Private health insurance ‘death spiral’ getting worse, data shows


“Young people realise the lack of value that they are getting,” he said.

“If private health insurance was good value for money, it would not have a problem in attracting and retaining customers.”

Only then, he said, would Australians who could afford insurance take it up, leaving those with “no other option” to be treated in the public system.

The largest decline was in age group 25 to 29, down 6.9 per cent, while the largest increase was in age group 90 to 94, up 8.8 per cent.

Older Australians were the only group to dramatically increase their participation; while there were 125,000 fewer under-65s with hospital cover, there were 63,000 more over-65s with cover.

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Grattan Institute health economist Stephen Duckett, who released a paper this month warning that the private health insurance sector was in a “death spiral”, said the new data “only reinforces the point” that drastic change was needed.

He said Australians – especially the young – were dropping their cover, with those left more likely to get sick and go to hospital, driving insurance costs up further.

“The value proposition is getting worse,” Dr Duckett said.

He said while insurance had always been about “pooling the risks over the life cycle”, with older people “more likely to draw on health insurance than younger people”, the risk ratio had changed.

While in the past a younger person in the system was “supporting two older people”, today they may be supporting three or four, Dr Duckett said.

Health Minister Greg Hunt this week announced a fresh review of private health insurance, looking for new ways to reduce premiums and reverse declining membership, having already cut the cost of prosthetic devices such as hip and knee replacements.

Insurers want to reduce the cost of hospital admissions – which make up 70 per cent of their expenses – a suggestion Dr Duckett said was sensible.

“That has to be part of it,” he said.

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Dr Bartone said Australians with health insurance became frustrated when they were not able to access the care they needed “at the appropriate time”, or faced unexpected gap payments.

And he called for regulatory changes to enable people to change insurers more easily.

“We need to improve the portability of premiums,” he said.

Dr Bartone rejected calls for the rebate to insurers to be abolished – and the $6 billion poured back into the public system – saying it would cost more for state-run hospitals to pick up the tab.

“It is fanciful to think that overnight you could suddenly transfer the majority of elective surgery into public hospital,” he said.

“If we suddenly transfer that load into the public system overnight, it would be a calamitous situation.”

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