Fixing a problem created by government


Health minister Greg Hunt will shortly announce a raft of reforms to private health insurance and the pricing of medical devices - to address an affordability issue largely created by government.

The announcement is expected to include a number of changes.

Whatever is announced is likely to be the 'next step' in a constant continuum of change. One absolute certainty is that more will come - it is only a matter of time.

Stakeholders often make the mistake of contemplating reform as a moment in time - detaching it from what has come before and, importantly, what will come in the future.

In reality, health reform operates at a strategic level, with over-arching factors driving specific changes. This means you tend to get reform on top of reform, on top of reform, rather than clean phases of reform, action and implementation. 

Whatever Mr Hunt announces in the coming days, history tells us it will be followed by further attempts at reform sooner rather than later, so the sector probably needs to contemplate it in terms of what will come next and how to influence that.

History is the guide - just look to the changes in the private health insurance rebate and the constant ratcheting down of its value.

Health financing and affordability is one of the single biggest issues driving health reform and it always has been - that can be affordability for government, insurers or consumers - but in the context of an ageing population, emerging new technologies and challenging fiscal circumstances, there is constant focus on getting more for less.

For government, particularly in health, addressing affordability often means using its policy muscle to address it for them by shifting cost elsewhere. This is exactly what has happened with private health insurance.

As shown in the recent report from the Australian Institute of Health and Welfare, as a result of changes to the rebate, the contribution of private health insurers to health spending has grown.

Government must take its share of responsibility for creating this affordability issue in private health insurance because it reduced the value of the rebate to consumers.

In fact, that was the point of the policy?

Government made the changes, decreased its value, health insurance became more expensive for consumers, and now government has to act to plug the holes it created.

It is a little like scuttling a ship then complaining when it starts to sink.

Government is not alone in its cognitive dissonance when it comes to this issue.

The same groups who backed changes undermining the rebate's contribution to consumers now complain about the obvious consequence - declining affordability. They are often the same groups calling for its complete abolition. 

For the sector, private health insurers, hospitals, device companies, specialists and allied health, regardless of what Mr Hunt announces they will continue to face governments who act without full consideration of the consequences and philosophical opponents whose only real interest is undermining the very existence of private health insurance.

Yet these are the facts - private health insurance premiums are rising at around the same average rate as overall health spending, including in Medicare and public hospitals, and the so-called affordability issue is largely the result of actions by government to force consumers to pay more by reducing its contribution to premiums.