November 08, 2019

Another grim week leaves private health insurance in Australia on life support (?)

The Leftist moan below has a point but there is no threat to the continued availability of private health insurance.  The increasing costs of medical procedures are probably unfixable so the cost of private insurance must increase. No government fiddling will alter that. And, yes, that will freeze out some people.  But those who can continue to afford it will do so.  The opportunity to avoid government medicine is compelling.

Government medicine is good enough and sometimes excellent but getting access to it is the problem. You can die on a waiting list and nobody even says "Sorry".  And government hospitals face a double whammy.  They too have to fund the increasing costs of procedures and on top of that they will face an influx of former private patients driven into their arms by those same costs.

So the future for private hospital insurance will remain strong but it will service fewer people.  It will be confined to a mostly affluent clientele, which it is not now.  Middle income people can and do afford it at the moment.

There is no doubt that the situation is politically unpalatable so what is likely to happen?  Restrictions.  Government hospitals will simply refuse some care to some people.  An early candidate for that would be to offer very limited service to people with self-inflicted illnesses -- principally smokers and the obese.  That already happens informally but will almost certainly increase -- no hip jobs for the obese and no lung resections for smokers, for instance.

I can speak from personal experience about one of those strategies.  A high-tech procedure of relatively recent origins is the PET scan. It is the best way of detecting cancer in you.  I gather that there is some access to them in public hospitals but it is very limited so you mostly have to go to a private laboratory to get one.  I did. I had it very promptly and it cost me $700 with NO Medicare rebate.  You can see why there is no rebate.  If there were it would be widely prescribed. And what would 100,000 prescriptions at $700 each cost?  It would break the bank.  So restricting availability of the procedure is both necessary and opens it up only to the well-off

So two-tiered medical care is inevitable. It already exists and will get worse.  Government medicine aims to prevent that but it cannot.  Medical innovations will continue and will continue to be ever-more costly

In April this year, the health minister, Greg Hunt, introduced reforms the government said would make private health insurance easier to understand and more affordable.

The changes, described by the federal government as the most significant reforms to the private health insurance system in a decade, included classifying the some 70,000 private health insurance policies available into gold, silver, bronze and basic categories, and discounts for young people.

A review from the consumer advocacy group Choice published on Wednesday found the opposite. More than 215 “silver” and “silver plus” policies cost more than “gold” policies, the report found, leaving consumers as confused by their options as ever. An Australian Medical Association report published one day later warned private health policies remained unaffordable and non-transparent.

The other cornerstone of the reforms – lower premiums for people under 30 – has failed to stop the exodus of young people from the system, Australian Prudential Regulation Authority [Apra] data shows. The financial authority in May issued a directive to the private health industry to take responsibility for the decline in affordability and uptake of insurance rather than rely on government reforms.

The situation has several health economists and policy experts questioning whether the private health insurance industry, far from being salvageable through reform, is worth saving at all.

Apra executive board member Geoff Summerhayes said it was “frustrating to see little evidence that insurers are taking actions that reflect their own assessment of the heightened risks in this challenging environment”.

“Apra recognises the industry has been under duress for some time, and the main factors, such as rising demand for health services and the soaring cost of treatments, are beyond insurers’ direct control,” he said. “But that’s not an excuse for doing nothing and hoping the government will fix everything.”

According to the Consumers Health Forum and the Australian Healthcare and Hospitals Association [AHHA] the only way forward is for the federal government to order an independent Productivity Commission review of the whole healthcare system, both public and private components. Unlike previous examinations of the private health insurance industry, this review should not be ordered from the starting point that the private health insurance must be saved, rather would question whether it should be.

AHHA acting chief executive Dr Linc Thurecht said the review should also investigate the public policy objectives that are being served by government support or private health insurance through publicly-funded subsidies.

“While there is a cost associated with holding such a review, this must be seen in the context of the latest data we have showing that Australia spent $185bn a year on healthcare,” he told Guardian Australia.

“AHHA would not say that the death of private health insurance is inevitable. But we need to hold all levels of government to account in reforming our healthcare system to better coordinate the delivery of healthcare, to take a longer-term view of individual’s healthcare journey, to remove low value care, to stop some healthcare providers charging exorbitant fees, to remove inequities in access to healthcare and health outcomes, and to improve transparency on outcomes and costs that matter to people.

“Private health insurance is seen by virtually all as being too expensive, too complicated and opaque, and not offering value for money.”

Grattan Institute health economist Dr Stephen Duckett said the death of the private health industry was inevitable. But he said while it was in a “death spiral, it’s a slow death spiral”.

“So do we arrest the death spiral and are there ways to do it without costing more money?” Duckett said. “The private health insurance industry says the answer is to give them another billion dollars. The answer from the industry always seems to be around forcing more people into private health insurance or undermining Medicare.

“The industry should be told enough is enough. That even if we keep the rebate for taking out private health cover, you must stand on your own two feet. It is crazy that people are forced into private health cover through rebates.

“Can you imagine any other product where we say ‘you don’t want to buy it, we think you should though, so you’re forced into it? It’s the most amazing policy for an economy where we value choice.”

At a presentation to the Actuaries Institute conference in Melbourne in October, the Private Healthcare Australia chairman, John Hill, said insurers would find it challenging not to pass on the rising costs of medical devices through premium increases come April.

“Inflated prices for established medical technologies must come down in line with the rest of the world,” Hill said. “One of the most commonly used implants, cardiac stents, are five times the price in Australia as they are in New Zealand.” It was a claim the chief executive of the Medical Technology Association of Australia, Ian Burgess, rejected as “absurd”. He accused the private health insurance industry of “an increasingly desperate attempt” to rein in costs and maintain profitability “by pointing the finger at everyone else”.

The chair of the Australian Healthcare Reform Alliance, Jennifer Doggett, said all of the reforms implemented to salvage private health insurance to date had been cosmetic. She said while reviews of the system had been done before, the benefit of a productivity commission review would be its scope.

“We haven’t had a review yet that includes the premise that we might not need private health insurance at all,” she said. “The reviews we’ve had so far have not examined what is best for Australia. We need a review that looks at consumer needs, not the needs of the private health insurance sector or doctors who want to keep their fees high, or the private sector, or some other interest group.”

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