How Means Testing Will Affect You And All Australians
Private Healthcare Australia CEO Michael Armitage has said the move to means test the 30% rebate would cause high-income earners to leave private health insurance, forcing low-income earners remaining in the funds to pay more.
The impact on those directly affected by the means test is likely to be that a lower rebate, or no rebate, would mean for many Australians the cost of health cover would increase dramatically. Families or individual who lose their rebate altogether would actually see the cost of their health cover go up by 42%.
Research conducted by leading market research company ANOP / Newspoll and a new Report by financial experts Deloitte (“Economic Impact Assessment of the Proposed Reforms to Private Health Insurance”) has estimated that many health fund members would drop or downgrade their cover and that as a consequence premiums would rise for those who remain and there would be significant additional burden on the public health system.
The ANOP/Newspoll survey found that that of those directly affected by the means test, 11% would drop their hospital cover and another 24% would downgrade while 18% would drop their ancillary (general) cover and another 34% would downgrade.
Deloitte estimates that in the first year 175, 000 Australians would drop their hospital cover and a further 538,000 would downgrade. 554,000 Australians would drop their ancillary (general) cover and 803,000 would downgrade.
Over five years:
1.6 million people would drop their hospital cover, and 4.3 million downgrade.
2.8 million people would drop their ancillary (general) cover and 5.7 million downgrade.
Those dropping their cover would be those less likely to have claimed healthcare benefits. To compensate for the loss of these members Deloitte estimates that in the five years after the means test is applied health funds will be forced to increase premiums by 10% more than would otherwise have been necessary.
This increase will affect everyone with health insurance. as the loss of health fund members would mean a significantly increased burden on the public health system.
Data from the Productivity Commission Report released shows is that private hospitals are the great equaliser as they perform the majority of elective surgery on patients from disadvantaged socio-economic backgrounds. For every 1000 people, private hospitals provide elective surgery for 83 patients who are disadvantaged as compared to 72 people treated in the public system. This dispels the popular myth that public hospitals treat a “sicker” group of patients by virtue of the socio-economic status of those patients (the commission also found the private hospitals treat proportionately more elderly patients).
Now that the Productivity Commission has released their final report, it is clear that the federal government should be encouraging the thousands of Australians who take responsibility for their health by paying for private health insurance to stay in the private system. If the means testing legislation is passed, the Treasury has estimated that thousands will drop their insurance and will become more of a burden on a public system already stretched to overcapacity. This will lead to longer wait times, which surely are unfair on those who rely on and use the public system. Furthermore, the commission’s findings indicate that any shift in use from private to public hospitals will lead to a higher overall cost to the health system and hence to the taxpayer.
Australians currently enjoy the benefits of a strong, balanced health care system. Means-testing the 30% Rebate on Private Health Insurance will put that at risk. If greater investment in the public system is required, the governments should respond, but not by removing resources from the sector that efficiently and safely treats 40 per cent of all patients. Because of the partnership between the two systems, if people leave private health insurance, the cost of providing private health insurance and public health care both rise.
In 2008-09, private hospitals in Australia performed procedures that Private Healthcare Australia estimates would have cost the public hospital system over $11 billion to carry out. The cost of supporting private health insurance through the 30% Federal Government rebate in 2008-09 was significantly less at $3.9 billion.
Does private health insurance favour older people and the benefits they need? No. In fact, private health insurance funds often pay claims of $50,000 to $100,000 – sometimes even more – to patients aged under 30. Private health insurance is structured fairly, with benefits to suit all ages and all health needs.
The Federal Government’s Private Health Insurance Rebate encourages people to not only join private health insurance but also to remain insured. The rebate, together with reforms including Lifetime Health Cover and the Medicare Levy Surcharge have helped to redress the previous imbalances in the Australian health insurance system.
In fact, it would cost the Federal Government more to allow private health insurance to diminish than to continue to support people who choose it. If private health insurance disappeared, the cost of providing public hospital treatment for the same number of patients would escalate dramatically.