No 'death spiral' say private health insurers

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Issues like the demand for services and affordability are impacting the entire health system, not just private health insurers, says Private Healthcare Australia chief executive Dr Rachel David.

Dr David was responding to the Grattan Institute's Stephen Duckett who, writing in The Australian Financial Review, described private health insurance as being in a "death spiral" of too few young members supporting rising numbers of older ones.

However, in a published response, Dr David said he had omitted one significant point - changes impacting private health insurers are the same issues confronting the entire health system.

The challenge of "peak healthcare", with an ageing population and rising demand for services, is impacting the system as a whole, said Dr David.

"We are not living in the 1970s any more," she wrote, pointing to the significant decline in rates of smoking, improved treatments for things like cancer and the consequent longer life expectancy.

"In the 1970s, there were 10 working people supporting every one dependent on the health and welfare system. Today there are five, and by 2040 there will be three.

"Health fund premiums are growing on average at 3.25 per cent per annum, but Commonwealth funding to public hospitals is growing at 6.5 per cent and this will increase again should there be a change in government. Health fund premium increases are the canary in the coalmine as a direct price signal hitting hip pockets at the same time each year," said Dr David, adding the annual rise is driven by higher benefit outlays.

The PHA boss said the solution is a collaboration between governments and the private health sector to "reduce some of the regulation and outdated funding models, which are putting upward pressure on premiums and health costs overall, if we are to continue to sustain a world-class system. We can ill-afford to lose the contributions made by half the population who are contributing to the cost of their healthcare through private health insurance."

Dr David said further reform is required to ensure the number of Australians with private health insurance does not continue to drop, to as low as 30 per cent by 2030-35.

"This will result in longer hospital waiting times, a further blowout in public hospital funding, and a shortage of beds for the people who need them most."

Dr David said short-term solutions should include the restoration of the private health insurance rebate to 30 per cent for low and middle-income earners, or at a minimum, arrest the decline to maintain it at current levels.

She also restated insurer calls for enhanced use of data to "detect and phase out medical care where the costs exceed the benefits, and adopting a national procurement system for medical devices."