An unfortunate contribution


The shark has officially been jumped with the report from Morgan Stanley arguing Australians should dump their private health insurance.

The report, actually released in June, essentially argues the public hospital system is now so good Australians should not really bother with private cover. It even says the "political appetite to implement reforms is limited." Serioulsy?

Morgan Stanlely claims some media have used 'poetic licence' to draw dramatic conclusions but maybe its analysts should be more careful. The report is full of perjoratives and sweeping statements regarding the value of private health so Morgan Stanley cannot really complain about the conclusions some have drawn.

The public hospital system may have improved, as the report says, but that is in the context of around 13 million Australians with private cover. In addition, any improvement in public hospitals might also has some relationship to their aggressive 'harvesting' of patients with private cover, something health minister Greg Hunt says needs to be addressed.

The numbers reveal the complete wrong-headedness of any report questioning the value of private health.

In New South Wales alone, over 40 per cent of all separations from hospitals in 2015-16 were from private hospitals - that is almost 1.3 million. This compares to 1.86 million separations from the state's public hospitals.

Is anyone seriously suggesting the state's public hospitals could comfortably accomodate an additional 1.3 million separations every year? 

Well, yes, Morgan Stanley is making that point. "We think as the value proposition of PHI gets increasingly challenged, the public can and will cope with 'spillover' volumes of elective surgery."

Some will even argue government could redirect the $6 billion that goes towards the private health insurance rebate towards public hospitals. Yet that would hardly be enough. The rebate leverages around another net $14 billion in benefit outlays by private insurers. How would government deal with the loss of this enormous contribution to the health system?

The thing with this report is that it does not really have to contemplate the disastrous implications to the health system of its recommendation. The most amusing thing is the effective disclaimers - well, we could be wrong, in which case our advice is completely wrong.

It really is an unfortunate contribution to a policy debate.