look who gets the rawest deal from private health insurance


In about 7 per cent of cases, specialists were found to charge more than twice the official Medicare Benefits Schedule fee. Together, they were responsible for almost 90 per cent of out-of-pocket costs incurred by private patients.

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If such rorts were rooted out, along with reforms to stop the delivery of excessive or low-value care to patients, private health insurance premiums could be cut by between 7 to 10 per cent, Duckett estimates.

Which is significant, given private health premiums have risen by a cumulative 30 per cent since 2001, well above average wages growth of 8 per cent.

Amid spiralling costs, is it any wonder more younger Australians are choosing to walk away from private health insurance – at least those not effectively forced into it by the Medicare Levy Surcharge and Lifetime Cover penalties?

Younger Australians, in particular, are being slugged with ever bigger bills for services they are less likely to use, and, if they do use them, they face no guarantee they won’t be slugged by inflated out-of-pocket costs.

More widely, Duckett debunks the idea that private hospitals are more efficient than public hospitals.

The Howard government push to get more Australians to take out private health insurance, and use privately provided care, was predicated on the assumption it would foster competition in health services, drive costs lower and take pressure off stressed public hospitals.

It hasn’t happened.

“The conventional wisdom is that private hospitals are indeed more efficient than public hospitals,” Duckett writes. “This view is usually supported only by anecdotes from surgeons who work in both sectors … The anecdotes are not supported by the data.”

The Grattan figures find patients in private hospitals stay 9 per cent longer than those treated for the same condition in public hospitals.

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Perhaps that’s what private patients want – to stay longer. But if so, says Duckett, they should pay for the pleasure themselves, and not be subsidised for the indulgence by taxpayers through the private health insurance rebate, which costs taxpayers $6 billion a year and has resulted in private coverage rising only minimally from 30 per cent to 41 per cent today.

“If private hospitals were more efficient than public hospitals, there would be good policy grounds for subsidising them. But if they are not, then it is generally not good policy to subsidise them.”

No one is arguing it’s time to let private health insurance and care die in Australia.

It’s just that, judged against reality, the move to promote private insurance is looking less like a pro-competitive reform and more like a distinctly il-Liberal policy of forcing consumers into buying a product at an inflated cost, and, crucially, one which may or may not cover them for their particular needs.

Such a policy hurts all Australians. But it’s a particularly raw deal for younger Australians, who, being healthier, are less likely to use the product they’ve been forced to buy.

Indeed, instead of fostering a more dynamic industry – one delivering innovative and competitively priced services to consumers – it appears the push has given birth to just another vast and powerful industry, one reliant on government subsidy and more preoccupied with lobbying for premium increases to the detriment of consumers.

It’s not dissimilar to the way younger Australians have been forced into the arms of the superannuation industry, where their nest eggs have been raided by a rapacious funds management industry delivering returns that are often not above-market, while charging inflated fees.

It’s just another way younger generations of Australians are getting a raw deal from governments exiting the field of providing services to a supposedly more efficient private sector.

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Who knows what sort of inefficiencies would have bedevilled an entirely publicly provided health or superannuation system.

But the alternative has proved no nirvana and today’s consumers are paying the price.

Across a range of markets, it’s increasingly clear governments have failed abjectly in their responsibility to design and foster efficiently functioning markets for the private provision of these goods.

Younger Australians, in particular, have had their nest eggs fleeced by excessive super and health insurance fees.

It’s not beyond salvage. Regulators have stepped up their game to try to design a better system for superannuation.

But the rescue mission to save private health promises to be epic indeed.

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