Retirees to be hit hardest by Australia’s private health ‘death spiral’

Feb 19, 2020
Older Australians are facing higher out-of-pocket hospital costs. Source: Getty.

Australia’s private health ‘death spiral’ continues as new figures reveal almost 10,000 people dumped private health cover in the final three months of last year.

Data released by the Australian Prudential Regulation Authority (APRA) on Tuesday showed that about 9,400 people ditched their private health cover — mainly younger members aged between 20 and 34 years, meaning just 44 per cent of Australians now have basic hospital cover. The report also showed out-of-pocket hospital costs have slowly risen, with people paying an average gap payment of $300.

Experts have previously warned the sector faces a steep decline if young people continue to ditch their cover. Henry Cutler, a professor at Macquarie University, said the new data highlights that those with low costs are dropping out of private health insurance, while those with high costs (older people) remain or are entering.

“That’ll obviously have impacts on the total cost of private health insurance, and how private health insurers fund that cost,” he said.

Choice health campaigner Dean Price said the recent statistics were “further proof of the death spiral” in private health insurance. He said it was no wonder Australians were abandoning private health insurance, adding: “Private health insurance costs too much, is too confusing and offers too little value.

“When you buy health insurance, you expect to be looked after when the worst happens, but our health insurance is letting us down with unexpected costs and unnecessary stress at the worst of times.

“Young people are voting with their feet and telling health insurers what they’re offering is poor value. We know that premiums are going to increase on April 1. With some funds increasing by nearly 6 percent from April, we just can’t see the health insurance death spiral slowing.”

Private Healthcare Australia chief executive Dr Rachel David said the recent statistics highlights that costs are rising at an unsustainable level in the health care system.

“As our population lives longer, and consumer expectations increase, so too does the cost of health care, leading to higher premiums and unexpected out-of-pocket costs,” she said. “The younger generation is feeling financially squeezed as health funds are paying record claims for hospital procedures in people aged over 55.

“The result — the proportion of Australians with hospital cover has fallen to the lowest level in 12.5 years, and by 2030-2035 could drop to 30 per cent. This will have significant flow-on effects to the public system — blowing out wait lists, reducing choice and access and greater demand for public health spend.”

Ian Burgess, the chief executive of Medical Technology of Australia, said it’s time for the government to step in and save private health insurance from itself.

“It’s clear private health insurers would rather drop customers than drop their prices and profits,” Burgess said. “Private health insurance premiums have grown faster than national house prices over the past decade.”

Burgess said part of the problem lies with the medical device industry. According to the recent APRA data, private health insurance profits before tax increased by 14 per cent over the past 12 months from $1.6 billion to $1.8 billion. This is despite the price of medical devices paid by health insurers dropping by up to 38 per cent in the past three years thanks to government reforms.

“Private health insurers haven’t paid one extra cent for medical devices over the past two premium years, despite raising premiums twice-inflation and banking nearly $1 billion in profits between the big corporate health funds,” he said.

It comes just months after think tank Grattan Institute blamed greedy doctors and hidden private hospital fees for the rising costs of private health insurance.

Important information: The information provided on this website is of a general nature and information purposes only. It does not take into account your personal health requirements or existing medical conditions. It is not personalised health advice and must not be relied upon as such. Before making any decisions about your health or changes to medication, diet and exercise routines you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from a medical professional.

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