Private Health insurance in Australia

Private health insurance in Australia and New Zealand.

Dr. Tauseefullah Akhund M.B.B.S, MPH (Sydney), (Australia)

INTRODUCTION

The private health insurance industry is under considerable pressure in Australia. According to Bloom (2000) since introduction of Medicare in 1985, number of Australians with private health insurance has been greatly declined. This drop in membership numbers has in turn created substantial pressure on the public hospital system.
This report will discuss two key concerns of private health insurance industry in Australia, like:

1) Fall in membership of private health insurance and their impact on both private and public hospitals and;

2) Introduction of new government reforms to support private health insurance industry.

According to Australian Bureau of statistics (2003) the federal government is determined to arrest this fall in private health insurance membership and to ease the burden on public hospitals. The main aim is to strike a better balance between the private and public sectors, ensuring Australians have a level of choice as well as universal access to excellent health care.
According to Bloom (2000) Australian government is clearly supporting a mixed model of health care system. This report will also discuss some arguments regarding the need of encouraging private health insurance industry, because some people believe that Medicare is tried and tested model and has always worked as cost effective model. This report will also discuss some of advantages and disadvantages of private health insurance in Australia and will also compare Australian private health industry to some of other countries of the world.

AREA OF STUDY

Private health insurance funds covers insurance against the accommodation cost of private hospitals and for private patients in public hospitals (Gardner, 1992). These funds also provide ancillary benefits, which include dental, physiotherapy, and ambulance services. According to Bloom (2000) before Medicare, PHI played important role in providing insurance for large number of population, but after introduction of Medicare in 1985 coverage of PHI greatly declined. According to Duckett (2000) there was a differential rate of decline in the prevalence of insurance across different population groups. Middle income families were more likely to drop insurance relative to high income and lower income families, and younger families were more likely to drop insurance relative to older families.

GOVERNMENT’S STRATEGY

The Federal Government is trying to arrest this decline in PHI membership, because of its beneficial effects and to ease the burden on public hospitals. With increased coverage of PHI there will be balance between the private and public sectors, ensuring Australians have a level of choice as well as opportunity to universal access to excellent health care. Government has taken certain actions, keeping in mind specifically affordability and industry stability. They are the:

Introduction of rebate

Introduction of thirty percent rebate was given by government to attract more consumers towards private health insurance. Australian Bureau of statistics (2003) states that since its introduction in 1999 statistics on participation rates showed the positive result in over a decade and provide firm evidence that the rebate has stabilized membership some how. Rebate has improved the affordability of health insurance for all members of registered health funds who are also eligible for Medicare rebates.

Introduction of simplified billing

According to Australian Government Department of Health and Ageing (2001) the government has taken action to avoid multiple billing and has amended legislation in to encourage hospitals, doctors and health funds to work together to simplify the billing process and to make sure that, patients are clear of any out-of-pocket costs they may have, before they go into hospital. With introduction of this patient will receive one or two bills rather then many bills from various doctors.

Expansion of 'no gap' and 'known gap' cover

The Government is modifying this system by working with the private health sector to promote no gap and known gap health insurance products (Australian Bureau of statistics, 2003). This Government has done enough to reduce the incidence of gap fees than any other government. The government has introduced Mediplus Ezyclaim which aims to cover an agreed gap between what a practitioner charges and what Medicare pays.

Implementation of Lifetime Health Cover

According to Australian Government Department of Health and Ageing (2001) with the introduction of Lifetime Health Cover (LHC) private health insurance now allows health funds to offer lifetime rates of hospital cover. People who are taking hospital cover early in their lives will pay lower premiums comparing to those who are joining late. There for new system is more beneficial for those who join early in their life. For example, someone joining at the age of 30 and maintaining their membership will always pay a lower premium for the same product as compared to someone who has delayed joining until age 55.

Review of reinsurance arrangements

The private health insurance reinsurance arrangements are a system for sharing the hospital and medical costs of high risk members admitted to hospital, between health funds (Australian Government Department of Health and Ageing, 2001). The reinsurance arrangements are essential to supporting community rating by increasing the industry's stability despite some funds having more high risk members than others.

According to ABS (2003) in addition to these government has also taken following actions to:

Improve consumer information on private health insurance.
Private sector trials of coordinated care, hospital in the home and early discharge programs.
Expand private sector provision of outreach services.
Deregulate prostheses pricing.
Implement new capital adequacy and solvency standards for the private health insurance industry.

Why these reforms are necessary

Because of increased demand for health care PHI is very crucial in everyday life of an Australian, and it is very important to fix a membership floor underneath the private health insurance system (Australian Government Department of Health and Ageing, 2001). Decline in private health insurance membership is not only threatening the existing balance between the public and private system, but it will also affect the viability of the public system as well as the private system. Falls in health insurance membership will impact on:

· The public system by increasing demand for public hospital services; and

· The private system by limiting its main source of consumer finance.

These changes will mean that insurers can provide better quality health insurance products, which will be more attractive to consumers. These reforms will also encourage the sector to work on its own behalf to improve its viability and the product it offers to the Australian people (Australian Government Department of Health and Ageing, 2001).

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