A greater reform effort is needed to keep health insurance affordable

Today we have published Medibank's response to the Australian Government's consultation paper "Private health insurance reforms – second wave".

Private health insurance is a critical element of Australia’s healthcare system. Our health system is strong precisely because it is a mixed system that relies on both public and private providers.

All Australians benefit from private health insurance as it takes pressure off the public health system, provides greater consumer choice, and reduces costs for taxpayers. Private health insurance funds two in every five hospital admissions in Australia – admissions whose costs would otherwise be borne by an already pressured public health system.

The Australian Government has announced a second wave of private health insurance reforms, with the aim of improving affordability, value and attractiveness of private health insurance, particularly for younger Australians. Today, we are releasing our response to the consultation on the suggested reforms.

The Commonwealth’s suggested second wave reforms to private health insurance include:

• Increasing the age of dependents to encourage younger people and also people with a disability to maintain private health insurance;
• Expanding home and community-based rehabilitation care;
• Expanding funding to at home and community based mental health care; and
• Applying greater rigour to certification for hospital admission.

Reforms to private health insurance need to enhance its value, affordability, and sustainability in the long-term, which will consequently place more downward pressure on premiums and help boost participation. It is critical to recognise that reforms like this will fundamentally strengthen Australia’s dual public-private health system and can significantly reduce health cost growth for taxpayers and consumers.

Given the world-leading outcomes of Australia’s mixed public-private healthcare system, it is critical that the Commonwealth recognises that the second wave of private health insurance reforms is not an end point – further reforms are needed to ensure sustainable cost growth across both the private and public health systems over the long-term.

We believe the Commonwealth should pursue reforms that:

• Address the inexplicable and unnecessary increase in prostheses costs in the private healthcare system versus the public system, which will have a material and near immediate impact on premiums.
• Encourage greater utilisation of out-of-hospital and alternative care, instead of in-hospital care, especially for chronic diseases. The current system discourages growth of out-of-hospital care, remains fragmented and provides little coordination that could deliver enhanced outcomes and experience for patients and lower premiums.
• Promote greater cost, price and quality transparency in the health system.
• Accelerate value-based funding of healthcare, which rewards providers for outcomes and for addressing the underlying causes of avoidable hospital utilisation.
• Provide more incentives for employers to fund private healthcare for employees and their families.

Medibank will continue to pursue programs that deliver value for our customers, as well as further cost saving measures to place downward pressure on premiums. But substantive reform by the Commonwealth is necessary to ensure the value, affordability and sustainability of private health insurance in the long-term.

While Medibank welcomes the second wave of proposed private health insurance reforms, more must be done if greater downward pressure is to be applied to limit cost growth in the health system.