<p>Australians with private health insurance are using their cover when admitted to public hospitals more than they used to. In 2004, an estimated <a href="https://link.springer.com/article/10.1007%2Fs40258-017-0338-6">6.8 per 1,000 admissions</a> to public hospitals were private patients; by 2014, this increased to <a href="https://link.springer.com/article/10.1007%2Fs40258-017-0338-6">22.7 per 1,000</a>.</p>
<p>Meanwhile, <a href="https://www.qldcountryhealth.com.au/members/news/2017/is-it-worth-being-a-private-patient-in-a-public-hospital/">insurance companies</a> argue increased use of private health insurance for public hospital care is contributing to <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/privatehealth-average-premium-round">rising premiums</a>.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
</strong>
</em>
</p>
<hr>
<h2>Why do people choose to be private patients?</h2>
<p>Australians might choose to be a private patient in a public hospital for many reasons. </p>
<p>The excess or co-payments applied by private health insurance providers for treatment in private hospitals may be discounted or exempted by public hospitals. So there may be no <a href="https://rph.health.wa.gov.au/For-patients-and-visitors/Private-patients">out-of-pocket expenses</a> for private patients, depending on the type and length of admission. </p>
<p>As a private patient you may be able to choose your doctor, if they have a “<a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/rights-of-private-practice">right of private practice</a>” at the hospital where you are admitted.</p>
<p>Patients also indicate that they choose to be admitted as private patients because this is a way of giving back to the public hospital. In <a href="https://doi.org/10.1080/14461242.2016.1170624">our research</a>, patients recounted being asked “would you like to help the hospital out?”; the suggestion being they would be doing so by using their private health insurance.</p>
<p>The idea of helping the hospital is also promoted on <a href="https://www.slhd.nsw.gov.au/RPA/pdf/Patients/Private_Patient.pdf">hospital websites</a> when information is provided. Some patients said they did not want to take public resources away from those who rely on the public system for care.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/which-are-better-public-or-private-hospitals-54338">Which are better, public or private hospitals?</a>
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</em>
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<p>Some patients in our research saw supporting the hospital as advantageous to them personally as a future patient: “a benefit to the hospital […] is beneficial to me in the long run,” one respondent said.</p>
<p>People also choose to be a private patient because they believe they will get privileges for doing so. <a href="https://rph.health.wa.gov.au/For-patients-and-visitors/Private-patients">Many hospitals</a> offer expressions of gratitude to private patients such as access to television, coffee vouchers or free parking. </p>
<p>Some offer <a href="https://www.goldcoast.health.qld.gov.au/patients-and-visitors/referrals-and-bookings/using-your-private-health-insurance">single rooms</a> to private patients, but priority is given to patients who are very ill or infectious. </p>
<p>Some patients in our research said they were surprised they did not receive quicker or better quality care as private patients: “Being a private patient in a public setting made no difference. The level of care was the same,” one said. </p>
<h2>Final things to consider</h2>
<p>Publicly accessible information about being a private patient in a public hospital, including information about payments and any potential out-of-pocket costs, varies greatly between hospitals and states, and can be hard to find. </p>
<p>While many public hospitals guarantee there are no costs associated with being a private patient, this is not the case for every public hospital. We advise the following:</p>
<ol>
<li><p>if you are eligible for Medicare benefits, you are not obligated to use your private health insurance in order to receive the same quality of care provided to all patients – it is your choice </p></li>
<li><p>check with your private health insurance fund about whether you will be charged for any services received</p></li>
<li><p>check the hospital website for information about using private health insurance</p></li>
<li><p>if you are unsure about the costs and benefits of using your private health insurance, say so. Many public hospitals have staff called <a href="https://www.alfredhealth.org.au/patients-families-friends/while-you-are-here/will-i-have-to-pay-for-any-services">patient liaison officers</a> who are there to answer your questions.</p></li>
</ol><img src="https://counter.theconversation.com/content/113367/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sophie Lewis receives funding from the Australian Research Council for projects examining: interactions between patients and health professionals for long-term condition self-management; and people's experiences of living with advanced cancer. </span></em></p><p class="fine-print"><em><span>Karen Willis has received funding from the Australian Research Council: In 2013-2015 for a project examining how Australians navigate healthcare; and in 2015-2018 for a project examining goal setting for people with chronic health conditions.</span></em></p><p class="fine-print"><em><span>Rebecca E. Olson receives / has received funding from the National Health & Medical Research Council, the Mater Misercordiae, the Physiotherapy Research Foundation, Cancer Australia for research into palliative care, cancer caregiving, health professional practice and health professional education. She has recently collected data for a study supported by the Queensland Treasury Corporation on patient decision-making.</span></em></p>When you enter a public hospital, you are likely to be asked if you have private health insurance, and if you want to use it. This is what you need to consider.Sophie Lewis, Senior Research Fellow, Centre for Social Research in Health, UNSW SydneyKaren Willis, Professor, Allied Health Research, Melbourne Health, La Trobe UniversityRebecca E. Olson, Senior Lecturer, School of Social Science, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1111712019-02-27T19:16:48Z2019-02-27T19:16:48ZIs it time to ditch the private health insurance rebate? It’s a question Labor can’t ignore<figure><img src="https://images.theconversation.com/files/261331/original/file-20190227-150721-1dc4i0r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Premium subsidies encourage Australians to take out and keep private health insurance. </span> </figcaption></figure><p><em>This is part of a major series called Advancing Australia, in which leading academics examine the key issues facing Australia in the lead-up to the 2019 federal election and beyond. Read the other pieces in the series <a href="https://theconversation.com/au/topics/advancing-australia-66135">here</a>.</em></p>
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<p>This election campaign, Labor’s health focus is expected to be on Medicare, which it regards as one of its defining achievements. But with <a href="https://www.apra.gov.au/publications/private-health-insurance-membership-and-coverage">almost half the population</a> covered by private health insurance, Labor needs to tread carefully on this vexed topic. </p>
<p>Government subsidies for private health insurance premiums <a href="https://www.abc.net.au/news/2018-01-30/private-health-insurance-too-expensive-and-excludes-too-much/9374920">cost over A$6 billion a year</a>. Is it time to scrap the rebate and redirect these funds elsewhere in the health system?</p>
<p>If Labor sees private health insurance as a system that provides unnecessary extravagances that Medicare won’t cover, it can’t justify this type of subsidy.</p>
<p>But picking a fight with the private health insurance industry would be politically foolhardy. And families have factored the subsidies into their budgets, so cutting or eliminating the subsidies would put further pressure on family finances at a time of wage stagnation. </p>
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Read more:
<a href="https://theconversation.com/do-you-really-need-private-health-insurance-heres-what-you-need-to-know-before-deciding-93661">Do you really need private health insurance? Here's what you need to know before deciding</a>
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<p>We’re unlikely to see much of a discussion about private health insurance during the election campaign. But the party that wins government must commit to reforming the ailing private health insurance system. </p>
<h2>How did we get here?</h2>
<p>Private health insurance has been a contested policy zone for more than 50 years. </p>
<p>Gough Whitlam prompted a bitter debate over whether government health insurance should be for everyone (universal) or just for the poor (residual), when in 1968 he <a href="https://onlinelibrary.wiley.com/doi/abs/10.5694/j.1326-5377.1968.tb83536.x">committed Labor to a universal scheme</a> to replace the then residual model. The new universal model eventually became Medibank in 1975, then Medicare in 1984. </p>
<p>It wasn’t until the 1996 election that then opposition leader John Howard formally conceded defeat on this issue, acknowledging that Medicare should be for all. However, Liberal governments keep returning to “residual” rhetoric, <a href="https://www.sbs.com.au/news/too-many-free-medicare-services-dutton">arguing wealthy people should pay directly for health care</a> rather than use the universal scheme, Medicare.</p>
<p>After winning the 1996 election, Howard opened a second front in the health-care war by <a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">reinstituting government subsidies for private health insurance</a>. </p>
<p>The cost of the first subsidy scheme – known as the Private Health Insurance Incentive Scheme – was estimated at A$600 million a year. Two decades later, the private health insurance subsidy has increased ten-fold to <a href="https://theconversation.com/private-health-insurance-rebates-dont-serve-their-purpose-lets-talk-about-scrapping-them-91061">more than A$6 billion a year</a>.</p>
<h2>Getting people to sign up and stay</h2>
<p>Liberal governments offer <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/(SICI)1099-1050(199912)8:8%3C653::AID-HEC491%3E3.0.CO;2-I">carrots to encourage people to take out insurance</a> – subsidies for premiums – but also use two sticks to penalise people for not taking out insurance. The sticks have proved to be <a href="http://www.publish.csiro.au/AH/AH020033">more effective than the carrots</a> in increasing insurance enrolment.</p>
<p>The first stick penalises the rich if they don’t have private health insurance. It is based on the “residual” ideology, that those who can afford to pay their own way should take out private health insurance and not use public hospitals. This stick takes the form of a <a href="https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-surcharge/">Medicare Levy surcharge</a>, starting at 1% of income to be paid by singles who earn more than A$90,000 a year, or families on more than A$180,000 a year. People who have private health insurance are exempt from the surcharge.</p>
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<p>
<em>
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Read more:
<a href="https://theconversation.com/private-health-insurance-premium-increases-explained-in-14-charts-92825">Private health insurance premium increases explained in 14 charts</a>
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<p>The second stick penalises people who do not take out private health insurance before turning 31. They have to pay higher premiums if they join later in life. When introduced in 2000 this scheme – known as <a href="https://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/lifetimehealthcover.htm">Lifetime Healthcover</a> – increased coverage from about <a href="https://theconversation.com/private-health-insurance-premium-increases-explained-in-14-charts-92825">30% to around 45%</a> of the population.</p>
<h2>What is private health for?</h2>
<p>Neither side of politics has confronted the fundamental question: what is the role of private health care and private health insurance, given we have universal health coverage?</p>
<p>Private health insurance can complement universal health insurance, providing insurance for services not covered by Medicare. Dental insurance is a good example. </p>
<p>Private health insurance can also be a substitute, where it overlaps with or replaces the public scheme, such as insurance for private hospital care for hip replacements. <a href="https://www.cambridge.org/core/journals/health-economics-policy-and-law/article/expanding-the-breadth-of-medicare-learning-from-australia/7D92551D6E3E393AC27123D14B7615C9">More than half of all hip replacements</a> are done in private hospitals. </p>
<p>The Liberal approach is simple: private health insurance is both an essential substitute for the universal public hospital system (“<a href="https://www.privatehealthcareaustralia.org.au/phi-rebate-keeps-pressure-off-public-hospitals-2/">it takes pressure off the public hospital system</a>”) and a complement (“<a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">it gives people choice of doctor</a>”).</p>
<p>Labor approaches private health insurance a bit like one might approach a dead cat on the table – as an issue that has to be dealt with, but that everybody wishes would just go away.</p>
<p>But private health insurance won’t go away. If Labor sees it solely as a complement, providing unnecessary extravagances not covered by Medicare, then the argument for any public subsidy is weak. </p>
<p>But if Labor sees private care primarily as a substitute, then the A$6 billion of subsidy to private care through the rebate may be better value for money than further support for public hospitals. If that is the case, Labor will have to confront the issue of whether to continue some combination of carrots and sticks, and what can be done to make the industry more efficient.</p>
<h2>Time for real reform</h2>
<p>Private health insurance premiums have risen dramatically, faster than average weekly earnings, as have consumer complaints.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=543&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=543&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=543&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=682&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=682&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258620/original/file-20190213-90469-p6d67u.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=682&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Labor is seeking to exploit public outrage at high private health insurance premiums by <a href="https://www.smh.com.au/business/consumer-affairs/shorten-s-private-health-premium-cap-bad-policy-or-circuit-breaker-20180802-p4zv6w.html">promising to establish a Productivity Commission review</a> into the sector. </p>
<p>In the meantime, Labor would <a href="https://theconversation.com/labors-2-cap-on-private-health-insurance-premium-rises-wont-fix-affordability-91232">freeze private health insurance premium increases</a> – in effect, kicking the policy can two years down the road.</p>
<p>Whichever party wins the election, it ought to revisit our nation’s history with failing industries. Over recent decades we have learnt that propping up industries in the face of consumers turning away from their products is not a long-term proposition. </p>
<p>Private health insurance is no car industry, but it’s not a sunrise industry either. Yet it receives a greater subsidy than manufacturing at its <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp9900/2000RP07">subsidised peak</a> at the end of the 1960s. </p>
<p>The government has to decide why it’s subsidising the private health care industry. If it decides it doesn’t want to in future, it needs a carefully managed transition.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/private-health-insurance-rebates-dont-serve-their-purpose-lets-talk-about-scrapping-them-91061">Private health insurance rebates don't serve their purpose. Let's talk about scrapping them</a>
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<p>Even if private care is seen primarily as a substitute for the public sector – and a way to take some demand off – subsidies for private care may be counter-productive. </p>
<p>Doctors earn more for each hour worked in the private sector, which makes it <a href="https://www.sciencedirect.com/science/article/pii/S0168851013000766">harder for public hospitals to attract staff</a>. So subsidies may end up undermining access to care in the public system. </p>
<p>Australians feel pressured to take out private health insurance because of the sticks, but the product is only sustainable with its current level of coverage because of the carrots: the hefty public subsidies. Without the carrots and sticks, coverage would probably return to the <a href="https://theconversation.com/private-health-insurance-premium-increases-explained-in-14-charts-92825">pre-1996 levels</a> of around one-third of the population. </p>
<p>The incoming government should look at the effectiveness and efficiency of the carrots and sticks, whether consumers and taxpayers get value for money from private health insurance, and how to address rising out-of-pocket costs.</p><img src="https://counter.theconversation.com/content/111171/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities as disclosed on its website.</span></em></p>Subsidies for private health insurance premiums cost the government over A$6 billion a year. Is it time to scrap the rebate and redirect these funds elsewhere in the health system?Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1048622018-10-30T02:58:44Z2018-10-30T02:58:44ZWaiting for better care: why Australia’s hospitals and health care are failing<figure><img src="https://images.theconversation.com/files/242387/original/file-20181025-71038-17bngcx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Health is the largest single component of state government expenditure.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/245905492?src=jhlWisgjKa449M1gf5-h5A-1-61&size=huge_jpg">Shutterstock/hxdbzxy</a></span></figcaption></figure><p><em>This week we’re exploring nine different policy areas across Australia’s states, as detailed in Grattan Institute’s State Orange Book 2018. Read the other articles in the series <a href="https://theconversation.com/au/topics/state-of-the-states-2018-61464">here</a></em>.</p>
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<p>Australia has a good health system by international standards, but it has to get better. Half of all patients across Australia wait more than a month for an elective hospital procedure, such as a hip replacement. This is in addition to waiting for an outpatient visit so they can be added to the elective procedure wait list. </p>
<p>“Elective” here doesn’t mean the patient can do without the procedure – they may be in pain or having trouble moving around while waiting. Elective simply means it doesn’t have to be done immediately and can be scheduled.</p>
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Read more:
<a href="https://theconversation.com/to-keep-patients-safe-in-hospitals-the-accreditation-system-needs-an-overhaul-101513">To keep patients safe in hospitals, the accreditation system needs an overhaul</a>
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<p>About 9% of people in New South Wales and about 25% in South Australia wait more than a year for public dental services, such as fillings, extractions and root canals. </p>
<p>Physicians report nearly one-third of patients with an acute mental illness wait more than eight hours in hospital emergency departments.</p>
<p>The Grattan Institute’s <a href="https://grattan.edu.au/report/state-orange-book-2018/">State Orange Book 2018</a> charts the performance, maps a route to improvement, and recommends penalties for states that fail to meet waiting list targets. </p>
<h2>Why hospitals are always key state election issues</h2>
<p>Health is the largest single component of state government expenditure in every state of Australia, and <a href="https://grattan.edu.au/report/budget-pressures-on-australian-governments-2014/">has been growing rapidly</a>. About two-thirds of <a href="https://www.aihw.gov.au/reports/health-welfare-expenditure/health-expenditure-australia-2015-16/contents/summary">state government health spending</a> – excluding transfers from the Commonwealth – is on public hospitals. </p>
<p>Just over half the population does not have health insurance and so relies on public hospitals for all their care. Even for people with private insurance, public hospitals are their principal source of emergency care. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/242391/original/file-20181025-71017-1e527cl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242391/original/file-20181025-71017-1e527cl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242391/original/file-20181025-71017-1e527cl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242391/original/file-20181025-71017-1e527cl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242391/original/file-20181025-71017-1e527cl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242391/original/file-20181025-71017-1e527cl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242391/original/file-20181025-71017-1e527cl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Even Australians with private health insurance use public emergency departments.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/270431723?src=CRCnZ-2UKKWBIUb0mQBTmg-1-12&size=huge_jpg">Annette Shaff/Shutterstock</a></span>
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<p>State governments are responsible for public hospitals, so hospital care is always a key issue in state elections. It is therefore no surprise state governments love to tell us how much they are doing for public hospitals, and election campaigns are often jam-packed with promises of new or expanded hospitals.</p>
<p>The politicians, at least in states with growing populations, are right that more beds are needed. What matters for the public, though, is not how many beds there are, but whether there are enough. One way of measuring that is waiting times, and here the picture isn’t as rosy as campaigning politicians would like us to believe.</p>
<h2>Waiting for elective hospital procedures</h2>
<p>It’s bad enough half of all patients across Australia wait more than a month for an elective procedure from the time they were booked. What’s worse is that about 10% wait more than six months. </p>
<p>In our smallest state, Tasmania, 10% of patients wait about a year. In the biggest state, NSW, the situation is almost as bad. </p>
<p><strong>This graph shows the waiting time (days) for elective procedures, 2012-13 to 2016-17, for the 10% of patients who wait longest (orange) and the median (maroon):</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=393&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=393&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=393&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=494&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=494&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242860/original/file-20181030-76384-o3lxkt.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=494&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><span class="source">Grattan Institute/Australian Institute of Health and Welfare</span></span>
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<p>Publicly reported data focus on elective procedure or elective surgery waiting times, but there is another important wait: from the time a patient is referred to the hospital to the time they are seen in an outpatient clinic. This is sometimes called the <a href="https://theconversation.com/getting-an-initial-specialists-appointment-is-the-hidden-waitlist-99507">“hidden waiting list”</a>. </p>
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Read more:
<a href="https://theconversation.com/getting-an-initial-specialists-appointment-is-the-hidden-waitlist-99507">Getting an initial specialists' appointment is the hidden waitlist</a>
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<p>For the patient, the wait for an appointment with an outpatient clinic matters – it delays diagnosis and treatment. Yet these waits are not publicly reported in NSW, Western Australia, the Australian Capital Territory or the Northern Territory. And the states that do report outpatient clinic wait times do not use consistent measures. </p>
<p>Our state and territory governments should strengthen hospital accountability to reduce combined outpatient and inpatient waiting times. There should be clear consequences and penalties for failure to meet targets.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/242392/original/file-20181025-71026-19w3hop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242392/original/file-20181025-71026-19w3hop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242392/original/file-20181025-71026-19w3hop.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242392/original/file-20181025-71026-19w3hop.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242392/original/file-20181025-71026-19w3hop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242392/original/file-20181025-71026-19w3hop.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242392/original/file-20181025-71026-19w3hop.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">First you have to wait to get on the waiting list. Then you get booked in for your procedure.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/counting-down-days-calendar-110130863?src=e7fmSXAl-CJ1LfyBpfMKeg-1-2">Shutterstock/cvm</a></span>
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<h2>Waiting for public dental care</h2>
<p>The <a href="http://www.coaghealthcouncil.gov.au/Portals/0/Australia%27s%20National%20Oral%20Health%20Plan%202015-2024_uploaded%20170216.pdf">COAG Health Council</a> (made up of Commonwealth, state and territory health officials) says current funding for public dental services allows for treatment of only about 20% of the eligible population. </p>
<p>The remaining 80% have to wait for long periods, pay for relatively expensive care in the private sector, or go without care entirely.</p>
<p>Waiting times vary significantly among states. And in several states, notably Vic and SA, <a href="https://www.pc.gov.au/research/ongoing/report-on-government-services/2018/health/primary-and-community-health">waiting times have got longer in recent years</a>.</p>
<p>Boosting public dental services will improve people’s health and reduce the strain on hospitals. </p>
<p>In 2015-16, there were <a href="https://www.aihw.gov.au/getmedia/acee86da-d98e-4286-85a4-52840836706f/aihw-hse-201.pdf.aspx?inline=true">67,266 hospital admissions for potentially preventable dental conditions</a> – more than one-fifth of all hospital admissions for potentially preventable acute conditions.</p>
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Read more:
<a href="https://theconversation.com/poor-and-elderly-australians-let-down-by-ailing-primary-health-system-100586">Poor and elderly Australians let down by ailing primary health system</a>
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<p>Unforgivably, our state governments have not delivered on a 2012 commitment to monitor waiting times for public dental care through a National Healthcare Agreement performance indicator. Data inconsistencies mean it is <a href="https://www.aihw.gov.au/getmedia/df234a9a-5c47-4483-9cf7-15ce162d3461/aihw-den-230.pdf.aspx?inline=true">not possible to reliably compare public dental waiting lists</a> across states and territories. </p>
<p>NSW does not provide data on public dental waiting lists at all, citing concerns about the potential for misleading comparisons. The only comparable data we have is from an Australian Bureau of Statistics sample survey, which shows more than 10% of patients across the country wait more than a year for public dental care. </p>
<p><strong>This graph shows the proportion of people who waited more than a year for public dental services:</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242862/original/file-20181030-76402-11wzj6r.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Notes: The figures in smaller states should be regarded as approximate; the percentages are of those who have been seen, and do not include those still waiting at the time of the survey.</span>
<span class="attribution"><span class="source">Grattan Institute/Australian Bureau of Statistics</span></span>
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<h2>Waiting for mental health care</h2>
<p>Campaigners say Australia has reached a “tipping point” on access to mental health care. Physicians report nearly one-third of patients with an acute mental illness wait more than eight hours in emergency departments. </p>
<p>We know this does damage: long waits for access to community mental health services can result in poorer outcomes for patients, as a condition may be harder to control the longer it persists. Long waits may also place additional pressure on families or friends who face the consequences of their friend or family member’s behaviour. </p>
<p>Yet there is no information about the adequacy of community mental health services in Australia. The 2017 <a href="http://www.health.gov.au/internet/main/publishing.nsf/content/mental-fifth-national-mental-health-plan">National Mental Health and Suicide Prevention Plan</a> only tracks the use of services, not their adequacy. </p>
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<p>
<em>
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Read more:
<a href="https://theconversation.com/more-australians-can-stay-healthier-and-out-of-hospital-heres-how-55746">More Australians can stay healthier and out of hospital – here's how</a>
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<p>In contrast, Canadian governments have agreed that a <a href="http://www.highperforminghealthcaresystems.com/content/25550">wide range of mental health and addictions indicators</a> will be collected and reported from 2019. </p>
<p>Australian voters should demand their state governments do the same thing. We should wait no longer for a better health system.</p><img src="https://counter.theconversation.com/content/104862/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities as disclosed on its website. The State Orange Book 2018, from which this article draws, was supported by a grant from the Susan McKinnon Foundation.</span></em></p>Australians are waiting too long for elective surgery, dental care and treatment for mental health. It’s no wonder health is a vote-changer.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.