New report confirms 'withering' rebate

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A new report from the Parliamentary Library confirms the contribution of a diminishing private health insurance rebate to rising concerns over affordability.

The report, 'whither the private health insurance rebate?', finds the rebate as a share of total industry premium revenue has fallen from 30.5 per cent in 2012-13 to 27.4 per cent in 2016-17.

The rebate has undergone significant reform in recent years with means testing, changes in indexation and its removal from Lifetime Health Cover loading, meaning what was once a 30 per cent government contribution to premiums is now a maximum of around 26 per cent for people aged under 65.

Spending on the rebate is essentially flat with government recently revising down its four-year forecast for spending on the program by over $1 billion.

The consumer contribution to the cost of private health insurance is rising, as a direct and deliberate result of government policy, yet the policy focus has been on health insurers and input costs.

At the same time, a recent discussion by the federal Department of Health confirmed the impact on premiums of efforts by states and territories to 'harvest' privately insured patients in the public hospital system.

According to the discussion paper, if the number of private patients in the public sector had grown at the same rate as private patients in private hospitals since 2010-11, premiums in 2015-16 would have been about 2.5 per cent lower.

Reforms recently announced by health minister Greg Hunt cut prostheses pricing and introduced product categories (Gold/Silver/Bronze).

The recently released Senate inquiry into out-of-pocket medical costs and the value and affordability of private health insurance made 19 recommendations, most of which were consistent with the recently announced reforms.