Older Aussies facing health insurance hike as the young ditch private cover

The report warns the sector could face a "death spiral" if the trend of young and healthy people ditching their cover continues. Source: Getty

Describing policies as “unfair, costly and confusing”, a new report has claimed that the private health insurance industry in Australia has become “riddled with inconsistencies and perverse incentives”.

The report, released by think tank the Grattan Institute on Monday, said people are increasingly dissatisfied with private health insurance and warned that an increasing number of younger Aussies are opting to cancel – or foregoing altogether – private cover, which could lead to further issues.

Experts warn that the sector faces a “death spiral” if young and healthy people continue to ditch their cover, leaving only older Australians – who tend to have more complex and expensive health needs – accessing health insurance, which would in turn drive up the cost of premiums due to increased pressure on the system.

The report, penned by Stephen Duckett and Kristina Nemet, also called on the government to rethink the taxpayer-funded subsidies available to the industry. Currently $6 billion of taxpayer cash goes towards the private health insurance rebate, and $3 billion is spent on private medical services for patients.

“It’s inevitable that government will have to make tough decisions about whether more subsidies are the answer to the impending crisis,” lead author and Grattan Institute Health Program Director Stephen Duckett said.

“Governments have failed to clearly define the role of private health insurance since Medicare was introduced in the 1980s. The upshot is we have a muddled health care system that is riddled with inconsistencies and perverse incentives.”

Sophie Walsh, insurance specialist at Finder, backed up these claims and warned that older Australians in particular may be faced with higher premium bills should this trend continue.

“The number of private health care members is stagnating, but the population is growing,” she said in a statement. “This makes private health insurance more expensive for everyone, especially for older Australians who rely on the safety net of private health care.”

However, Australian Private Hospitals Association CEO Michael Roff has since hit back, saying the report shows a “complete lack of understanding of the contribution of the private health sector to Australian health care”. 

“The report – which by its own admission raises questions but provides no answers – fails to understand the basics of private hospital care. This is concerning when it claims to be the basis for discussing Government support of health insurance,” Roff says. 

“As a basis for policy-maker decision making, its failure to understand what private hospitals offer Australians it is a poor starting point for the debate.

Roff argues the context provided by the report for policy makers is “outdated and flawed”.

“The report claims ‘Complex procedures requiring specialised equipment of skills are rarely available in private hospitals’.

“This is absolute rubbish. New technology and equipment are almost universally introduced first into the private system. A good example of this is robotic surgery. Commonplace now in major private and public hospitals, this technology was pioneered in Australia at the Epworth, a private hospital in Melbourne.

“There are 801 procedures available in public hospitals, private hospitals perform 796 of them. The five not performed in private are major organ transplants.”

What are your thoughts on this? Do you agree with the report?

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