Private health – here’s where your dollars go

Health costs, including the escalating cost of private health insurance, are among the top issues for retirees. We know because you told us so late last year. National Seniors Australia’s inaugural Policy Advocacy Survey of 6,500 older people found that private health was your second biggest concern.

This article was originally published by our friends at National Seniors.

Australian Medical Association (AMA) data sheds light on what parts of their business are driving premium increases.

Customers would hope the funds are being spent on superior services and treatments, hospital stays and improved equipment.

The AMA data suggests otherwise.

Net profit and management expenses have experienced the largest increases over the past four years.

The AMA data comes after the AMA disputed claims in an ABC Four Corners episode which alleged up to 80% of spinal surgery patients were being billed for more complex services than provided – information revealed to the ABC by private health insurers, and which the AMA calls unbalanced.

According to the AMA, in the year to June 2023, net insurance profit increased by 50.2% and management expenses by 32% – far greater than increases in patient rebates (3.6%) and increases in general treatment benefits (13.4%).

The increase reported is for four years and compares data from the year ending June 2023 with data from the year ending June 2019.

AMA president Professor Steve Robson told The Medical Republic, “When patients pay their insurance premiums, they expect that money is going mostly towards the costs of benefits for treatment and hospital stays, but what this [analysis] shows is that management expenses and insurance profits are key drivers of premium increases.”

Private health insurers dispute AMA’s figures. Private Health Australia CEO Dr Rachel David said, “Health fund management expenses are closely scrutinised during the premium setting round by APRA/DoHAC to ensure they are appropriate.

“Inflation is affecting all sectors, and this includes the operation of private health funds. There is no evidence management expenses have risen faster than [other costs].”

The private health sector has countered the AMA claims by pointing out that health insurance return on average 86 cents in the dollar back to members compared to the general insurance sector which returned 65 cents in the dollar from premiums.

The AMA argues that private health insurers should be required to return at least 90 cents in the dollar to premium holders as a minimum.

With the war between doctors and health insurers heating up it’s more important than ever to review the private health insurance system.

National Seniors Australia has recommended to the Federal Government that the Productivity Commission is best suited to conduct the in-depth inquiry, which should focus on the:

• Growth of private health insurance premiums and out-of-pocket expenses
• Value and scope of product offerings covered by private health insurance
• Reforms needed to minimise premiums and out-of-pocket costs.

We believe the inquiry should have a special emphasis on identifying ways to improve its value proposition to policyholders in general and older policyholders in particular.

Despite numerous previous reviews into the health system and a pledge by the then Labor Opposition to have the Productivity Commission conduct a full review, nothing has changed. Private health insurance holders continue to face a never-ending cycle of premium increases, product limitations and soaring out-of-pocket costs.

Add to this the debate between doctors and insurers about who is responsible for these soaring premium costs and you can see that only an independent review can get to the bottom of this.

A systemic review with the view to redesign the private health care system with fit-for-purpose policy settings is something that all older Australians can support.