More Government tax incentives for health insurance?

This blog was originally published on John Menadue's, 'Pearls and Irritations' here

While in the real world consumers struggle to meet private health care costs, health funds are hoping for yet more government help.

A mix of Government subsidies and regulatory protection appear to have sheltered health funds from market realities, not least the feedback from exasperated members who are reporting with increasing vehemence their concerns about the poor value their health insurance provides.

How else do you explain the suggestion from the industry that an even bigger tax is required to prod higher income earners into taking out insurance?

Granted, there are a number of funds who are not-for-profit and provide insurance to sections of the community or various professions such as teachers and the defence community.  But on the whole, this is an industry which has profited from high annual premium increases for the past 20 years and even when, as now seems likely, this year’s rise will be around twice the inflation rate, a rise possibly below 4 per cent is being hailed as good news.

The growing frustration of fund members fuelled by premium pressures and shrinking benefits brings into question the speed at which the industry has responded to the signals from its market.  Any other marketer of a premium product would be acting with agility, haste and urgency to ensure its product remains relevant and valued.  But then health insurance is not like any other market.

This state of affairs is impacting in the real world – and impacting hard the many families and older Australians who go to great lengths to retain their insurance.  Many Australians are walking away from insurance. The prospect of having to pay even more in out of pocket costs on top of hefty $4,000 plus annual premiums has been the last straw.  After steady growth in fund memberships earlier this century, the proportion of Australians with health insurance has dipped to 45.8 per cent, its lowest point in six years.

The speculation about this year’s premium increase comes amid ballooning evidence of the continued growth in out of pocket costs.  The Consumers Health Forum has launched a national Out of Pocket Pain survey (see Out of Pocket Pain survey) to capture the lived experiences of consumers who learn that there is an additional level of discomfort quite apart from the physical pain of a medical procedure.

We propose to use the results of the OOP survey to inform the positions we  take to the newly established Ministerial Advisory Committee on Out of Pocket Costs.  We are the only body representing consumers on the otherwise medically-dominated committee.

As we near the 20-year mark since the array of subsidies and regulatory provisions were provided to a then-ailing health insurance sector, it needs to be asked whether the tax sticks for consumers and carrots for the health funds have worked to the community’s benefit.

We have been left with a set of arrangements that was meant to reduce pressure on the public hospitals but which now sees increasing numbers of privately insured patients seeking public hospital care— so much so that the Minister is now pondering penalties on the public system at the bidding of an already highly profitable private system.

Is it not time for the funds to take some lead in boosting the value of their products so they ‘compete’ on merit, rather than looking for more subsidies to improve affordability of their products?

Cost is only one part of the value equation.  Seeking a higher tax stick to coax more joiners might be an easier short-term route, but as history is showing, it is not sustainable.  Either the private sector needs to significantly boost value and do something about rising medical costs, particularly specialist fees, and/or review the whole PHI suite of policy settings.

CHF has argued the latter course for some time, urging the Government to implement a Productivity Commission inquiry into government assistance to health funds.

And there are numerous areas where a more effective and unified approach by the private sector is in order. For instance, one area where immediate better value could be realised is in rehabilitation services where, presently, insured patients post-treatment must attend hospital-based services for required periods to qualify for benefits.

One option would be to follow the principles of the recent disability and aged care reforms of the ‘dollar following the consumer’ whereby people could have a payment by the insurer to which they direct to a package of tailored rehab services of their choosing.  Food for thought.

We are witnessing an erosion of equity of access to healthcare not merely because of high costs but also because of a failure to take much needed system-wide reforms that reflect the real potential of modern health care that need not rely so heavily on hospital-based services.


About the author

Leanne Wells

Leanne Wells

Leanne was Chief Executive of the Consumers Health Forum of Australia from 2014 until August 2022